Kimball Electronics Inc.
08/19/2026 | Press release | Distributed by Public on 08/19/2026 15:21
Annual Report for Fiscal Year Ending June 30, 2026 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
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," "might," "should," "would," "could," "will," "can," "potentially," "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 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.
Business Overview
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 ("CDMO") 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 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.
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 remains 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, a characteristic of our business and the market that we expect to continue.
We 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.
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 announced acquisition 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 continue to maintain a strong balance sheet as of the end of fiscal year 2026, which included a current ratio of 2.1, a debt-to-equity ratio of 0.2, and Share Owners' equity of $585 million. Refer to the Future Liquidity section of Liquidity and Capital Resources below for further discussion of our liquidity.
The continuing success of our business is dependent upon our ability to replace expiring customers/programs with new customers/programs. We monitor our success in this area by tracking the number of customers and the percentage of our net sales generated from them by years of service as depicted in the table below. While variation in the size of program awards makes it difficult to directly correlate this data to our sales trends, we believe it does provide useful information regarding our customer loyalty and new business growth.
| Year End | ||||||||||||||||||||
| Customer Service Years | 2026 | 2025 | 2024 | |||||||||||||||||
| More than 10 Years | ||||||||||||||||||||
| % of Net Sales | 77 | % | 77 | % | 76 | % | ||||||||||||||
| # of Customers | 26 | 36 | 38 | |||||||||||||||||
| 5 to 10 Years | ||||||||||||||||||||
| % of Net Sales | 17 | % | 17 | % | 18 | % | ||||||||||||||
| # of Customers | 12 | 13 | 15 | |||||||||||||||||
| Less than 5 Years | ||||||||||||||||||||
| % of Net Sales | 6 | % | 6 | % | 6 | % | ||||||||||||||
| # of Customers | 12 | 9 | 12 | |||||||||||||||||
| Total | ||||||||||||||||||||
| % of Net Sales | 100 | % | 100 | % | 100 | % | ||||||||||||||
| # of Customers | 50 | 58 | 65 | |||||||||||||||||
Our total number of customers declined by eight from 2025 to 2026. Those customers accounted for approximately 1% of our consolidated net sales in fiscal year 2025.
A detailed discussion of risk factors and uncertainties that could have an effect on our performance are located within Item1A - Risk Factors.
Presentation of Results of Operations and Liquidity and Capital Resources
A discussion regarding our financial condition and results of operations for fiscal year 2026 compared to fiscal year 2025 is presented below. A discussion regarding our financial condition and results of operations for fiscal year 2025 compared to fiscal year 2024 can be found under captions entitled "Results of Operations - Fiscal Year 2025 Compared with Fiscal Year 2024" and "Liquidity and Capital Resources" in the section entitled "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended June 30, 2025 filed with the SEC on August 22, 2025, which is available free of charge through the SEC's website at http://www.sec.gov or the Company's website, https://investors.kimballelectronics.com. The Company's website and the information contained therein, or incorporated therein, are not intended to be incorporated into this Annual Report on Form 10-K.
Results of Operations - Fiscal Year 2026 Compared with Fiscal Year 2025
| At or For the Year Ended | |||||||||||||||||||||||||||||
| June 30 | |||||||||||||||||||||||||||||
| (Amounts in Millions, Except for Per Share Data) | 2026 | as a % of Net Sales | 2025 | as a % of Net Sales | % Change | ||||||||||||||||||||||||
| Net Sales | $ | 1,431.4 | $ | 1,486.7 | (4) | % | |||||||||||||||||||||||
| Gross Profit | $ | 117.5 | 8.2 | % | $ | 104.4 | 7.0 | % | 13 | % | |||||||||||||||||||
| Selling and Administrative Expenses | 61.1 | 4.3 | % | 50.3 | 3.4 | % | 22 | % | |||||||||||||||||||||
|
Restructuring Expense
|
5.0 | 0.3 | % | 11.0 | 0.7 | % | (55) | % | |||||||||||||||||||||
|
(Gain on Disposal) Asset Impairment
|
(14.7) | (1.0) | % | (2.4) | (0.2) | % | (516) | % | |||||||||||||||||||||
| Operating Income | 66.1 | 4.6 | % | 45.5 | 3.1 | % | 45 | % | |||||||||||||||||||||
| Other Income (Expense) | (12.8) | (19.3) | |||||||||||||||||||||||||||
| Provision for Income Taxes | 25.3 | 9.2 | 173 | % | |||||||||||||||||||||||||
| Net Income | $ | 28.0 | $ | 17.0 | 65 | % | |||||||||||||||||||||||
| Diluted Earnings per Share | $ | 1.13 | $ | 0.68 | 66 | % | |||||||||||||||||||||||
| Open Orders | $ | 643 | $ | 642 | - | % | |||||||||||||||||||||||
| Net Sales by Vertical Market | For the Year Ended | ||||||||||||||||
| June 30 | |||||||||||||||||
| (Amounts in Millions) | 2026 | 2025 | % Change | ||||||||||||||
| Automotive | $ | 656.9 | $ | 708.5 | (7) | % | |||||||||||
| Medical | 412.8 | 396.2 | 4 | % | |||||||||||||
| Industrial | 361.7 | 382.0 | (5) | % | |||||||||||||
| Total Net Sales | $ | 1,431.4 | $ | 1,486.7 | (4) | % | |||||||||||
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 2026 decreased by 4% compared to net sales in fiscal year 2025. Foreign currency fluctuations had a favorable 2% impact on net sales in fiscal year 2026 compared to fiscal year 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 resulting from the loss of a major automotive program that was unrelated to Kimball, the continued pressure on customer demand partially as a result of tariffs primarily impacting North America, partially offset by improvements in Europe.
•Sales to customers in the medical market increased when compared to the prior fiscal year. Fiscal year 2025 was 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 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.
Sales to Nexteer Automotive, Philips, and ZF accounted for the following portions of our net sales:
| Year Ended June 30 | |||||||||||
| 2026 | 2025 | ||||||||||
| Nexteer Automotive | 18% | 19% | |||||||||
| Philips | 11% | * | |||||||||
| ZF | 11% | 11% | |||||||||
|
* amount is less than 10% of total
|
|||||||||||
Gross profit as a percent of net sales improved in fiscal year 2026 when compared to fiscal year 2025 as we experienced volume leverage in Europe, cost efficiencies from global restructuring and the closure of our Tampa facility, and favorable foreign exchange rates.
For fiscal year 2026, selling and administrative expenses increased as a percent of net sales and in absolute dollars when compared to fiscal year 2025, driven by higher wages and benefits, increased profit-sharing bonus expense and stock compensation 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 a customer terminating a program.
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.
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.
Other Income (Expense) consisted of the following:
| Other Income (Expense) | Year Ended | ||||||||||
| June 30 | |||||||||||
| (Amounts in Thousands) | 2026 | 2025 | |||||||||
| Interest Income | $ | 1,232 | $ | 771 | |||||||
| Interest Expense | (8,504) | (14,745) | |||||||||
| Foreign Currency/Derivative Gain (Loss) | (1,263) | (1,751) | |||||||||
| Gain (Loss) on SERP Investments | 666 | 614 | |||||||||
|
Factoring fees / AR program discounts
|
(3,862) | (2,415) | |||||||||
|
Credit facilities fees and bank charges
|
(910) | (1,018) | |||||||||
| Other | (195) | (762) | |||||||||
| Other Income (Expense), net | $ | (12,836) | $ | (19,306) | |||||||
Interest expense has decreased in the year ended June 30, 2026 compared to the year ended June 30, 2025 due to lower borrowings on credit facilities and lower interest rates. The Foreign Currency/Derivative Gain (Loss) resulted from net foreign currency exchange rate movements during the periods. The losses in fiscal year 2026 and 2025 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.
Our income before income taxes and effective tax rate were comprised of the following U.S. and foreign components:
| Year Ended June 30, 2026 | Year Ended June 30, 2025 | ||||||||||||||||||||||
| (Amounts in Thousands) | Income (Loss) Before Taxes | Effective Tax Rate | Income (Loss) Before Taxes | Effective Tax Rate | |||||||||||||||||||
| United States | $ | 2,551 | 157.8 | % | $ | (9,681) | 11.8 | % | |||||||||||||||
| Foreign | $ | 50,670 | 41.9 | % | $ | 35,910 | 28.9 | % | |||||||||||||||
| Total | $ | 53,221 | 47.5 | % | $ | 26,229 | 35.2 | % | |||||||||||||||
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 2025 was driven higher by the limitation on the deductibility of business interest expense under Section 163(j) and the inclusion of GILTI income which resulted in additional U.S. tax on foreign earnings.
Our overall effective tax rate will fluctuate depending on the geographic distribution of our worldwide earnings. See Note 12 - Income Taxes of Notes to Consolidated Financial Statements for more information.
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.
Open orders were flat as of June 30, 2026 compared to June 30, 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, 2026 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.
Liquidity and Capital Resources
Working capital at June 30, 2026 was $360.9 million compared to working capital of $381.0 million at June 30, 2025. The current ratio was 2.1 at June 30, 2026 and 2.2 at June 30, 2025, respectively. The debt-to-equity ratio was 0.2 at June 30, 2026 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 $403.8 million at June 30, 2026 and $373.5 million at June 30, 2025.
Cash Conversion Days ("CCD") are calculated as the sum of Days Sales Outstanding ("DSO") plus Contract Asset Days ("CAD") plus Production Days Supply on Hand ("PDSOH") less Accounts Payable Days ("APD") and less Advances from Customers Days ("ACD"). CCD, or a similar metric, is used in our industry and by our management to measure the efficiency of managing working capital. The following table summarizes our CCD for the quarterly periods indicated.
| Three Months Ended | ||||||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | December 31, 2025 | September 30, 2025 | June 30, 2025 | ||||||||||||||||||||||||||||
| DSO | 53 | 56 | 59 | 54 | 56 | |||||||||||||||||||||||||||
| CAD | 19 | 20 | 20 | 18 | 18 | |||||||||||||||||||||||||||
| PDSOH | 89 | 91 | 92 | 85 | 84 | |||||||||||||||||||||||||||
| APD | 62 | 62 | 65 | 59 | 55 | |||||||||||||||||||||||||||
| ACD | 17 | 15 | 15 | 15 | 18 | |||||||||||||||||||||||||||
| CCD | 82 | 90 | 91 | 83 | 85 | |||||||||||||||||||||||||||
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 several quarters, we have improved our CCD metrics by better aligning our working capital with the lower sales levels.
Cash Flows
The following table reflects the major categories of cash flows for the fiscal years ended June 30, 2026 and 2025.
| Year Ended June 30 | ||||||||||||||
| (Amounts in Millions) | 2026 | 2025 | ||||||||||||
| Net cash provided by operating activities | $ | 72.3 | $ | 183.9 | ||||||||||
| Net cash used for investing activities | $ | (25.9) | $ | (14.7) | ||||||||||
| Net cash used for financing activities | $ | (47.1) | $ | (160.9) | ||||||||||
Cash Flows from Operating Activities
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 by operating activities for the fiscal year ended June 30, 2025 was primarily driven by change in receivables, which provided cash of $71.8 million due to lower sales levels and increased use of factoring programs, and inventories, which provided cash of $74.6 million due to working down previously inflated inventory levels from strategic inventory builds to mitigate part shortages. Net income adjusted for non-cash items also generated operating cash flow of $56.5 million in fiscal year 2025.
Cash Flows from Investing Activities
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 2025 includes $33.7 million cash used for capital investments primarily to support new business awards and replacement of older machinery, 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.
Cash Flows from Financing Activities
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 used for financing activities for the fiscal year ended June 30, 2025 resulted largely from net payments on our credit facilities of $147.3 million.
Credit Facilities
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.
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.
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, 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 the amended primary credit facility.
Factoring Arrangements
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, 2026 and 2025, we sold, without recourse, $315.8 million and $338.4 million of accounts receivable, respectively.
In addition to our customers' supply chain financing arrangements, we have also entered into receivables purchase agreements ("RPA's") with third-party banking institutions 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 RPA's timely 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 fiscal years ended June 30, 2026 and 2025, under these programs, we sold $171.3 million and $19.4 million of 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.
Future Liquidity
As of June 30, 2026, following several quarters of strong cash generated from operating activities and debt reduction, we are in a much improved liquidity position with $88.9 million in cash and unused borrowings in USD equivalent under all of our credit facilities of $314.9 million. Additionally, considering expected future sources of liquidity from cash generated from 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 have purchase obligations that arise in the normal course of business for items such as raw materials, services, and software acquisitions/license commitments. In certain instances, such as when lead times dictate, we enter into contractual agreements for material in excess of the levels required to fulfill customer orders. In turn, material authorization agreements with customers cover a portion of the exposure for material that we must purchase prior to having a firm order.
At June 30, 2026, our foreign operations held cash totaling $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.
The Company's Repurchase Plan allows the repurchase of up to $140 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 $115.6 million of common stock under the Repurchase Plan through June 30, 2026.
Our ability to generate cash from operations to meet our liquidity obligations could be adversely affected in the future by factors such as general economic and market conditions, lack of availability of raw material components in the supply chain, a decline in demand for our services, loss of key contract customers, unsuccessful integration of acquisitions and new operations, global health emergencies, and the related uncertainties around the financial impact, and other unforeseen circumstances. In particular, should demand for our customers' products and, in turn, our services decrease significantly over the next 12 months, the available cash provided by operations could be adversely impacted.
Fair Value
During 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 14 - Fair Value of Notes to Consolidated Financial Statements for additional information.
Off-Balance Sheet Arrangements
As of June 30, 2026, we do not have any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Kimball Electronics' Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the Consolidated Financial Statements and related notes. Actual results could differ from these estimates and assumptions. Management uses its best judgment in the assumptions used to value these estimates, which are based on current facts and circumstances, prior experience, and other assumptions that are believed to be reasonable. Management believes the following critical accounting policies reflect the more significant judgments and estimates used in preparation of our Consolidated Financial Statements and are the policies that are most critical in the portrayal of our financial position and results of operations. Management has discussed these critical accounting policies and estimates with the Audit Committee of the Company's Board of Directors and with the Company's independent registered public accounting firm.
Revenue recognition - Kimball Electronics recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services and products. The majority of our revenue is recognized over time as manufacturing services are performed where we manufacture a product with no alternative use and have an enforceable right to payment for performance completed to date. The remaining revenue is recognized when the customer obtains control of the manufactured product.
Taxes - Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future taxable income and available tax planning strategies that could be implemented to realize our deferred tax assets. If recovery is not likely, we provide a valuation allowance based on our best estimate of future taxable income in the various taxing jurisdictions and the amount of deferred taxes ultimately realizable. Future events could change management's assessment.
We operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. However, we believe we have made adequate provision for income and other taxes for all years that are subject to audit. As tax positions are effectively settled, the tax
provision will be adjusted accordingly. The liability for uncertain income tax and other tax positions, including accrued interest and penalties on those positions, was $1.6 million and $1.5 million at June 30, 2026 and June 30, 2025, respectively.
New Accounting Standards
See Note 1 - Business Description and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for information regarding New Accounting Standards.
Kimball Electronics Inc. published this content on August 19, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 19, 2026 at 21:21 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]