What changed in this filing

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Item 1. Financial Statements

2024-11-06 compared with 2024-05-08 · 116 added, 251 removed, 489 unchanged (43% of the section changed)

3 unchanged sentences

(Amounts in Thousands, Except for Share Data)

September 30,

2024 June 30,

47 unchanged sentences

KIMBALL ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in Thousands, Except for Per Share Data)

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Unaudited) 2024 2023

3 unchanged sentences

Selling and Administrative Expenses 13,427 16,052

Other General Income ( 892 ) — ( 892 ) —

Restructuring Expense 2,322 —

Goodwill Impairment 5,820 — 5,820 —

Asset Impairment 16,564 — 16,564 —

Operating Income (Loss)

( 6,431 ) 25,220 29,669 56,280

Gain on Disposal ( 1,264 ) —

Operating Income 9,115 19,490

Other Income (Expense):

3 unchanged sentences

Other income (expense), net ( 6,231 ) ( 6,279 )

Income (Loss) Before Taxes on Income ( 12,753 ) 21,876 11,734 48,237

Income Before Taxes on Income 2,884 13,211

Provision (Benefit) for Income Taxes

( 270 ) 2,457

Net Income (Loss) $ ( 6,076 ) $ 16,400 $ 12,968 $ 36,629

Earnings (Loss) Per Share of Common Stock:

Net Income $ 3,154 $ 10,754

Earnings Per Share of Common Stock:

Basic $ 0.13 $ 0.43

8 unchanged sentences

Three Months Ended Three Months Ended

March 31, 2024 March 31, 2023

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

Net income (loss)

$ ( 6,076 ) $ 16,400

Other comprehensive income (loss):

Foreign currency translation adjustments $ ( 3,678 ) $ ( 193 ) $ ( 3,871 ) $ 2,094 $ — $ 2,094

Postemployment actuarial change ( 23 ) 5 ( 18 ) ( 68 ) 18 ( 50 )

Derivative gain (loss) 2,185 ( 499 ) 1,686 3,270 ( 768 ) 2,502

Reclassification to (earnings) loss:

Derivatives ( 1,600 ) 352 ( 1,248 ) ( 1,111 ) 293 ( 818 )

Amortization of actuarial change 37 ( 9 ) 28 ( 19 ) 5 ( 14 )

Other comprehensive income (loss) $ ( 3,079 ) $ ( 344 ) $ ( 3,423 ) $ 4,166 $ ( 452 ) $ 3,714

Total comprehensive income (loss)

$ ( 9,499 ) $ 20,114

Nine Months Ended Nine Months Ended

March 31, 2024 March 31, 2023

September 30, 2024 September 30, 2023

(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) 2024 2023

1 unchanged sentence

Net income $ 3,154 $ 10,754

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

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

Depreciation and amortization 9,195 9,017

(Gain) loss on sales of assets 110 ( 37 )

Gain on sales of assets

( 126 ) ( 10 )

Deferred income taxes 3,146 694

Goodwill impairment 5,820 —

Asset impairment 16,264 —

Gain on disposal

Stock-based compensation 2,072 1,693

8 unchanged sentences

Accrued expenses and taxes payable ( 22,542 ) ( 8,614 )

Net cash provided by (used for) operating activities 24,717 ( 57,885 )

Net cash provided by operating activities 45,474 12,801

Cash Flows From Investing Activities:

2 unchanged sentences

Purchases of capitalized software ( 165 ) ( 148 )

Net proceeds from disposal

Other, net 16 ( 16 )

Net cash used for investing activities ( 37,702 ) ( 66,497 )

Net cash provided by (used for) investing activities 5,226 ( 11,302 )

Cash Flows From Financing Activities:

Proceeds from credit facilities — 75,000

Payments on credit facilities ( 50,000 ) —

Net change in revolving credit facilities 900 15,350

Repurchases of common stock ( 2,917 ) —

Payments related to tax withholding for stock-based compensation ( 937 ) ( 1,365 )

Debt issuance costs ( 150 ) ( 100 )

Net cash provided by financing activities 36,571 107,148

Net cash (used for) provided by financing activities ( 52,954 ) 13,985

Effect of Exchange Rate Change on Cash and Cash Equivalents 1,830 ( 549 )

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash 23,473 ( 17,528 )

Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash ( 424 ) 14,935

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,

2024 June 30,

9 unchanged sentences

(Unaudited) Additional Paid-In Capital

Amounts at December 31, 2023 $ 316,309 $ 315,097 $ ( 9,641 ) $ ( 74,776 ) $ 546,989

Net income (loss)

( 6,076 ) ( 6,076 )

Amounts at June 30, 2024 $ 319,463 $ 316,564 $ ( 17,807 ) $ ( 77,759 ) $ 540,461

Other comprehensive income (loss) 6,038 6,038

2 unchanged sentences

( 2,246 ) 1,285 ( 961 )

Amounts at March 31, 2024 $ 317,828 $ 309,021 $ ( 13,064 ) $ ( 74,724 ) $ 539,061

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

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

Net income 12,968 12,968

Other comprehensive income (loss) ( 2,018 ) ( 2,018 )

Issuance of non-restricted stock ( 18,000 shares)

Compensation expense related to stock compensation plans 5,138 5,138

Performance and restricted share issuance ( 108,000 and 19,000 shares)

Repurchase of Common Stock ( 159,000 shares) (including excise tax)

( 2,892 ) ( 2,892 )

Amounts at March 31, 2024 $ 317,828 $ 309,021 $ ( 13,064 ) $ ( 74,724 ) $ 539,061

Amounts at September 30, 2024 $ 319,175 $ 319,718 $ ( 11,769 ) $ ( 79,366 ) $ 547,758

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 shares 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

See Notes to Condensed Consolidated Financial Statements .

6 unchanged sentences

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, 2024 and June 30, 2023, results of operations for the three and nine months ended March 31, 2024 and 2023, cash flows for the nine months ended March 31, 2024 and 2023, and share owners’ equity for the three and nine months ended March 31, 2024 and 2023.

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of September 30, 2024 and June 30, 2024, results of operations for the three months ended September 30, 2024 and 2023, cash flows for the three months ended September 30, 2024 and 2023, and share owners’ equity for the three months ended September 30, 2024 and 2023.

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, 2024 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.

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:

9 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.

17 unchanged sentences

Customary terms require payment within 30 to 45 days, with any terms beyond 45 days being considered extended payment terms.

We utilize factoring arrangements for certain of our accounts receivables with third-party financial institutions in order to extend terms for the customer without negatively impacting our cash flow.

We participate in our customers’ supply chain financing arrangements for certain of our accounts receivables in order to extend terms for the customer without negatively impacting our cash flow.

These arrangements in all cases do not contain recourse provisions which would obligate us in the event of our customers’ failure to pay.

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.

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 nine months ended March 31, 2024 and 2023, we sold, without recourse, $ 317.0 million and $ 357.1 million of accounts receivable, respectively.

For the three months ended March 31, 2024 and 2023, factoring fees were $ 0.9 million and $ 1.4 million, and $ 2.6 million and $ 3.8 million during the nine months ended March 31, 2024 and 2023, respectively.

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

In the three months ended September 30, 2024 and 2023, we sold, without recourse, $ 87.3 million and $ 103.0 million of accounts receivable, respectively.

For the three months ended September 30, 2024 and 2023, factoring fees were $ 0.5 million and $ 0.9 million.

Factoring fees are recorded in Non-operating income (expense), net on our Condensed Consolidated Statements of Income for the three months ended September 30, 2024.

Prior to fiscal year 2025, factoring fees were recorded in Selling and Administrative Expenses.

During the three months ended December 31, 2023, changes to the expected timing of payments from and risk of default for a customer resulted in the recording of an allowance for credit losses of $ 2.0 million in Selling and Administrative Expenses on our Condensed Consolidated Statements of Income.

1 unchanged sentence

The amount expected to be collected after twelve months is included in Other Assets, net on the Condensed Consolidated Balance Sheet.

At March 31, 2024, the noncurrent receivable associated with this customer in Other Assets, net totaled $ 2.5 million, which is net of the $ 2.0 million allowance for expected credit losses.

The current portion of receivables from this customer is $ 2.8 million at March 31, 2024.

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 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.

During the quarter ending March 31, 2024, the Company made the decision to divest of GES, our automation, test and measurement business unit and committed to a plan to sell the business.

As a result, the business unit met the criteria to be classified as held for sale, and goodwill and asset impairment were recorded during the quarter.

See Note 3 - Assets and Liabilities He ld for Sale for more information on goodwill and asset impairment and Note 12 - Goodwill and Other Intangible Assets of Notes to Condensed Consolidated Financial Statements for more information on Goodwill and Other Intangible Assets.

The Company leases certain office facilities, warehouse facilities, and equipment 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 $ 1.9 million at March 31, 2024 and $ 2.6 million at June 30, 2023, respectively.

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

Other General Income:

Other General Income in the three and nine months ended March 31, 2024 included $ 0.9 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.

Restructuring:

We recorded restructuring expense of $ 1.6 million in the three and nine months ended March 31, 2024 for employee-related costs as we undertook restructuring efforts during the current quarter to align our cost structure with reduced end market demand levels, including resizing our workforce and taking specific cost actions.

We expect to continue executing the restructuring efforts over the remainder of the calendar year and estimate between $ 1.0 million and $ 2.0 million of additional pre-tax restructuring charges.

At September 30, 2024, the noncurrent receivable associated with this customer in Other Assets, net totaled $ 2.7 million, which is net of the $ 2.0 million allowance for expected credit losses.

The current portion of receivables from this customer is $ 2.2 million at September 30, 2024.

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, government subsidies, bank charges, 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, factoring fees, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations.

Prior to fiscal year 2025, factoring fees were recorded in Selling and Administrative Expenses on our Condensed Consolidated Statements of Income.

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) 2024 2023

1 unchanged sentence

Gain (loss) on SERP investments 345 ( 177 )

Factoring fees ( 537 ) —

Credit facilities and bank fees ( 263 ) ( 201 )

Other ( 172 ) ( 79 )

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, 2024 and June 30, 2023, the remaining provision recorded for the one-time deemed repatriation tax was $ 5.9 million and $ 7.8 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, 2024, $ 2.6 million of the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheets.

As of September 30, 2024 and June 30, 2024, the remaining provision recorded for the one-time deemed repatriation tax was $ 3.3 million and $ 5.9 million, respectively, payable through fiscal year 2026.

As of September 30, 2024, the remaining deemed repatriation tax is short term and is recorded in Accrued expenses on the Condensed Consolidated Balance Sheets.

New Accounting Standards:

9 unchanged sentences

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 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, 2024 and 2023.

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, and precision molded plastics in automotive, medical, and industrial applications, to the specifications and designs of our customers.

The following table disaggregates our revenue by end market vertical for the three months ended September 30, 2024 and 2023.

Three Months Ended

(Amounts in Millions) 2024 2023

Vertical Markets:

Automotive (1)

$ 188.4 $ 212.5

113.0 135.5 323.5 377.1

Industrial (3)

110.0 127.3 346.2 334.9

Total net sales $ 374.3 $ 438.1

(1) For the three and nine months ended March 31, 2023, respectively, $ 5.9 million and $ 14.8 million of the Automotive net sales were previously categorized as Other.

(2) For the three and nine months ended March 31, 2023, respectively, $ 1.5 million and $ 3.6 million of the Medical net sales were previously categorized as Other.

(3) For the three and nine months ended March 31, 2023, respectively, $ 0.4 million and $ 2.1 million of the Industrial net sales were previously categorized as Other .

For the three months ended March 31, 2024 and 2023, 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.

For both the nine months ended March 31, 2024 and 2023, approximately 96 % of our net sales, respectively, were recognized over time.

For both the three months ended September 30, 2024 and 2023, approximately 97 % 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.

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 $ 76.1 million and $ 78.8 million as of March 31, 2024 and June 30, 2023, respectively.

Contract assets were $ 74.3 million and $ 76.3 million as of September 30, 2024 and June 30, 2024, 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 $ 49.6 million and $ 45.6 million as of March 31, 2024 and June 30, 2023, respectively.

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 $ 42.3 million and $ 43.1 million as of September 30, 2024 and June 30, 2024, 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

See Note 5 - Inventories of Notes to Condensed Consolidated Financial Statements for further discussion.

Assets and Liabilities Held for Sale

In the third quarter of fiscal year 2024, the Company made the decision to divest of GES, our automation, test and measurement business unit (“disposal group”), and committed to a plan to sell the business, allowing for increased focus and support for the Company’s EMS operations.

As a result, the disposal group business has met the criteria to be classified as held for sale.

Accordingly, the Company classified the assets and liabilities of the disposal group as held for sale during the third quarter of fiscal year 2024.

The Company expects a sale of the disposal group to occur within the next 12 months.

The disposal group did not qualify as discontinued operations as it did not represent a strategic shift that will have a major effect on our operations and financial results.

Once the disposal group was classified as held for sale, it was reported at the lower of its carrying value or fair value less costs to sell during the quarter ended March 31, 2024.

The carrying value exceeded the fair value less costs to sell, and the Company recognized impairment charges of $ 5.8 million and $ 16.6 million on goodwill and assets held for sale, respectively.

The Company ceased recording depreciation and amortization on the applicable assets of the disposal group.

We assess goodwill for impairment at the reporting unit level annually or when conditions indicate an earlier review is necessary.

In connection with the preparation of our financial statements for the quarter ended March 31, 2024, we completed an impairment analysis for the goodwill recorded in the reporting unit due to the more-likely-than-not expectation of selling the reporting unit.

We determined the reporting unit’s carrying value was more than its fair value by an amount greater than the $ 5.8 million carrying amount of goodwill and thus was fully impaired.

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

The major classes of assets and liabilities held for sale consisted of the following:

(Amounts in Thousands) March 31,

Assets held for sale:

Receivables, net $ 8,599

Inventories 7,217

Prepaid expenses and other current assets 4,766

Property and Equipment, net 5,822

Other Intangible Assets, net 8,010

Other Assets, net

Valuation Allowance ( 16,264 )

Total Assets held for sale $ 29,619

Liabilities held for sale:

Accounts payable $ 4,239

Advances from customers 944

Accrued expenses 2,302

Other long-term liabilities 1,884

Total Liabilities held for sale $ 9,369

Other assets, net in the table above includes $ 10.2 million of deferred tax assets.

Following approval by our Board of Directors, on July 31, 2024, we entered into a definitive agreement and closed on the sale of 100% of the equity interests in GES to Averna Test Systems, Inc., resulting in cash proceeds after costs to sell of $ 18.5 million, which is subject to additional purchase price adjustments.

The pre-tax gain recognized on the sale in the first quarter of fiscal year 2025 was $ 1.3 million.

In fiscal year 2024, following the Company’s decision to divest of GES, we classified the disposal group as held for sale and recognized $ 22.9 million in pre-tax impairment charges.

The following table summarizes net sales and income (loss) before taxes on income for the disposal group:

Three Months Ended Nine Months Ended

March 31 March 31

Three Months Ended

(Amounts in Thousands) 2024 2023

2 unchanged sentences

$ 985 $ ( 595 )

(1) Includes goodwill impairment of $ 5.8 million and asset impairment of $ 16.6 million for the three and nine months ended March 31, 2024.

Also includes allocated corporate overhead expenses.

(1) Includes gain on sale of $ 1.3 million for the three months ended September 30, 2024.

Each period also includes allocated corporate overhead expenses.

Restructuring and Subsequent Event

In the three months ended September 30, 2024, we continued our restructuring efforts to align our cost structure with reduced end market demand levels, including resizing our workforce and taking specific cost actions, and recorded restructuring expense of $ 2.3 million which were primarily employee-related costs.

The cumulative amount incurred since inception of these efforts beginning in fiscal year 2024 through September 30, 2024 was $ 4.7 million.

We expect to continue executing these previously announced restructuring efforts over the remainder of the fiscal year and estimate between $ 2.0 million and $ 3.0 million of additional pre-tax restructuring charges.

In addition, on November 4, 2024 , the Company announced that its Board of Directors has approved a plan to cease operations at our Tampa facility, expected to be completed by the end of the fiscal year.

The decision was another important step towards sharpening our strategic focus, while leveraging our global footprint and streamlining the operating structure.

We expect to incur approximately $ 8.0 million to $ 11.0 million in total exit costs, including most significantly $ 6.0 million to $ 7.0 million in employee termination benefits and $ 2.0 million to $ 3.0 million in logistical costs to transfer and validate programs at our other facilities.

We expect these costs to be predominantly cash expenditures, and a majority are anticipated to be incurred over the remainder of fiscal year 2025.

As the commitment to this disposal plan occurred subsequent to September 30, 2024, no charges have been incurred or recorded in the quarter.

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

Inventory components were as follows:

(Amounts in Thousands) March 31, 2024 June 30, 2023

(Amounts in Thousands) September 30, 2024 June 30, 2024

Finished products $ 192 $ 141

2 unchanged sentences

Total inventory $ 335,272 $ 338,116

Additionally, we have raw materials inventory totaling $ 44.1 million classified as long-term included in Other Assets, net in our Condensed Consolidated Balance Sheets.

Additionally, as of September 30 and June 30, 2024, we have raw materials inventory totaling $ 43.1 million and $ 42.8 million, respectively, classified as long-term included in Other Assets, net in our Condensed Consolidated Balance Sheets.

This inventory is associated with a customer who is remediating a recall and we do not expect the inventory to be consumed within the next twelve months.

We have received deposits totaling $ 29.1 million from this customer related to this inventory, which is included in Other long-term liabilities in our Condensed Consolidated Balance Sheets.

At June 30, 2023, we had no inventory or customer deposits classified as long-term.

As of September 30 and June 30, 2024, we have received deposits totaling $ 42.0 million and $ 38.7 million, respectively, from this customer related to this inventory, which is included in Other long-term liabilities in our Condensed Consolidated Balance Sheets.

Accumulated Other Comprehensive Income (Loss)

During the nine months ended March 31, 2024 and 2023, 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, 2024 and 2023, 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) 6,951 ( 1,024 ) 111 6,038

Balance at March 31, 2024

Balance at September 30, 2024

$ ( 7,309 ) $ ( 3,419 ) $ ( 1,041 ) $ ( 11,769 )

4 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 )

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) 2024 2023

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.

This product warranty liability and expense were immaterial during the nine months ended March 31, 2024 and 2023.

This product warranty liability and expense were immaterial during the three months ended September 30, 2024 and 2023.

Credit Facilities

1 unchanged sentence

Borrowing Capacity at Borrowings Outstanding at Borrowings Outstanding at

(Amounts in Millions, in U.S Dollar Equivalents) March 31, 2024 March 31, 2024 June 30, 2023

(Amounts in Millions, in U.S Dollar Equivalents) September 30, 2024 September 30, 2024 June 30, 2024

Primary credit facility (1)

5 unchanged sentences

Poland revolving credit facility (3)

Vietnam credit facility (3)

Total credit facilities $ 186.8 $ 245.9 $ 294.8

23 unchanged sentences

• 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, 2024 and June 30, 2023.

The Company had $ 0.4 million in letters of credit contingently committed against the primary credit facility at both September 30, 2024 and June 30, 2024.

(2) The Company amended its 364-day multi-currency revolving credit facility agreement on January 5, 2024 (the “secondary credit facility”), which allows for borrowings up to $ 100.0 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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Interest on borrowing under these facilities is charged at a rate as defined under the respective foreign credit facility.

During the second quarter of fiscal year 2024, the Company entered into a foreign credit facility for its EMS operation in China with a new lender, which allows for borrowings up to 50 million RMB, and canceled the prior credit facility which allowed for borrowings up to $ 7.5 million.

As a result of the GES divestiture that occurred on July 31, 2024, the Company no longer has the Vietnam credit facility, which allowed for borrowings up to $ 5.0 million.

(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, 2024 and June 30, 2023 were 6.9 % and 6.8 %, respectively.

The weighted-average interest rate on borrowings outstanding under the credit facilities at both September 30, 2024 and June 30, 2024 were 6.8 %.

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, 2024.

There were no changes in the inputs or valuation techniques used to measure fair values during the three months ended September 30, 2024.

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, 2024.

Recurring Fair Value Measurements:

As of March 31, 2024 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:

March 31, 2024

As of September 30, 2024 and June 30, 2024, 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, 2024

(Amounts in Thousands) Level 1 Level 2 Total

Cash equivalents $ 17,431 $ — $ 17,431

foreign exchange contracts $ — $ 916 $ 916

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Total liabilities at fair value $ — $ 2,485 $ 2,485

We had no level 3 assets or liabilities at March 31, 2024 and June 30, 2023, or any activity in Level 3 assets or liabilities during the nine months ended March 31, 2024.

We had no level 3 assets or liabilities at September 30, 2024 and June 30, 2024, or any activity in Level 3 assets or liabilities during the three months ended September 30, 2024.

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

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See Note 1 1 - Employee Benefit Plans of Notes to Condensed Consolidated Financial Statements for further information regarding the SERP.

Non-Recurring Fair Value Measurements:

As of March 31, 2024, the automation, test and measurement business unit met the criteria to be classified as held for sale, and as a result, a valuation allowance of $ 16.3 million was established to reflect the fair value less cost to sell of the disposal group, which was based on expected proceeds and the estimated carrying value of the net assets to be disposed.

We utilized Level 3 inputs based on management’s best estimates and assumptions to estimate the fair value.

See Note 3 - Assets and Liabilities Held for Sale of Notes to Condensed Consolidated Financial Statements for additional information.

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, 2024.

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, 2024.

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, 2024.

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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, 2024, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

As of September 30, 2024, we had outstanding foreign exchange contracts to hedge currencies against the U.S.

dollar in the aggregate notional amount of $ 27.1 million and to hedge currencies against the Euro in the aggregate notional amount of 56.4 million Euro.

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

Based on fair values as of March 31, 2024, we estimate that approximately $ 3.5 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, 2024, we estimate that approximately $ 2.9 million of pre-tax derivative loss deferred in Accumulated Other Comprehensive Loss will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months.

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, 2024 and June 30, 2023.

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, 2024 and June 30, 2024.

See Note 9 - Fair Value of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of derivative assets and liabilities and Note 6 - 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,

2024 June 30,

2023 Balance Sheet Location March 31,

2024 Balance Sheet Location September 30,

2024 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) 2024 2023

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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) 2024 2023

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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, $ 3.7 million and $ 4.2 million for the nine months ended March 31, 2024 and March 31, 2023, respectively.

Total expense related to employer contributions to the domestic retirement plans was $ 0.4 million and $ 1.6 million for the three months ended September 30, 2024 and September 30, 2023, 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.

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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, 2024, both total investments and obligations under SERP were $ 5.4 million, of which $ 0.3 million were short term and $ 5.1 million were long term.

As of September 30, 2024, both total investments and obligations under SERP were $ 5.8 million, of which $ 2.1 million were short term and $ 3.7 million were long term.

As of June 30, 2024, both total investments and obligations under SERP were $ 5.4 million, of which $ 2.0 million were short term and $ 3.4 million were long term.

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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, 2024 and 2023 was approximately $ 0.4 million and $ 0.1 million, respectively.

The change in net unrealized holding gains for the three months ended September 30, 2024 and 2023 was approximately $ 0.3 million and $( 0.2 ) million, respectively.

Defined Benefit Postemployment Plan:

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

As of March 31, 2024, total obligations under these plans were $ 7.4 million of which $ 5.7 million were long term and $ 1.7 million were short term.

As of September 30, 2024, total obligations under these plans were $ 7.4 million of which $ 6.6 million were long term and $ 0.8 million were short term.

As of June 30, 2024, total obligations under these plans were $ 7.0 million of which $ 6.2 million were long term and $ 0.8 million were short term.

Net periodic benefit costs were not material for the nine months ended March 31, 2024 and 2023.

Net periodic benefit costs were not material for the three months ended September 30, 2024 and 2023.

Stock Compensation Plans

A stock compensation plan was created and adopted by the Company’s Board of Directors (the “Board”) on October 3, 2014.

The Kimball Electronics, Inc.

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

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

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 was approved by our Share Owners on November 17, 2023.

The 2023 Plan supersedes our 2014 Plan and allows for the issuance of up to 2.0 million shares.

A stock compensation plan was created and adopted by the Company’s Board of Directors (the “Board”) on September 20, 2023 and approved by our Share Owners at our 2023 Annual Meeting on November 17, 2023.

The 2023 Plan allows for the issuance of up to 2.0 million shares and replaced our former 2014 plan.

The shares under the 2023 Plan may be granted in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted awards, performance share awards, cash awards, and other equity awards.

The Plan is a ten-year plan that terminates automatically on November 17, 2033.

No award shall be granted pursuant to the Plan after such date, but awards theretofore granted may extend beyond that date.

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 2023 Plan and the Deferral Plan, refer to our Annual Report on Form 10-K for the year ended June 30, 2024.

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

During the first nine months of fiscal year 2024, the following stock compensation was granted under the 2014 Plan, the 2023 Plan, and the Deferral Plan.

During the first three months of fiscal year 2025, the following stock compensation was granted under the 2023 Plan and the Deferral Plan.

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

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1st Quarter 152,917 $ 18.49

Long-Term Performance Shares (4)

2nd Quarter 35,650 $ 25.21

Restricted Shares (4)

2nd Quarter 23,768 $ 25.21

Unrestricted Shares (5)

2nd Quarter 18,128 $ 25.24

Deferred Share Units (6)

2nd Quarter 26,347 $ 25.24

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

These annual performance share awards were approved by the Talent, Culture, and Compensation Committee of the Board.

The awards granted in fiscal year 2024 will cliff vest at the third anniversary of the award date in fiscal year 2027.

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.

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

(1) Long-term performance share awards for the leadership team members (consisting of our CEO and his direct reports) are expected to be granted in the second quarter of fiscal year 2025 upon approval of performance metrics by the Talent, Culture, and Compensation Committee of the Board (“Committee”).

The Committee granted long-term performance share awards to key employees not on our leadership team during the quarter.

These awards granted in fiscal year 2025 will cliff vest at the third anniversary of the award date in fiscal year 2028.

For these key employee 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 could be zero if minimum thresholds are not met up to a maximum of 125 % if results on both measures exceed targets under the formula.

(2) The grant date fair value is the weighted average stock price based on the dates of the grants.

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

(3) Restricted shares were granted to leadership team members and other key employees.

These restricted shares were approved by the Talent, Culture, and Compensation Committee of the Board.

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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) Additional long-term performance share and restricted share awards were approved by the Talent, Culture, and Compensation Committee of the Board and were granted in the second quarter of fiscal year 2024.

The awards will vest over a 5 -year performance cycle, with one-third of the interest in the shares vesting after year three of the grant, another one-third after year four of the grant, and the final one-third after year five of the grant.

The vesting of the performance share awards could range from 0 % to 100 % of the targeted issuable shares, dependent on the achievement of specific performance metrics.

(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 .

Goodwill and Other Intangible Assets

A summary of goodwill is as follows, amounts as of March 31, 2024 exclude the amounts classified as held for sale:

A summary of goodwill is as follows, amounts as of June 30, 2024 exclude the amounts that were classified as held for sale and later divested on July 31, 2024:

(Amounts in Thousands)

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Goodwill, net $ 6,191

Impairment recorded

Goodwill classified as held for sale

Accumulated impairment classified as held for sale

Balance as of March 31, 2024

Balance as of September 30, 2024

Goodwill 19,017

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Goodwill, net $ 6,191

A summary of other intangible assets subject to amortization is as follows, amounts as of March 31, 2024 exclude the amounts classified as held for sale:

March 31, 2024 June 30, 2023

(Amounts in Thousands) Cost Accumulated

Amortization Net Value Cost Accumulated

Amortization Net Value

Capitalized Software $ 30,500 $ ( 27,303 ) $ 3,197 $ 30,867 $ ( 27,385 ) $ 3,482

Customer Relationships — — — 8,618 ( 3,524 ) 5,094

Technology — — — 5,060 ( 4,816 ) 244

Trade Name — — — 6,575 ( 3,060 ) 3,515

Other Intangible Assets $ 30,500 $ ( 27,303 ) $ 3,197 $ 51,120 $ ( 38,785 ) $ 12,335

For the three months ended March 31, 2024 and 2023, amortization expense of other intangible assets was $ 0.5 million and $ 0.9 million, respectively.

For the nine months ended March 31, 2024 and 2023, amortization expense of other intangible assets was $ 2.0 million and $ 2.6 million, respectively.

Other Intangible Assets includes capitalized software.

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

The amortization period for the customer relationships, technology, and trade name intangible assets was 15 years, 5 years, and 10 years, respectively.

We ceased amortization on the intangible assets upon meeting the held for sale classification.

See Note 3 - Assets and Liabilities Held for Sale of Notes to Condensed Consolidated Financial Statements for additional information.

For the three months ended September 30, 2024 and 2023, amortization expense of other intangible assets was $ 0.3 million and $ 0.9 million, respectively.

The three months ended September 30, 2023 included the amortization on customer relationships, technology, and trade name intangible assets associated with GES.

See Note 3 - Sale of GES of Notes to Condensed Consolidated Financial Statements for additional information.

We have no intangible assets with indefinite useful lives, which are not subject to amortization.

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

During both the nine months ended March 31, 2024 and 2023, the Company had no share repurchases under the Repurchase Plan.

During the three months ended September 30, 2024, the Company repurchased $ 2.9 million shares of common stock under the Repurchase Plan at an average price of $ 18.01 per share.

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

Since the inception of the Repurchase Plan, the Company has repurchased $ 94.7 million of common stock at an average cost of $ 15.49 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) 2024 2023

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Diluted $ 0.12 $ 0.43

For the three months ended March 31, 2024, all 434,000 outstanding stock compensation awards were antidilutive, as a result of the net loss recognized for the period, and were excluded from the dilutive calculation.

The net loss in the three months ended March 31, 2024 was not allocated to participating securities as the holders have no requirements to fund losses.

For the nine months ended March 31, 2024 and for the three and nine months ended March 31, 2023, all outstanding stock compensation awards were dilutive and were included in the dilutive calculation.

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