KE - Earnings call transcript Q4 2018 | Kimball Electronics, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gents. My name is Tawanda, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball Electronics Fourth Quarter Fiscal 2018 Financial Results Conference Call. [Operator Instructions]. Today's call, August 2, 2018, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. XXXX, influence Kimball's of XX-K annual year June may be statements for that release. ended in today's seen report XX, factors the forward-looking outcome can the Risk in and on Form The panel Charron, the and Mike of Board Chief and is Financial Chief Officer; Kimball Vice Chairman Electronics. Executive of -- Sergesketter, today's for call Don President Officer of Charron. turn like I to the call to would Don now over Mr. may begin. you Charron,

Donald Charron

you, conference Thank Welcome, call. our everyone, quarter fourth Tawanda. to

afternoon on ended yesterday results Our of quarter earnings issued release fourth the June our was XXXX. XX,

I for the you will financial After then have posted financial and will on by the on presentation We overall on Mike making within I that, tab. remarks you will via conference this can tab call. Relation webcast, any you webcast Investors presentation to a a the the found the find over summary begin be it questions if to few Downloads & that answer Presentations may listening quarter, Or accompany have. in can Events we overview. website, The turn are it our the portal.

compared annual fourth in the medical of end billion and quarter, quarter Our sequentially consecutive our sales X% to XXXX the up in of double-digit the of exceed XXXX. from for $X year and automotive longtime fourth growth the market verticals achieve quarter were strong in fiscal helped XX% year-over-year our goal year us down sales year fiscal growth in quarter the fourth when fiscal to Very previous XXXX.

beyond over as forward or billion growth the in to sales. rate, on annual our sustain going company organic X% basis this annual $X grow we last previous approximately and an goal As quarter, and we to the stated compound was is growth look our three rate annual years, CAGR,

fourth the with third operating performance, sequentially quarter were the and We quarter ROIC. growth priorities expenses on quarter. pending make year contributions directly operating focused We goal Romania in basis improved helping to of in by the offsetting quarter, will 'XX through progress continued anticipated Margin basis this were forward came when We year in toward our and fiscal look fourth remain XXXX. did progress to positive disappointed from points of We of we XX.X% we our acquisition XX midrange be are that the achieve overall much improved fiscal associated Partially to year operating our income. goal. long-term GES. performance to achieving XX for to in X.X% margin continue in goal have improved the important to us. the focus efficiency work capital their to and compared drive pleased of do and income our points have still prior expansion not The

and We of XXXX, investments would balance necessary supply disruptions. to the year million. the materials fiscal stock focused tight secure continue further cash fourth the and leverage $XX.X this our total in quarter drive doing what's in our minimize bringing $X.X remain to sheet capital to to XXXX buffer that growth raw strong We levels and flow market profits. expenditures million fiscal to to sales invested We in year make on appropriate maintain in

the to components concerns tariffs before an Committee U.S. of week last the the hearing were help round voice to the next proposed to electronic landscape persuade certain Representative given and from changing opportunity on the remove Trade administration list U.S. tariffs. also to testify to in China We the a our of public for respond We working it have diligently tariffs. been and to as prepare relates

X. are for the effect which components we tariffs on certain went for into applying for addition, July In an exemption

accurate get had that tariffs able our to suppliers for from to information pass be it critical to the to the customers. through For cost our taken us be effect, will

$X.X brings share October X.X also shares quarter XX.X year we XXXX, total to XXXX million million common fiscal board-authorized our which repurchase our stock, since the owners million of to shares under purchased by During share and program. fourth returned our of purchasing our XXX,XXX

As we last begun our call, work of implementation stated has on our strategic plan. on board-approved updated our the

to for We process capital in And acquisition of GES, in borrowings of are our first expansion it to to a XXXX. focusing primary and beyond we closed, of EMS government year continue for to for restated the option and an revenue business GES allow believe million fiscal our company. anticipation on amount obtaining facility of are this acquisition, is credit quarter first $XXX upon the margin step high-quality still growth. quarter Friday, amended available -- EMS Last committed the to to borrowing When the during multifaceted close track development our we manufacturing by increase finalizing optimizing be and our the plans GES with $XXX finally, efficiency, necessary platform and solutions approvals our our to XX, strategy on to request. will new pending million was July in

turn I'll to more discuss our in Mike over fourth results detail. to Now quarter

open call Mike? then will to We your the questions.

Michael Sergesketter

Thanks, Don.

can if Downloads to tab. can our find portal. you listening referring Events the Or deck During webcast on in Relations on slide you're the comments, tab within found webcast, via Don Investor which the my be I'll website it Presentations & be mentioned, the

fluctuations our foreign compared approximately million, X, increase Slide which year sales quarter. a of net growth. accounted in X% was quarter on $XXX.X were XX% fourth for prior net $XXX.X sales million the year-over-year to Favorable shown currency As fourth

in Comparing is Romania including net quarter down ago, product sales our the quarterly ramp-up sales our year from on vertical in vertical our market by our the to some vertical, largely automotive during We quarter. compared a facility. third a X. mix see was XX% did automotive up in sales of vertical our record programs industry by as softness were XX% sequentially by Slide the new sales driven continued depicted Our net introductions,

Our board existing largest the medical quarter, in sales range medical the demand compared medical year fourth double programs. mid-XX% up Sequentially, quarter was third our last compared to digits. from our of up to across were vertical the from strong vertical by the

and vertical increases primarily which industrial a was QX double industrial the as than from pumps, smart year And more XX% effects in end overall programs, offset programs. of exit reaching of up life. was vertical programs lower result of by and a as existing prior other digits in certain public down the the Our of metering our demand other primarily of safety result

up largely from the and are digits new an we sequentially to quarter, safety in product demand encouraged uptick when compared However, third was a that introduction. public double

quarter Our X quarter included contributions year. X.X% which and Romania, was mentioned, improvement was in up from and they in sales year reflected improvements quarter their fourth efficiencies. gross margin at the leverage as continued from current Don the on same nicely improved year in Gross margin last the volumes compared Slide as to ago in X.X%, a ramp-up

were were also quarter. margin quarter. and year Romania administrative to XX units, of domestic in points program or to $XX.X the the up higher which cost improvement, compared basis Selling expenses, fourth $X.X deck, addition prior fourth quarter, fourth benefit favorable our million improvement health other the Romania, mix million X the leverage In in in the year Slide prior volumes self-insurance from sales to care the lower gross related contributed and to

a for compensation result quarter result QX XX%. cost including selling quarter to of year Diluted share lowered reconciliation the was the fourth was million compared tax a rate current slide current the fiscal adjustments, released million of of of of the last quarter fourth a employee partially exchange to an and last quarter currency -- section quarter net of impact in deck the to the reform to tax from of our credit. fourth rate the by provided result income of year provides The approximately larger to expense were during provided of earnings Operating XXXX XX. of of in the IRS as as net the fiscal fourth $X.XX annual uses earnings As income costs income. partially current The allowance Net the recorded Slide quarter $XX had payable. in million. the inventories million net year. year favorable related GES, XX the was fourth full adjusted unfavorable the year The by $XX.X and quarter the of reduction $X.X quarter, XXXX tax the reflects noncash partly primarily largely gains, cash or are equivalents in XX%, was our The at cash year investments included flow plus higher metrics. fourth Don rate depreciation basis reform included and cash product increase year. per the were investments the XXXX to of primarily a costs, by shown new Capital the during Slide introductions. When stock related loss new costs other income $X.XX earnings inflated by the valuation during salary in quarter to was largely and operations this $X.X of in provided statement. year fourth approximately flow guidance state to was mentioned, ended in adjusted estimated non-GAAP $X.X was quarter on for reform, million from in S&A the of fourth $X.X well of $X.X the income expense, which costs, our year non-GAAP for excluding and for increased The benefit $XX.X remaining credits the a fourth from Cash year effective year to the quarter million, to year QX in adjusted measurement for metrics the XXXX largely increased for the support to benefits; fourth offset at impacted trends. in fiscal rate in XXXX, approximately quarter, $X.X the pending June directly million pretax quarter which noncash adjustments XX, in related investment related XX% GAAP effective period related in the for compared rate receivables, fourth income accounts equipment cash XXXX. Capital X current the Non-GAAP were state from capital the rate. and rate year tax to our quarter XX year quarter manufacturing tax We compared totaled and rate, by in The last reform capacity administrative expense reduction current drove quarter largely tax the year The to effective in trends depreciation prior expense during the per ago. was net, in income operating fourth fiscal adjustments which was our a further Slide which fiscal and flow reflects outlook provided subsequent Other strong the incurred of were losses quarter, share amounted Net tax increase acquisition and significantly related an current the approximated to with prior $XXX,XXX fourth cash amounted tax offset movements, primarily true-up expense year accounting full was to year related prior significantly our $X.XX. which compensation $XX.X million, diluted adjusting trend. line full expense. the fiscal of compared quarter. year income foreign during million. million derivative expenses to and incentive which as include was and points.

million which returned from amounting also our million at XX, our our through $X.X capital on million Borrowings from XXXX, down XXXX. $X.X were March of million, XX owners June stock $X.X the during and were the common down to XX, repurchase credit quarter. facility June We share to $X

plus equivalents XX, June represented available, our million. cash cash of short-term of As unused $XXX as credit amount the facilities, totaled liquidity our and

million today's credit The our and is general our amended queue? I to like open call the we million been $XX expected Don available positioned to $XX has GES purposes, fund and from capital including primary facility would $XXX is which working to would that, in This the upon available, Tawanda, sheet additional increases amount to to liquidity up like used is used additional with continued questions any expected by analysts. to be to mentioned, the five be I conclude our saying years, million restated request. an for very corporate do for increasing With As partially and for short-term balance facility analyst acquisitions. subsequently with the questions we're acquisition. an growth. have of facility strong well from

Operator

Instructions]. [Operator

comes question of of from Chase first AWH Our Basta Capital. line the

Chase Basta

growth pretty medical on color had sequential the additional XXXX? vertical. vertical some the for that You nice Can and us in outlook you're and thinking year-over-year what give you that drove in

Donald Charron

in Yes, really is, there, we bit business couple a of positive in new which we overall have across ago, we so as years quarter and multiple really good think, our full areas nice we think up momentum, picked which stronger programs Indianapolis widespread. our But thought the have that had strength the and of pretty with have and we I in a such going really growth portfolio we programs, sign. continue the I to thought a growth, ramp acquisition relatively for fiscal widespread. year. said, of to in little I contributing That's in the pleased a We're to would than programs factor And it looks be, way. some unexpected, as the to the

fiscal us So we're hoping the can continue year. it going new that into for

Chase Basta

Okay. you Or there? there's explains sequential little of bit kind softness seasonality segment what that? automotive a of element on. an And there Is then in of touched

Donald Charron

so don't and inventory you some programs seasonality heads us the yes, of in seasonality. I all That's impacting Yes, around to same get in We've some know had some QX. mean, would market shortage short in I between that's to have what been happened That essentially, and regions could impact. production; supply explain the really really the levels supply that. that. for also had QX contributed this buffering component softness situation have hard the Maybe levels, throughout our chain.

numbers, high. explaining I you we was QX look the at why time had think hard when a so

it's business So the sequential the in essentially book hard quarters. as is same drop just of explain, play to both but in

go We'll the how we'll shapes So it remain up. see. fiscal XXXX, pretty of year year into we strong. as see calendar the rest we expect to And

programs will to in we overall the the does. on Just have given of front programs. current that namely But how production programs, really got market ramp, new still depend the we've us in

Chase Basta

pass having understand more kind of regarding in And discussion, the your to ability then on and you're Okay. conversations a price bit tariff about can that of customers talk switch you just to regard? us the little help

Donald Charron

of a of effect being that's I'm be question and really Yes, CFOs good that's, to one in is and CEOs sure, answered this ripple by terms lot going nowadays how managed. a

manufacturing on to first there's our the going the ability the U.S. those We plants. stream. to thing parts issues. aggravation to absorb it's into that, an think at tariffs no by let's could create have going say, to is absorb disruption the of I that to -- everyone, costs. concept and the that We buy everyone way end would pass-through say, from for be China we come value we don't I going The embraced And in have be it's day, or

So pass we We've already List parts customers. X dialogue, to on that started that to through could definitely impact with especially have us. them will our several

finalized is So up specifics, today. we've List least X to We've given list end didn't after dialogue opened our get it's very the with know until at final hearing. final. what customers. the we never The them the

it's List pretty the that, the to end end probably pass through. have up about talking the been expect being for our at day, and need. think a said, same customers we We've contractually, all So room, it an to going have to we'd we X. to day, of But are the tough end pass our the we it of the through, that But I and aggravation. to we it through plans negotiation as pass at of

best the don't I questions it. I you that's any that, about describe have follow-on know Chase. So to could if

Chase Basta

us you impact that? about No, anything anything on XXXX can or that's more like or on tell your numbers the then helpful. GES acquisition, there is fiscal that acquisition And

Donald Charron

cash time. the release the hope or just out our million. and we price Not of down press approvals, reiterate in We're getting allocation something at to the final about purchase we talked to I terms government our at to what this investors. get in $XX

As impact and the to to we need we standpoint. the line soon be likely approvals fiscal about will most and close be add 'XX transaction as year able gain can what we'll more range to top the from EPS

Operator

[Operator Instructions].

next comes the Our line from of [indiscernible]. question

Unidentified Analyst

fiscal our from be expect the kind have and environment ramping might of the interested some any of about have this this think in over turn component-constrained throughout when that of kind blip? insights additional that I'm we component we're we to we suppliers we situation. As programs supply able Have on 'XX, to gotten new in

Donald Charron

good really question. a Yes,

First programs. working year actually been of supply the all, on on ramping that we're year, we've for this over programs securing a new those for

of It demand sort demand answer -- the see those There's so of part programs that's us lined calendar tight. more on we in Most that tight, of fall material those is that frame. got component end components The mean, year. that today telling available. in need some but of material some second derisked it believe this this the supply shortages And up to half are we've the profile an that of softening markets we feel give like in the of been I the the the it's depends. making into and we we'll reports we ramp-up. depends us that time manufacturer summer ramp

we, that has so year really truly get we the XXXX half us overall, seen component before industry first handle, If rate, get capacitized throughout end growth be categories the of of the to the to let's really in improve rates and we then And of softens. if it's some blip, They're tight. as a say, back they say, run demand it an the just industry definitely that -- it the of the can XXXX. let's the new truly -- could especially manufacturers telling the some are

For end could of XXXX the example, ceramic us are situation in demand that short telling supply profile the guys the capacitor last to certain multilayer scenarios.

adding So Marada end capacity. example, add to companies been year. we'll the coming see. new this line, There's on hard capacity capacity. new in of like They've by new for that working They're

supply cases, an of -- they The automotive catch-up the in a is automotive in are end -- one the components some So see towards automotive grade. tougher year. that we'll some it's the

-- And we the ramp-ups, to our because particular in not for we so capacity, of example, some capacity space, on overall pay our and the automotive attention commercial that grade. include which depend

Operator

[Operator showing no now questions to I'm for would time. call like I closing further the at turn remarks. back to over this Instructions]. Don

Donald Charron

great brings Tawanda. you, your to We us have you, call. Thank appreciate a That and you interest call. forward speaking and today's end with our Thank day. of to next on look the

Operator

this listeners, and up you, may to At nice Thank day. you have time, hang call. the disconnect a simply from

Kimball Electronics (KE) 4 Aug 182018 Q4 Earnings call transcript