What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-05-06 · 113 added, 213 removed, 444 unchanged (42% of the section changed)

3 unchanged sentences

(Amounts in Thousands, Except for Share Data)

September 30,

2022 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) 2022 2021

24 unchanged sentences

Three Months Ended Three Months Ended

March 31, 2022 March 31, 2021

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

Net income $ 13,638 $ 10,472

Other comprehensive income (loss):

Foreign currency translation adjustments $ ( 2,432 ) $ — $ ( 2,432 ) $ ( 5,177 ) $ — $ ( 5,177 )

Postemployment actuarial change ( 19 ) 7 ( 12 ) 18 ( 5 ) 13

Derivative gain (loss) 1,063 ( 271 ) 792 ( 1,108 ) 254 ( 854 )

Reclassification to (earnings) loss:

Derivatives ( 22 ) 31 9 5 18 23

Amortization of actuarial change ( 61 ) 15 ( 46 ) ( 77 ) 20 ( 57 )

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

Total comprehensive income $ 11,949 $ 4,420

Nine Months Ended Nine Months Ended

March 31, 2022 March 31, 2021

September 30, 2022 September 30, 2021

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

8 unchanged sentences

Other comprehensive income (loss) $ ( 7,411 ) $ ( 6 ) $ ( 7,417 ) $ ( 4,642 ) $ 376 $ ( 4,266 )

Total comprehensive income $ 13,632 $ 46,578

Total comprehensive income (loss) $ 2,092 $ ( 1,702 )

See Notes to Condensed Consolidated Financial Statements .

2 unchanged sentences

(Amounts in Thousands)

Nine Months Ended

Three Months Ended

(Unaudited) 2022 2021

1 unchanged sentence

Net income $ 9,509 $ 2,564

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

Adjustments to reconcile net income to net cash used for operating activities:

Depreciation and amortization 7,611 8,908

Loss on sales of assets 104 28

(Gain) loss on sales of assets ( 21 ) 10

Deferred income taxes ( 238 ) 820

8 unchanged sentences

Accrued expenses and taxes payable 2,253 ( 13,550 )

Net cash (used for) provided by operating activities ( 84,665 ) 103,755

Net cash used for operating activities ( 60,194 ) ( 8,187 )

Cash Flows From Investing Activities:

6 unchanged sentences

Proceeds from credit facilities 20,000 —

Payments on credit facilities — ( 34,500 )

Net change in revolving credit facilities 32,186 6,536

Settlements on previous year acquisition — 2,957

Repurchases of common stock ( 4,726 ) ( 2,996 )

Payments related to tax withholding for stock-based compensation ( 1,417 ) ( 1,571 )

Debt issuance costs ( 25 ) —

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

Net cash provided by financing activities 50,769 4,965

Effect of Exchange Rate Change on Cash and Cash Equivalents ( 1,391 ) ( 1,028 )

Net (Decrease) Increase in Cash and Cash Equivalents ( 70,839 ) 24,661

Net Decrease in Cash and Cash Equivalents ( 30,136 ) ( 17,118 )

Cash and Cash Equivalents at Beginning of Period 49,851 106,442

10 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, 2021 $ 307,996 $ 216,646 $ ( 10,877 ) $ ( 68,598 ) $ 445,167

Net income 13,638 13,638

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

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

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

(Unaudited) Additional Paid-In Capital

Amounts at June 30, 2022 $ 311,090 $ 240,222 $ ( 19,672 ) $ ( 77,669 ) $ 453,971

1 unchanged sentence

Other comprehensive income (loss) ( 7,417 ) ( 7,417 )

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

Compensation expense related to stock compensation plans 1,598 1,598

1 unchanged sentence

( 2,417 ) 1,001 ( 1,416 )

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 September 30, 2022 $ 310,271 $ 249,731 $ ( 27,089 ) $ ( 76,668 ) $ 456,245

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

See Notes to Condensed Consolidated Financial Statements .

5 unchanged sentences

(also referred to herein as “Kimball Electronics,” the “Company,” “we,” “us,” or “our”) is a global, multifaceted manufacturing solutions provider.

We provide contract electronics manufacturing services (“EMS”) and diversified manufacturing services, including engineering and supply chain support, to customers in the automotive, medical, industrial, and public safety end markets.

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 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.

We deliver a package of value that begins with our core competency of producing durable electronics and has expanded into diversified contract manufacturing services for non-electronic components, medical disposables, precision molded plastics, and production automation, test, and inspection equipment.

Our design and manufacturing expertise coupled with robust processes and procedures help us ensure that we deliver the highest levels of quality, reliability, and service throughout the entire life cycle of our customers’ products.

We deliver award-winning service across our highly integrated global footprint, which is enabled by our largely common operating system, procedures, and standardization.

We are well 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, 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 Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of September 30, 2022 and June 30, 2022, results of operations for the three months ended September 30, 2022 and 2021, cash flows for the three months ended September 30, 2022 and 2021, and share owners’ equity for the three months ended September 30, 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, 2022 and related notes thereto included in our Annual Report on Form 10-K.

4 unchanged sentences

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.

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.

Change in Estimates:

6 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 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 .

The effects of this change in useful life estimate for the three months ended September 30, 2022 were a decrease in depreciation expense of $ 2.0 million, an increase in net income of $ 1.6 million, and an increase to basic and diluted earnings per share by $ 0.06 .

Revenue Recognition:

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 revenue from contracts with customers is generated primarily from manufacturing services provided for the production of electronic assemblies, components, medical devices, 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.

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.

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.

26 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, 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.

In the three months ended September 30, 2022 and 2021, we sold, without recourse, $ 97.6 million and $ 62.1 million of accounts receivable, respectively.

Factoring fees were $ 0.9 million and $ 0.2 million for the three months ended September 30, 2022 and 2021, respectively.

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

One of our China operations, in limited circumstances, may receive banker’s acceptance drafts from customers as payment on account.

The banker’s acceptance drafts are non-interest bearing and primarily mature within six months from the origination date.

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 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 nine months ended March 31, 2022 and 2021 were less than $ 0.1 million and $ 1.8 million, respectively.

Goodwill and Other Intangible Assets:

Goodwill represents the difference between the purchase price and the related underlying tangible and intangible net asset fair values resulting from business acquisitions.

Annually, or if conditions indicate an earlier review is necessary, goodwill is tested at the reporting unit level.

Annually, or if conditions indicate an earlier review is necessary, goodwill is assessed or tested at the reporting unit level.

If the estimated fair value of the reporting unit is less than the carrying value, goodwill is written down to its estimated fair value.

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, 2022, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

As of September 30, 2022, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

See Note 11 - 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 March 31, 2022 and $ 1.6 million at June 30, 2021.

Lease right-of-use assets and lease liabilities each totaled $ 3.0 million at September 30, 2022 and $ 3.1 million at June 30, 2022, respectively.

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 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.

Other General Income in the three months ended September 30, 2021 included $ 1.4 million 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.

No Other General Income was recorded in three months ended September 30, 2022.

Non-operating Income (Expense), net:

2 unchanged sentences

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

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Amounts in Thousands) 2022 2021

1 unchanged sentence

Gain (loss) on SERP investments ( 235 ) ( 87 )

Adjustments after measurement period of GES acquisition — 335 — 53

Other 201 ( 219 )

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 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:

Adopted in fiscal year 2022:

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.

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.

As of September 30, 2022 and June 30, 2022, the remaining provision recorded for the one-time deemed repatriation tax was $ 7.8 million and $ 8.9 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, 2022, $ 1.9 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheet.

Revenue from Contracts with Customers

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 nine months ended March 31, 2022 and 2021.

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, and industrial applications, to the specifications and designs of our customers.

Beginning in fiscal year 2023, the Company changed its presentation of revenue for the industrial and public safety end market verticals by combining them into the industrial end market vertical.

Prior year periods have been recast to conform to the current year presentation.

The following table disaggregates our revenue by end market vertical for the three months ended September 30, 2022 and 2021.

Three Months Ended

(Amounts in Millions) 2022 2021

3 unchanged sentences

Industrial 100.9 75.0

Public Safety 13.8 13.5 35.7 37.3

Other 5.7 3.3

Total net sales $ 405.9 $ 292.7

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.

For the three months ended September 30, 2022 and 2021, approximately 96 % and 95 % 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 $ 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 $ 17.2 million and $ 7.6 million as of March 31, 2022 and June 30, 2021, respectively.

Contract assets were $ 68.3 million and $ 64.1 million as of September 30, 2022 and June 30, 2022, respectively.

In limited circumstances, the Company may receive payments from customers in advance of the satisfaction of performance obligations primarily for material price variances, 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 $ 24.6 million and $ 22.5 million as of September 30, 2022 and June 30, 2022, 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) March 31, 2022 June 30, 2021

(Amounts in Thousands) September 30, 2022 June 30, 2022

Finished products $ 751 $ 525

3 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

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:

During the three months ended September 30, 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) ( 7,237 ) ( 86 ) ( 94 ) ( 7,417 )

Balance at March 31, 2022

Balance at September 30, 2022

$ ( 24,586 ) $ ( 2,289 ) $ ( 214 ) $ ( 27,089 )

4 unchanged sentences

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 )

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) 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 nine months ended March 31, 2022 and 2021 were as follows:

Nine Months Ended

Changes in the product warranty liability for the three months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

(Amounts in Thousands) 2022 2021

6 unchanged sentences

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

(Amounts in Millions, in U.S Dollar Equivalents) September 30, 2022 September 30, 2022 June 30, 2022

Primary credit facility (1)

$ 74.6 $ 225.0 $ 171.4

Secondary credit facility (2)

Thailand overdraft credit facility (2)

China revolving credit facility (3)

Netherlands revolving credit facility 2.0 7.0 9.2

4 unchanged sentences

(1) The Company maintains a U.S.

primary credit facility (the “primary facility”) among the Company, the lenders party thereto, and JPMorgan Chase Bank, National Association, as Administrative Agent, and Bank of America, N.A., as Documentation Agent, scheduled to mature July 27, 2023.

The primary facility provides for $ 150 million in borrowings, with an option to increase the amount available for borrowing to $ 225 million upon request, subject to the consent of each lender participating in such increase.

This facility is maintained for working capital and general corporate purposes of the Company including capital expenditures and potential acquisitions.

A commitment fee is payable on the unused portion of the credit facility at a rate that ranges from 20.0 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 primary facility.

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

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.

primary credit facility (the “primary credit facility”) 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, scheduled to mature May 4, 2027.

The primary credit facility provides for $ 300 million in borrowings, with an option to increase the amount available for borrowing to $ 450 million upon request, subject to the consent of each lender participating in such increase.

This facility is maintained for working capital and general corporate purposes of the Company.

A commitment fee is payable on the unused portion of the credit facility at a rate that 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 primary credit facility.

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

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;

• any Term Benchmark borrowing denominated in U.S.

Dollars will utilize the Secured Overnight Financing Rate (“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 Revolving Commitment Term Benchmark spread which can range from 100.0 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 target days prior to the advance (adjusted upwards to reflect bank reserve costs) for such interest period as defined in the agreement, plus the Revolving Commitment Term Benchmark spread which can range from 100.0 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

JPMorgan’s prime rate;

1 % per annum above the Adjusted LIBO Rate (as defined under the primary credit facility);

Prime Rate in the U.S.

last quoted by the Wall Street Journal, and if this is ceased to be quoted, the highest bank prime loan rate or similar loan rate quoted by the Federal Reserve Board;

1/2 of 1% per annum above the Federal Funds Effective Rate (as defined under the primary credit facility);

plus the ABR Loans spread which can range from 25.0 to 75.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA.

1 % per annum above the Adjusted SOFR Rate (as defined under the primary credit facility);

plus the Revolving Commitment ABR spread which can range from 0.0 to 75.0 basis points based on the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA.

The Company’s financial covenants under the primary credit facility require:

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

• 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, 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.

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, to be less than 3.5 to 1.0.

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

(2) During the first quarter of fiscal year 2023, the Company expanded the borrowing capacity of the Thailand credit facility to $ 10.1 million.

(3) The Company entered into a foreign credit facility for its EMS operation in China which allows for borrowings up to $ 7.5 million.

The facility is scheduled to mature on June 30, 2023.

(4) The amount of Long-term debt under credit facilities, less current maturities reflects the borrowings on the primary credit 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, 2022 and June 30, 2021 were 2.3 % and 2.0 %, respectively.

The weighted-average interest rate on borrowings outstanding under the credit facilities at September 30, 2022 and June 30, 2022 were 4.4 % and 2.7 %, 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.

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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, 2022.

There were no changes in the inputs or valuation techniques used to measure fair values during the three months ended September 30, 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, 2022.

Recurring Fair Value Measurements:

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

As of September 30, 2022 and June 30, 2022, 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, 2022

(Amounts in Thousands) Level 1 Level 2 Total

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Total liabilities at fair value $ — $ 3,522 $ 3,522

We had no level 3 assets or liabilities at March 31, 2022 and June 30, 2021.

We had no level 3 assets or liabilities at September 30, 2022 and June 30, 2022, or any activity in Level 3 assets or liabilities during the three months ended September 30, 2022.

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

The SERP investment assets are offset by a SERP liability which represents the Company’s obligation to distribute SERP funds to participants.

See Note 9 - Investments of Notes to Condensed Consolidated Financial Statements for further information regarding the SERP.

See Note 9 - Employee Benefit Plans of Notes to Condensed Consolidated Financial Statements for further information regarding the SERP.

Financial Instruments Not Carried At Fair Value:

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, 2022.

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, 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, 2022.

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We use forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency.

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

Non-designated foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances and other balance sheet positions denominated in currencies other than the functional currencies.

As of September 30, 2022, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

dollar in the aggregate notional amount of $ 27.4 million and to hedge currencies against the Euro in the aggregate notional amount of 80.5 million Euro.

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Depending on the type of exposure hedged, we may either purchase a derivative contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the currency revaluation impact of foreign currency denominated liabilities.

The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability.

The fair value of outstanding derivative instruments is recognized on the Condensed Consolidated Balance Sheets as a derivative asset or liability and presented with Prepaid expenses and other current assets and Accrued expenses, respectively.

When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flow is impacted for the net settlement.

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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, 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.

Based on fair values as of September 30, 2022, we estimate that approximately $ 0.7 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.

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 March 31, 2022 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 September 30, 2022 and June 30, 2022.

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,

2022 June 30,

2021 Balance Sheet Location March 31,

2022 Balance Sheet Location September 30,

2022 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) 2022 2021

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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) 2022 2021

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Total Derivative Pre-Tax Gain (Loss) Recognized in Income $ 1,801 $ 174

The Company maintains a self-directed supplemental employee retirement plan (“SERP”) for executive and other key employees.

The Company SERP utilizes a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy.

The Company recognizes SERP investment assets on the balance sheet at current fair value.

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 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 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) March 31,

2022 June 30,

SERP investments - current asset $ 3,494 $ 3,095

SERP investments - other long-term asset 8,411 9,549

Total SERP investments $ 11,905 $ 12,644

SERP obligation - current liability $ 3,494 $ 3,095

SERP obligation - other long-term liability 8,411 9,549

Total SERP obligation $ 11,905 $ 12,644

Employee Benefit Plans

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The SERP is structured as a rabbi trust, and therefore, assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy.

We recognize SERP investment assets on the balance sheet at current fair value.

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

As of September 30, 2022, both total investments and obligations under SERP were $ 8.1 million, of which $ 0.5 million were short term and $ 7.6 million were long term.

As of June 30, 2022, both total investments and obligations under SERP were $ 10.4 million, of which $ 2.6 million were short term and $ 7.8 million were long term.

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, 2022 and 2021 was approximately $( 0.3 ) million and $( 0.1 ) million, respectively.

The Company established and maintains severance plans for all domestic employees and other postemployment plans for certain foreign subsidiaries.

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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, 2022 and 2021.

Net periodic benefit costs were not material for the three months ended September 30, 2022 and 2021.

Stock Compensation Plans

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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, 2022.

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

During the first three months of fiscal year 2023, the following stock compensation was granted under the Plan.

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

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1st Quarter 184,446 $ 23.34

Restricted Shares (3)

1st Quarter 55,355 $ 23.34

Long-Term Performance Shares (4)

2nd Quarter 600 $ 26.79

Unrestricted shares (3)

2nd Quarter 5,027 $ 24.87

Deferred share units (4)

2nd Quarter 34,480 $ 24.87

1st Quarter 500 $ 21.51

(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 awards granted in fiscal year 2023 will cliff vest at the third anniversary of the award date in fiscal year 2026.

Under these awards, a number of shares will be issued to each participant based upon a combination of the Company’s profitability based on its operating income over the performance period as defined in the Company’s operating business plans for the applicable fiscal years and the Company’s growth based on a comparison of 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.

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(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.

(3) Restricted shares were granted to officers and other key employees.

These restricted shares were approved by the Compensation and Governance Committee of the Board.

The contractual life of the restricted shares is three years , with one-third of the interest in the restricted shares vested after year one of the grant, another one-third after year two of the grant, and the final one-third after year three of the grant.

Restricted shares are expensed over the contractual vesting period as earned.

If the employment of a holder of restricted shares terminates before the RSU has vested for any reason other than death, retirement, or disability, the restricted shares not yet vested will be forfeited.

(4) Long-term performance share awards were granted to a key employee.

This award granted in fiscal year 2023 will cliff vest at the first anniversary of the award date in fiscal year 2024.

Shares will be issued to this participant based on the performance metrics described in (1) above.

Goodwill and Other Intangible Assets

A summary of goodwill is as follows:

(Amounts in Thousands) March 31,

(Amounts in Thousands) September 30,

2022 June 30,

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

March 31, 2022 June 30, 2021

September 30, 2022 June 30, 2022

(Amounts in Thousands) Cost Accumulated

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Other Intangible Assets $ 50,144 $ ( 36,352 ) $ 13,792 $ 50,144 $ ( 35,437 ) $ 14,707

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.

For both the three months ended September 30, 2022 and 2021, amortization expense of other intangible assets was $ 0.9 million.

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

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

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.

During the three months ended September 30, 2022, the Company had no share repurchases under the Plan.

Since the inception of the Plan, the Company has repurchased $ 88.8 million of common stock at an average cost of $ 15.27 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) 2022 2021

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Diluted $ 0.38 $ 0.10

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.

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

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