Kimball Electronics Reports Fourth Quarter and Fiscal Year 2016 Results

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Kimball Electronics Inc., a leading global electronic manufacturing services (EMS) provider of high-quality, durable electronic products, has announced financial results for its fourth quarter and fiscal year ended June 30, 2016. Kimball has posted net sales of $220 million for the three months ended June 30, 2016, up from $201.13 million in the same period of the previous year.

Donald D. Charron, Chairman and Chief Executive Officer, stated, “Continued strength in the automotive market combined with sales from new program launches helped us set new quarterly and annual sales records in the fourth quarter and fiscal year of 2016. Our new business opportunities pipeline remains healthy and we continue to work diligently to achieve our goal of $1 billion in annual sales by fiscal year 2018.”

Charron continued, “While we were pleased to have achieved our goal of 4% operating income in the fourth quarter, we continue to experience pressure on our margins and still have work to do in order to consistently achieve our 4% operating income target. Margin expansion will continue to be a priority of focus for us going forward. Fiscal year 2017 will be a pivotal year for us as we work through another year of significant new program launches, the ramp-up of our new Romaniaoperation, and the integration of our recent Medivative and Aircom acquisitions.”

Fourth Quarter Fiscal Year 2016 Overview:

• Consolidated net sales increased 10% compared to the fourth quarter of fiscal year 2015, setting a new quarterly sales record.
• On May 2, 2016, the Company announced the acquisition of Medivative Technologies, LLC. Excluding the incremental net sales associated with the acquisition, consolidated net sales increased 8% over the prior year fourth quarter. Consolidated earnings were not materially impacted during the quarter from the Medivative acquisition.
• Incremental net loss associated with the start-up of the Romania facility was $1.0 million during the current year fourth quarter.
• Cash flow from operating activities was $8.8 million during the quarter.
• Investments in capital expenditures were $6.5 million during the quarter.
• $5.0 million was returned to Share Owners during the quarter in the form of common stock repurchases associated with the $20 million, 18-month stock repurchase program announced in October 2015.
• Cash and cash equivalents were $54.7 million and borrowings outstanding on credit facilities were $9.0 million at June30, 2016.
• Cash conversion days (“CCD”) for the quarter ended June30, 2016 were 59 days, which improved from 63 days for the same quarter last year. CCD is calculated as the sum of days sales outstanding plus production days supply on hand less accounts payable days.

Net Sales by Vertical Market:

• Net sales increased 3% from the prior fiscal year, setting a new annual record of $842.1 million.
• Spin-off expenses totaled $0.1 million and $2.6 million in fiscal years 2016 and 2015, respectively.
• Cash flow provided by operating activities for fiscal year 2016 was $36.8 million.
• Capital expenditures were $34.6 million in fiscal year 2016 compared to $36.9 million in fiscal year 2015.
• Return on invested capital (“ROIC”) was 9.0% for fiscal year 2016, which declined from 12.5% for the prior fiscal year (see reconciliation of non-GAAP financial measures for ROIC calculation).
• Fiscal year 2015 financial results included an allocation of costs incurred by our former parent, Kimball International, Inc., through October 31, 2014, the completion date of our spin-off from our former parent. As a result, the full fiscal year 2015 financial statements were not necessarily indicative of our complete cost structure as an independent company.

Outlook

• Management maintains the goal of $1 billion in net sales by fiscal year 2018 and believes it is achievable.
• Management is maintaining a mid-range goal of 4% operating income.
• A long-term goal of 12.5% ROIC has been set by management.
• Fiscal year 2017 capital expenditures are expected to remain at a similar level as fiscal year 2016 with significantly higher spending occurring in the first half of the year. Fiscal year 2018 capital expenditures are expected to decline to a level that approximates depreciation expense.