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Item 1. Financial Statements

2022-05-06 compared with 2022-02-08 · 113 added, 81 removed, 544 unchanged (26% of the section changed)

49 unchanged sentences

(Amounts in Thousands, Except for Per Share Data)

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Unaudited) 2022 2021 2022 2021

24 unchanged sentences

Three Months Ended Three Months Ended

December 31, 2021 December 31, 2020

March 31, 2022 March 31, 2021

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

8 unchanged sentences

Other comprehensive income (loss) $ ( 1,471 ) $ ( 218 ) $ ( 1,689 ) $ ( 6,339 ) $ 287 $ ( 6,052 )

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

Six Months Ended Six Months Ended

December 31, 2021 December 31, 2020

Total comprehensive income $ 11,949 $ 4,420

Nine Months Ended Nine Months Ended

March 31, 2022 March 31, 2021

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

13 unchanged sentences

(Amounts in Thousands)

Six Months Ended

Nine Months Ended

(Unaudited) 2022 2021

3 unchanged sentences

Depreciation and amortization 22,452 25,245

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

Loss on sales of assets 104 28

Deferred income taxes ( 538 ) ( 4,675 )

22 unchanged sentences

Payments related to tax withholding for stock-based compensation ( 1,579 ) ( 771 )

Debt issuance costs ( 25 ) —

Net cash provided by (used for) financing activities 64,856 ( 58,729 )

16 unchanged sentences

(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 13,638 13,638

Other comprehensive income (loss) ( 1,689 ) ( 1,689 )

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

Compensation expense related to stock compensation plans 1,515 1,515

Restricted share units issuance ( 1,000 shares)

( 13 ) 7 ( 6 )

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 259,000 shares)

( 4,891 ) ( 4,891 )

Amounts at March 31, 2022 $ 309,466 $ 230,284 $ ( 12,566 ) $ ( 73,450 ) $ 453,734

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

Six Months Ended

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

Nine Months Ended

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

7 unchanged sentences

( 3,126 ) 1,566 ( 1,560 )

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

Restricted share units issuance ( 2,000 shares)

( 40 ) 22 ( 18 )

Deferred share issuance ( 3,000 shares)

Repurchase of Common Stock ( 259,000 shares)

( 4,891 ) ( 4,891 )

Amounts at March 31, 2022 $ 309,466 $ 230,284 $ ( 12,566 ) $ ( 73,450 ) $ 453,734

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

5 unchanged sentences

( 2,524 ) 1,753 ( 771 )

Deferred share issuance ( 3,000 shares)

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

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

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 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 Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of March 31, 2022 and June 30, 2021, results of operations for the three and nine months ended March 31, 2022 and 2021, cash flows for the nine months ended March 31, 2022 and 2021, and share owners’ equity for the three and nine months ended March 31, 2022 and 2021.

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.

14 unchanged sentences

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 .

The effects of this change in useful life estimate for the three months ended March 31, 2022 were a decrease in depreciation expense of $ 2.4 million, an increase in net income of $ 1.9 million, and an increase to basic and diluted earnings per share by $ 0.07 .

The effects of this change in useful life estimate for the nine months ended March 31, 2022 were a decrease in depreciation expense of $ 4.1 million, an increase in net income of $ 3.2 million, and an increase to basic and diluted earnings per share by $ 0.13 .

Revenue Recognition:

2 unchanged sentences

Typically, our customer agreements do not commit the customer to purchase our services until a purchase order is provided, which is generally short term in nature.

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.

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.

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 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.

In the nine months ended March 31, 2022 and 2021, we sold, without recourse, $ 201.5 million and $ 246.3 million of accounts receivable, respectively.

Factoring fees were $ 0.4 million and $ 0.2 million for the three months ended March 31, 2022 and 2021, respectively, and $ 0.9 million and $ 1.0 million during the nine months ended March 31, 2022 and 2021, 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.

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

We did not hold any drafts at March 31, 2022, 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.

Banker’s acceptance drafts sold at a discount or transferred in settlement of current accounts payable during the nine months ended March 31, 2022 and 2021 were less than $ 0.1 million and $ 1.8 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 December 31, 2021, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

As of March 31, 2022, 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 $ 3.6 million at December 31, 2021 and $ 1.6 million at June 30, 2021.

Lease right-of-use assets and lease liabilities each totaled $ 3.4 million at March 31, 2022 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 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.

Other General Income in the nine months ended March 31, 2022 and 2021 included $ 1.4 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.

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.

No Other General Income was recorded in three months ended March 31, 2022, and $ 0.4 million in the three months ended March 31, 2021.

Non-operating Income (Expense), net:

2 unchanged sentences

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

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in Thousands) 2022 2021 2022 2021

Foreign currency/derivative gain (loss) $ ( 625 ) $ ( 637 ) $ ( 1,325 ) $ 4,330

Gain on SERP investments 402 811 315 1,361

Gain (loss) on SERP investments ( 719 ) 164 ( 404 ) 1,525

Adjustments after measurement period of GES acquisition — 335 — 53

18 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 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.

As of March 31, 2022 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 March 31, 2022, $ 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 and six months ended December 31, 2021 and 2020.

Three Months Ended Six Months Ended

December 31 December 31

The following table disaggregates our revenue by end market vertical for the three and nine months ended March 31, 2022 and 2021.

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in Millions) 2022 2021 2022 2021

6 unchanged sentences

Total net sales $ 368.1 $ 310.3 $ 976.0 $ 962.7

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.

For both the three months ended March 31, 2022 and 2021, approximately 95 % of our net sales 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, 2022 and 2021, approximately 95 % and 89 % 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 $ 57.2 million and $ 45.9 million as of December 31, 2021 and June 30, 2021, respectively.

Contract assets were $ 63.8 million and $ 45.9 million as of March 31, 2022 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.

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 $ 17.2 million and $ 7.6 million as of March 31, 2022 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) December 31, 2021 June 30, 2021

(Amounts in Thousands) March 31, 2022 June 30, 2021

Finished products $ 895 $ 769

3 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

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:

During the nine months ended March 31, 2022 and 2021, 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) ( 7,912 ) 459 ( 230 ) ( 7,683 )

Balance at December 31, 2021

Balance at March 31, 2022

$ ( 10,135 ) $ ( 1,968 ) $ ( 463 ) $ ( 12,566 )

4 unchanged sentences

Net current-period other comprehensive income (loss) 4,262 578 ( 607 ) 4,233

Balance at December 31, 2020

Balance at March 31, 2021

$ ( 3,632 ) $ ( 2,676 ) $ ( 10 ) $ ( 6,318 )

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 Six Months Ended Affected Line Item in the Condensed Consolidated Statements of Income

December 31 December 31

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

(Amounts in Thousands) 2022 2021 2022 2021

18 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 six months ended December 31, 2021 and 2020 were as follows:

Six Months Ended

Changes in the product warranty liability for the nine months ended March 31, 2022 and 2021 were as follows:

Nine Months Ended

(Amounts in Thousands) 2022 2021

5 unchanged sentences

Credit facilities consisted of the following:

Borrowings at Borrowings Outstanding at Borrowings Outstanding at

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

Borrowing Capacity at Borrowings Outstanding at Borrowings Outstanding at

(Amounts in Millions, in U.S Dollar Equivalents) March 31, 2022 March 31, 2022 June 30, 2021

Primary credit facility (1)

$ 21.9 $ 127.7 $ 62.7

Secondary credit facility (2)

Thailand overdraft credit facility 0.1 — —

Netherlands revolving credit facility 0.8 9.4 3.5

Poland revolving credit facility 5.7 — —

Total credit facilities $ 42.8 $ 137.1 $ 66.2

27 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 December 31, 2021 and June 30, 2021.

The Company had $ 0.4 million in letters of credit contingently committed against the credit facility at both March 31, 2022 and June 30, 2021.

Subsequent to March 31, 2022, the Company amended and restated this primary facility on May 4, 2022 .

See Note 15 - Sub sequent Event of Notes to Condensed Consolidated Financial Statements for further information on the amended and restated primary facility.

(2) The Company entered into a credit agreement on March 16, 2022 (the “secondary credit facility”), which allows for borrowings up to $ 20 million.

This secondary credit facility was established for working capital purposes and had a maturity date of the earlier of June 30, 2022 or the date upon which the primary credit facility was refinanced.

As noted above, the primary credit facility was amended and restated on May 4, 2022 , and the secondary credit facility was terminated on the same date.

(3) 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 both December 31, 2021 and June 30, 2021 was 2.0 %.

The weighted-average interest rate on borrowings outstanding under the credit facilities at March 31, 2022 and June 30, 2021 were 2.3 % 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 six months ended December 31, 2021.

There were no changes in the inputs or valuation techniques used to measure fair values during the nine months ended March 31, 2022.

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 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

As of March 31, 2022 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:

March 31, 2022

(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 December 31, 2021 and June 30, 2021.

We had no level 3 assets or liabilities at March 31, 2022 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 six months ended December 31, 2021.

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, 2022.

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

As of March 31, 2022, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

dollar in the aggregate notional amount of $ 39.2 million and to hedge currencies against the Euro in the aggregate notional amount of 41.1 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 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.

Based on fair values as of March 31, 2022, we estimate that approximately $ 0.1 million of pre-tax derivative gain 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.

Gains on foreign exchange contracts are generally offset by losses in operating income 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 December 31, 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 March 31, 2022 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 December 31,

(Amounts in Thousands) Balance Sheet Location March 31,

2022 June 30,

2021 Balance Sheet Location December 31,

2021 Balance Sheet Location March 31,

2022 June 30,

5 unchanged sentences

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

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in Thousands) 2022 2021 2022 2021

2 unchanged sentences

The Effect of Derivative Instruments on Condensed Consolidated Statements of Income

Three Months Ended Six Months Ended

(Amounts in Thousands) December 31 December 31

Three Months Ended Nine Months Ended

(Amounts in Thousands) March 31 March 31

Derivatives in Cash Flow Hedging Relationships Location of Gain or (Loss) 2022 2021 2022 2021

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 six months ended December 31, 2021 and 2020 was approximately $( 0.2 ) million and $ 0.8 million, respectively.

The change in net unrealized holding gains for the nine months ended March 31, 2022 and 2021 was approximately $( 1.1 ) million and $ 0.9 million, respectively.

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

(Amounts in Thousands) December 31,

(Amounts in Thousands) March 31,

2022 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 six months ended December 31, 2021 and 2020.

Net periodic benefit costs were not material for the nine months ended March 31, 2022 and 2021.

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

During the first nine 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

Long-Term Performance Shares (1)

2nd Quarter 600 $ 26.79

Unrestricted shares (3)

21 unchanged sentences

A summary of goodwill is as follows:

(Amounts in Thousands) December 31,

(Amounts in Thousands) March 31,

2022 June 30,

3 unchanged sentences

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

December 31, 2021 June 30, 2021

March 31, 2022 June 30, 2021

(Amounts in Thousands) Cost Accumulated

6 unchanged sentences

Other Intangible Assets $ 49,893 $ ( 34,776 ) $ 15,117 $ 52,821 $ ( 35,813 ) $ 17,008

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.

During the three months ended March 31, 2022 and 2021, amortization expense of other intangible assets was $ 0.8 million and $ 0.9 million, respectively.

During the nine months ended March 31, 2022 and 2021, amortization expense of other intangible assets was $ 2.6 million and $ 2.5 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 six months ended December 31, 2021, the Company had no share repurchases under the Plan.

During the nine months ended March 31, 2022, the Company repurchased $ 4.9 million of common stock under the Plan at an average price of $ 18.87 per share, which was recorded as Treasury stock, at cost in the Condensed Consolidated Balance Sheet.

Since the inception of the Plan, the Company has repurchased $ 84.6 million of common stock at an average cost of $ 15.13 per share.

1 unchanged sentence

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

Three Months Ended Six Months Ended

December 31 December 31

Three Months Ended Nine Months Ended

March 31 March 31

(Amounts in thousands, except per share data) 2022 2021 2022 2021

9 unchanged sentences

Diluted $ 0.54 $ 0.41 $ 0.84 $ 1.67

Subsequent Event

On May 4, 2022 , the Company entered into an amended and restated credit agreement (the “Credit Agreement”) among the Company, the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., as Documentation Agent.

The Credit Agreement amends and restates the Company’s primary credit facility, which was scheduled to mature on July 27, 2023.

The Credit Agreement has a maturity date of May 4, 2027 and allows for $ 300 million in borrowings, with an option to increase the amount available for borrowing to $ 450 million at the Company’s request, subject to the consent of each lender participating in such increase.

The proceeds of the loans are to be used for working capital and general corporate purposes of the Company.

A commitment fee of the unused portion of principal amount of the credit facility is payable at a rate that now ranges from 10.0 to 25.0 basis points per annum as determined by the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA, as defined in the Credit Agreement.

The interest rate on borrowings is dependent on the type and currencies of borrowings.

The Term Benchmark borrowings will continue to use SOFR or EURIBOR plus the Term Benchmark Loans spread which has been updated to range from 100.0 to 175.0 basis points, and the ABR borrowings will continue to use ABR plus the ABR Loans spread which has been updated to range from 0.0 to 75.0 basis points.

Both the Term Benchmark Loans spread and ABR spread will continue to be based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA.

The Company’s financial covenants under the Credit Agreement require:

• a ratio of consolidated total indebtedness minus unencumbered U.S.

cash on hand in the United States in excess of $ 15 million to adjusted consolidated EBITDA, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be greater than 3.0 to 1.0;

provided, however, that for each fiscal quarter end during the four quarter period following a material permitted acquisition, as defined in the Credit Agreement, the Company will not permit this financial covenant to be greater than 3.5 to 1.0 for each such fiscal quarter end, and

• an interest coverage ratio, defined as that ratio of consolidated EBITDA for such period to cash interest expense for such period, for any period of four consecutive fiscal quarters ending during any period set forth below, to be less than 3.5 to 1.0.

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