KE 10-K & 10-Q changes, risk factors and insider trading
Kimball Electronics, Inc. · Nasdaq · Printed Circuit Boards · CIK 1606757 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Concentration among a small number of key customers, and our customers’ ordering behavior, could materially reduce our revenues, profitability, and manufacturing efficiency.”
New heading “We may not realize the anticipated benefits of the Helvoet acquisition or other future acquisitions.”
New heading “We may not achieve the organic growth on which our strategy depends.”
New heading “Our development, deployment, and use of artificial intelligence technologies could expose us to operational, legal, reputational, and competitive risks.”
New heading “Failure to satisfy applicable customer, industry, and regulatory quality standards could adversely affect our customer relationships, results of operations, and reputation.”
New heading “Climate change, evolving sustainability regulation, and stakeholder expectations regarding environmental, social, and governance matters could increase our costs, impose new compliance obligations, and expose us to enforcement, litigation, and reputational risk.”
New heading “Shifts in U.S. political, tax, trade, and regulatory policy could adversely affect our business and results of operations.”
New heading “Our reliance on customer supply-chain financing and receivables purchase agreements exposes us to program-availability and counterparty risks.”
Removed heading “Reduction of purchases by, or the loss of, one or more key customers could reduce revenues and profitability.”
Removed heading “Our ability to efficiently utilize our manufacturing capacity is highly dependent on our customers’ actions.”
Removed heading “If our engineering and manufacturing services do not meet our customers’ quality standards, our sales, operating results, and reputation could suffer.”
Removed heading “Our failure to maintain applicable registrations for our manufacturing facilities could negatively impact our ability to produce products for our customers.”
Removed heading “Climate change, and the legal and regulatory initiatives related to climate change, could subject us to extensive environmental regulation and significant potential environmental liabilities.”
Removed heading “Sustainability/ESG issues, including those related to climate change and sustainability, may increase our costs and impose difficult and expensive compliance requirements.”
Removed heading “We will face risks associated with the organic and inorganic growth of our business and we may neither be able to continue that growth nor have the necessary resources to dedicate to that growth.”
Removed heading “Changes in financial accounting standards or policies have affected, and in the future may affect, our reported financial condition or results of operations.”
Removed heading “Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation.”
Largest changes
“We make substantial investments of capital and operating expenses to implement comprehensive, company-wide quality systems, certifications, and controls in our operations in an effort to ensure sustained compliance with various product and quality system regulations and requirements, and to meet the needs of our customers. However, in the event we fail to adhere to these requirements, we become subject to potential investigations and fines and penalties. …”see in full comparison
“Our medical CDMO operations — including our expanded footprint in Indianapolis, Indiana and our new Helvoet operations in India and the Netherlands — are subject to additional quality and regulatory requirements, including the U.S. Food and Drug Administration’s Quality Management System Regulation (formerly the Quality System Regulation) and current Good Manufacturing Practices (cGMP), the European Union Medical Device Regulation (2017/745) and In Vitro Diagnostic Regulation (2017/746), ISO 13485, and comparable regimes in China, India, and Thailand. …”see in full comparison
“AI-specific laws and regulations are developing rapidly and are increasingly divergent across jurisdictions. Examples include the European Union Artificial Intelligence Act, the Colorado Artificial Intelligence Act, and other state-level AI laws in the United States, as well as evolving guidance from the U.S. Securities and Exchange Commission on AI-related disclosure. Complying with these laws and regulations could increase our costs, require changes to our AI systems, or limit our ability to deploy AI technologies. …”see in full comparison
We have also experienced, and may again experience in the future, such shortages due to the effects of and responses to industry-wide conditions, pandemics, natural disasters, and other events outside our control, including macroeconomic events, trade restrictions, political crises, social unrest, terrorism, and conflicts (including the Russian invasion of, and ongoing war in,see in full comparisonUkraineUkraine, the conflict involving the United States, Israel, and Iran and the related regional instability in the Middle East, evolving trade and sanctions regimes affecting semiconductor supply, and the risk of prolonged reliance on select regions (including Taiwan and mainland China) for certain critical components). We cannot reasonably predict the full extent to which these events may impact our supply chain, because any impacts will depend on future developments that are highly uncertain and continuously evolving, including new information that may emerge concerning new or existing pandemics, further actions by governmental entities or others in response to the types of events described above, and how quickly and to what extent normal economic and operating conditions can resume.
“Climate change, evolving sustainability regulation, and stakeholder expectations regarding environmental, social, and governance matters could increase our costs, impose new compliance obligations, and expose us to enforcement, litigation, and reputational risk.”see in full comparison
“Our ability to execute our strategy depends on attracting, developing, and retaining employees with the technical, engineering, and operational skills needed to run an increasingly automated, digitized, and data-driven manufacturing environment, including engineers, data and analytics professionals, cybersecurity and artificial intelligence specialists, skilled operators supporting our Industry 4.0 initiatives, and quality and regulatory personnel supporting our operations. …”see in full comparison
Full comparison: every changed paragraph (80)
Concentration among a small number of key customers, and our customers’ ordering behavior, could materially reduce our revenues, profitability, and manufacturing efficiency.
Losses of key customers within specific industries or significant volume reductions from key customers are both risks. For fiscal year 2026, sales to our three largest customers — Nexteer Automotive, Philips, and ZF — accounted for approximately 40% of our net sales in the aggregate, and sales to Nexteer Automotive alone accounted for approximately 18% of our net sales. Over the past two fiscal years, we experienced the loss of a major automotive program from a significant customer, which was unrelated to Kimball’s performance, and we cannot assure you that similar program losses will not occur in the future. For example, our automotive customers, including Nexteer Automotive and ZF, are subject to significant cyclical, technological, and regulatory pressures. If our automotive customers reduce production volumes, delay or cancel programs, in-source manufacturing, or shift purchasing to competitors, our results of operations could be materially adversely affected.
Reduction of purchases by, or the loss of, one or more key customers could reduce revenues and profitability.
Losses of key customers within specific industries or significant volume reductions from key customers are both risks. Our continuing success is dependent upon replacing expiring contract customers/programs with new customers/programs. See “Customers” in Item 1 - Business for disclosure of the net sales as a percentage of consolidated net sales for each of our significant customers during fiscal years 2026, 2025, 2024, and 2023.2024. Regardless of whether our agreements with our customers, including our significant customers, have a definite term, our customers typically do not commit to firm production schedules for more than one quarter. Our customers generally have the right to cancel a particular product, subject to contractual provisions governing the final product runs, excess or obsolete inventory, recovery of dedicated investments, and end-of-life pricing. As many of our costs and operating expenses are relatively fixed, a reduction in customer demand, particularly a reduction in demand for a product that represents a significant amount of revenue, can harm our gross profit margins and results of operations.
Many factors outside of our control impact our customers and their ordering behavior, including global pandemics, recessions in end markets, changing technologies and industry standards, commercial acceptance for products, shifting market demand, product obsolescence, changing sourcing strategies, and our customers’ loss of business. Our customers generally have the right to cancel a particular product, subject to contractual provisions governing the final product runs, excess or obsolete inventory, recovery of dedicated investments, and end-of-life pricing. New customer relationships also present risk because we do not have an extensive product or customer relationship history. As many of our costs and operating expenses are relatively fixed, a reduction in customer demand, particularly a reduction in demand for a product that represents a significant amount of revenue, can harm our gross profit margins and results of operations.
We can provide no assurance that we will be able to fully replace any lost sales from these risks, which could have an adverse effect on our financial position, results of operations, or cash flows.
Our ability to efficiently utilize our manufacturing capacity is highly dependent on our customers’ actions.
Regardless of whether our agreements with our customers, including our significant customers, have a definite term, our customers typically do not commit to firm production schedules for more than one quarter. Our customers generally have the right to cancel a particular product, subject to contractual provisions governing the final product runs, excess or obsolete inventory, recovery of dedicated investments, and end-of-life pricing. Accordingly, our relative ability (or inability) to forecast customer demand levels can make it difficult to schedule production and maximize the efficient use of our manufacturing capacity and supply chain capabilities.
Many factors outside of our control impact our customers and their ordering behavior, including global pandemics, recessions in end markets, changing technologies and industry standards, commercial acceptance for products, shifting market demand, product obsolescence, changing sourcing strategies, and our customers’ loss of business. New customer relationships also present risk because we do not have an extensive product or customer relationship history.
Our integrated supply chain solutions for purchasing components and materials is a competitive strength and key to our strategy as a CMO.CDMO. Inflation and prices from suppliers have increased and may continue to rise. When prices rise for these or other similar reasons, they impact our margins and results of operations if we are not able to pass the increases through to our customers or otherwise offset them through cost savings. Many of our customer contracts permit periodic prospective adjustments to pricing based on decreases and increases in component prices and other factors; however, we could bear the risk of component price increases that occur between any such re-pricing or, if such re-pricing is not permitted or accepted by customers, during the balance of the term of the particular customer contract. There can be no assurance that we will continue to be able to purchase the components and materials needed to manufacture customer products at favorable prices. Accordingly, certain component price increases could adversely affect our gross profit margins and results of operations.
We have also experienced, and may again experience in the future, such shortages due to the effects of and responses to industry-wide conditions, pandemics, natural disasters, and other events outside our control, including macroeconomic events, trade restrictions, political crises, social unrest, terrorism, and conflicts (including the Russian invasion of, and ongoing war in, UkraineUkraine, the conflict involving the United States, Israel, and Iran and the related regional instability in the Middle East, evolving trade and sanctions regimes affecting semiconductor supply, and the risk of prolonged reliance on select regions (including Taiwan and mainland China) for certain critical components). We cannot reasonably predict the full extent to which these events may impact our supply chain, because any impacts will depend on future developments that are highly uncertain and continuously evolving, including new information that may emerge concerning new or existing pandemics, further actions by governmental entities or others in response to the types of events described above, and how quickly and to what extent normal economic and operating conditions can resume.
We continue to expand our global operations by increasing our product and service offerings, including as a CMO,CDMO, and scaling our infrastructure at certain facilities to support our business. This expansion increases the complexity of our business and places significant strain on our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. We may not be able to manage these expansions effectively or successfully, which could damage our reputation, limit our growth, and negatively affect our operating results.
We may not realize the anticipated benefits of the Helvoet acquisition or other future acquisitions.
On July 1, 2026, we completed our acquisition of Helvoet. Helvoet is our largest acquisition to date, expanded our manufacturing footprint into India and, additionally, the Netherlands, and materially expanded our precision molded plastics, complex tooling, and medical device component manufacturing capabilities. The success of the Helvoet acquisition depends on our ability to integrate Helvoet’s operations, employees, customers, information systems, financial and internal controls, and manufacturing processes with those of the Company on the timelines we currently expect, and to retain Helvoet’s key personnel and customer relationships.
Integration efforts may be complicated by differences in operating practices, geographic distances, differing regulatory regimes (including in India and the European Union), the need to remediate any control deficiencies identified in the integration process, and the diversion of management attention from ongoing operations. If we are unable to integrate Helvoet successfully or realize the strategic, operational, or financial benefits we expect, or if unanticipated integration costs, liabilities, or delays arise, we may not achieve the return on investment or the growth we anticipate and our business, results of operations, and financial condition could be materially adversely affected. Some of these risks are heightened by our decision to fund a portion of the purchase price from our credit facilities. Similar risks would apply to future acquisitions we may complete.
•widespread health emergencies and foreign governments’ measures taken in response to them;
•changes in U.S. or foreign policies, regulatory requirements, and laws;
•tariffs and other trade barriers imposed by the United States and/or other countries;
These risks could have an adverse effect on our financial position, results of operations, or cash flows. Certain foreign jurisdictions restrict the amount of cash that can be transferred to the United States or impose taxes and penalties on such transfers of cash.cash To the extentif we have excess cash in foreign locations that could be used in, or is needed by, our operations in the United States, we may incur significant penalties and/or taxesseek to repatriate these funds.
During fiscal year 2026, tariffs implemented under various U.S. trade authorities increased costs within our supply chain. We have generally recovered, and expect to continue recovering, a significant portion of these costs through contractual pass-through and repricing mechanisms. Although we may not be able to fully recover tariff-related costs, any unrecovered amounts are not expected to be material to our results of operations or cash flows. Changes in tariff policies, trade restrictions, or other international trade measures could nevertheless adversely affect our costs, our customers, our supply chain, or demand for our services.
We are currently evaluating the potential impact of the imposition of tariffs on our business, our customers and financial condition and implementing measures that may address or mitigate the potential impact on our business. We cannot predict with certainty the future trade policy of the U.S. or other countries, and we cannot reasonably predict the full extent to which these events may impact our supply chain, because any impacts will depend on future trade policy, treaty, and tariff developments that are highly uncertain and continuously evolving. Relevant factors include whether such tariffs are ultimately implemented, the timing and duration of implementation and the amount, scope, and nature of such tariffs and potential exclusions from the application of those tariffs. These tariffs and other unfavorable government policies on international trade (such as export controls) may increase the cost of manufacturing our customers’ products, affect the demand for our manufacturing services, or restrict our access to raw materials and components used in the manufacture of our customers’ products, each of which could negatively impact our financial condition and results of operations. Further, such developments, or the perception that any such developments could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity and adversely impact the price and demand for our customers’ products, increase our costs, and affect our customers and suppliers, any of which could have a material adverse effect on our business, financial condition and results of operations.
We may not achieve the organic growth on which our strategy depends.
Our strategy to achieve sustained, profitable growth depends on our ability to expand our existing customer relationships, secure new customer programs, launch those programs on time and on budget, successfully introduce new categories of manufacturing services (including through our Kimball Solutions CDMO offerings), and expand our global manufacturing footprint (including the ramp of our new Indianapolis, Indiana medical CDMO facility). New program start-ups typically require significant investment in capacity, tooling, and working capital, and generally generate lower margins early in a program’s life. If we fail to execute on these initiatives, if new programs experience delays or higher start-up costs than we anticipate, or if we cannot secure and retain the customer demand needed to fill our expanded capacity, our revenue growth, margin performance, and returns on invested capital could be adversely affected.
If our engineering and manufacturing services do not meet our customers’ quality standards, our sales, operating results, and reputation could suffer.
We make substantial investments of capital and operating expenses to implement comprehensive, company-wide quality systems, certifications, and controls in our operations in an effort to ensure sustained compliance with various product and quality system regulations and requirements, and to meet the needs of our customers. However, in the event we fail to adhere to these requirements, we become subject to costs associated with product defects, interruptions in production, and reputational harm. Our failure to comply with applicable quality system standards could, in turn, adversely affect our customers through failures to supply product to them. Quality or noncompliance failures could have an adverse effect on our reputation in addition to an adverse impact on our financial position, results of operations, or cash flows. While we maintain product liability and other insurance coverage that we believe to be generally in accordance with industry practices, our insurance coverage may not be adequate to protect us fully against substantial claims and costs that may arise from warranty and other liabilities related to product defects.
Our business may be harmed due to failure to successfully implement information technology solutions or a lack of reasonable safeguards to maintain data security, including adherence to evolving global data privacy lawslaws, cross-border data transfer, AI-specific regulations, and physical security measures.
The operation of our business depends on effective information technology systems, including data management, analytics, and emergingartificial intelligence and machine learning andtechnologies artificial(collectively, intelligence“AI”) platforms and applications. See also ‘Risks related to our development and use of artificial intelligence’ below. These systems are subject to the risk of security breach or cybersecurity threat, including misappropriation of assets or other sensitive information, such as confidential business information and personally identifiable data relating to employees, customers, and other business partners, or data corruption which could cause operational disruption. The unpredictability of AI, machine learning, and similar systems that automate certain operational tasks bring the potential for unintended consequences and unexpected disruptions in business operations, financial losses, and reputational damage.damage, including if such systems produce incorrect or biased outputs, expose confidential data to third-party AI providers, or generate outputs that infringe third-party intellectual property or violate applicable privacy or AI-specific laws (such as the EU AI Act, Colorado AI Act, and other emerging AI legislation). As we could be the target of cyber and other security threats, which are becoming increasingly sophisticated, we must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address, and mitigate the risk of unauthorized access, misuse, computer viruses, and other events that could have a security impact. Information systems require an ongoing commitment of significant resources to research new technologies and processes, maintain and enhance existing systems, and develop new systems in order to keep pace with changes in information processing technology and evolving industry standards as well as to protect against cyber risks and security breaches. While we provide employee awareness training around phishing, malware, and other cyber threats to help protect against these cyber and security risks, we cannot ensure the measures we take to protect our information technology systems will be sufficient.
Implementation delays, poor execution, or a breach of information technology systems could disrupt our operations, damage our reputation, or increase costs related to the mitigation of, response to, or litigation arising from any such issue. Similar risks exist with our third-party vendors. Any problems caused by these third parties, including those resulting from disruption in communications services, cyber attacks, or security breaches, have the potential to hinder our ability to conduct business. In addition, data privacy laws and regulations, such as the European Union General Data Protection Regulation (“GDPR”), the UK GDPR, ePrivacy Directive, the California Privacy Rights Act (“CPRA”), and similar legislation in jurisdictions in which we operate, pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties.
Because we operate in the United States, Mexico, China, India, The Netherlands, Poland, Romania, and Thailand, we are subject to a wide and evolving range of data privacy, employee-monitoring, and cross-border data-transfer laws, including the EU and UK General Data Protection Regulations, the ePrivacy Directive, Mexico’s Federal Personal Data Protection Law, India’s Digital Personal Data Protection Act, and analogous laws in U.S. states and other jurisdictions in which we operate. AI-specific laws — including the EU Artificial Intelligence Act and state-level AI laws such as Colorado’s Artificial Intelligence Act — increasingly overlap with these privacy regimes and impose their own compliance obligations on our development, deployment, or use of AI systems.
Compliance with these laws is complex, costly, and increasingly requires cross-functional coordination among legal, IT, human resources, and business owners. Non-compliance, or perceived non-compliance, with any of these laws could result in significant civil penalties, injunctions, litigation, contract remediation obligations, and reputational harm, any of which could materially adversely affect our business, financial condition, and results of operations.
Our development, deployment, and use of artificial intelligence technologies could expose us to operational, legal, reputational, and competitive risks.
We use, and expect to continue to use and expand our use of AI, across our business, including in engineering design services, manufacturing process optimization, predictive maintenance, quality analytics, supply chain forecasting, back office productivity tools, and certain administrative functions. Some of these tools are developed internally, and others are provided by third-party suppliers, including through generally available large language models and cloud services.
Our use of AI presents a variety of risks, including operational risks (such as system errors, unreliable or biased outputs, and disruptions to business processes); intellectual property risks (including uncertainty regarding ownership of AI-generated outputs and possible infringement of third-party rights); data privacy and confidentiality risks (including the possibility that confidential customer or supplier information could be exposed through third-party AI tools); cybersecurity risks (including AI-enabled attacks such as deepfake impersonation, prompt injection, model poisoning, and automated phishing); competitive risks (including if our competitors deploy AI more effectively or at lower cost); and reputational risks (including if AI is misused or produces harmful, biased, or inaccurate outputs).
AI-specific laws and regulations are developing rapidly and are increasingly divergent across jurisdictions. Examples include the European Union Artificial Intelligence Act, the Colorado Artificial Intelligence Act, and other state-level AI laws in the United States, as well as evolving guidance from the U.S. Securities and Exchange Commission on AI-related disclosure. Complying with these laws and regulations could increase our costs, require changes to our AI systems, or limit our ability to deploy AI technologies. Failure to comply, or perceived failure to comply, could result in enforcement actions, litigation, or reputational harm. In addition, the U.S. Securities and Exchange Commission has focused on so-called ‘AI washing,’ or overstating the capabilities or business impact of AI, and we could be subject to claims if any of our public statements about AI are considered misleading.
Our use of AI also depends on our ability to attract and retain personnel with the relevant technical skills, to invest in the necessary infrastructure, and to safeguard our customers’ and suppliers’ proprietary information. Any of these risks could adversely affect our business, financial condition, results of operations, or reputation.
Our ability to execute our strategy depends on attracting, developing, and retaining employees with the technical, engineering, and operational skills needed to run an increasingly automated, digitized, and data-driven manufacturing environment, including engineers, data and analytics professionals, cybersecurity and artificial intelligence specialists, skilled operators supporting our Industry 4.0 initiatives, and quality and regulatory personnel supporting our operations. Competition for these skills is intense and can be compounded by broader labor market pressures — including localized labor shortages, wage inflation, evolving employee expectations regarding workplace flexibility, and demographic shifts in the regions where we operate. If we are unable to attract and retain qualified personnel, to develop the technical and leadership capabilities of our existing workforce, or to manage the labor and retention effects of restructuring actions such as the closure of our Tampa facility, our ability to serve our customers, execute our strategic initiatives, and maintain operational efficiency could be adversely affected.
Our success depends to a large extent on our ability to attract and retain highly qualified and diverse executive officers, key employees, and skilled personnel, and to continue to implement our succession plans for managers and other key employees. These employees are not generally bound by employment or non-competition agreements, and we cannot assure you that we will retain them. The labor market for these employees is intensely competitive, and compensation and benefit costs continue to increase significantly in the current economic environment. In particular, the high demand for manufacturing labor in certain geographic areas in which we operate makes recruiting new production employees and retaining experienced production employees difficult.
Our success also depends on keeping pace with technological advancements, including Industry 4.0, and adapting services to provide manufacturing capabilities which meet customers’ changing needs. Therefore, we must retain our qualified engineering and technical personnel and successfully anticipate and respond to technological changes in a cost effective and timely manner.
Shortages of workers could adversely impact our ability to operate our business effectively and timely serve our customers’ needs, which could adversely affect our relations with customers, result in reductions in orders from customers, or cause us to lose customers. Turnover in personnel could result in additional training and inefficiencies that could adversely impact our operating results. Our culture and guiding principles focus on continuous training, motivating, and development of employees, and we strive to attract, motivate, and retain qualified personnel. To aid in managing our growth and strengthening our pool of qualified personnel, we will need to internally develop, recruit, and retain diverse, qualified personnel. If we are not able to do so, our business and our ability to continue to grow could be harmed.
Failure to satisfy applicable customer, industry, and regulatory quality standards could adversely affect our customer relationships, results of operations, and reputation.
We make substantial investments in comprehensive, company-wide quality systems, certifications, and controls designed to satisfy customer requirements and to comply with the various product and quality-system regulations applicable to our operations. If we fail to meet these requirements, we may incur costs associated with product defects, warranty and product liability claims, production interruptions, government investigations, fines, and penalties, and our failure to comply could delay or prevent our customers’ ability to obtain or maintain product approvals or to receive products from us on schedule. Any of the foregoing could adversely affect our reputation, customer relationships, financial position, results of operations, or cash flows. Although we maintain product liability and other insurance coverage that we believe is generally consistent with industry practice, our coverage may not be adequate to protect us fully against substantial claims arising from warranty or product-defect liabilities.
Our medical CDMO operations — including our expanded footprint in Indianapolis, Indiana and our new Helvoet operations in India and the Netherlands — are subject to additional quality and regulatory requirements, including the U.S. Food and Drug Administration’s Quality Management System Regulation (formerly the Quality System Regulation) and current Good Manufacturing Practices (cGMP), the European Union Medical Device Regulation (2017/745) and In Vitro Diagnostic Regulation (2017/746), ISO 13485, and comparable regimes in China, India, and Thailand. Failures to comply, delays in obtaining or maintaining product-specific registrations or notified body certifications, or negative outcomes from FDA or comparable inspections could result in warning letters, import alerts, consent decrees, product recalls, or the temporary suspension of production, any of which could adversely affect our reputation, customer relationships, financial position, results of operations, or cash flows. Because we also handle customer-owned drug substances and drug products in support of drug delivery programs, our failure or our customers’ failure to comply with applicable drug cGMP, controlled-substance handling, or pharmacovigilance obligations could adversely affect our medical CDMO business.
Climate change, evolving sustainability regulation, and stakeholder expectations regarding environmental, social, and governance matters could increase our costs, impose new compliance obligations, and expose us to enforcement, litigation, and reputational risk.
Customers, investors, and other stakeholders continue to focus on environmental issues — including climate change, greenhouse gas emissions, water use, waste, and hazardous materials — and on broader sustainability topics. We have made public commitments to significantly reduce our greenhouse gas emissions and waste intensity and to increase our use of renewable electricity and recycled water by 2030, and we may adopt additional voluntary sustainability initiatives in the future. Our failure or perceived failure to achieve these commitments, or to satisfy other sustainability expectations of our customers, investors, employees, or other stakeholders, could adversely affect our reputation, our customer and investor relationships, our ability to attract and retain employees, our results of operations, and our attractiveness as an investment or business partner, and could expose us to government enforcement actions and private litigation.
Our failure to maintain applicable registrations for our manufacturing facilities could negatively impact our ability to produce products for our customers.
We make substantial investments of capital and operating expenses to implement comprehensive, company-wide quality systems, certifications, and controls in our operations in an effort to ensure sustained compliance with various product and quality system regulations and requirements, and to meet the needs of our customers. However, in the event we fail to adhere to these requirements, we become subject to potential investigations and fines and penalties. Our failure to comply with applicable regulations and quality system standards could, in turn, adversely affect our customers through failures to supply product to them or delays in their ability to obtain and maintain product approvals. As a medical device manufacturer, we also have additional compliance requirements. The U.S. Food and Drug Administration (“FDA”) extensively regulates all aspects of product and manufacturing quality for medical products under its current Good Manufacturing Practices (cGMP) regulations. Outside the U.S., our operations and our customers’ products are subject to similar regulatory requirements, notably by the European Medicines Agency and the Safe Food and Drug Administration in China. For instance, we are required to register with the FDA and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation (“QSR”) requirements, which require manufacturers of medical devices to adhere to certain regulations, including testing, quality control and documentation procedures. Any determination by the FDA or other regulatory authorities of manufacturing or other deficiencies could adversely affect our business. Failure or noncompliance could have an adverse effect on our reputation in addition to an adverse impact on our financial position, results of operations, or cash flows.
Climate change, and the legal and regulatory initiatives related to climate change, could subject us to extensive environmental regulation and significant potential environmental liabilities.
There is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere will cause significant changes in weather patterns around the globe and an increase in the frequency and severity of natural disasters or extreme weather conditions, such as hurricanes, earthquakes, droughts, wildfires, cyclones, or floods. Physical climate risks and the operation of facilities in areas subject to increased water stress could impair our production capabilities, disrupt the operations of our supply chain and infrastructure, and impact our customers and their demand for our services.
TheIncreased frequency and severity of extreme weather events, sea-level rise, and heightened water stress associated with climate change could damage our facilities or those of our suppliers and customers, disrupt our supply chain, and reduce demand for our services. Our past and present operation and ownership by Kimball Electronics of manufacturing plants and real propertyoperations are also subject to extensive and changing federal, state, local, and foreign environmental laws and regulations,regulations including those relating togoverning discharges into air, water, and land, the handling and disposal of solid and hazardous waste, the use of certain hazardous materials in the production of select products,production, and the remediation of contamination associated with releases of hazardous substances. Compliance with more stringent laws or regulations, or stricter interpretation of existing requirements, could require material expenditures, and any investigations or remedial efforts could result in material liabilities.
We are also subject to a rapidly evolving set of climate- and sustainability-related disclosure regimes. The European Union’s Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) apply, or under certain circumstances could apply, to our EU operations and, in some cases, to our global business. We prepare our annual Guiding Principles Report with reference to the ESRS as outlined by the CSRD, and continued compliance with the CSRD and ESRS, together with the European Union’s ongoing ‘Omnibus’ simplification proposals and evolving climate-related disclosure regimes in California and other U.S. states, could require significant effort and resources, particularly if the requirements do not align with existing initiatives. Transition to a lower-carbon economy could also require material investments in renewable energy, energy efficiency, and retrofitting or constructing facilities with lower-emission technology, and increases in the cost of energy, water, or other resources used in our operations or in the freight and logistics services on which we depend could reduce our profitability.
In addition, our customers have adopted, and may continue to adopt, procurement policies and sustainability goals that impose environmental, social, and governance requirements on their suppliers, including us, and an increasing number of investors have adopted sustainability policies for their portfolio companies. These practices, together with the divergent and rapidly evolving investor policies, voluntary sustainability frameworks, and regulatory regimes described above, may be difficult or expensive to comply with, may conflict with one another, and could adversely affect our reputation, business, or financial condition. Given the political significance and continuing uncertainty around these issues, we cannot predict how climate change and related legal, regulatory, and market developments will ultimately affect our operations and financial condition.
In addition, as regulators and investors increasingly focus on climate change and other sustainability issues, we are subject to new disclosure frameworks and regulations. For example, the European Parliament adopted the Corporate Sustainability Reporting Directive (CSRD) and the resulting adoption of EU sustainability reporting standards to be developed by the European Financial Reporting Advisory Group, with such standards to be tailored to EU policies building on and contributing to international standardization initiatives, will apply not only to local operations in the EU, but under certain circumstances, to entire global companies like Kimball Electronics that have EU operations. As part of our commitment to transparency and accountability, we wrote our annual Guiding Principles Report to align with the European Sustainability Reporting Standards (ESRS), as outlined by the CSRD. We expect that continued compliance with the CSRD and ESRS could require significant effort in future years. Other climate change disclosure requirements, and compliance with such rules, if and when they are finalized, could also require significant effort, particularly if they do align with existing initiatives like ESRS and CSRD.
We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist. Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures, some of which could be material. In addition, any investigations or remedial efforts relating to environmental matters could involve material costs or otherwise result in material liabilities.
The long-term effects of climate change on the global economy and our industry in particular are unclear. Changes in climate where we, our customers, and our supply chain operate could have a long-term adverse impact on our business, results of operations, and financial condition. In addition, we have committed to reduce our greenhouse gas emissions, waste and hazardous waste intensity and increase our use of renewable electricity and recycled water significantly by 2030 as part of our long-term sustainability strategy, and we may take additional voluntary steps to mitigate our impact on the environment. Climate transition risks related to shifts to a low-carbon economy and the associated costs of retrofitting or constructing facilities with green technology, in addition to investments in renewable energy and energy efficiency could involve material costs or otherwise impact our customers and their demand for our services.
Environmental regulations or changes in the supply, demand, or available sources of energy, water, or other resources may affect the availability or cost of goods and services, including natural resources, necessary to run our business. The cost of energy is a critical component of freight expense and the cost of operating manufacturing facilities. Increases in the cost of energy in particular could reduce our profitability. Given the political significance and uncertainty around these issues, we cannot predict how climate change, and the legal and regulatory initiatives related to climate change, will affect our operations and financial condition.
•Changes in policies by the U.S. or other governments could negatively affect our operating results due to changes in duties, tariffs or taxes, or limitations on currency or fund transfers, as well as government-imposed restrictions on producing certain products in, or shipping them to, specific countries. These changes could force our customers or us to consider various strategic options including, but not limited to, looking for different suppliers, shifting production to facilities in different geographic regions, absorbing the additional costs, or passing the cost on to customers. Ultimately, these changes could adversely affect the competitiveness of our domestic operations, which could lead to the reduction or exit of certain U.S. manufacturing capacity. Depending on the types of changes made, demand for our foreign manufacturing facilities could be reduced, or operating costs in our manufacturing facilities could be increased, which could negatively impact our financial performance. Moreover, any retaliatory actions by other countries where we operate could also negatively impact our financial performance.
•We are subject to a variety of federal, state, local and foreign environmental, health and safety, product stewardship and producer responsibility laws and regulations, including those arising from global pandemics or relating to the use, generation, storage, discharge and disposal of hazardous chemicals used during our manufacturing process, those governing worker health and safety, those requiring design changes, supply chain investigation or conformity assessments, and those relating to the recycling or reuse of products we manufacture. These include EU regulations and directives, such as the Restrictions on Hazardous Substances (“RoHS”), the Waste Electrical and Electronic Equipment (“WEEE”) directives, and the Registration, Evaluation, Authorization, and Restriction of Chemicals (“REACH”) regulation, and similar regulations in China (the Management Methods for Controlling Pollution for Electronic Information Products or “China RoHS”). In addition, new technical classifications of e-Waste being discussed in the Basel Convention technical working group could affect both our customers’ abilities and obligations in electronics repair and refurbishment. If we fail to comply with any present or future regulations or timely obtain any needed permits, we could become subject to liabilities, and we could face fines or penalties, the suspension of production, or prohibitions on sales of products we manufacture. In addition, such regulations could restrict our ability to expand our facilities or could require us to acquire costly equipment, or to incur other significant expenses, including expenses associated with the recall of any non-compliant product or with changes in our operational, procurement and inventory management activities.
Shifts in U.S. political, tax, trade, and regulatory policy could adversely affect our business and results of operations.
Since January 2025, changes in the U.S. presidential administration have led to a series of executive orders, agency reorganizations, and rapidly evolving policy priorities that affect areas critical to our operations, including tariffs and trade policy, immigration enforcement, environmental and workplace regulation, the pace and scope of federal regulatory enforcement, and the composition of the federal workforce. These developments have introduced increased legal, regulatory, reputational, and operational uncertainty for companies that operate cross-border supply chains, including us.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, made the 21% corporate tax rate permanent and made a variety of other changes to the U.S. tax code, some of which may affect our effective tax rate, cash taxes, deferred tax assets and liabilities (including in respect of GILTI, Section 163(j), and Section 174 research and experimental expenditures), and the value of our tax incentives. Further changes in U.S. tax law, or in tax laws in the foreign jurisdictions in which we operate, could adversely affect our results of operations.
Management's Discussion & Analysis (MD&A)
Largest changes
“In fiscal year 2025, the Company announced that its Board of Directors had approved a plan to cease operations at our Tampa facility, which was completed by the end of the fiscal year 2025, and the sale of the land and building was completed in fiscal year 2026. The decision was another important step towards sharpening our strategic focus, while leveraging our global footprint and streamlining the operating structure. …”see in full comparison
“Other General Income in fiscal year 2024 consisted of $0.9 million 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. There was no Other General Income reported in fiscal year 2025.”see in full comparison
“We are closely monitoring ongoing geopolitical tensions in the Middle East, including the recent conflict involving the U.S., Israel, and Iran, and the related regional instability. We are specifically monitoring the impacts to global macroeconomic conditions, supply chain disruptions, freight and component cost increases, and the related impact to end customer demand.”see in full comparison
“We completed the divestiture of GES on July 31, 2024 and recorded a gain on disposal of $2.4 million during fiscal year 2025. In fiscal year 2024, we recorded pre-tax impairment charges of $5.8 million and $17.0 million on goodwill and assets held for sale, respectively. See Note 3 - Sale of GES of Notes to Consolidated Financial Statements for more information.”see in full comparison
“Beginning in February 2025, the U.S. implemented tariffs on a variety of countries and commodities under the International Emergency Economic Powers Act (“IEEPA”), and certain countries have imposed or are considering retaliatory tariffs on U.S. exports. The global tariff landscape is highly dynamic, including legal challenges and administrative processes related to tariffs and potential refunds. Increased tariffs have and may continue to impact end customer demand. …”see in full comparison
“On April 30, 2026, the Company entered into an amended and restated credit agreement (the “restated primary credit facility”). The restated primary credit facility continues to provide for revolving borrowings of $300 million, with the option to increase the amount available for revolving borrowings by an additional $150 million at the Company’s request, subject to the consent of each lender participating in such increase. The amended and restated credit agreement is scheduled to mature on April 30, 2031. …”see in full comparison
Full comparison: every changed paragraph (52)
Certain statements contained within this document are considered forward-looking under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “forecasts,” “seeks,” “likely,” “future,” “may,” “might,” “should,” “would,” “could,” “will,” “can,” “potentially,” “can,” “goal,” “predict,probable,” and similar expressions. These forward-looking statements are subject to risks and uncertainties including, but not limited to, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine,war, global health emergencies, availability or cost of raw materials and components, tariffs and other trade barriers, foreign exchange fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of Kimball Electronics are located within Item 1A - Risk Factors.
We are a global, multifaceted manufacturing solutions provider. We provide electronics manufacturing services (“EMS”), including engineering and supply chain support, to customers in the automotive, medical, and industrial end markets. We further produce higher level and final assemblies and offer contract development and manufacturing organization (“CMOCDMO”) solutions which include the production of medical disposables and drug delivery devices, from precision molded plastics and cold chain management to drug integration. Our manufacturing services, including engineering and supply chain support, utilize common production and support capabilities globally. We are well recognized by our customers and the industry for our excellent quality, reliability, and innovative service. We have participated in the CIRCUITS ASSEMBLY,ASSEMBLY Service Excellence Awards for the past twelve consecutive years, winning awards for excellence each year of participation and recently receiving top honors in all seven award categories. CIRCUITS ASSEMBLY is a leading brand and technical publication for electronics manufacturers worldwide, has recognized us for the past 13 consecutive years for rankings in Highest Overall Customer Rating in their Service Excellence Awards. Most recently, we were recognized by our customers for highest ratings in service excellence in seven categories: dependability/timely delivery, manufacturing quality, responsiveness, technology, value for the price, flexibility, and overall satisfaction.worldwide.
The contract manufacturing services industry is very competitive. As a mid-sized player, we can expect to be challenged by the agility and flexibility of the smaller, regional players, and we can expect to be challenged by the scale and price competitiveness of the larger, global players. We enjoy a unique market position between these extremes which allows us to compete with the larger scale players for high-volume projects, but also maintain our competitive position in the generally lower volume durable electronics market space. We expect to continue to effectively operate in this market space; however, one significant challenge will be maintaining our profit margins. Pricing isremains competitive in the market even as production efficiencies and material pricing advantages for most projects drive costs and prices down over the life of the projects.projects, Thisa characteristic of our business and the contractmarket electronicsthat marketplacewe is expectedexpect to continue.
The Worldwide Manufacturing Services Market - 2025 Edition, a comprehensive study on the worldwide EMS market published by New Venture Research (“NVR”), provided worldwide forecast trends through 2029. NVR projects the worldwide assembly market for electronics products to grow at a compound annual growth rate (“CAGR”) of 6.3% over the next five years.
We continue to monitor the current economic and industry conditions for uncertainties that may pose a threat to our future growth or cause disruption in business strategy, execution, and timing in the markets in which we compete.
Beginning in February 2025, the U.S. implemented tariffs on a variety of countries and commodities under the International Emergency Economic Powers Act (“IEEPA”), and certain countries have imposed or are considering retaliatory tariffs on U.S. exports. The global tariff landscape is highly dynamic, including legal challenges and administrative processes related to tariffs and potential refunds. Increased tariffs have and may continue to impact end customer demand. We have recovered, and expect to continue recovering, a significant portion of our tariff-related costs from our customers, although recovery may lag the timing of cost occurrence. In the fourth quarter of fiscal year 2026, following the Supreme Court ruling that the IEEPA tariffs must be vacated, we began receiving refunds on IEEPA tariffs, a significant portion of which will be returned to our customers. While we may not be able to fully recover tariff costs, we expect any unrecovered amounts, after giving effect to our contractual pass-through and repricing mechanisms, to be immaterial to our results of operations and cash flows.
We are closely monitoring ongoing geopolitical tensions in the Middle East, including the recent conflict involving the U.S., Israel, and Iran, and the related regional instability. We are specifically monitoring the impacts to global macroeconomic conditions, supply chain disruptions, freight and component cost increases, and the related impact to end customer demand.
Net sales in fiscal year 2026 decreased 4% compared to fiscal year 2025, driven primarily by decreases in the automotive and industrial vertical markets partially offset by an increase in the medical market.
Net sales in fiscal year 2025 decreased 13% from the prior fiscal year, with decreases in each of our end market verticals. The decrease in sales to customers in the automotive markets were largely driven by the loss of a major automotive program that was unrelated to Kimball and other automotive programs going end of life. The decrease in sales to customers in the medical markets was primarily driven by lower demand resulting from customer overstocking of inventory. We expect moderate medical growth in fiscal year 2026. The decrease in sales to customers in the industrial market were related to the sale of GES and declines in smart metering and public safety. We expect consolidated net sales in fiscal year 2026 to decline marginally from fiscal year 2025, largely due to the continued impact of the loss of a major automotive program discussed above.
We have a strong focus on cost control balanced with managing the future growth prospects of our business. We expect to make investments that will strengthen or add new capabilities to our package of value as a multifaceted manufacturing solutions company, including through entering into a lease on a new facility for our Indianapolis operations, and our recently completedannounced capacityacquisition expansions.of Helvoet. Managing working capital in conjunction with fluctuating demand levels is likewise key. In addition, a long-standing component of our profit-sharing incentive bonus plan is its link to our financial performance, which results in varying amounts of compensation expense as profits change.
In fiscal year 2025, the Company announced that its Board of Directors had approved a plan to cease operations at our Tampa facility, which was completed by the end of the fiscal year 2025, and the sale of the land and building was completed in fiscal year 2026. The decision was another important step towards sharpening our strategic focus, while leveraging our global footprint and streamlining the operating structure. Production activities on existing customer programs were transferred out of Tampa, with the majority of the work going to our plants in North America, primarily our newly expanded facility in Mexico and Jasper. As we continue to monitor the progression of tariffs and the geopolitical economic environment, additional restructuring efforts may be necessary. In fiscal year 2027, we expect the following known trends and uncertainties to affect our results of operations: (i) integration of Helvoet, including one-time integration costs, purchase-accounting adjustments, and expected revenue and cost synergies; (ii) start-up costs and depreciation associated with our new Indianapolis, Indiana medical CDMO facility as it replaces our existing Indianapolis operations; (iii) continued uncertainty regarding U.S. and foreign tariff policy; (iv) ongoing demand pressure in the automotive vertical, partially offset by expected growth in the medical vertical; and (v) potential changes to our effective tax rate arising from the geographic mix of earnings and from the continued implementation of the One Big Beautiful Bill Act. We continue to work with our customers to optimize our global footprint.
We completed the divestiture of our GES business on July 31, 2024 and undertook restructuring efforts beginning in fiscal year 2024 to align our cost structure with reduced end-market demand levels. 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, which concluded with the assets being held for sale at 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. Production activities on existing customer programs have been transferred out of Tampa as of June 30, 2025, with the majority of the work going to our plants in North America, primarily our newly expanded facility in Mexico and Jasper.
Our total number of customers declined by seveneight from 20242025 to 2025;2026. three of which were divested with our automation, test, and measurement business, and the remaining fourThose customers accounted for less thanapproximately 1% of our consolidated net sales in fiscal year 2024.2025.
Beginning in the first quarter 2026, sales to certain customers previously included in the automotive vertical, specifically those customers more aligned with commercial vehicle applications versus passenger vehicles, are now reflected in the industrial vertical to better reflect the nature of the programs. Prior periods have been recast to conform to current period presentation. For the year ended June 30, 2025, $29.4 million of the industrial net sales were previously categorized as automotive.
Net sales in fiscal year 20252026 decreased by 13%4% compared to net sales in fiscal year 2024.2025. The impact from foreignForeign currency fluctuations had a favorable 2% impact on net sales was less than 1% in fiscal year 20252026 compared to fiscal year 2024.2025. By end market vertical, our market verticals fluctuated as follows:
•Sales to customers in the automotive market were down in the current fiscal year when compared to the prior fiscal year drivenresulting byfrom the loss of a major automotive program that was unrelated to KimballKimball, andthe othercontinued automotivepressure programson goingcustomer enddemand partially as a result of life.tariffs primarily impacting North America, partially offset by improvements in Europe.
•Sales to customers in the medical market decreasedincreased when compared to the prior fiscal year. ThisFiscal decreaseyear 2025 was primarilyfavorably drivenimpacted by lower$24 demandmillion resultingin non-recurring consignment inventory sales to a customer for completed programs. Offsetting the decreases from the non-recurring consignment inventory sales in the prior year were a step-up in sales with our largest medical customer overstockingin ofaddition inventory.to some new program wins.
•In the industrial end market vertical, sales to customers decreased when compared to fiscal year 2025 primarily as a result of decline in residential HVAC partially offset by an increase in smart metering in Europe.
•In the industrial end market vertical, the sale of GES accounts for approximately one third of the sales decrease compared to the prior fiscal year. We also experienced declines in our smart metering programs, where our customers are experiencing continued market share declines from commoditization, and to a lesser degree, declines in public safety and climate control customers.
Sales to Nexteer AutomotiveAutomotive, Philips, and ZF accounted for the following portions of our net sales:
Gross profit as a percent of net sales declinedimproved in fiscal year 20252026 when compared to fiscal year 20242025 as we experienced lostvolume absorptionleverage onin lowerEurope, revenue.cost efficiencies from global restructuring and the closure of our Tampa facility, and favorable foreign exchange rates.
For fiscal year 2025,2026, selling and administrative expenses declinedincreased as a percent of net sales and in absolute dollars when compared to fiscal year 2024,2025, driven by costhigher reductionwages efforts,and thebenefits, divestiture of GES in July 2024, the classification of factoring fees, decreasedincreased profit-sharing bonus expense,expense and lowerstock allowancecompensation driven by improved performance, and increased professional fees relating to business transformation. Fiscal year 2026 also included a $2.0 million recovery received during the first three months of fiscal year 2026 resulting from credita losses.customer terminating a program.
Other General Income in fiscal year 2024 consisted of $0.9 million 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. There was no Other General Income reported in fiscal year 2025.
In fiscal year 2026 and 2025, we recorded pre-tax restructuring expense of $5.0 million and $11.0 million, primarily for employee-related costs as we undertook restructuring efforts to align our cost structure with reduced end market demand levels and incurred costs related to the Tampa closure. In fiscal year 2024, we recorded pre-tax restructuring expense of $2.4 million, for employee-related costs as we undertook restructuring efforts to align our cost structure with reduced end market demand levels.
At June 30, 2025, we ceased operations at our Tampa facility. At that time, the related land, building, and equipment were classified as held for sale. On April 22, 2026, the Company completed the sale of the Tampa land and buildings recording a gain on sale of $15.0 million. See Note 4 - Restructuring Activities of Notes to Consolidated Financial Statements for more information. We completed the divestiture of GES on July 31, 2024 and recorded a gain on disposal of $2.4 million during fiscal year 2025. See Note 3 - Sale of GES of Notes to Consolidated Financial Statements for more information.
We completed the divestiture of GES on July 31, 2024 and recorded a gain on disposal of $2.4 million during fiscal year 2025. In fiscal year 2024, we recorded pre-tax impairment charges of $5.8 million and $17.0 million on goodwill and assets held for sale, respectively. See Note 3 - Sale of GES of Notes to Consolidated Financial Statements for more information.
Interest expense has decreased in the year ended June 30, 20252026 compared to the year ended June 30, 20242025 due to lower borrowings on credit facilities and lower interest rates. Prior to fiscal year 2025, factoring fees were recorded in Selling and Administrative Expenses on our Consolidated Statements of Income. The Foreign Currency/Derivative Gain (Loss) resulted from net foreign currency exchange rate movements during the periods. The losses in fiscal year 20252026 and 20242025 were driven by the weakening of the U.S. dollar versus foreign currencies that we have exposure to in our business. The revaluation to fair value of the SERP investments recorded in Other Income (Expense) is offset by the revaluation of the SERP liability recorded in Selling and Administrative Expenses, and thus there is no effect on net income.
The consolidated effective tax rate for fiscal year 2026 was driven higher primarily by the recognition of dividend withholding taxes from foreign subsidiaries as well as the inclusion of GILTI income which resulted in additional U.S. tax on foreign earnings.
The consolidated effective tax rate for fiscal year 2024 was lower due to the impact of the GES impairment charges, partially offset by the valuation allowance. The domestic unfavorable tax rate was also distorted by the impairment charges.
We recorded net income of $28.0 million in fiscal year 2026, or $1.13 per diluted share, an increase of 64.6% from fiscal year 2025 net income of $17.0 million, or $0.68 per diluted share.
We recorded net income of $17.0 million in fiscal year 2025, or $0.68 per diluted share, a decrease of 17.2% from fiscal year 2024 net income of $20.5 million, or $0.81 per diluted share.
Open orders were down 2%flat as of June 30, 20252026 compared to June 30, 2024.2025. The total reported for June 30, 2025 has been revised to $642 million, from the $702 million originally reported, to more accurately reflect the calculation of open order activity impacting all three verticals. Open orders are the aggregate sales price of production pursuant to unfulfilled customer orders, which may be delayed or canceled by the customer subject to contractual termination provisions. The majority of open orders as of June 30, 20252026 are expected to be filled within the next twelve months. Open orders at a point in time may not be indicative of future sales trends due to the contract nature of our business and the variability of order lead times among our customers.
We define Days Sales Outstanding as the average of monthly trade accounts and notes receivable divided by an average day’s net sales, Contract Asset Days as the average monthly contract assets divided by an average day’s net sales, Production Days Supply on Hand as the average of monthly gross inventory divided by an average day’s cost of sales, Accounts Payable Days as the average of monthly accounts payable divided by an average day’s cost of sales, and Advances from Customers Days as the average of monthly customer deposits divided by an average day’s cost of sales. Over the past twoseveral quarters, we have improved our CCD metrics by better aligning our working capital with the lower sales levels.
Net cash provided by operating activities for the fiscal year ended June 30, 2026 was primarily driven by net income adjusted for non-cash items as well as changes in operating assets and liabilities. Net income adjusted for non-cash items generated operating cash flow of $62.8 million in fiscal year 2026. Changes in operating assets and liabilities generated cash flow of $9.5 million in fiscal year 2026 driven primarily by cash provided by accounts payable of $20.0 million, which was driven by the improvement of payment terms, and accrued expenses and taxes payable which provided cash of $13.3 million, driven by improved performance which resulted in increased accrued taxes and accrued compensation. Partially offsetting cash provided by accounts payable and accrued expenses was an increase in inventory which used cash of $19.9 million, which was due to longer lead times on certain components as well as ramp up of new programs.
Net cash provided for operating activities for the fiscal year ended June 30, 2024 was driven by net income adjusted for non-cash items, partially offset by changes in operating assets and liabilities. Net income and non-cash adjustments generated operating cash flow of $82.6 million in fiscal year 2024. Partially offsetting this was cash used of $9.4 million from changes in operating assets and liabilities in fiscal year 2024.
Net cash used for investing activities during fiscal year 2026 includes $51.7 million cash used for capital investments including for the new medical facility in Indianapolis as well as to support new business awards and facility improvements, partially offset by the $21.7 million of proceeds from the sale of the Tampa facility. See Note 4 - Restructuring Activities of Notes to Consolidated Financial Statements for more information on the Tampa facility sale.
Net cash used for investing activities during fiscal year 2024 includes $47.0 million cash used for capital investments. The capital investments were primarily to support new business awards, replacement of older machinery and equipment, and facility expansions.
Net cash used for financing activities for the fiscal year ended June 30, 2026 resulted largely from payments of $30.9 million on our credit facilities to reduce debt.
Net cash provided by financing activities for the fiscal year ended June 30, 2024 resulted largely from net borrowings on our credit facilities of $13.5 million primarily for working capital purposes and capital expenditures.
The Company maintains a U.S. primary credit facility (the “primary credit facility”) which was scheduled to mature on May 4, 2027. The primary credit facility provides for $300 million in revolving borrowings, with an option to increase the amount available for borrowing to $450 million at the Company’s request, subject to the consent of each lender participating in such increase. On December 20, 2024, the Company entered into an amended and restated credit agreement which resulted in the addition of a term loan borrowing, allowing for term loan borrowings of $100 million repayable in scheduled quarterly installments, and is scheduled to mature on December 20, 2029. This facility is maintained for working capital and general corporate purposes of the Company. The Company terminated its 364-day multi-currency revolving credit facility (the “secondary credit facility”), which previously allowed for borrowings up to $100 million and had a maturity date of January 3, 2025. We were in compliance with the financial covenants of the primary credit facility during the period ended June 30, 2025.
On April 30, 2026, the Company entered into an amended and restated credit agreement (the “restated primary credit facility”). The restated primary credit facility continues to provide for revolving borrowings of $300 million, with the option to increase the amount available for revolving borrowings by an additional $150 million at the Company’s request, subject to the consent of each lender participating in such increase. The amended and restated credit agreement is scheduled to mature on April 30, 2031. The terms for the term loan borrowings remain largely unchanged in the restated primary credit facility. It is still scheduled to mature on December 20, 2029 for such term loan borrowings and the quarterly payment schedule for such term loan borrowings. This facility is maintained for working capital and general corporate purposes of the Company. We were in compliance with the financial covenants of the primary credit facility during the period ended June 30, 2026.
Through the amendment of the primary credit facility, including adding a $100 million term loan borrowing, we were able to maintain our same total borrowing capacity even with the termination of the secondary credit facility. Additionally, we were able to secure our primary credit facility’s interest rate pricing for the $100 million term loan for five years, which is beyond the duration of our current primary credit facility.
We also maintain 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. As of June 30, 2025,2026, we maintained foreign credit facilities at our Thailand operation, our China operation, our Netherlands subsidiary, and our Poland operation.
See Note 9 - Credit Facilities of Notes to Consolidated Financial Statements for more information on our credit facilities, including the terms of the credit facilities such as interest, commitment fees, debt covenants, and debtthe covenants.amended primary credit facility.
We participate in our customers’ supply chain financing arrangements 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. During the fiscal years ended June 30, 20252026 and 2024,2025, we soldsold, $338.4without recourse, $315.8 million and $410.0$338.4 million of accounts receivable, respectively.
DuringIn theaddition fourthto quarterour ofcustomers’ fiscalsupply yearchain 2025,financing arrangements, we have also entered into anreceivables accountspurchase receivableagreements factoring program(“RPA’s”) with athird-party financialbanking institutioninstitutions for certain domestic receivables. We sell our entire interest in certain receivables for 100% of face value, less a discount. We are required to remit amounts collected as a servicer under the ReceivablesRPA’s Purchase Agreement (the “RPA”) on a weekly basistimely to the financial institution that purchased the receivables. Our risks with respect to receivables we service include commercial disputes regarding such receivablesreceivables, and under one of the RPA’s, no greater than 5.0%5% of sold and outstanding receivables in the event of customer insolvency. In the fiscal yearyears ended June 30, 2026 and 2025, under thisthese program,programs, we sold $171.3 million and $19.4 million of receivables.receivables, respectively. See Note 1 - Business Description and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for more information regarding our factoring arrangements.
As of June 30, 2025,2026, following aseveral yearquarters of strong cash generated from operating activities and debt reduction, we are in a much improved liquidity position with $88.8$88.9 million in cash and unused borrowings in USD equivalent under all of our credit facilities of $284.7$314.9 million. Additionally, considering expected future sources of liquidity from cash generated from operations and proceeds from the sale of the Tampa facility,operations, we are positioned to meet our working capital and other operating needs for at least the next twelve months.
We expect to continue to prudently invest in capital expenditures that would help us continue our growth as a multifaceted manufacturing solutions company, including for capacity expansions and potential acquisitions such as the recent announcement of the Helvoet acquisition. In July 2026, the Company paid a purchase price of approximately 90.0 million Euro, or approximately $103.0 million which was funded with a combination of the Company’s cash and existing lines of credit. See Note 22 - Subsequent Event of Notes to Consolidated Financial Statements for more information regarding our recent acquisition.
At June 30, 2026, our capital expenditure commitments were approximately $7.7 million, consisting primarily of capital related to new program wins as well as for facility improvements. We anticipate our available liquidity will be sufficient to fund these capital expenditures.
We expect to continue to prudently make capital investments, including for capacity expansions and potential acquisitions, that would help us continue our growth as a multifaceted manufacturing solutions company. In March 2025, we executed a lease for a facility in Indiana to expand our medical CMO footprint with the lease commencing in June 2025. The initial lease term is ten years and annual base rent of $1.8 million, increasing 3% each year. At June 30, 2025, our capital expenditure commitments were approximately $35 million, consisting primarily of leasehold improvements and capital related to new program wins. We anticipate our available liquidity will be sufficient to fund these capital expenditures.
We expect to continue our restructuring efforts, including the closure of our Tampa facility. We expect these restructuring efforts to be predominantly cash expenditures to be incurred over the first half of fiscal year 2026. We estimate additional pre-tax restructuring charges between $0.5 million to $1.0 million. Now that Tampa’s operations have ceased, we expect to sell the building and land, with the proceeds from the sale anticipated to exceed the combined amount of the total expected restructuring costs and the carrying value of the Assets Held for Sale.
At June 30, 2025,2026, our foreign operations held cash totaling $85.3$85 million. Most of our accumulated unremitted foreign earnings have been invested in active non-U.S. business operations. The Company continually evaluates its global cash needs. If such funds were repatriated or we determined that all or a portion of such foreign earnings are no longer permanently reinvested, we may be subject to applicable non-U.S. income and withholding taxes. Determination of the amount of any potential future unrecognized deferred tax liability on such unremitted earnings is not practicable and is recorded in the period when any foreign earnings are determined to be no longer permanently reinvested. During fiscal year 2025, the Company changed its indefinite reinvestment assertion for our subsidiary in China, and has recorded a deferred tax liability on their earnings for the applicable withholding taxes. The Company continues to assert permanent reinvestment of foreign earnings in all other foreign jurisdictions as well as for earnings prior to fiscal year 2025 for China.
What changed in the latest 10-Q
Risk Factors
We are subject to various risks and uncertainties in the course of our business. A comprehensive disclosure of risk factors related to Kimball Electronics can be found in our Annual Report on Form 10-K for the year ended June 30, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
Subsequent to March 31, 2026, the Company entered into an amended and restated credit agreement on April 30, 2026 to its existing primary credit facility. This amendment and restatement changes the maturity date of the revolving credit borrowings from May 4, 2027 to April 30, 2031. See Note 8 - Credit Facilities of Notes to Consolidated Financial Statements for more information on our credit facilities, including the terms of the credit facilities such as interest, commitment fees, debt covenants, andsee in full comparisondebtthecovenants.amended primary credit facility.
“We are closely monitoring ongoing geopolitical tensions in the Middle East, including the recent conflict involving the U.S., Israel, and Iran, and the related regional instability. We are specifically monitoring the impacts to global macroeconomic conditions, supply chain disruptions, freight and component cost increases, and the related impact to end customer demand.”see in full comparison
Beginning in February 2025, the U.S. implemented tariffs on a variety of countries andsee in full comparisoncommodities.commodities,In response,and certain countries haveimposed,imposed or areconsidering,considering retaliatory tariffs on U.S. exports. The global tariff landscape isevolvinghighlyatdynamic,aincludingrapidlegalpace, with changes impacting businesseschallenges andmarketsadministrativearoundprocessestherelatedworld.toWhiletariffstheseandincreasedpotential refunds. Increased tariffs have and may continue to impact end customerdemand,demand.weWe have recovered, and expectthattowecontinuewillrecovering,recovera significant portion of our tariff-related costs from our customers, although recovery may lag thetarifftimingcostsofbycostpassing them on to our customers.occurrence. If we are unable to fully recover these costs, our results of operations and cash flows could be adversely impacted.
“Now that Tampa’s operations have ceased, we expect to sell the building and land, with the proceeds from the sale anticipated to exceed the combined amount of the total expected restructuring costs and the carrying value of the Assets Held for Sale.”see in full comparison
Gross profit as a percent of net sales in thesee in full comparisonsecondthird quarter of fiscal year 2026 improved when compared to thesecondthird quarter of fiscal year 2025 as well as in the firsthalfnine months of the fiscal year.TheImprovements in both quarter over quarter as well as year over year were primarily driven by broad improvements in Europe, including the maturing of a new braking program and favorable exchange rates. We also experienced improvementwasas a result of efficiencies driven by our restructuring efforts, including the Tampaclosure,closure.andThesefavorableimprovementsexchangewererates.partially offset by increased costs from opening our new manufacturing facility in Indianapolis. Gross profit as a percent of net sales in the third quarter of fiscal year 2025 experienced dilution from the non-recurring consignment inventory sale.
Our provision (benefit) for income taxes for thesee in full comparisonsixnine months endedDecemberMarch 31, 2026 and March 31, 2025and December 31, 2024was$4.3$7.3 million, or23.7%27.4% of income before taxes on income, and$(0.2)$3.1 million, or(3.6)%23.0% of income before taxes on income, respectively.The tax benefit in the six months ended December 31, 2024 is primarily the result of the valuation allowance reversal recorded in period associated with the expected capital gains from the sale of the Tampa property.
Full comparison: every changed paragraph (40)
Certain statements contained within this document are considered forward-looking under the Private Securities Litigation Reform Act of 1995. The statements may be identified by the use of words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “estimates,” “forecasts,” “likely,” “future,” “may,” “should,” “would,” “could,” “will,” “can,” “potentially,” and similar expressions. These forward-looking statements are subject to risks and uncertainties including, but not limited to, global economic conditions, geopolitical environment and conflicts such as the war in Ukraine,war, global health emergencies, availability or cost of raw materials and components, tariffs and other trade barriers, foreign exchange fluctuations, and our ability to convert new business opportunities into customers and revenue. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of Kimball Electronics are contained in our Annual Report on Form 10-K for the year ended June 30, 2025.
The Worldwide Manufacturing Services Market - 2025 Edition, a comprehensive study on the worldwide EMS market published by New Venture Research (“NVR”), provided worldwide forecast trends through 2029. NVR projects the worldwide assembly market for electronics products to grow at a compound annual growth rate (“CAGR”) of 6.3% over the next five years.
We continue to monitor the current economic and industry conditions for uncertainties that may pose a threat to our future growth or cause disruption in business strategy, execution, and timing in the markets in which we compete.
Beginning in February 2025, the U.S. implemented tariffs on a variety of countries and commodities.commodities, In response,and certain countries have imposed,imposed or are considering,considering retaliatory tariffs on U.S. exports. The global tariff landscape is evolvinghighly atdynamic, aincluding rapidlegal pace, with changes impacting businesseschallenges and marketsadministrative aroundprocesses therelated world.to Whiletariffs theseand increasedpotential refunds. Increased tariffs have and may continue to impact end customer demand,demand. weWe have recovered, and expect thatto wecontinue willrecovering, recovera significant portion of our tariff-related costs from our customers, although recovery may lag the tarifftiming costsof bycost passing them on to our customers.occurrence. If we are unable to fully recover these costs, our results of operations and cash flows could be adversely impacted.
We are closely monitoring ongoing geopolitical tensions in the Middle East, including the recent conflict involving the U.S., Israel, and Iran, and the related regional instability. We are specifically monitoring the impacts to global macroeconomic conditions, supply chain disruptions, freight and component cost increases, and the related impact to end customer demand.
Net sales in the secondthird quarter of the current fiscal year decreased 5%6% compared to the prior fiscal year secondthird quarter, mostdriven significantlyprimarily by single-digit percentage declines in our automotiveeach end market vertical.
We continue to maintain a strong balance sheet, which included a current ratio of 2.2,2.1, a debt-to-equity ratio of 0.3, and Share Owners’ equity of $579$578 million at DecemberMarch 31, 2025.2026. Refer to the Future Liquidity section of Liquidity and Capital Resources below for further discussion of our liquidity.
Our total number of customers declined by eight when comparing Decemberthe nine-month periods ended March 31, 20252026 to DecemberMarch 31, 20242025. allThose of whichcustomers accounted for approximately 1% of our consolidated net sales in the first sixnine months of fiscal year 2025.
Beginning in the first quarter of fiscal year 2026, sales to certain customers previously included in the automotive vertical, specifically those customers more aligned with commercial vehicle applications versus passenger vehicles, are now reflected in the industrial vertical to better reflect the nature of the programs. Prior periods have been recast to conform to current period presentation. For the three and sixnine months ended DecemberMarch 31, 2024,2025, $6.5$7.5 million and $13.1$20.6 million of the industrial net sales were previously categorized as automotive.
SecondThird quarter fiscal year 2026 consolidated net sales decreased 5%6% compared to the secondthird quarter of fiscal year 2025, and the year-to-date fiscal year 2026 consolidated net sales decreased 3%4% compared to the year-to-date period of fiscal year 2025.
Foreign currency fluctuations had a favorable 2%3% impact on net sales in the current quarter compared to the secondthird quarter of fiscal year 2025, and a favorable impact of 2% in the current year-to-date period compared to the year-to-date period of fiscal year 2025.
•In the automotive end market vertical, sales to customers decreased for both the quarter over quarter andremained year-to-daterelatively periodsflat drivenwhen bycompared to prior year quarter. Year-to-date the automotive end market vertical decreased resulting from the loss of a major automotive program that was unrelated to Kimball andKimball, the continued pressure on customer demand as a result of tariffs primarily impacting North America.America, and softness in demand, particularly in Asia, partially offset by improvements in Europe.
•Sales to the medical end market vertical increased for both thedecreased quarter over quarter andbut increased in the year-to-date periodsperiod. drivenThe third quarter of fiscal year 2025 and the prior year-to-date period were favorably impacted by $24 million in non-recurring consignment inventory sales to a customer for completed programs. Offsetting the decreases from the non-recurring consignment inventory sales in the prior year were a step-up in sales with our largest medical customer in addition to some new program wins.
•In the industrial end market vertical, sales to customers decreased for both quarter over quarter and year-to-date periods primarily as a result of declines in climate controls.controls Theand year-to-dateresidential period remained relatively flat when compared to prior year-to-date.HVAC.
Gross profit as a percent of net sales in the secondthird quarter of fiscal year 2026 improved when compared to the secondthird quarter of fiscal year 2025 as well as in the first halfnine months of the fiscal year. TheImprovements in both quarter over quarter as well as year over year were primarily driven by broad improvements in Europe, including the maturing of a new braking program and favorable exchange rates. We also experienced improvement wasas a result of efficiencies driven by our restructuring efforts, including the Tampa closure,closure. andThese favorableimprovements exchangewere rates.partially offset by increased costs from opening our new manufacturing facility in Indianapolis. Gross profit as a percent of net sales in the third quarter of fiscal year 2025 experienced dilution from the non-recurring consignment inventory sale.
Selling and administrative expenses increased both as a percent of net sales and in absolute dollars in the secondthird quarter of fiscal year 2026 when compared to the secondthird quarter of fiscal year 2025 as well as in the first halfnine months of the fiscal year. The increased expenses were primarily driven by higher wages and benefits in addition tobenefits, increased profit-sharing bonus expense and stock compensation driven by improved performance.performance, and increased professional fees relating to business transformation. The year-to-date period also included a $2.0 million recovery received during the first three months of fiscal year 2026 resulting from a customer terminating a program.
In the three and sixnine months ended DecemberMarch 31, 2025,2026, we recorded pre-tax restructuring expense of $1.8$0.9 million and $3.2$4.1 million for employee-related costs as we undertook restructuring efforts to align our cost structure with reduced end market demand levels and incurred costs related to the Tampa closure. In the three and sixnine months ended DecemberMarch 31, 2024,2025, we recorded pre-tax restructuring expense of $4.7$2.0 million and $7.0$9.0 million for employee-related costs for cost structure alignment and incurred costs related to the Tampa closure in the second quarter.closure.
Interest expense has decreased in the three and sixnine months ended DecemberMarch 31, 20252026 compared to the three and sixnine months ended DecemberMarch 31, 20242025 due to lower borrowings on credit facilities and lower interest rates. Foreign currency/derivative gains (losses) result from net foreign currency exchange rate movements during the periods. The revaluation to fair value of the SERP investments recorded in Other Income (Expense) is offset by the revaluation of the SERP liability recorded in Selling and Administrative Expenses, and thus there is no effect on net income.
Our provision (benefit) for income taxes for the sixnine months ended DecemberMarch 31, 2026 and March 31, 2025 and December 31, 2024 was $4.3$7.3 million, or 23.7%27.4% of income before taxes on income, and $(0.2)$3.1 million, or (3.6)%23.0% of income before taxes on income, respectively. The tax benefit in the six months ended December 31, 2024 is primarily the result of the valuation allowance reversal recorded in period associated with the expected capital gains from the sale of the Tampa property.
Open orders weredeclined relativelyby flat6% when comparing DecemberMarch 31, 20252026 to DecemberMarch 31, 2024.2025. Open orders at a point in time may not be indicative of future sales trends due to the contract nature of our business.
Working capital at DecemberMarch 31, 20252026 was $378.5$371.9 million compared to working capital of $381.0 million at June 30, 2025. The current ratio was 2.22.1 at DecemberMarch 31, 20252026 and 2.2 at June 30, 2025. The debt-to-equity ratio was 0.3 at DecemberMarch 31, 20252026 and 0.3 at June 30, 2025. Our short-term liquidity available, represented as cash and cash equivalents plus the unused amount of our credit facilities, some of which are uncommitted, totaled $363.0$358.5 million at DecemberMarch 31, 20252026 and $373.5 million at June 30, 2025.
The following table reflects the major categories of cash flows for the first sixnine months of fiscal years 2026 and 2025.
Net cash provided by operating activities for the first sixnine months of fiscal year 2026 was driven by net income adjusted for non-cash items, partially offset by changes in operating assets and liabilities. Net cash provided by operating activities for the first sixnine months of the prior year was driven by net income adjusted for non-cash items and changes in operating assets and liabilities.
Net income adjusted for non-cash items provided cash of $34.4$52.7 million in the first sixnine months of fiscal year 2026, while changes in operating assets and liabilities used $19.4$22.8 million of cash in the first sixnine months of fiscal year 2026, largely due to a decrease in advances from customers, which used cash of $10.8$13.2 million and an increase in contract assets,receivables, which used cash of $7.9$9.8 million. Partially offsetting cash used for advances from customers and receivables was an increase in accounts payable, which provided cash of $15.1 million.
Net income adjusted for non-cash items provided cash of $28.1$40.0 million in the first sixnine months of fiscal year 2025, while changes in operating assets and liabilities provided $46.8$65.9 million of cash in the first sixnine months of fiscal year 2025, largely due to a decrease of accounts receivable, which provided cash of $45.5$32.5 million, and a decrease of inventory, which provided cash of $28.0$39.9 million. Partially offsetting cash provided by accounts receivable and inventory was a decrease in accrued expenses and taxes payable, which used cash of $27.1$19.7 million primarily driven by timing of profit-sharing incentive bonus and income tax payments.
Net cash used by investing activities of $24.4$38.1 million in the first sixnine months of fiscal year 2026 was largely due to capital investments of $28.7$43.2 million. The capital investments were primarily for the new medical facility in Indianapolis as well as to support new business awards and replacementfacility of older machinery and equipment.improvements.
Net cash used by investing activities of $1.2$5.2 million in the first sixnine months of fiscal year 2025 was largely due to capital investments of $20.0$24.0 million primarily to support new business awards and replacement of older machinery and equipment, partially offset by the $18.5 million of proceeds from the sale of GES. See Note 3 - Sale of GES of Notes to Consolidated Financial Statements for more information on the divestiture of GES.
For the first sixnine months of fiscal year 2026, net cash usedprovided forby financing activities of $2.1$2.5 million resulted largely from net borrowings on our credit facilities of $15.4 million partially offset by repurchases of our common stock under an authorized repurchase plan and the remittance of tax withholdings on share-based payments partially offset by net borrowings on our credit facilities of $6.7 million.payments. For the first sixnine months of fiscal year 2025, net cash used for financing activities of $97.3$126.6 million resulted largely from net payments on our credit facilities of $89.8$116.1 million.
The Company maintains a U.S. primary credit facility (the “primary credit facility”) scheduled to mature May 4, 2027. The primary credit facility provides for $300 million in revolving borrowings, with an option to increase the amount available for borrowing to $450 million at the Company’s request, subject to the consent of each lender participating in such increase. On December 20, 2024, the Company entered into an amended and restated credit agreement which resulted in the addition of a term loan borrowing, allowing for term loan borrowings of $100 million repayable in scheduled quarterly installments, and is scheduled to mature on December 20, 2029. This facility is maintained for working capital and general corporate purposes of the Company. We were in compliance with the financial covenants of the primary credit facility as of DecemberMarch 31, 2025.2026.
We also maintain 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. As of DecemberMarch 31, 2025,2026, we maintained foreign credit facilities at our Thailand operation, our China operation, our Netherlands subsidiary, and our Poland operation.
Subsequent to March 31, 2026, the Company entered into an amended and restated credit agreement on April 30, 2026 to its existing primary credit facility. This amendment and restatement changes the maturity date of the revolving credit borrowings from May 4, 2027 to April 30, 2031. See Note 8 - Credit Facilities of Notes to Consolidated Financial Statements for more information on our credit facilities, including the terms of the credit facilities such as interest, commitment fees, debt covenants, and debtthe covenants.amended primary credit facility.
We participate in our customers’ supply chain financing arrangements 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. In the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, we sold, without recourse, $144.1$208.7 million and $169.0$236.2 million of accounts receivable, respectively.
DuringIn theaddition fourthto quarterour ofcustomers’ fiscalsupply yearchain 2025,financing arrangements, we have also entered into anreceivables accountspurchase receivableagreements factoring program(“RPA’s”) with athird-party financialbanking institutioninstitutions for certain domestic receivables. We sell our entire interest in certain receivables for 100% of face value, less a discount. We are required to remit amounts collected as a servicer under the ReceivablesRPA’s Purchase Agreement (the “RPA”) on a weekly basistimely to the financial institution that purchased the receivables. Our risks with respect to receivables we service include commercial disputes regarding such receivables and under one of the RPA’s, no greater than 5% of sold and outstanding receivables in the event of customer insolvency. In the sixnine months ended DecemberMarch 31, 2025,2026, under this program, we sold $57.4$100.1 million of receivables. See Note 1 - Business Description and Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements for more information regarding the factoring arrangements.
As of DecemberMarch 31, 2025,2026, following several quarters of strong cash generated from operating activities and debt reduction, we are in a much improved liquidity position with $77.9$82.5 million in cash and unused borrowings in USD equivalent under all of our credit facilities of $285.1$276.0 million. Additionally, considering expected future sources of liquidity from cash generated from operations and proceeds from the completed sale of the Tampa facility, we are positioned to meet our working capital and other operating needs for at least the next twelve months.
We expect to continue to prudently invest in capital expenditures, including for capacity expansions and potential acquisitions, that would help us continue our growth as a multifaceted manufacturing solutions company. At DecemberMarch 31, 2025,2026, our capital expenditure commitments were approximately $16.0$8.5 million, consisting primarily of capital related to new program wins and leasehold improvements on our new medical facility. We anticipate our available liquidity will be sufficient to fund these capital expenditures.
Now that Tampa’s operations have ceased, we expect to sell the building and land, with the proceeds from the sale anticipated to exceed the combined amount of the total expected restructuring costs and the carrying value of the Assets Held for Sale.
At DecemberMarch 31, 2025,2026, our foreign operations held cash totaling $77.5$81.8 million. Most of our accumulated unremitted foreign earnings have been invested in active non-U.S. business operations. The Company continually evaluates its global cash needs. If such funds were repatriated or we determined that all or a portion of such foreign earnings are no longer permanently reinvested, we may be subject to applicable non-U.S. income and withholding taxes. Determination of the amount of any potential future unrecognized deferred tax liability on such unremitted earnings is not practicable and is recorded in the period when any foreign earnings are determined to be no longer permanently reinvested. The Company asserts permanent reinvestment of foreign earnings in all our foreign jurisdictions with the exception of earnings from our China operation beginning in 2025 and thereafter.
The Company’s Repurchase Plan allows the repurchase of up to $120 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 Repurchase Plan has no expiration date but may be suspended or discontinued at any time. The extent to which the Company repurchases its shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by the Company’s management team. The Company expects to finance the purchases with existing liquidity. The Company has repurchased $109.5$113.5 million of common stock under the Repurchase Plan through DecemberMarch 31, 2025.2026.
During the secondthird quarter of fiscal year 2026, no level 1 or level 2 financial instruments were affected by a lack of market liquidity. For level 1 financial assets, readily available market pricing was used to value the financial instruments. Our foreign currency derivative assets and liabilities, which were classified as level 2, were independently valued using observable market inputs such as forward interest rate yield curves, current spot rates, and time value calculations. To verify the reasonableness of the independently determined fair values, these derivative fair values were compared to fair values calculated by the counterparty banks. Our own credit risk and counterparty credit risk had an immaterial impact on the valuation of the foreign currency derivatives. See Note 9 - Fair Value of Notes to Condensed Consolidated Financial Statements for additional information.
As of DecemberMarch 31, 2025,2026, we do not have any material off-balance sheet arrangements.
KE insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-03 | Korn Steven T |
Gift | 4,000 | — | — |
| 2026-09-03 | Korn Steven T |
Gift | 1,000 | — | — |
| 2026-08-24 | Korn Steven T |
Grant/award | 20,065 | — | — |
| 2026-08-24 | Korn Steven T |
Option exercise | 25,153 | — | — |
| 2026-08-24 | Korn Steven T |
Shares withheld for tax | 19,660 | $22.73 | $446.9K |
| 2026-08-24 | Hass Douglas |
Option exercise | 12,132 | — | — |
| 2026-08-24 | Hass Douglas |
Grant/award | 3,422 | — | — |
| 2026-08-24 | Hass Douglas |
Shares withheld for tax | 6,751 | $22.73 | $153.5K |
| 2026-08-24 | Delorenzo Jessica L |
Grant/award | 3,438 | — | — |
| 2026-08-24 | Delorenzo Jessica L |
Shares withheld for tax | 4,498 | $22.73 | $102.2K |
| 2026-08-24 | Delorenzo Jessica L |
Option exercise | 6,783 | — | — |
| 2026-08-24 | Croom Jana T |
Grant/award | 8,303 | — | — |
| 2026-08-24 | Croom Jana T |
Option exercise | 16,727 | — | — |
| 2026-08-24 | Croom Jana T |
Shares withheld for tax | 9,838 | $22.73 | $223.6K |
| 2026-08-24 | Baumann Adam M |
Option exercise | 2,438 | — | — |
| 2026-08-24 | Baumann Adam M |
Grant/award | 1,202 | — | — |
| 2026-08-24 | Baumann Adam M |
Shares withheld for tax | 1,533 | $22.73 | $34.8K |
| 2026-08-24 | Phillips Richard D |
Shares withheld for tax | 30,391 | $22.73 | $690.8K |
| 2026-08-24 | Phillips Richard D |
Option exercise | 40,953 | — | — |
| 2026-08-24 | Phillips Richard D |
Grant/award | 36,277 | — | — |
| 2026-08-24 | Thomson Kathy R |
Shares withheld for tax | 6,743 | $22.73 | $153.3K |
| 2026-08-24 | Thomson Kathy R |
Grant/award | 3,874 | — | — |
| 2026-08-24 | Thomson Kathy R |
Option exercise | 10,486 | — | — |
| 2026-08-24 | Regrut Andrew Donald |
Grant/award | 3,623 | — | — |
| 2026-08-24 | Regrut Andrew Donald |
Shares withheld for tax | 2,153 | $22.73 | $48.9K |
| 2026-08-24 | Regrut Andrew Donald |
Option exercise | 1,878 | — | — |
| 2026-06-01 | Phillips Richard D |
Gift | 4,214 | — | — |
| 2026-06-01 | Phillips Richard D |
Gift | 4,214 | — | — |
| 2026-06-01 | Regrut Andrew Donald |
Shares withheld for tax | 457 | $25.61 | $11.7K |
| 2026-06-01 | Regrut Andrew Donald |
Option exercise | 1,052 | — | — |
| 2026-05-26 | Phillips Richard D |
Gift | 77,974 | — | — |
| 2026-05-26 | Phillips Richard D |
Gift | 77,974 | — | — |
Well-known investors holding KE (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 387,766 | $9.9M | 0.01% | Added 30% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 347,136 | $8.9M | 0.01% | Added 101% |
| D. E. Shaw & Co. | 2026-06-30 | 305,933 | $7.8M | 0.0% | Added 93% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 196,720 | $5.0M | 0.0% | Reduced 12% |
| Two Sigma Investments | 2026-06-30 | 30,875 | $790.4K | 0.0% | Reduced 28% |
| Renaissance Technologies | 2026-06-30 | 24,432 | $625.5K | 0.0% | New position |