KIMBALL INTERNATIONAL, INC. Business Overview
Kimball International (the "Company," "Kimball International ," "we," "us," or "our") is a leading omnichannel commercial furnishings company with deep expertise in the Workplace, Health, and Hospitality markets. We combine our bold entrepreneurial spirit, a history of craftsmanship and today's design-driven thinking alongside a commitment to our culture of caring and lasting connections with our customers, shareholders, employees, and communities. For over 70 years, our brands have seized opportunities to customize solutions into personalized experiences, turning ordinary spaces into meaningful places. Our family of brands includes Kimball, National, Etc., Interwoven,Poppin ,Kimball Hospitality , and D'style.
Management currently considers the following events, trends, and uncertainties to be most important to understanding our financial condition and operating performance:
•Operating Environment - While we are mindful of the challenging macroeconomic environment and heightened recessionary risks, through our focused set of strategic choices we are successfully delivering in-demand products and solutions to end markets and geographies with higher growth, resiliency and favorable return-to-office dynamics.
•Goodwill Impairment - During the second quarter of fiscal year 2023 we recorded goodwill impairment of$36.7 million as the carrying value ofPoppin exceeded its fair value as of theOctober 31, 2022 testing date. No goodwill remains on thePoppin goodwill reporting unit. •Transformation Restructuring Plan - Current actions under our transformation restructuring plan are focused on activities such as the streamlining of manufacturing facilities, the consolidation of showrooms, and the closure of our manufacturing 21 -------------------------------------------------------------------------------- facility inTijuana, Mexico which was completed during the first quarter of fiscal year 2023. This phase of the transformation restructuring plan began in the first quarter of our fiscal year 2021, and we expect a substantial majority of the restructuring actions to be completed by the end of fiscal year 2023. In addition to the savings already generated from the first phase of the transformation restructuring plan, the efforts of this second phase of the transformation restructuring plan are expected to generate annualized pre-tax savings of approximately$19.0 million when it is fully implemented. See Note 3 - Restructuring of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information. •Due to the contract and project nature of furniture markets, fluctuation in the demand for our products and variation in the gross margin on those projects is inherent to our business, which in turn impacts our operating results. Effective management of our manufacturing capacity is and will continue to be critical to our success. See below for further details regarding current sales and order backlog trends.
•We expect to continue to invest in capital expenditures prudently, particularly for projects that will enhance our capabilities and diversification while providing an opportunity for growth and improved profitability.
•We continue to maintain a strong balance sheet. Our short-term liquidity
available, represented as cash and cash equivalents plus the unused amount of
our revolving credit facility, was
Financial Overview
At or for the For the
Three Months Ended Six Months Ended
December 31 December 31
(Amounts in Millions, Except for Per
Share Data) 2022 2021 % Change 2022 2021 % Change
Net Sales $ 183.0 $ 151.4 21 % $ 360.8 $ 308.0 17 %
Gross Profit 66.1 46.4 42 % 125.8 95.5 32 %
Gross Profit % 36.2 % 30.7 % 34.9 % 31.0 %
Selling and Administrative Expenses 56.8 51.9 9 % 110.2 102.1 8 %
Contingent Earn-out (Gain) Loss - (22.5) (3.2) (17.9)
Restructuring Expense 1.7 1.0 2.0 2.5
Goodwill Impairment 36.7 34.1 36.7 34.1
Operating Income (Loss) (29.0) (18.1) (60 %) (20.0) (25.2) 21 %
Operating Income (Loss) % (15.9 %) (12.0 %) (5.6 %) (8.2 %)
Adjusted Operating Income (Loss) * $ 11.5 $ (0.4) 2,856 % $ 18.7 $ 0.2 10,182 %
Adjusted Operating Income (Loss) % * 6.3 % (0.3 %) 5.2 % 0.1 %
Net Income (Loss) $ (36.1) $ (21.3) (69 %) $ (29.5) $ (26.4) (12 %)
Net Income (Loss) as a Percentage of Net Sales (19.7 %) (14.1 %) (8.2 %) (8.6 %) Adjusted Net Income (Loss) * 3.0 (5.7) 152 %$ 7.8 $ (3.8) 307 %
Diluted Earnings (Loss) Per Share
(71 %)$ (0.81) $ (0.72) (13
%)
Adjusted Diluted Earnings (Loss) Per Share*$ 0.08 $ (0.16) 150 %$ 0.21 $ (0.10) 310 % Return on Invested Capital ** 24.9 % 0.9 % 22.9 % 1.5 % Adjusted EBITDA *$ 16.0 $ 4.0 297 %$ 27.6 $ 8.9 209 % Adjusted EBITDA % * 8.8 % 2.7 % 7.6 % 2.9 % Order Backlog **$ 144.8 $ 196.9 (26 %) * Items indicated represent Non-GAAP (Generally Accepted Accounting Principles) measurements. ** Items indicated represent Key Performance Indicators. See the "Non-GAAP Financial Measures and Other Key Performance Indicators" section below. 22 --------------------------------------------------------------------------------
Net Sales by End Market Three Months Ended Six Months Ended December 31 December 31 (Amounts in Millions) 2022 2021 % Change 2022 2021 % Change Workplace$ 124.3 $ 107.9 15 %$ 256.3 $ 216.5 18 % Health 31.0 26.6 17 % 57.1 49.6 15 % Hospitality 27.7 16.9 64 % 47.4 41.9 13 % Total Net Sales$ 183.0 $ 151.4 21 %$ 360.8 $ 308.0 17 %
Our Workplace end market includes sales to the commercial, financial,
government, and education vertical markets and eBusiness. The revenue of
Second quarter fiscal year 2023 consolidated net sales increased$31.6 million , or 21% compared to second quarter fiscal year 2022 net sales driven by increased pricing of workplace and health products and higher volume in our hospitality market. Consolidated net sales for the year-to-date period of fiscal year 2023 increased 17% compared to the same year-to-date period in fiscal year 2022 driven by increased pricing of workplace and health products coupled with increased sales volume of workplace products. Each of our end market sales levels can fluctuate depending on overall demand and mix of projects in a given period. Order backlog atDecember 31, 2022 decreased$52.2 million , or 26%, when compared to the backlog level as ofDecember 31, 2021 as concerns of a recession led customers to delay orders which drove declines in workplace and health order rates in the quarter endedDecember 31, 2022 . Our manufacturing lead times have improved which allowed us to fulfill orders quicker thus also reducing our backlog. Backlog at a point in time may not be indicative of future sales trends. Gross profit as a percent of net sales increased 550 basis points to 36.2% for the second quarter of fiscal year 2023 from 30.7% for the second quarter of fiscal year 2022. Gross profit as a percent of net sales increased 390 basis points to 34.9% for the year-to-date period of fiscal year 2023 from 31.0% for the year-to-date period of fiscal year 2022. The increased second quarter and year to date gross profit as a percent of net sales was driven by price increases, the impact of LIFO accounting which generated income during the current year compared to expense in the prior year, and savings realized from our operational excellence initiatives which more than offset inflationary pressure on materials, increased freight costs, and other manufacturing expense increases. The prior year second quarter and year to date gross profit also included the costs associated with the one-time COVID vaccine incentive which did not repeat in the current year. Selling and administrative (S&A) expenses in the second quarter of fiscal year 2023 compared to the second quarter of fiscal year 2022 increased$4.9 million and decreased 330 basis points as a percent of net sales, due to the leverage of our increased sales. Selling and administrative expenses in the year-to-date period of fiscal year 2023 compared to the year-to-date period of fiscal year 2022 increased$8.1 million and decreased 250 basis points as a percent of net sales. Increased S&A expenses in the second quarter and year-to-date period were driven by increased incentive compensation costs, increased salary expense driven by inflation, increased advertising and marketing expense, and higher warranty expense. The prior year second quarter and year to date S&A expense also included costs associated with the one-time COVID vaccine incentive which did not repeat in the current year. We recognized pre-tax restructuring expense of$1.7 million and$2.0 million for the three and six months endedDecember 31, 2022 and$1.0 million and$2.5 million for the three and six months endedDecember 31, 2021 . See Note 3 - Restructuring of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information. In connection with our annual goodwill impairment test, we assessed goodwill at the reporting unit level for impairment during our second quarter of fiscal year 2023 and based on our analysis determined ourPoppin reporting unit had carrying value in excess of the calculated fair value. The decline in the fair value of the reporting unit was driven by revised sales and profitability forecasts primarily attributable to changes in demand due to uncertainty in the macroeconomic environment. As a result, we recorded a pre-tax, non-cash charge to reduce the carrying value of goodwill by$36.7 million during the second quarter of fiscal year 2023. During the second quarter of fiscal year 2022 we also recorded a pre-tax, non-cash charge to reduce the carrying value of goodwill by$34.1 million primarily attributable to changes in demand due to the ongoing COVID-19 pandemic and supply chain constraints. We recorded non-cash pre-tax contingent earn-out benefit during the year-to-date period of fiscal year 2023 of$3.2 million and during the second quarter and year-to-date periods of fiscal year 2022, of$22.5 million and$17.9 million , 23 --------------------------------------------------------------------------------
respectively, which partially offset the goodwill impairment, as there is a
lower likelihood of
Other Income (Expense) consisted of the following:
Three Months Ended Six Months Ended
December 31 December 31
(Amounts in Thousands) 2022 2021 2022 2021
Interest Income $ 112 $ 43 $ 189 $ 52
Interest Expense (696) (275) (1,377) (532)
Gain on Supplemental Employee Retirement Plan
Investments 619 680 160 587
Other 51 29 20 (64)
Other Income (Expense), net $ 86 Our effective tax rate for the three and six months endedDecember 31, 2022 were negative tax rates of (24.6%) and (40.3%) which were lower than the combined federal and state statutory tax rate primarily due to the book versus tax treatment of nondeductible goodwill impairment, earn-out valuation adjustment, and the sale of our Mexican subsidiary stock. Our effective tax rate for the three and six months endedDecember 31, 2021 were negative tax rates of (21.0%) and (4.7%), respectively, driven by the book versus tax treatment of nondeductible goodwill impairment and earn-out valuation adjustments. Comparing the balance sheet as ofDecember 31, 2022 toJune 30, 2022 , our accounts receivable decreased as several larger projects were finalized and the payment was received. Our prepaid expenses decline was driven by receipt of prepaid inventory in transit. As uncertainty in the macroeconomic environment is impacting customer order patterns, we revised ourPoppin sales growth expectations and recognized a goodwill impairment charge which reduced our goodwill balance. Our accounts payable balance has declined as we have decelerated inventory purchases.
Liquidity and Capital Resources
Our total cash and cash equivalents was$14.1 million atDecember 31, 2022 and$10.9 million atJune 30, 2022 . Our total debt was$60.0 million atDecember 31, 2022 and$68.1 million atJune 30, 2022 . During the first six months of fiscal year 2023, cash flows provided by operations of$31.5 million more than offset capital expenditures including capitalized software of$11.5 million , the return of capital to shareholders in the form of dividends which totaled$6.6 million and stock repurchases which totaled$3.0 million . Working capital atDecember 31, 2022 andJune 30, 2022 was$58.9 million and$67.7 million , respectively. The current ratio was 1.4 at bothDecember 31, 2022 andJune 30, 2022 . Our short-term liquidity available, represented as cash and cash equivalents plus the unused amount of our revolving credit facility, totaled$77.3 million atDecember 31, 2022 . AtDecember 31, 2022 , we had$1.8 million in letters of credit outstanding, which reduced our borrowing capacity on the revolving credit facility. We had$60.0 million and$68.0 million of borrowings on our revolving credit facility atDecember 31, 2022 andJune 30, 2022 , respectively. Total availability to borrow under the credit facility totaled$63.2 million atDecember 31, 2022 .
Cash Flows
The following table reflects the major categories of cash flows for the first six months of fiscal years 2023 and 2022.
Six Months Ended
December 31
(Amounts in Thousands) 2022 2021
Net cash provided by operating activities
24
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For the first six months of fiscal year 2023 net cash provided by operating activities was$31.5 million inclusive of net loss of$29.5 million which included goodwill impairment of$36.7 million . In the first six months of fiscal year 2022 net cash provided by operating activities was$12.6 million inclusive of a net loss of$26.4 million which included$34.1 million of goodwill impairment and$17.9 million of contingent earn-out liability gains. Changes in working capital balances provided$14.4 million of cash in the first six months of fiscal year 2023 and provided$8.1 million of cash in the first six months of fiscal year 2022. The$14.4 million of cash provided by changes in working capital balances in the first six months of fiscal year 2023 was driven by a$19.2 million decrease in receivables as several larger projects were finalized and the payment was received and a$14.5 million decrease in prepaid expenses and other current assets as prepaid in-transit inventory was received which were partially offset by a$10.5 million decline in our accounts payable as we decelerated inventory purchases. The$8.1 million of cash provided by changes in working capital balances in the first six months of fiscal year 2022 was driven by a$17.8 million increase in inventory which was more than offset by a$16.7 million increase in our accounts payable and a$12.2 million increase in customer deposits. Our measure of accounts receivable performance, also referred to as Days Sales Outstanding ("DSO"), for the six-month periods endedDecember 31, 2022 andDecember 31, 2021 were both 32 days. We define DSO as the average of monthly accounts and notes receivable divided by an average day's net sales. Our Production Days Supply on Hand ("PDSOH") of inventory measure for the six-month periods endedDecember 31, 2022 andDecember 31, 2021 were 98 and 69 days, respectively. The increase in PDSOH was driven by increases in average inventory levels outpacing the sales ramp up with the majority of the inventory increase related to made-to-stock inventory in our eBusiness segment. We define PDSOH as the average of the monthly net inventory divided by an average day's cost of sales.
Cash Flows from Investing Activities
During the first six months of both fiscal years 2023 and 2022, our capital investments totaled$11.5 million . The current and prior year capital investments include the construction of a warehouse, manufacturing equipment upgrades to increase automation in production facilities, software upgrades, and facility improvements.
Cash Flows from Financing Activities
During the six months endedDecember 31, 2022 , we had proceeds from borrowings on our revolving credit facility of$86.0 million and during the same period we repaid$94.0 million on our revolving credit facility. During the six months endedDecember 31, 2021 we had proceeds from borrowings on our credit facility of$10.0 million and repaid$10.0 million on our revolving credit facility. We paid dividends of$6.6 million in both the six-month periods endedDecember 31, 2022 andDecember 31, 2021 . Consistent with our historical dividend policy, our Board of Directors evaluates the appropriate dividend payment on a quarterly basis. We repurchased shares pursuant to a previously announced stock repurchase program, which drove cash outflow of$3.0 million and$2.4 million in the year-to-date periods of fiscal year 2023 and 2022, respectively. Future debt payments may be paid out of cash flows from operations or from future refinancing of our debt.
Revolving Credit Facility
During the second quarter of fiscal year 2023, we entered into a Third Amendment to Amended and Restated Credit Agreement which provides, among other items, amendments to the Credit Agreement to extend the maturity date of the Credit Facility fromOctober 24, 2024 toDecember 21, 2025 , and establish SOFR ("Secured Overnight Financing Rate") as a pricing benchmark for dollar borrowings in replacement of LIBOR. The complete amended agreement was filed as Exhibit 10.1 to our Current Report on Form 8-K filed onDecember 22, 2022 . As ofDecember 31, 2022 we had a$125.0 million revolving credit facility with a maturity date ofDecember 2025 that allowed for both issuances of letters of credit and cash borrowings. We also have an option to request an increase of the amount available for borrowing to$200.0 million , subject to participating banks' consent. The loans under the Credit Agreement could consist of, at our election, advances inU.S. dollars or advances in any other currency that was agreed to by the lenders. The proceeds are to be used for general corporate purposes including acquisitions. A portion of the revolving credit facility, not to exceed$10 million of the principal amount, was available for the issuance of letters of credit. AtDecember 31, 2022 , we had$1.8 million in letters of credit outstanding, which reduced our borrowing capacity on the revolving credit facility. AtDecember 31, 2022 andJune 30, 2022 , we had$60.0 million and$68.0 million , respectively, in borrowings outstanding. 25 -------------------------------------------------------------------------------- The revolving credit facility requires us to comply with certain debt covenants, the most significant of which is the adjusted leverage ratio and the interest coverage ratio. The adjusted leverage ratio is defined as (a) consolidated total indebtedness minus unencumberedU.S. cash equivalents in excess of$15,000,000 provided that the maximum subtraction does not exceed$35,000,000 to (b) adjusted consolidated EBITDA, determined as of the end of each of our fiscal quarters for the then most recently ended four fiscal quarters, to not be greater than 3.00 to 1.00. The interest coverage ratio, for any period, of (a) Consolidated EBITDA for such period to (b) cash interest expense for such period, calculated on a consolidated basis in accordance with GAAP for the trailing four quarter period then ending, to not be less than 3.00 to 1.00. We were in compliance with all debt covenants of the revolving credit facility during the six-month period endedDecember 31, 2022 .
The table below compares the adjusted leverage ratio and the interest coverage ratio with the limits specified in the credit agreement.
At or For the Period Ended Limit As Specified in
Covenant December 31, 2022 Credit Agreement Excess
Adjusted Leverage Ratio 1.08 ? 3.00 1.92
Interest Coverage Ratio 10.00 ? 3.00 7.00
Future Liquidity
We believe our principal sources of liquidity from available funds on hand, cash
generated from operations, and the availability of borrowing under our revolving
credit facility will be sufficient to meet our working capital and other
operating needs for at least the next twelve months. Our Board of Directors
declared quarterly dividends of $0.09 per share for payment during our third
quarter of fiscal year 2023. Future cash dividends are subject to approval by
our Board of Directors and may be adjusted as business needs or market
conditions change.
During the remainder of fiscal year 2023 we expect to invest approximately $15
million in capital expenditures, particularly for projects such as machinery and
equipment upgrades and automation, software, and showroom related expenses. As
of December 31, 2022 , there have been no material changes to our short-term and
long-term contractual obligations as discussed in Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of our
Annual Report on Form 10-K for the fiscal year ended June 30, 2022 outside the
ordinary course of business. We are also assessing the potential of selling
unused parcels of land. We continuously monitor for potential acquisitions that
would enhance our capabilities and diversification while providing an
opportunity for growth and improved profitability.
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, lack of availability or cost of manufacturing labor, loss of key
contract customers, and other unforeseen circumstances. In particular, should
demand for our products decrease significantly over the next 12 months, the
available cash provided by operations could be adversely impacted.
Non-GAAP Financial Measures and Other Key Performance Indicators
This Management's Discussion and Analysis ("MD&A") contains non-GAAP financial
measures. A non-GAAP financial measure is a numerical measure of a company's
financial performance that excludes or includes amounts so as to be different
than the most directly comparable measure calculated and presented in accordance
with U.S. GAAP in the statements of operations, statements of comprehensive
income, balance sheets, statements of cash flows, or statements of shareholders'
equity of the company. The non-GAAP financial measures used within this MD&A
include:
•adjusted operating income (loss), defined as operating income (loss) excluding
restructuring expenses, goodwill impairment, market valuation adjustments
related to our SERP liability, acquisition-related amortization and inventory
valuation adjustments, contingent earn-out gain or loss, and COVID vaccine
incentive costs;
•adjusted operating income (loss) percentage, defined as adjusted operating income as a percentage of net sales;
•adjusted net income (loss), defined as net income (loss) excluding
restructuring expenses, goodwill impairment, acquisition-related amortization
and inventory valuation adjustments, contingent earn-out gain or loss, and COVID
vaccine incentive costs;
26
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•adjusted diluted earnings (loss) per share, defined as diluted earnings (loss)
per share excluding restructuring expenses, goodwill impairment,
acquisition-related amortization and inventory valuation adjustments, contingent
earn-out gain or loss, and COVID vaccine incentive costs;
•adjusted EBITDA, defined as earnings before interest, statutory income tax
impacts for taxable after-tax measures, depreciation, and amortization and
excluding restructuring expenses, goodwill impairment, acquisition-related
inventory valuation adjustments, contingent earn-out gain or loss, and COVID
vaccine incentive costs; and
•adjusted EBITDA percentage, defined as adjusted EBITDA as a percentage of net sales.
Reconciliations of the reported GAAP numbers to these non-GAAP financial measures are included in the tables below. Management believes it is useful for investors to understand and to be able to meaningfully trend, analyze and benchmark how our core operations performed without market value adjustments related to our SERP liability, without expenses incurred in executing our transformation restructuring plan, without goodwill impairment costs, without acquisition-related costs, and without COVID vaccine incentive costs. Many of our internal performance measures that management uses to make certain operating decisions exclude these expenses to enable meaningful trending of core operating metrics. These non-GAAP financial measures should not be viewed as an alternative to the GAAP measures and are presented as supplemental information.
Reconciliation of Non-GAAP Financial Measures and Other Key Performance Indicators (Amounts in Thousands, Except for Per Share Data)
Adjusted Operating Income (Loss) Three Months Ended Six Months Ended
December 31 December 31
2022 2021 2022 2021
Operating Income (Loss), as reported $ (29,021)
1,679 1,010 2,049 2,465
Add: Pre-tax Goodwill Impairment 36,684 34,118 36,684 34,118
Add: Pre-tax Expense Adjustment to SERP Liability 619 680 160 587
Add: Pre-tax Acquisition-related Amortization 1,502 1,610 3,004 3,220
Add: Pre-tax Acquisition-related Inventory Valuation Adjustment
- 62 - 205
Add: Pre-tax Contingent Earn-Out (Gain) Loss - (22,510) (3,160) (17,900)
Add: Pre-tax COVID Vaccine Incentive - 2,709 - 2,709
Adjusted Operating Income (Loss) $ 11,463 $ 182,947 $ 151,403 $ 360,758 $ 308,013 Adjusted Operating Income (Loss) % 6.3 % (0.3 %) 5.2 % 0.1 % 27 -------------------------------------------------------------------------------- Adjusted Net Income (Loss) Three Months Ended Six Months Ended December 31 December 31 2022 2021 2022 2021 Net Income (Loss), as reported$ (36,063) $ (21,314) $ (29,507) $ (26,363) Pre-tax Restructuring Expense 1,679 1,010 2,049 2,465 Tax on Restructuring Expense (431) (259) (527) (634) Add: After-tax Restructuring Expense 1,248 751 1,522 1,831 Pre-tax Goodwill Impairment 36,684 34,118 36,684 34,118 Tax on Goodwill Impairment - - - - Add: After-tax Goodwill Impairment 36,684 34,118 36,684 34,118 Pre-tax Acquisition-related Amortization 1,502 1,610 3,004 3,220 Tax on Acquisition-related Amortization (386) (414) (773) (829) Add: After-tax Acquisition-related Amortization 1,116 1,196 2,231 2,391 Pre-tax Acquisition-related Inventory Valuation Adjustment - 62 - 205 Tax on Acquisition-related Inventory Valuation Adjustment - (16) - (53) Add: After-tax Acquisition-related Inventory Adjustment - 46 - 152 Pre-tax Contingent Earn-Out (Gain) Loss - (22,510) (3,160) (17,900) Tax on Contingent Earn-Out (Gain) Loss - - - - Add: After-tax Contingent Earn-Out (Gain) Loss - (22,510) (3,160) (17,900) Pre-tax COVID Vaccine Incentive - 2,709 - 2,709 Tax on COVID Vaccine Incentive - (697) - (697) Add: After-tax COVID Vaccine Incentive - 2,012 - 2,012 Adjusted Net Income (Loss)$ 2,985 $
(5,701)
Adjusted Diluted Earnings (Loss) Per Share Three Months Ended Six Months Ended
December 31 December 31
2022 2021 2022 2021
Diluted Earnings (Loss) Per Share, as reported
0.04 0.02 0.05 0.05
Add: After-tax Goodwill Impairment 1.00 0.93 1.00 0.93
Add: After-tax Acquisition-related Amortization 0.03 0.03 0.06 0.07
Add: After-tax Acquisition-related Inventory
Adjustment - - - 0.01
Add: After-tax Contingent Earn-Out (Gain) Loss - (0.61) (0.09) (0.49)
Add: COVID Vaccine Incentive - 0.05 - 0.05
Adjusted Diluted Earnings (Loss) Per Share
28
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Adjusted EBITDA
Three Months Ended Six Months Ended
December 31 December 31
2022 2021 2022 2021
Net Income (Loss) $ (36,063) $ (21,314) $ (29,507) $ (26,363)
Provision for Income Taxes 7,128 3,696 8,475 1,184
Income (Loss) Before Taxes on Income (28,935) (17,618) (21,032) (25,179)
Interest Expense 696 275 1,377 532
Interest Income (112) (43) (189) (52)
Depreciation 3,806 3,623 7,440 7,185
Amortization 2,219 2,415 4,414 4,854
Pre-tax Restructuring Expense 1,679 1,010 2,049 2,465
Pre-Tax Goodwill Impairment 36,684 34,118 36,684 34,118
Pre-tax Acquisition-related Inventory Valuation
Adjustment - 62 - 205
Pre-tax Contingent Earn-Out (Gain) Loss - (22,510) (3,160) (17,900)
Pre-tax COVID Vaccine Incentive - 2,709 - 2,709
Adjusted EBITDA $ 16,037 $ 4,041 $ 27,583 $ 8,937
Net Income (Loss) % (19.7 %) (14.1 %) (8.2 %) (8.6 %)
Adjusted EBITDA % 8.8 % 2.7 % 7.6 % 2.9 %
The order backlog metric is a key performance indicator representing firm orders
placed by our customers which have not yet been fulfilled and are expected to be
recognized as revenue during future quarters. The timing of shipments can vary,
but generally the backlog of orders is expected to ship within a six-month
period.
Return on
Critical Accounting Policies
Our Condensed Consolidated Financial Statements have been prepared in accordance withU.S. GAAP. These principles require the use of estimates and assumptions that affect amounts reported and disclosed in the Condensed Consolidated Financial Statements and related notes. Actual results could differ from these estimates and assumptions. Management continually reviews the accounting policies and financial information disclosures. A summary of the more significant accounting policies that require the use of estimates and judgments in preparing the financial statements is provided in our Annual Report on Form 10-K for the fiscal year endedJune 30, 2022 . During the first six months of fiscal year 2023, there were no material changes in the accounting policies and assumptions previously disclosed.
New Accounting Standards
See Note 2 - Recent Accounting Pronouncements and Supplemental Information of Notes to Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for information regarding New Accounting Standards.
Forward-Looking Statements
Certain statements contained within this document are considered forward-looking under the Private Securities Litigation Reform Act of 1995. The statements generally can be identified by the use of words or phrases, including, but not limited to "intend," "anticipate," "believe," "estimate," "project," "target," "plan," "expect," "setting up," "beginning to," "will," "should," "would," "resume," or similar statements. We caution that forward-looking statements are subject to known and unknown risks and uncertainties that may cause the Company's actual future results and performance to differ materially from expected results, including, but not limited to, the possibility that any of the anticipated benefits of thePoppin acquisition will not be realized or 29
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will not be realized within the expected time period; the risk that any projections or guidance by the Company, including revenues, margins, earnings, or any other financial results are not realized; a shortage of manufacturing labor and related cost; disruptions in our supply chain and freight channels including impacts on cost and availability, adverse changes in global economic conditions; successful execution of the second phase of the Company's restructuring plan; significant reduction in customer order patterns; loss of key suppliers; relationships with strategic customers and product distributors; changes in the regulatory environment; global health concerns; the potential for impairment of goodwill; or similar unforeseen events. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of the Company are contained in the Company's Form 10-K filing for the fiscal year endedJune 30, 2022 and other filings with theSecurities and Exchange Commission .
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