What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-05-05 · 97 added, 180 removed, 484 unchanged (36% of the section changed)

3 unchanged sentences

(Amounts in Thousands, Except for Share Data)

September 30,

2023 June 30,

18 unchanged sentences

Accounts payable 308,912 322,274

Advances from customers 41,467 33,905

Accrued expenses 66,272 72,515

12 unchanged sentences

Shares issued:

Shares outstanding:

24,845,000 and 24,724,000 , respectively

Additional paid-in capital 314,255 315,482

10 unchanged sentences

(Amounts in Thousands, Except for Per Share Data)

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Unaudited) 2023 2022

3 unchanged sentences

Selling and Administrative Expenses 16,052 15,750

Other General Income — — — ( 1,384 )

Operating Income 19,490 13,571

18 unchanged sentences

Three Months Ended Three Months Ended

March 31, 2023 March 31, 2022

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

Net income $ 16,400 $ 13,638

Other comprehensive income (loss):

Foreign currency translation adjustments $ 2,094 $ — $ 2,094 $ ( 2,432 ) $ — $ ( 2,432 )

Postemployment actuarial change ( 68 ) 18 ( 50 ) ( 19 ) 7 ( 12 )

Derivative gain (loss) 3,270 ( 768 ) 2,502 1,063 ( 271 ) 792

Reclassification to (earnings) loss:

Derivatives ( 1,111 ) 293 ( 818 ) ( 22 ) 31 9

Amortization of actuarial change ( 19 ) 5 ( 14 ) ( 61 ) 15 ( 46 )

Other comprehensive income (loss) $ 4,166 $ ( 452 ) $ 3,714 $ ( 1,471 ) $ ( 218 ) $ ( 1,689 )

Total comprehensive income $ 20,114 $ 11,949

Nine Months Ended Nine Months Ended

March 31, 2023 March 31, 2022

September 30, 2023 September 30, 2022

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

13 unchanged sentences

(Amounts in Thousands)

Nine Months Ended

Three Months Ended

(Unaudited) 2023 2022

1 unchanged sentence

Net income $ 10,754 $ 9,509

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

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

Depreciation and amortization 9,017 7,611

9 unchanged sentences

Accounts payable ( 11,564 ) 17,630

Advances from customers 7,574 3,614

Accrued expenses and taxes payable ( 8,614 ) ( 1,470 )

Net cash used for operating activities ( 57,885 ) ( 84,665 )

Net cash provided by (used for) operating activities 12,801 ( 60,194 )

Cash Flows From Investing Activities:

7 unchanged sentences

Net change in revolving credit facilities 15,350 32,186

Repurchases of common stock — ( 4,726 )

Payments related to tax withholding for stock-based compensation ( 1,365 ) ( 1,417 )

Debt issuance costs ( 100 ) ( 25 )

Net cash provided by financing activities 13,985 50,769

Effect of Exchange Rate Change on Cash and Cash Equivalents ( 549 ) ( 1,391 )

Net Decrease in Cash, Cash Equivalents, and Restricted Cash ( 17,528 ) ( 70,839 )

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash 14,935 ( 30,136 )

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period (1)

10 unchanged sentences

The restricted cash included in Prepaid expenses and other current assets on the balance sheet represents funds held by the Company for a foreign subsidiary’s employee savings plan.

(Unaudited) March 31,

(Unaudited) September 30,

2023 June 30,

6 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, 2022 $ 312,085 $ 260,451 $ ( 14,892 ) $ ( 76,496 ) $ 481,148

Net income 16,400 16,400

Other comprehensive income (loss) 3,714 3,714

Issuance of non-restricted stock ( 100 shares)

Compensation expense related to stock compensation plans 1,921 1,921

Amounts at March 31, 2023 $ 314,008 $ 276,851 $ ( 11,178 ) $ ( 76,495 ) $ 503,186

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

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, 2023 $ 315,482 $ 296,053 $ ( 11,046 ) $ ( 76,495 ) $ 523,994

1 unchanged sentence

Other comprehensive income (loss) ( 6,735 ) ( 6,735 )

Issuance of non-restricted stock ( 14,100 shares)

Compensation expense related to stock compensation plans 1,613 1,613

Performance share issuance ( 85,000 shares)

Performance and restricted share issuance ( 107,000 and 14,000 shares, respectively)

( 2,840 ) 1,476 ( 1,364 )

Amounts at March 31, 2023 $ 314,008 $ 276,851 $ ( 11,178 ) $ ( 76,495 ) $ 503,186

Amounts at September 30, 2023 $ 314,255 $ 306,807 $ ( 17,781 ) $ ( 75,019 ) $ 528,262

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

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, and industrial safety end markets.

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.

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

We deliver a package of value that begins with our core competency of producing durable electronics, and we further offer 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.

2 unchanged sentences

Basis of Presentation:

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of March 31, 2023 and June 30, 2022, results of operations for the three and nine months ended March 31, 2023 and 2022, cash flows for the nine months ended March 31, 2023 and 2022, and share owners’ equity for the three and nine months ended March 31, 2023 and 2022.

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of September 30, 2023 and June 30, 2023, results of operations for the three months ended September 30, 2023 and 2022, cash flows for the three months ended September 30, 2023 and 2022, and share owners’ equity for the three months ended September 30, 2023 and 2022.

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, 2023 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.

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.

In fiscal year 2022, a 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 nine months ended March 31, 2023 were a decrease in depreciation expense of $ 2.6 million, an increase in net income of $ 2.0 million, and an increase to basic and diluted earnings per share by $ 0.08 .

Reclassifications:

Advances from customers are now reported separately on the Condensed Consolidated Statements of Cash Flows.

Advances from customers were previously reported in accounts payable and accrued expenses.

Prior period amounts have been reclassified to conform to current period presentation.

See Note 2 - Revenue from Contracts with Customers of Notes to Condensed Consolidated Financial Statements for more information on advances from customers.

Revenue Recognition:

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 customers’ specifications.

We recognize revenue in accordance with the standard issued by the Financial Accounting Standards Board (“FASB”), Revenue from Contracts with Customers and all the related amendments.

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

6 unchanged sentences

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

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

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

corresponding amount of revenue to recognize.

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

20 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, 2023 and 2022, we sold, without recourse, $ 357.1 million and $ 201.5 million of accounts receivable, respectively.

Factoring fees were $ 1.4 million and $ 0.4 million for the three months ended March 31, 2023 and 2022, and $ 3.8 million and $ 0.9 million during the nine months ended March 31, 2023 and 2022, respectively.

We also have the ability to and have periodically utilized additional accounts receivable factoring arrangements to provide flexible access to cash as needed.

In the three months ended September 30, 2023 and 2022, we sold, without recourse, $ 103.0 million and $ 97.6 million of accounts receivable, respectively.

For both the three months ended September 30, 2023 and 2022, factoring fees were $ 0.9 million.

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

4 unchanged sentences

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

As of March 31, 2023, the Company determined there have been no indicators of impairment for goodwill and other intangible assets.

As of September 30, 2023, 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.

We perform our annual goodwill impairment test of our Global Equipment Services (“GES”) reporting unit in the fourth quarter.

As of March 31, 2023, GES has $ 5.8 million of goodwill.

In our latest annual test performed as of April 30, 2022, the fair value of the GES reporting unit exceeded its carrying value by 9 %.

We are in the process of developing our long-range plan, which will support our annual test.

Our test will consider GES’s recent performance and trends in the semiconductor and consumer electronics capital equipment markets which GES serves.

If our test indicates a decline in GES’s fair value, there could be a non-cash charge for impairment.

The Company leases certain office, manufacturing, and warehouse facilities under operating leases, in addition to land on which certain office and manufacturing facilities resides.

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 $ 2.8 million at March 31, 2023 and $ 3.1 million at June 30, 2022, respectively.

Lease right-of-use assets and lease liabilities each totaled $ 3.0 million at September 30, 2023 and $ 2.6 million at June 30, 2023, 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 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 and nine months ended March 31, 2023 and in the three months ended March 31, 2022.

Non-operating Income (Expense), net:

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

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

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

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

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Amounts in Thousands) 2023 2022

20 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, 2023 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 March 31, 2023, $ 1.9 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheet.

As of September 30, 2023 and June 30, 2023, the remaining provision recorded for the one-time deemed repatriation tax was $ 5.9 million and $ 7.9 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, 2023, $ 2.6 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:

Currently, there are no issued but not yet adopted accounting standards that are expected to have a material impact on the Company.

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, 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.

Beginning in fiscal year 2024, the Company changed its presentation of revenue for miscellaneous sales previously included in Other to include in the respective customers’ end market verticals.

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 and nine months ended March 31, 2023 and 2022.

Three Months Ended Nine Months Ended

March 31 March 31

The following table disaggregates our revenue by end market vertical for the three months ended September 30, 2023 and 2022.

Three Months Ended

(Amounts in Millions) 2023 2022

3 unchanged sentences

Industrial 123.2 101.7

Other 7.8 5.5 20.5 12.7

Total net sales $ 438.1 $ 405.9

For the three months ended March 31, 2023 and 2022, 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.

For the nine months ended March 31, 2023 and 2022, approximately 96 % and 95 % of our net sales, respectively, were recognized over time.

For the three months ended September 30, 2023 and 2022, approximately 97 % and 96 % 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 $ 75.7 million and $ 64.1 million as of March 31, 2023 and June 30, 2022, respectively.

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 $ 36.0 million and $ 22.5 million as of March 31, 2023 and June 30, 2022, respectively.

Contract assets were $ 87.7 million and $ 78.8 million as of September 30, 2023 and June 30, 2023, respectively.

The Company may receive payments from customers in advance of the satisfaction of performance obligations primarily for material price variances, inventory purchases, tooling, or other miscellaneous services or costs.

These payments are recognized as contract liabilities until the performance obligations are completed and are included in Advances from customers, if inventory related, and Accrued expenses, if not inventory related, on the Condensed Consolidated Balance Sheets , which amounted to $ 53.7 million and $ 45.6 million as of September 30, 2023 and June 30, 2023, 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, 2023 June 30, 2022

(Amounts in Thousands) September 30, 2023 June 30, 2023

Finished products $ 54 $ 432

3 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

During the nine months ended March 31, 2023 and 2022, 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, 2023 and 2022, 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) ( 4,230 ) ( 2,522 ) 17 ( 6,735 )

Balance at March 31, 2023

Balance at September 30, 2023

$ ( 16,062 ) $ ( 1,154 ) $ ( 565 ) $ ( 17,781 )

4 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 )

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) 2023 2022

17 unchanged sentences

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

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, 2023 and 2022 were as follows:

Nine Months Ended

(Amounts in Thousands) 2023 2022

Product warranty liability at the beginning of the period $ 529 $ 610

Additions to warranty accrual (including changes in estimates) 158 ( 64 )

Settlements made (in cash or in kind) ( 109 ) ( 13 )

Product warranty liability at the end of the period $ 578 $ 533

This product warranty liability and expense were immaterial during the three months ended September 30, 2023 and 2022.

Credit Facilities

1 unchanged sentence

Borrowing Capacity at Borrowings Outstanding at Borrowings Outstanding at

(Amounts in Millions, in U.S Dollar Equivalents) March 31, 2023 March 31, 2023 June 30, 2022

(Amounts in Millions, in U.S Dollar Equivalents) September 30, 2023 September 30, 2023 June 30, 2023

Primary credit facility (1)

29 unchanged sentences

• 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,

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 not 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 March 31, 2023 and June 30, 2022.

The Company had $ 0.4 million in letters of credit contingently committed against the credit facility at both September 30, 2023 and June 30, 2023.

(2) The Company entered into a 364-day multi-currency revolving credit facility agreement on February 3, 2023 (the “secondary credit facility”), which allows for borrowings up to $ 50 million, among the Company, as borrower, certain subsidiaries of the Company as guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., as Documentation Agent.

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The Company’s financial covenants under this secondary credit facility are the same as the financial covenants for its primary credit facility.

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

(4) The Company entered into a foreign credit facility for its EMS operation in China during the first quarter of fiscal year 2023 which allows for borrowings up to $ 7.5 million.

(5) The Company entered into a foreign credit facility for its operation in Poland which allows for borrowings up to 5.0 million Euro (approximately $ 5.4 million equivalent).

(6) The Company entered into a foreign credit facility for its operation in Vietnam which allows for borrowings up to $ 5.0 million.

(3) The Company also maintains foreign credit facilities for working capital and general corporate purposes at specific foreign locations rather than utilizing funding from intercompany sources.

These foreign credit facilities can be canceled at any time by either the bank or us and generally include renewal clauses.

Interest on borrowing under these facilities is charged at a rate as defined under the respective foreign credit facility.

(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 May 4, 2027.

The weighted-average interest rate on borrowings outstanding under the credit facilities at March 31, 2023 and June 30, 2022 were 6.6 % and 2.7 %, respectively.

The weighted-average interest rate on borrowings outstanding under the credit facilities at September 30, 2023 and June 30, 2023 were 7.1 % and 6.8 %, respectively.

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

5 unchanged sentences

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

There were no changes in the inputs or valuation techniques used to measure fair values during the nine months ended March 31, 2023.

There were no changes in the inputs or valuation techniques used to measure fair values during the three months ended September 30, 2023.

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, 2023.

Recurring Fair Value Measurements:

As of March 31, 2023 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:

March 31, 2023

As of September 30, 2023 and June 30, 2023, 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, 2023

(Amounts in Thousands) Level 1 Level 2 Total

Cash equivalents $ — $ — $ —

foreign exchange contracts — 2,642 2,642

6 unchanged sentences

(Amounts in Thousands) Level 1 Level 2 Total

Cash equivalents $ 1,541 $ — $ 1,541

foreign exchange contracts — 6,320 6,320

4 unchanged sentences

Total liabilities at fair value $ — $ 1,245 $ 1,245

We had no level 3 assets or liabilities at March 31, 2023 and June 30, 2022, or any activity in Level 3 assets or liabilities during the nine months ended March 31, 2023.

We had no level 3 assets or liabilities at September 30, 2023 and June 30, 2023, or any activity in Level 3 assets or liabilities during the three months ended September 30, 2023.

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

3 unchanged sentences

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

There were no changes to the inputs and valuation techniques used to assess the fair value of these financial instruments during the nine months ended March 31, 2023.

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, 2023.

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, 2023.

9 unchanged sentences

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 March 31, 2023, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

As of September 30, 2023, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

dollar in the aggregate notional amount of $ 14.1 million and to hedge currencies against the Euro in the aggregate notional amount of 59.8 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 March 31, 2023, we estimate that approximately $ 3.4 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, 2023, we estimate that approximately $ 0.2 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 March 31, 2023 and June 30, 2022.

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, 2023 and June 30, 2023.

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 March 31,

(Amounts in Thousands) Balance Sheet Location September 30,

2023 June 30,

2022 Balance Sheet Location March 31,

2023 Balance Sheet Location September 30,

2023 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) 2023 2022

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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) 2023 2022

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Employee Benefit Plans

Defined Contribution Retirement Plan:

The Company maintains a trusteed defined contribution retirement plan which is in effect for substantially all domestic employees meeting the eligibility requirements.

The Company matches 50% of eligible employee contributions up to 6%.

The Company also provides a discretionary contribution determined annually by the Talent, Culture, and Compensation Committee of the Company’s Board of Directors.

Total expense related to employer contributions to the domestic retirement plans was, in millions, $ 1.6 million and $ 1.5 million for the three months ended September 30, 2023 and September 30, 2022, respectively.

The Company also maintains a supplemental employee retirement plan (“SERP”) for executives and other key employees which enables them to defer cash compensation on a pre-tax basis and restore amounts that would otherwise be payable under our tax-qualified retirement plans if the IRS did not have limits on includable compensation and maximum benefits.

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.

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

As of March 31, 2023, both total investments and obligations under SERP were $ 8.4 million, of which $ 2.7 million were short term and $ 5.7 million were long term.

As of September 30, 2023, both total investments and obligations under SERP were $ 6.0 million, of which $ 1.6 million were short term and $ 4.4 million were long term.

As of June 30, 2023, both total investments and obligations under SERP were $ 8.7 million, of which $ 2.7 million were short term and $ 6.0 million were long term.

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.

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 both the nine months ended March 31, 2023 and 2022 was approximately $ 0.1 million and $( 1.1 ) million, respectively.

The change in net unrealized holding gains for both the three months ended September 30, 2023 and 2022 was approximately $( 0.2 ) million and $( 0.3 ) million, respectively.

Defined Benefit Postemployment Plan:

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, 2023 and 2022.

As of September 30, 2023 and June 30, 2023, total obligations under these plans were both $ 6.6 million, of which $ 5.6 million were both long term and $ 1.0 million were both short term.

Net periodic benefit costs were not material for the three months ended September 30, 2023 and 2022.

Stock Compensation Plans

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

On September 20, 2023, on the recommendation of our Talent, Culture, and Compensation (TCC) Committee, our Board adopted the Kimball Electronics, Inc.

2023 Equity Incentive Plan (the “2023 Plan”), subject to Share Owner approval at our 2023 Annual Meeting.

The 2023 Plan will supersede our 2014 Plan if it is approved by our Share Owners.

On October 20, 2016, the Board approved a nonqualified deferred stock compensation plan, the Kimball Electronics, Inc.

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For more information on the 2014 Plan and the Deferral Plan, refer to our Annual Report on Form 10-K for the year ended June 30, 2023.

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

For more information on the 2023 Plan, refer to our Notice of 2023 Annual Meeting and Proxy Statement.

During the first three months of fiscal year 2024, the following stock compensation was granted under the 2014 Plan and the Deferral Plan.

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

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1st Quarter 71,422 $ 29.19

Long-Term Performance Shares (4)

1st Quarter 500 $ 21.51

Unrestricted Shares (5)

2nd Quarter 13,842 $ 23.30

Deferred Share Units (6)

2nd Quarter 38,925 $ 23.07

Unrestricted Shares (5)

3rd Quarter 108 $ 23.30

Deferred Share Units (6)

3rd Quarter 107 $ 23.30

Long-Term Performance Shares (1)

3rd Quarter 92,072 $ 25.51

Restricted Shares (3)

3rd Quarter 23,017 $ 25.51

Total Shareholder Return Performance Shares (7)

3rd Quarter 42,626 $ 16.88

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

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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.

(5) Unrestricted shares were awarded to non-employee members of the Board as compensation for the portion of their annual retainer fees resulting from their elections 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.

(6) 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 .

(7) Total shareholder return (“TSR”) performance shares were awarded to our CEO during fiscal year 2023.

This award was approved by the Talent, Culture, and Compensation Committee of the Board.

The participant will earn from 0 % to 100 % of the target award based on the total shareholder return ranking of the Company compared to the performance peer group at the end of the three -year performance period.

The shares will vest on March 1, 2026.

Goodwill and Other Intangible Assets

A summary of goodwill is as follows:

(Amounts in Thousands) March 31,

(Amounts in Thousands) September 30,

2023 June 30,

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

March 31, 2023 June 30, 2022

September 30, 2023 June 30, 2023

(Amounts in Thousands) Cost Accumulated

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Other Intangible Assets $ 51,250 $ ( 39,647 ) $ 11,603 $ 51,120 $ ( 38,785 ) $ 12,335

During the three months ended March 31, 2023 and 2022, amortization expense of other intangible assets was $ 0.9 million and $ 0.8 million, respectively.

During the nine months ended March 31, 2023 and 2022, amortization expense of other intangible assets was $ 2.6 million.

For both the three months ended September 30, 2023 and 2022, 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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Share Owners’ Equity

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

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

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

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

During the nine months ended March 31, 2023, 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.

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

During both the three months ended September 30, 2023 and 2022, the Company had no share repurchases under the Repurchase Plan.

Since the inception of the Repurchase Plan, the Company has repurchased $ 88.8 million of common stock at an average cost of $ 15.27 per share.

Earnings Per Share

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) 2023 2022

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

What changed 10-Q

Item 1. Financial Statements