Lasting relationships. Global success.Lasting relationships. Global success. Safe Harbor Statement Certain statements contained within this supplementary information and any statements made during our earnings conference call today may be considered forward-looking under the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties including, but not limited to, successful integration of acquisitions and new operations, the global economic conditions, significant volume reductions from key contract customers, loss of key customers or suppliers, financial stability of key customers and suppliers, availability or cost of raw materials, and increased competitive pricing pressures reflecting excess industry capacities. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of Kimball Electronics, Inc. (the “Company”) are contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, our earnings release, and other filings with the Securities and Exchange Commission (the “SEC”). This supplementary information contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP) in the United States in the statement of income, statement of comprehensive income, balance sheet, statement of cash flows, or statement of equity of the company. The non-GAAP financial measures contained herein include Selling & Administrative Expense (%), Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA and Return on Invested Capital (ROIC), which have been adjusted for spin-off expenses, proceeds from a lawsuit settlement, and a bargain purchase gain. Management believes it is useful for investors to understand how its core operations performed without the effects of incremental costs related to the spin-off, the lawsuit proceeds, and the bargain purchase gain. Excluding these amounts allows investors to meaningfully trend, analyze, and benchmark the performance of the Company’s core operations. Many of the Company’s internal performance measures that management uses to make certain operating decisions use these and other non-GAAP measures to enable meaningful trending of core operating metrics. 2
Lasting relationships. Global success.Lasting relationships. Global success. Reconciliation of Non-GAAP Results (Unaudited) Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Operating Income, as Reported $ 8,697 $ 10,821 $ 9,050 $ 6,921 $ 6,933 $ 7,078 $ 8,790 $ 12,822 Add: Spin-off Expenses 1,285 321 24 137 0 0 0 0 Less: Lawsuit Proceeds 0 0 0 0 0 0 0 4,005 Adjusted Operating Income $ 9,982 $ 11,142 $ 9,074 $ 7,058 $ 6,933 $ 7,078 $ 8,790 $ 8,817 Net Income, as reported $ 6,229 $ 7,191 $ 7,394 $ 4,475 $ 4,564 $ 7,477 $ 5,771 $ 10,122 Add: Spin-off Expenses 1,168 278 16 85 0 0 0 0 Less: Lawsuit Proceeds 0 0 0 0 0 0 0 2,499 Less: Bargain Purchase Gain 0 0 0 0 0 0 0 925 Adjusted Net Income $ 7,397 $ 7,469 $ 7,410 $ 4,560 $ 4,564 $ 7,477 $ 5,771 $ 6,698 Adjusted Net Income $ 7,397 $ 7,469 $ 7,410 $ 4,560 $ 4,564 $ 7,477 $ 5,771 $ 6,698 Add(Less) Interest, net (7) (10) (8) (11) (8) 1 19 16 Add Depreciation & Amortization 5,023 4,832 4,958 4,885 4,894 4,557 5,533 5,713 Add(Less) Taxes 2,622 2,744 1,301 1,780 1,781 (166) 2,294 3,463 Adjusted EBITDA $ 15,035 $ 15,035 $ 13,661 $ 11,214 $ 11,231 $ 11,869 $ 13,617 $ 15,890 Operating Income, As Reported (YTD) $ 16,484 $ 27,305 $ 36,355 $ 6,921 $ 13,854 $ 20,932 $ 29,722 $ 12,822 Add: Spin-off Expenses (YTD) $ 2,249 $ 2,571 $ 2,594 $ 137 $ 137 $ 137 $ 137 $ — Less: Lawsuit Proceeds $ — $ — $ — $ — $ — $ — $ — $ 4,005 Adjusted Operating Income (YTD) $ 18,733 $ 29,876 $ 38,949 $ 7,058 $ 13,991 $ 21,069 $ 29,859 $ 8,817 Annualized Adjusted Operating Income $ 37,466 $ 39,835 $ 28,232 $ 27,982 $ 28,092 $ 35,268 Tax Rate 25.5% 26.3% 23.4% 28.8% 29.2% 19.5% 20.4% 22.7% Tax Effect $ 9,554 $ 10,477 $ 9,114 $ 8,131 $ 8,171 $ 5,478 $ 6,091 $ 8,006 After Tax Adjusted Operating Income (YTD) $ 27,912 $ 29,358 $ 29,835 $ 20,101 $ 19,811 $ 22,614 $ 23,768 $ 27,262 Average Invested Capital * $ 236,021 $ 237,512 $ 239,463 $ 255,406 $ 256,785 $ 259,557 $ 263,371 $ 283,490 ROIC 11.8% 12.4% 12.5% 7.9% 7.7% 8.7% 9.0% 9.6% 13* Average Invested Capital is computed using the average quarterly Share Owners equity plus current and non-current debt less cash and cash equivalents.
