10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number    001-36454

KIMBALL ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)

Indiana	35-2047713
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
1600 Royal Street, Jasper, Indiana	47549-1001
(Address of principal executive offices)	(Zip Code)

(812) 634-4000

Registrant’s telephone number, including area code

Not Applicable

Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes  x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o                                                                                       Accelerated filer  o

Non-accelerated filer  x (Do not check if a smaller reporting company)           Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes  o    No  x

The number of shares outstanding of the Registrant’s common stock as of May 4, 2015 was 29,171,749 shares.

KIMBALL ELECTRONICS, INC.

FORM 10-Q

INDEX

		Page No.
PART I    FINANCIAL INFORMATION
	Item 1. Financial Statements
	Condensed Consolidated Balance Sheets         - March 31, 2015 (Unaudited) and June 30, 2014	3
	Condensed Consolidated Statements of Income (Unaudited)         - Three and Nine Months Ended March 31, 2015 and 2014	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)         - Three and Nine Months Ended March 31, 2015 and 2014	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)         - Nine Months Ended March 31, 2015 and 2014	6
	Condensed Consolidated Statement of Share Owners’ Equity (Unaudited)         - Nine Months Ended March 31, 2015	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4. Controls and Procedures	32
PART II    OTHER INFORMATION
	Item 1. Legal Proceedings	33
	Item 1A. Risk Factors	33
	Item 6. Exhibits	34
SIGNATURES		35
EXHIBIT INDEX		36

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

KIMBALL ELECTRONICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, Except for Share Data)

	(Unaudited)
	March 31, 2015			June 30, 2014
ASSETS
Current Assets:
Cash and cash equivalents	$	61,670		$	26,260
Receivables, net of allowances of $240 and $352, respectively	139,196			128,425
Inventories	122,799			116,159
Prepaid expenses and other current assets	23,488			20,490
Total current assets	347,153			291,334
Property and Equipment, net of accumulated depreciation of $147,842 and $151,747, respectively	94,770			97,934
Goodwill	2,564			2,564
Other Intangible Assets, net of accumulated amortization of $24,759 and $28,606, respectively	4,271			1,830
Other Assets	15,777			15,068
Total Assets	$	464,535		$	408,730
LIABILITIES AND SHARE OWNERS’ EQUITY
Current Liabilities:
Accounts payable	$	123,537		$	119,853
Accrued expenses	27,226			26,602
Total current liabilities	150,763			146,455
Other long-term liabilities	10,117			9,903
Total Liabilities	160,880			156,358
Share Owners’ Equity:
Preferred stock-no par value
Shares authorized: 15,000,000 Shares issued: none	—			—
Common stock-no par value
Shares authorized: 150,000,000 Shares issued: 29,172,000 and 29,143,000, respectively	—			—
Additional paid-in capital	297,443			—
Net Parent investment	—			250,753
Retained earnings	18,811			—
Accumulated other comprehensive income (loss)	(12,599		)	1,619
Total Share Owners’ Equity	303,655			252,372
Total Liabilities and Share Owners’ Equity	$	464,535		$	408,730

See Notes to Condensed Consolidated Financial Statements.

3

KIMBALL ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in Thousands, Except for Per Share Data)

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Unaudited)	2015			2014			2015			2014
Net Sales	$	206,858		$	185,680		$	618,224		$	542,581
Cost of Sales	187,905			169,127			563,510			499,666
Gross Profit	18,953			16,553			54,714			42,915
Selling and Administrative Expenses	8,132			9,197			27,409			25,992
Other General Income	—			(666		)	—			(5,688		)
Restructuring Expense	—			—			—			402
Operating Income	10,821			8,022			27,305			22,209
Other Income (Expense):
Interest income	10			6			22			32
Interest expense	—			(1		)	(5		)	(2		)
Non-operating income (expense), net	(896		)	98			(1,246		)	660
Other income (expense), net	(886		)	103			(1,229		)	690
Income Before Taxes on Income	9,935			8,125			26,076			22,899
Provision for Income Taxes	2,744			1,769			7,265			3,645
Net Income	$	7,191		$	6,356		$	18,811		$	19,254
Earnings Per Share of Common Stock:
Basic	$	0.25		$	0.22		$	0.65		$	0.66
Diluted	$	0.25		$	0.22		$	0.64		$	0.66
Average Number of Shares Outstanding:
Basic	29,172			29,143			29,159			29,143
Diluted	29,318			29,143			29,344			29,143

See Notes to Condensed Consolidated Financial Statements.

4

KIMBALL ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in Thousands)

	Three Months Ended									Three Months Ended
	March 31, 2015									March 31, 2014
(Unaudited)	Pre-tax			Tax			Net of Tax			Pre-tax			Tax			Net of Tax
Net income							$	7,191								$	6,356
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(7,955	)	$	—		$	(7,955	)	$	54		$	(154	)	$	(100	)
Postemployment severance actuarial change	201			(76		)	125			128			(48		)	80
Derivative gain (loss)	4,537			(761		)	3,776			362			(72		)	290
Reclassification to (earnings) loss:
Derivatives	(2,155		)	312			(1,843		)	468			(123		)	345
Amortization of prior service costs	6			(2		)	4			10			(4		)	6
Amortization of actuarial change	(44		)	18			(26		)	(28		)	10			(18		)
Other comprehensive income (loss)	$	(5,410	)	$	(509	)	$	(5,919	)	$	994		$	(391	)	$	603
Total comprehensive income							$	1,272								$	6,959

	Nine Months Ended									Nine Months Ended
	March 31, 2015									March 31, 2014
(Unaudited)	Pre-tax			Tax			Net of Tax			Pre-tax			Tax			Net of Tax
Net income							$	18,811								$	19,254
Other comprehensive income (loss):
Foreign currency translation adjustments	$	(16,466	)	$	(16	)	$	(16,482	)	$	4,937		$	(471	)	$	4,466
Postemployment severance actuarial change	449			(171		)	278			(100		)	39			(61		)
Derivative gain (loss)	6,421			(822		)	5,599			(536		)	110			(426		)
Reclassification to (earnings) loss:
Derivatives	(4,258		)	681			(3,577		)	1,085			(249		)	836
Amortization of prior service costs	26			(9		)	17			30			(12		)	18
Amortization of actuarial change	(89		)	36			(53		)	46			(18		)	28
Other comprehensive income (loss)	$	(13,917	)	$	(301	)	$	(14,218	)	$	5,462		$	(601	)	$	4,861
Total comprehensive income							$	4,593								$	24,115

See Notes to Condensed Consolidated Financial Statements.

5

KIMBALL ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

	Nine Months Ended
	March 31
(Unaudited)	2015			2014
Cash Flows From Operating Activities:
Net income	$	18,811		$	19,254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,649			13,259
(Gain) loss on sales of assets	(46		)	97
Restructuring	—			311
Deferred income tax and other deferred charges	(1,867		)	(1,505		)
Deferred tax valuation allowance	—			(1,401		)
Stock-based compensation	2,719			2,406
Other, net	193			(164		)
Change in operating assets and liabilities:
Receivables	(14,799		)	1,797
Inventories	(10,395		)	(6,358		)
Prepaid expenses and other current assets	(1,698		)	(753		)
Accounts payable	6,661			1,336
Accrued expenses	(2,978		)	4,607
Net cash provided by operating activities	11,250			32,886
Cash Flows From Investing Activities:
Capital expenditures	(19,450		)	(13,608		)
Proceeds from sales of assets	282			201
Purchases of capitalized software	(3,551		)	(295		)
Other, net	51			599
Net cash used for investing activities	(22,668		)	(13,103		)
Cash Flows From Financing Activities:
Net transfers from (to) Kimball International, Inc.	50,295			(842		)
Debt issuance costs	(123		)	—
Net cash provided by (used for) financing activities	50,172			(842		)
Effect of Exchange Rate Change on Cash	(3,344		)	271
Net Increase in Cash and Cash Equivalents	35,410			19,212
Cash and Cash Equivalents at Beginning of Period	26,260			18,424
Cash and Cash Equivalents at End of Period	$	61,670		$	37,636
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Income taxes	$	8,223		$	3,738
Interest expense	$	5		$	2

See Notes to Condensed Consolidated Financial Statements.

6

KIMBALL ELECTRONICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHARE OWNERS’ EQUITY

(Amounts in Thousands, Except for Share Data)

			Net Parent Investment			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total Share Owners’ Equity
(Unaudited)	Additional Paid-In Capital
Amounts at June 30, 2014	$	—	$	250,753		$	—	$	1,619		$	252,372
Conversion of net Parent investment	250,753		(250,753		)						—
Net income						18,811					18,811
Other comprehensive income (loss)								(14,218		)	(14,218		)
Net contribution from Parent	45,632										45,632
Issuance of non-restricted stock (29,000 shares)	309										309
Compensation expense related to stock compensation plans	749										749
Amounts at March 31, 2015	$	297,443	$	—		$	18,811	$	(12,599	)	$	303,655

See Notes to Condensed Consolidated Financial Statements.

7

KIMBALL ELECTRONICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Business Description and Summary of Significant Accounting Policies

Business Description:

Kimball Electronics, Inc. (also referred to herein as “Kimball Electronics”, the “Company”, “we”, “us” or “our”) is a global contract electronic manufacturing services (“EMS”) company that specializes in producing durable electronics for the automotive, medical, industrial, and public safety markets. We offer a package of value that begins with our core competency of producing “durable electronics” and includes our set of robust processes and procedures that help us ensure that we deliver the highest levels of quality, reliability, and service throughout the entire life cycle of our customers’ products. We have been producing safety critical electronic assemblies for our automotive customers for over 30 years. We are well recognized by customers and industry trade publications for our excellent quality, reliability, and innovative service.

Kimball Electronics, Inc. was a wholly owned subsidiary of Kimball International, Inc. (“former Parent” or “Kimball International”) and as of 5:00 p.m. New York time on October 31, 2014 became a stand-alone public company upon the completion of a spin-off from former Parent. In conjunction with the spin-off, on October 31, 2014, Kimball International distributed 29.1 million shares of Kimball Electronics common stock to Kimball International Share Owners. Holders of Kimball International common stock received three shares of Kimball Electronics common stock for every four shares of Kimball International common stock held on October 22, 2014. Kimball International structured the distribution to be tax free to its U.S. Share Owners for U.S. federal income tax purposes.

Basis of Presentation:

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of March 31, 2015 and June 30, 2014, results of operations for the three and nine months ended March 31, 2015 and 2014, and cash flows for the nine months ended March 31, 2015 and 2014. The financial data presented herein is unaudited and should be read in conjunction with the annual Combined Financial Statements as of and for the year then ended June 30, 2014 and related notes thereto included in our registration statement on Form 10, which the Securities and Exchange Commission (the “SEC”) declared effective on October 7, 2014 (“Form 10”). As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted, although we believe that the disclosures are adequate to make the information presented not misleading. Intercompany transactions and balances have been eliminated. Management believes the financial statements include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly the financial statements for the interim periods. The results of operations for the interim periods shown in this report are not necessarily indicative of results for any future interim period or for the entire fiscal year.

On September 30, 2014, the shares of Kimball Electronics Mexico, S.A. de C.V., a wholly owned subsidiary of former Parent, were contributed in a capital transaction to Kimball Electronics Mexico, Inc., a wholly owned subsidiary of Kimball Electronics, Inc. The financial results for Kimball Electronics Mexico, S.A. de C.V. are included in the Condensed Consolidated Financial Statements herein for all periods presented. Assets and liabilities were recorded at historical costs or carrying value.

The Condensed Consolidated Financial Statements include allocations from former Parent for direct costs and indirect costs attributable to the operations of the Company through October 31, 2014, the spin-off date. These allocations were made on a direct usage or cost incurred basis when appropriate, with the remainder allocated using various drivers including average capital deployed, payroll, revenue less material costs, headcount, or other measures. While we believe such allocations are reasonable, these financial statements do not purport to reflect what the results of operations, comprehensive income, financial position, equity, or cash flows would have been had the Company operated as a stand-alone public company for the entirety of the periods presented. Note 2 - Related Party Transactions of Notes to Condensed Consolidated Financial Statements provides information regarding direct and indirect cost allocations.

Cash and Cash Equivalents:

Cash equivalents consist primarily of highly liquid investments with original maturities of three months or less at the time of acquisition. Cash and cash equivalents consist of bank accounts and money market funds. Bank accounts are stated at cost, which approximates fair value, and money market funds are stated at fair value.

8

Notes Receivable and Trade Accounts Receivable:

Notes receivable and trade accounts receivable are recorded per the terms of the agreement or sale, and accrued interest is recognized when earned. We determine on a case-by-case basis the cessation of accruing interest, the resumption of accruing interest, the method of recording payments received on nonaccrual receivables, and the delinquency status for our limited number of notes receivable.

Our policy for estimating the allowance for credit losses on trade accounts receivable and notes receivable includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt experience. Management uses these specific analyses in conjunction with an evaluation of the general economic and market conditions to determine the final allowance for credit losses on the trade accounts receivable and notes receivable. Trade accounts receivable and notes receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. Our limited amount of notes receivable allows management to monitor the risks, credit quality indicators, collectability, and probability of impairment on an individual basis. Adjustments to the allowance for credit losses are recorded in Selling and Administrative Expenses.

In the ordinary course of business, customers periodically negotiate extended payment terms on trade accounts receivable. Customary terms require payment within 30 to 45 days, with any terms beyond 45 days being considered extended payment terms. We may utilize accounts receivable factoring arrangements with third-party financial institutions in order to extend terms for the customer without negatively impacting our cash flow.  In all cases, these arrangements 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 nine months ended March 31, 2015 and 2014, respectively, we sold, without recourse, $100.1 million and $150.4 million of accounts receivable. Factoring fees were not material.

Other General Income:

Other General Income in the three and nine months ended March 31, 2014 included $0.7 million and $5.7 million, respectively, of pre-tax income resulting from settlements received related to two antitrust class action lawsuits in which Kimball Electronics was a class member. The lawsuits alleged that certain suppliers of 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. No Other General Income was recorded in the three and nine months ended March 31, 2015.

Non-operating Income (Expense), net:

The Non-operating income (expense), net line item includes the impact of such items as foreign currency rate movements and related derivative gain or loss, fair value adjustments on supplemental employee retirement plan (“SERP”) investments, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations. The gain on SERP investments is offset by a change in the SERP liability that is recognized in Selling and Administrative Expenses.

Components of Non-operating income (expense), net:

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Foreign currency/derivative gain (loss)	$	(920	)	$	114		$	(1,151	)	$	368
Gain on supplemental employee retirement plan investments	154			46			203			521
Other	(130		)	(62		)	(298		)	(229		)
Non-operating income (expense), net	$	(896	)	$	98		$	(1,246	)	$	660

9

Income Taxes:

In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on expected annual income, statutory tax rates, and available tax planning opportunities in the various jurisdictions in which we operate. Unusual or infrequently occurring items are separately recognized in the quarter in which they occur.

In September 2013, the United States Treasury Department and the Internal Revenue Service (the “IRS”) issued final regulations effective for our first quarter of fiscal year 2015, which provide guidance on a number of matters with regard to tangible property, including whether expenditures qualify as deductible repairs, the treatment of materials and supplies, capitalization of tangible property, dispositions of property, and related elections.  The regulations as issued did not have a material effect on our Condensed Consolidated Financial Statements.

“Emerging Growth Company” Reporting Requirements:

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as a company is deemed to be an “emerging growth company,” it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

Section 107 of the JOBS Act also provides that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We would cease to be an “emerging growth company” upon the earliest of:

• the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act;

• the last day of the fiscal year in which our total annual gross revenues exceed $1 billion;

• the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or

• the date on which we become a “large accelerated filer,” as defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock held by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.

New Accounting Standards:

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance to customers of cloud computing arrangements about whether an arrangement includes a software license. If a software license exists in the arrangement, the guidance requires the software license element of the arrangement to be accounted for consistently with the acquisition of other software licenses by the customer. Otherwise, the customer should account for the arrangement as a service contract. The guidance is effective for our fiscal year 2017 financial statements using either of two acceptable adoption methods: (i) retrospective adoption; or (ii) prospective adoption to all arrangements entered into or materially modified after the effective date. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In April 2015, the FASB issued guidance on presentation of debt issuance costs. Under the new guidance, debt issuance costs related to a recognized debt liability must be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. In addition, amortization of debt issuance costs must be reported as interest expense. The guidance is effective retrospectively for our fiscal year 2017 financial statements. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In June 2014, the FASB provided explicit guidance on how to account for share-based payments granted to employees in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The guidance will be applied prospectively for our first quarter fiscal year 2017 financial statements.  We do not expect the adoption to have a material effect on our financial statements.

10

In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. To achieve this core principle, the guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance addresses several areas including transfer of control, contracts with multiple performance obligations, and costs to obtain and fulfill contracts. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The guidance is effective for our fiscal year 2019 financial statements using either of two acceptable adoption methods: (i) retrospective adoption to each prior reporting period presented with the option to elect certain practical expedients; or (ii) adoption with the cumulative effect of initially applying the guidance recognized at the date of initial application and providing certain additional disclosures. We have not yet selected a transition method nor determined the effect of this guidance on our financial statements.

In April 2014, the FASB issued guidance on reporting discontinued operations and disclosures of disposals of components of an entity. Under the new guidance, a disposal that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results is a discontinued operation. The new guidance requires expanded disclosures that will provide more information about the assets, liabilities, income, and expenses of discontinued operations, and also requires disclosures of significant disposals that do not qualify for discontinued operations reporting. The guidance is effective prospectively for disposals or components of our business classified as held for sale during fiscal year 2016. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In July 2013, the FASB issued guidance to eliminate the diversity in practice related to the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The guidance became effective prospectively for our first quarter fiscal year 2015 financial statements. The adoption did not have a material effect on our Condensed Consolidated Financial Statements.

Note 2. Related Party Transactions

Services Provided by Kimball International, Inc.:

Prior to the spin-off on October 31, 2014, Kimball Electronics operated as a reportable segment within Kimball International. The Condensed Consolidated Financial Statements include allocations of general corporate expenses from former Parent including, but not limited to, spin-off costs, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, and other shared services. The allocations were primarily made using various drivers including average capital deployed, payroll, revenue less material costs, headcount, or other measures, with the remainder allocated on a direct usage or cost incurred basis when appropriate. Former Parent charged us for such services and indirect general and corporate overhead expenses of approximately $3.2 million for the three months ended March 31, 2014, and for the nine months ended March 31, 2015 and 2014, we were charged approximately $4.5 million and $8.6 million, respectively. Additionally, former Parent charged us approximately $0.6 million for the three months ended March 31, 2014 for corporate incentive plan expenses, including stock-based compensation, and approximately $2.1 million and $3.6 million in the nine months ended March 31, 2015 and 2014, respectively. These costs are primarily included in Selling and Administrative Expenses and were charged through October 31, 2014, the spin-off date.

We consider the basis on which the expenses were allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us through the spin-off date. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly traded company through the spin-off date. Actual costs that might have been incurred had we been a stand-alone company would depend on a number of factors, including what functions we might have performed ourselves or outsourced and strategic decisions we might have made in areas such as information technology and infrastructure. As an independent company, we are performing these functions using our own resources or purchased services from third parties, or, for a limited time, former Parent.

11

Taxes:

The Company entered into a Tax Matters Agreement with former Parent that governs the Company’s rights and obligations after the spin-off with respect to tax liabilities and benefits, tax attributes, tax contests, and other tax sharing regarding income taxes, other tax matters, and related tax returns. The Company will continue to have joint and several liabilities with former Parent with the IRS and certain U.S. state tax authorities for U.S. federal income and state taxes for the taxable periods in which the Company was a part of former Parent’s consolidated group. The tax matters agreement specifies the portion, if any, of this liability for which the Company bears responsibility, and former Parent has agreed to indemnify the Company against any amounts for which the Company is not responsible. As of March 31, 2015, the Company has a receivable from Kimball International recorded for $0.8 million, of which $0.6 million is a long-term receivable and was recorded in Other Assets on the balance sheet, relating to benefits from federal and state research and development tax credits.

Cash Management:

For purposes of the historical Condensed Consolidated Financial Statements, former Parent did not allocate to us the cash and cash equivalents held at former Parent’s corporate level for the periods presented prior to the spin-off. Cash in our Condensed Consolidated Balance Sheet as of June 30, 2014 primarily represents cash held by international entities at the local level. In connection with the spin-off, net distributions of cash were made from former Parent to us of $44.3 million on or around October 31, 2014. We began operations as an independent company with approximately $63 million of cash, including cash held by our foreign facilities.

Former Parent provided centralized treasury functions for us, whereby, former Parent regularly transferred cash both to and from our subsidiaries, as necessary. Intercompany receivables/payables from/to related parties arising from the corporate overhead activity described above were included in Net Parent investment in the Condensed Consolidated Financial Statements. As of July 1, 2014, Net Parent investment was converted to Additional paid-in capital. For additional information, see Note 1 – Business Description and Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.

Agreements with Kimball International, Inc.:

As part of the spin-off, the Company entered into various agreements with former Parent which provide for the allocation between the Company and former Parent of the assets, liabilities, and obligations, of former Parent and its subsidiaries, and govern the relationship between former Parent and the Company after the spin-off. These agreements became effective on October 31, 2014 and included the following:

Separation and Distribution Agreement:

The Separation and Distribution Agreement, among other things, (1) provides for the transfers of assets and assumptions of liabilities; (2) governs the rights and obligations of the parties regarding the distribution; (3) provides that following the spin-off the Company is responsible for obtaining and maintaining its own insurance coverage; and (4) governs other matters, including, but not limited to access and provision of records, intellectual property, confidentiality, treatment of outstanding guarantees and similar credit support, and dispute resolution procedures.

Employee Matters Agreement:

The Employee Matters Agreement provides (1) that generally the Company has responsibility for its own employees and compensation plans, subject to certain exceptions; (2) that following the spin-off, the Company’s employees will generally participate in various retirement, welfare, and other employee benefit and compensation plans established and maintained by the Company; (3) for the treatment of outstanding equity awards in connection with the spin-off; (4) for the assumption of certain employment related contracts that the Company’s employees originally entered into with former Parent; and (5) the allocation of certain employee liabilities and the cooperation between the Company and former Parent in sharing employee information.

Transition Services Agreement:

The Transition Services Agreement provides the Company and former Parent will provide to each other specified services on a transitional basis to help ensure an orderly transition following the spin-off. These services include information technology, financial, telecommunications, benefits support services, and other specified services. The services will be provided at cost and are planned to extend for a period of six to eighteen months in most circumstances.

Tax Matters Agreement:

See section entitled “Taxes” above for information on the Tax Matters Agreement.

12

Note 3. Inventories

Inventories are valued using the lower of first-in, first-out (FIFO) cost or market value. Inventory components were as follows:

(Amounts in Thousands)	March 31, 2015		June 30, 2014
Finished products	$	18,366	$	18,818
Work-in-process	11,675		12,530
Raw materials	92,758		84,811
Total inventory	$	122,799	$	116,159

Note 4. Accumulated Other Comprehensive Income (Loss)

During the nine months ended March 31, 2015 and 2014, the changes in the balances of each component of Accumulated Other Comprehensive Income (Loss), net of tax, were as follows:

Accumulated Other Comprehensive Income (Loss)							Postemployment Benefits
(Amounts in Thousands)	Foreign Currency Translation Adjustments			Derivative Gain (Loss)			Prior Service Costs			Net Actuarial Gain			Accumulated Other Comprehensive Income (Loss)
Balance at June 30, 2014	$	4,925		$	(3,406	)	$	(35	)	$	135		$	1,619
Other comprehensive income (loss) before reclassifications	(16,482		)	5,599			—			278			(10,605		)
Reclassification to (earnings) loss	—			(3,577		)	17			(53		)	(3,613		)
Net current-period other comprehensive income (loss)	(16,482		)	2,022			17			225			(14,218		)
Balance at March 31, 2015	$	(11,557	)	$	(1,384	)	$	(18	)	$	360		$	(12,599	)
Balance at June 30, 2013	$	1,038		$	(4,360	)	$	(59	)	$	105		$	(3,276	)
Other comprehensive income (loss) before reclassifications	4,466			(426		)	—			(61		)	3,979
Reclassification to (earnings) loss	—			836			18			28			882
Net current-period other comprehensive income (loss)	4,466			410			18			(33		)	4,861
Balance at March 31, 2014	$	5,504		$	(3,950	)	$	(41	)	$	72		$	1,585

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The following reclassifications were made from Accumulated Other Comprehensive Income (Loss) to the Condensed Consolidated Statements of Income:

Reclassifications from Accumulated Other Comprehensive Income (Loss)	Three Months Ended						Nine Months Ended						Affected Line Item in the Condensed Consolidated Statements of Income
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Derivative gain (loss) (1)	$	285		$	(465	)	$	664		$	(848	)	Cost of Sales
	1,870			(3		)	3,594			(237		)	Non-operating income (expense), net
	(312		)	123			(681		)	249			Benefit (Provision) for Income Taxes
	$	1,843		$	(345	)	$	3,577		$	(836	)	Net of Tax
Postemployment Benefits:
Amortization of prior service costs (2)	$	(4	)	$	(8	)	$	(17	)	$	(21	)	Cost of Sales
	(2		)	(2		)	(9		)	(9		)	Selling and Administrative Expenses
	2			4			9			12			Benefit (Provision) for Income Taxes
	$	(4	)	$	(6	)	$	(17	)	$	(18	)	Net of Tax
Amortization of actuarial gain (loss) (2)	$	27		$	21		$	55		$	(32	)	Cost of Sales
	17			7			34			(14		)	Selling and Administrative Expenses
	(18		)	(10		)	(36		)	18			Benefit (Provision) for Income Taxes
	$	26		$	18		$	53		$	(28	)	Net of Tax
Total reclassifications for the period	$	1,865		$	(333	)	$	3,613		$	(882	)	Net of Tax

Amounts in parentheses indicate reductions to income.

(1) See Note 7 - Derivative Instruments of Notes to Condensed Consolidated Financial Statements for further information on derivative instruments.

(2) See Note 9 - Postemployment Benefits of Notes to Condensed Consolidated Financial Statements for further information on postemployment benefit plans.

Note 5. Commitments and Contingent Liabilities

Prior to the spin-off on October 31, 2014, the Company and certain of its subsidiaries guaranteed former Parent’s obligations under a former Parent credit facility. As of June 30, 2014, former Parent had no borrowings under its credit facility, and as a result, the potential obligation under this guarantee was not deemed to be material and no liability was recorded. As of October 31, 2014, in connection with the spin-off, the Company and former Parent entered into new separate credit facilities, and the Company no longer guarantees former Parent’s obligations under former Parent’s credit facility. No other guarantees existed which were contingent on the future performance of another entity as of March 31, 2015 and June 30, 2014.

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Standby letters of credit are issued to third-party suppliers, lessors, and insurance institutions and can only be drawn upon in the event of the Company’s failure to pay its obligations to a beneficiary. As of March 31, 2015, we had a maximum financial exposure from unused standby letters of credit totaling $0.3 million. We are not aware of circumstances that would require us to perform under any of these arrangements and believe that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect our Condensed Consolidated Financial Statements. Accordingly, no liability has been recorded as of March 31, 2015 with respect to the standby letters of credit. The Company also may enter into commercial letters of credit to facilitate payments to vendors and from customers.

We maintain a provision for limited warranty repair or replacement of products manufactured and sold, which is established in specific manufacturing contract agreements. We estimate product warranty liability at the time of sale based on historical repair or replacement cost trends in conjunction with the length of the warranty offered. Management refines the warranty liability periodically based on changes in historical cost trends and in certain cases where specific warranty issues become known.

Changes in the product warranty accrual for the nine months ended March 31, 2015 and 2014 were as follows:

	Nine Months Ended
	March 31
(Amounts in Thousands)	2015			2014
Product warranty liability at the beginning of the period	$	911		$	507
Additions to warranty accrual (including changes in estimates)	735			(155		)
Settlements made (in cash or in kind)	(756		)	(59		)
Product warranty liability at the end of the period	$	890		$	293

Note 6. Fair Value

The Company categorizes assets and liabilities measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas level 3 generally requires significant management judgment. The three levels are defined as follows:

• Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

• Level 2: Observable inputs other than those included in level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

• Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Our policy is to recognize transfers between these levels as of the end of each quarterly reporting period. There were no transfers between these levels during the nine months ended March 31, 2015. There were also no changes in the inputs or valuation techniques used to measure fair values during the nine months ended March 31, 2015.

Financial Instruments Recognized at Fair Value:

The following methods and assumptions were used to measure fair value:

Financial Instrument	Level	Valuation Technique/Inputs Used
Cash equivalents	1	Market - Quoted market prices.
Derivative assets: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates, considering counterparty credit risk.
Trading securities: mutual funds held by nonqualified supplemental employee retirement plan (SERP)	1	Market - Quoted market prices within active markets.
Derivative liabilities: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates adjusted for Kimball Electronics’ non-performance risk.

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Recurring Fair Value Measurements:

As of March 31, 2015 and June 30, 2014, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

	March 31, 2015
(Amounts in Thousands)	Level 1		Level 2		Total
Assets
Cash equivalents	$	34,950	$	—	$	34,950
Derivatives: foreign exchange contracts	—		5,678		5,678
Trading securities: mutual funds held in nonqualified SERP	5,733		—		5,733
Total assets at fair value	$	40,683	$	5,678	$	46,361
Liabilities
Derivatives: foreign exchange contracts	$	—	$	1,309	$	1,309
Total liabilities at fair value	$	—	$	1,309	$	1,309
	June 30, 2014
(Amounts in Thousands)	Level 1		Level 2		Total
Assets
Derivatives: foreign exchange contracts	$	—	$	800	$	800
Trading securities: mutual funds held in nonqualified SERP	5,260		—		5,260
Total assets at fair value	$	5,260	$	800	$	6,060
Liabilities
Derivatives: foreign exchange contracts	$	—	$	699	$	699
Total liabilities at fair value	$	—	$	699	$	699

We had no Level 3 assets during the nine months ended March 31, 2015.

Nonqualified supplemental employee retirement plan (SERP) assets consist primarily of equity funds, balanced funds, a bond fund, and a money market fund. The SERP investment assets are offset by a SERP liability which represents Kimball Electronics’ obligation to distribute SERP funds to participants. See Note 8 - Investments of Notes to Condensed Consolidated Financial Statements for further information regarding the SERP.

Non-Recurring Fair Value Measurements:

During the nine months ended March 31, 2015, we had no fair value adjustments applicable to items that are subject to non-recurring fair value measurement after the initial measurement date.

Financial Instruments Not Carried At Fair Value:

Financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value that have carrying amounts which approximate fair value include the following:

Financial Instrument	Level	Valuation Technique/Inputs Used
Notes receivable	2	Market - Price approximated based on the assumed collection of receivables in the normal course of business, taking into account non-performance risk.

The carrying value of our cash deposit accounts, trade accounts receivable, and trade accounts payable approximates fair value due to the relatively short maturity and immaterial non-performance risk.

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Note 7. Derivative Instruments

Foreign Exchange Contracts:

We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of business. Our primary means of managing this exposure is to utilize natural hedges, such as aligning currencies used in the supply chain with the sale currency. To the extent natural hedging techniques do not fully offset currency risk, we use derivative instruments with the objective of reducing the residual exposure to certain foreign currency rate movements. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness, and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes.

We use forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency. Foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances denominated in currencies other than the functional currencies. As of March 31, 2015, we had outstanding foreign exchange contracts to hedge currencies against the U.S. dollar in the aggregate notional amount of $31.9 million and to hedge currencies against the Euro in the aggregate notional amount of 46.8 million Euro. The notional amounts are indicators of the volume of derivative activities but may not be indicators of the potential gain or loss on the derivatives.

In limited cases due to unexpected changes in forecasted transactions, cash flow hedges may cease to meet the criteria to be designated as cash flow hedges. Depending on the type of exposure hedged, we may either purchase a derivative contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the currency revaluation impact of foreign currency denominated liabilities.

The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability. When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flow is impacted for the net settlement. For derivative instruments that meet the criteria of hedging instruments under FASB guidance, the effective portions of the gain or loss on the derivative instrument are initially recorded net of related tax effect in Accumulated Other Comprehensive Income (Loss), a component of Share Owners’ Equity, and are subsequently reclassified into earnings in the period or periods during which the hedged transaction is recognized in earnings. The ineffective portion of the derivative gain or loss is reported in the Non-operating income (expense), net line item on the Condensed Consolidated Statements of Income immediately. The gain or loss associated with derivative instruments that are not designated as hedging instruments or that cease to meet the criteria for hedging under FASB guidance is also reported in the Non-operating income (expense), net line item on the Condensed Consolidated Statements of Income immediately.

Based on fair values as of March 31, 2015, we estimate a $0.9 million pre-tax derivative gain deferred in Accumulated Other Comprehensive Income (Loss) will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months. Gains on foreign exchange contracts are generally offset by losses in operating income in the income statement when the underlying hedged transaction is recognized in earnings. Because gains or losses on foreign exchange contracts fluctuate partially based on currency spot rates, the future effect on earnings of the cash flow hedges alone is not determinable, but in conjunction with the underlying hedged transactions, the result is expected to be a decline in currency risk. The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both March 31, 2015 and June 30, 2014.

See Note 6 - Fair Value of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of derivative assets and liabilities and the Condensed Consolidated Statements of Comprehensive Income for the changes in deferred derivative gains and losses. Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets and derivative gains and losses in the Condensed Consolidated Statements of Income are presented below.

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Fair Value of Derivative Instruments on the Condensed Consolidated Balance Sheets

	Asset Derivatives					Liability Derivatives
		Fair Value As of					Fair Value As of
(Amounts in Thousands)	Balance Sheet Location	March 31, 2015		June 30, 2014		Balance Sheet Location	March 31, 2015		June 30, 2014
Derivatives Designated as Hedging Instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	3,240	$	599	Accrued expenses	$	1,306	$	241
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	2,438		201		Accrued expenses	3		458
Total derivatives		$	5,678	$	800		$	1,309	$	699

The Effect of Derivative Instruments on Other Comprehensive Income (Loss)

	Three Months Ended				Nine Months Ended
	March 31				March 31
(Amounts in Thousands)	2015		2014		2015		2014
Amount of Pre-Tax Gain or (Loss) Recognized in Other Comprehensive Income (Loss) (OCI) on Derivatives (Effective Portion):
Foreign exchange contracts	$	4,537	$	362	$	6,421	$	(536	)

The Effect of Derivative Instruments on Condensed Consolidated Statements of Income

		Three Months Ended					Nine Months Ended
(Amounts in Thousands)		March 31					March 31
Derivatives in Cash Flow Hedging Relationships	Location of Gain or (Loss)	2015		2014			2015			2014
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion):
Foreign exchange contracts	Cost of Sales	$	285	$	(465	)	$	664		$	(848	)
Foreign exchange contracts	Non-operating income (expense)	1,870		(3		)	3,595			(237		)
Total		$	2,155	$	(468	)	$	4,259		$	(1,085	)
Amount of Pre-Tax Loss Reclassified from Accumulated OCI into Income (Ineffective Portion):
Foreign exchange contracts	Non-operating income (expense)	$	—	$	—		$	(1	)	$	—
Derivatives Not Designated as Hedging Instruments
Amount of Pre-Tax Gain or (Loss) Recognized in Income on Derivatives:
Foreign exchange contracts	Non-operating income (expense)	$	965	$	174		$	2,006		$	(664	)
Total		$	965	$	174		$	2,006		$	(664	)
Total Derivative Pre-Tax Gain (Loss) Recognized in Income		$	3,120	$	(294	)	$	6,264		$	(1,749	)

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Note 8. Investments

Prior to the spin-off, former Parent maintained a self-directed supplemental employee retirement plan (SERP) in which the Company’s executive employees were eligible to participate. Subsequent to the spin-off and during the second quarter of fiscal year 2015, the assets and liabilities of former Parent’s SERP related to Kimball Electronics’ employees were transferred to a Company sponsored SERP. The SERP utilizes a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy. The Company recognizes SERP investment assets on the balance sheet at current fair value. A SERP liability of the same amount is recorded on the balance sheet representing an obligation to distribute SERP funds to participants. The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in income in the Other Income (Expense) category. Adjustments made to revalue the SERP liability are also recognized in income as selling and administrative expenses and offset valuation adjustments on SERP investment assets. The change in net unrealized holding gains (losses) for the nine months ended March 31, 2015 and 2014 was, in thousands, $(13) and $219, respectively.

SERP asset and liability balances applicable to Kimball Electronics participants were as follows:

(Amounts in Thousands)	March 31, 2015		June 30, 2014
SERP investments - current asset	$	191	$	167
SERP investments - other long-term asset	5,542		5,093
Total SERP investments	$	5,733	$	5,260
SERP obligation - current liability	$	191	$	167
SERP obligation - other long-term liability	5,542		5,093
Total SERP obligation	$	5,733	$	5,260

Note 9. Postemployment Benefits

The Company maintains severance plans for all domestic employees, and prior to the spin-off, the Company’s employees participated in severance plans sponsored by former Parent. These plans cover domestic employees and provide severance benefits to eligible employees meeting the plans’ qualifications, primarily involuntary termination without cause. There are no statutory requirements for us or former Parent to contribute to the plans, nor do employees contribute to the plans. The plans hold no assets. Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment. Benefits are based upon on employee’s years of service and accumulate up to certain limits specified in the plans and include both salary and an allowance for medical benefits. The benefit obligation for periods prior to the spin-off was determined in total for each of the plans and allocated by the number of Kimball Electronics domestic employees participating in the plans. In conjunction with the spin-off, these plans were legally separated and were remeasured. There were no significant changes to the actuarial assumptions used in the remeasurement.

The components of net periodic postemployment benefit cost applicable to Kimball Electronics participants were as follows:

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Service cost	$	91		$	66		$	239		$	201
Interest cost	14			10			36			29
Amortization of prior service costs	6			10			26			30
Amortization of actuarial (gain) loss	(44		)	(28		)	(89		)	46
Net periodic benefit cost	$	67		$	58		$	212		$	306

The benefit cost in the above table includes only normal recurring levels of severance activity. Unusual or non-recurring severance actions are not estimable using actuarial methods and are expensed in accordance with the applicable U.S. GAAP.

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Note 10. Stock Compensation Plan

A stock compensation plan similar to the former Parent plan was created and adopted by the Company’s Board of Directors on October 3, 2014. The Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan (the “Plan”) allows for the issuance of up to 4.5 million shares and may be awarded in the form of incentive stock options, stock appreciation rights, restricted shares, unrestricted shares, restricted share units, or performance shares and performance units. The Plan is a ten-year plan with no further awards allowed to be made under the Plan after October 1, 2024.

On December 2, 2014, Performance Share Awards issued and outstanding to Kimball Electronics employees under the previous Kimball International Incentive Plans were amended, in accordance with the terms of the plans, to provide an equitable adjustment as a result of the spin-off. The awards will be granted in shares of the Company stock instead of Kimball International, Inc. shares under the Kimball Electronics Plan. The amended awards retained the same terms and conditions and vesting schedule, issuance dates, and expiration dates of the original Kimball International awards.

During the first nine months of fiscal year 2015, the following stock compensation was awarded to officers and key employees as well as non-employee members of the Company’s Board of Directors as compensation for director’s fees as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. The awards were granted under the Company’s 2014 Stock Option and Incentive Plan.

Performance Shares	Quarter Awarded	Shares	Grant Date Fair Value (3)
Annual Performance Shares (1)	3rd Quarter	57,379		$13.55
Unrestricted Shares (2)	Quarter Awarded	Shares	Grant Date Fair Value (3)
Unrestricted shares (director compensation)	2nd Quarter	28,700		$10.76

(1) Additional annual performance shares were awarded to bring certain members of the Company's management team and other key employees closer to their market value for total compensation and compensation mix as well as to recognize exceptional performance and contributions during the spin-off. Similar to the annual performance shares awarded in June 2014, payouts will be determined by the bonus percentage computed under the Company's 2014 Profit Sharing Incentive Bonus Plan for fiscal year 2015. The number of shares issued will be less than the maximum shares issuable if the maximum bonus percentages are not achieved. The annual performance shares vest after the end of the Company's fiscal year.

(2) Unrestricted shares which were awarded to non-employee members of the Company’s Board of Directors as compensation for director’s fees as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. Director’s fees are expensed over the period that directors earn the compensation. Unrestricted shares do not have vesting periods, holding periods, restrictions on sale, or other restrictions.

(3) The grant date fair value of the annual performance shares and the unrestricted shares was based on the stock price at the date of the award.

During the first nine months of fiscal year 2015 and prior to the spin-off, former Parent allocated to the Company stock compensation related to unrestricted shares of Kimball International, Inc. Class B common stock awarded to non-employee members of former Parent’s Board of Directors as compensation for director’s fees. The stock compensation allocated to the Company consisted of 8,147 unrestricted shares of Kimball International, Inc. Class B common stock with a grant date fair value of $16.01, and all awards were granted under former Parent’s Amended and Restated 2003 Stock Option and Incentive Plan.

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Note 11. Share Owners’ Equity

Effective October 16, 2014, the Company’s authorized capital was increased to 165 million shares comprised of 15 million preferred shares without par value and 150 million common shares without par value. On the same day, 50 thousand common shares outstanding were split into 29.1 million common shares. On October 31, 2014, Kimball International, Inc., the Company’s sole Share Owner, distributed all 29.1 million outstanding shares of Kimball Electronics common stock to Kimball International Share Owners in connection with the spin-off. Upon the spin-off, holders of Kimball International common stock received three shares of Kimball Electronics common stock for every four shares of Kimball International common stock held on October 22, 2014. Preferred and common shares were retrospectively restated for the number of Kimball Electronics shares authorized and outstanding immediately following these events.

A stock compensation plan similar to the former Parent plan was created and adopted by the Company’s Board of Directors on October 3, 2014. The Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan (the “Plan”) allows for the issuance of up to 4.5 million shares and may be awarded in the form of incentive stock options, stock appreciation rights, restricted shares, unrestricted shares, restricted share units, or performance shares and performance units. For additional information, see Note 10 - Stock Compensation Plan of Notes to Condensed Consolidated Financial Statements.

Net Parent investment in the Condensed Consolidated Financial Statements represents former Parent’s historical investment in us, our accumulated net earnings after taxes, and the net effect of the transactions with and allocations from former Parent. As of July 1, 2014, Net Parent investment was converted to Additional paid-in capital. During the nine months ended March 31, 2015, Net contribution from Parent of $45.6 million included non-cash net transfers to Parent of $4.7 million including net transfers of assets and liabilities and allocation of stock compensation. For additional information, see Note 1 – Business Description and Summary of Significant Accounting Policies, as well as Note 2 – Related Party Transactions of Notes to Condensed Consolidated Financial Statements.

Note 12. Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

	Three Months Ended				Nine Months Ended
	March 31				March 31
(Amounts in thousands, except per share data)	2015		2014		2015		2014
Basic and Diluted Earnings Per Share:
Net Income	$	7,191	$	6,356	$	18,811	$	19,254
Basic weighted average common shares outstanding	29,172		29,143		29,159		29,143
Dilutive effect of average outstanding performance shares	146		—		185		—
Dilutive weighted average shares outstanding	29,318		29,143		29,344		29,143
Earnings Per Share of Common Stock:
Basic	$	0.25	$	0.22	$	0.65	$	0.66
Diluted	$	0.25	$	0.22	$	0.64	$	0.66

Basic and diluted earnings per share and the average number of common shares outstanding for the three and nine months ended March 31, 2014 were retrospectively restated adjusting the number of Kimball Electronics shares outstanding for the stock split effective on October 16, 2014. See Note 11 - Share Owners’ Equity of Notes to Condensed Consolidated Financial Statements for more information regarding the stock split. The same number of shares was used to calculate basic and diluted earnings per share for the three and nine months ended March 31, 2014 since no Kimball Electronics stock-based awards were outstanding prior to the spin-off.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Spin-Off Transaction

On October 31, 2014, Kimball Electronics, Inc. (also referred to herein as “Kimball Electronics”, the “Company”, “we”, “us” or “our”) became a stand-alone public company upon the completion of a spin-off from Kimball International, Inc. (“former Parent” or “Kimball International”) into two independent publicly-traded companies.

In conjunction with the spin-off, on October 31, 2014, Kimball International distributed 29.1 million shares of Kimball Electronics common stock to Kimball International Share Owners. Holders of Kimball International common stock received three shares of Kimball Electronics common stock for every four shares of Kimball International common stock held on October 22, 2014. Kimball International structured the distribution to be tax free to its U.S. Share Owners for U.S. federal income tax purposes.

The Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the financial position, results of operations, and cash flows of Kimball Electronics. Kimball Electronics qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as a company is deemed to be an “emerging growth company,” it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. The JOBS Act also provides that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

Prior to the spin-off on October 31, 2014, the Condensed Consolidated Financial Statements presented herein, and discussed below, were derived from the accounting records of former Parent as if we operated on a stand-alone basis. The Condensed Consolidated Financial Statements include allocations of general corporate expenses from former Parent including, but not limited to, spin-off costs, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, and other shared services through October 31, 2014, the spin-off date. The allocations were made on a direct usage or cost incurred basis when appropriate, with the remainder allocated using various drivers including average capital deployed, payroll, revenue less material costs, headcount, or other measures. While we believe these allocations have been made on a consistent basis and are reasonable based on the relevant cost drivers, such expenses may not be indicative of the actual expenses that would have been incurred had Kimball Electronics been operating as a stand-alone company.

Business Overview

We are a global contract electronic manufacturing services (“EMS”) company that specializes in producing durable electronics for the automotive, medical, industrial, and public safety markets. Our engineering, manufacturing, and supply chain services utilize common production and support capabilities globally. We are well recognized by customers and industry trade publications for our excellent quality, reliability, and innovative service.

A significant business challenge that we face as an independent publicly traded company is maintaining our profit margins while we look to accelerate revenue growth.  During the past few years, the EMS industry as a whole has experienced slower market growth as compared to pre-recession levels, which has added pressure to an already competitive marketplace.  As a mid-sized player in the EMS market, we can expect to be challenged by the agility and local knowledge 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 lower volume durable electronics market space.  We expect to continue to effectively operate in this market space.  Price increases are uncommon in the market as production efficiencies and material pricing advantages for most projects drive prices down over the life of the projects – while margins can be maintained.  This characteristic of the contract electronics marketplace is expected to continue, which will allow us to effectively compete in the same manner as we did prior to becoming an independent company.

Key economic indicators currently point toward continued strengthening in the overall economy. However, uncertainties still exist and may pose a threat to our future growth as they have the tendency to cause disruption in business strategy, execution, and timing in many of the markets in which we compete.

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The January 2015 edition of the Manufacturing Market Insider published by New Venture Research provided market information for calendar year 2014 as well as the outlook for the coming year. Although official figures were not all available, leading EMS companies showed preliminary revenue growth of approximately 5% in calendar year 2014. The Company experienced revenue growth of approximately 9% during calendar year 2014. The publication noted that growth in the EMS industry has been gradually slowing in the last three years when compared to earlier years. The publication suggested that the worldwide semiconductor capital spending is an indicator for the EMS industry. As noted in the publication, Gartner, a market research company, is projecting flat growth for 2015 and 2016, but 7% or greater growth for 2017 and 2018. The Company does not directly serve the semiconductor market; however, it may be indicative of the end market demand for products utilizing electronic components.

Our focus is on the four key vertical markets of automotive, medical, industrial, and public safety. Our overall expectation for the EMS market is that of moderate growth, but with mixed demand.

The automotive end market is benefiting from relative strength in the U.S. and China markets, while demand in Europe is stable.  The industrial market is improving with demand for climate control products increasing. We are seeing demand in the public safety market starting to stabilize and improve. Demand in the medical market remains stable. We continue to monitor the current economic environment and its potential impact on our customers.

We invest in capital expenditures prudently for projects in support of both organic growth and potential acquisitions that would enhance our capabilities and diversification while providing an opportunity for growth and improved profitability. We have a strong focus on cost control and closely monitor market changes and our liquidity in order to proactively adjust our operating costs and discretionary capital spending as needed. 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 that it is linked to our performance which is designed to adjust compensation expense as profits change.

In addition to the above discussion related to the current market conditions, management currently considers the following events, trends, and uncertainties to be most important to understanding our financial condition and operating performance:

• Due to the contract and project nature of the EMS industry, fluctuation in the demand for our products and variation in the gross margin on those projects is inherent to our business. Effective management of manufacturing capacity is, and will continue to be, critical to our success.

• The nature of the EMS industry is such that the start-up of new customers and new programs to replace expiring programs occurs frequently. While our agreements with customers generally do not have a definitive term and thus could be canceled at any time, we generally realize relatively few cancellations prior to the end of the product’s life cycle. We attribute this to our focus on long-term customer relationships, meeting customer expectations, required capital investment, and product qualification cycle times. As such, our ability to continue contractual relationships with our customers, including our principal customers, is not certain. New customers and program start-ups generally cause losses early in the life of a program, which are generally recovered as the program becomes established and matures. Risk factors within our business include, but are not limited to, general economic and market conditions, customer order delays, increased globalization, foreign currency exchange rate fluctuations, rapid technological changes, component availability, supplier and customer financial stability, the contract nature of this industry, the concentration of sales to large customers, and the potential for customers to choose a dual sourcing strategy or to in-source a greater portion of their electronics manufacturing. 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 award 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. Additional risk factors that could have an effect on our performance are located within the “Risk Factors” section of our registration statement on Form 10, which the SEC declared effective on October 7, 2014 (“Form 10”).

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	Nine Months Ended
	March 31
Customer Service Years	2015		2014
10+ Years
% of Net Sales	50	%	58	%
# of Customers	21		22
5+ to 10 Years
% of Net Sales	36	%	33	%
# of Customers	27		27
0 to 5 Years
% of Net Sales	14	%	9	%
# of Customers	28		22
Total
% of Net Sales	100	%	100	%
# of Customers	76		71

• Globalization continues to reshape not only the industries in which we operate but also our key customers and competitors.

• Employees throughout our business operations are an integral part of our ability to compete successfully, and the stability of the management team is critical to long-term Share Owner value. Our career development and succession planning processes help to maintain stability in management.

Certain preceding statements could be considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties including, but not limited to, adverse changes in the global economic conditions, loss of key customers or suppliers, or similar unforeseen events. Additional information on risks is contained in our registration statement on Form 10.

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Financial Overview

	At or for the Three Months Ended
	March 31
(Amounts in Millions)	2015		as a % of Net Sales		2014		as a % of Net Sales		% Change
Net Sales	$	206.9			$	185.7			11	%
Gross Profit	$	19.0	9.2	%	$	16.6	8.9	%	14	%
Selling and Administrative Expenses	$	8.1	4.0	%	$	9.2	5.0	%	(12	)%
Other General Income	$	—			$	0.7
Operating Income	$	10.8	5.2	%	$	8.0	4.3	%	35	%
Net Income	$	7.2			$	6.4			13	%
Open Orders	$	181.1			$	170.7			6	%

	For the Nine Months Ended
	March 31
(Amounts in Millions)	2015		as a % of Net Sales		2014		as a % of Net Sales		% Change
Net Sales	$	618.2			$	542.6			14	%
Gross Profit	$	54.7	8.9	%	$	42.9	7.9	%	27	%
Selling and Administrative Expenses	$	27.4	4.5	%	$	26.0	4.7	%	5	%
Other General Income	$	—			$	5.7
Operating Income	$	27.3	4.4	%	$	22.2	4.1	%	23	%
Net Income	$	18.8			$	19.3			(2	)%

Net Sales by Vertical Market	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Millions)	2015		2014		% Change		2015		2014		% Change
Automotive	$	74.9	$	72.1	4	%	$	220.0	$	201.4	9	%
Medical	59.7		54.7		9	%	183.6		153.6		20	%
Industrial	51.6		41.2		25	%	155.1		139.0		12	%
Public Safety	15.3		13.5		13	%	46.3		38.5		20	%
Other	5.4		4.2		28	%	13.2		10.1		31	%
Total Net Sales	$	206.9	$	185.7	11	%	$	618.2	$	542.6	14	%

Third quarter and year-to-date fiscal year 2015 total net sales increased 11% and 14% compared to the third quarter and year-to-date period of fiscal year 2014, respectively. The current fiscal year third quarter increase in net sales over the prior fiscal year third quarter was driven by sales growth to customers in all four of our vertical markets, with the industrial and public safety vertical markets experiencing double-digit growth. For the nine-month period endedMarch 31, 2015, net sales to customers in all four of our vertical markets increased over the same period of the prior year, with all but the automotive vertical market experiencing double-digit sales growth.

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Despite the decline in sales to Johnson Controls, Inc. (“JCI”) as discussed in further detail below, sales to customers in the automotive market improved primarily on the strength of the China market. Sales to customers in the medical market, the industrial market, and the public safety market improved from both increased demand for existing products and new product awards.

Open orders were up 6% as of March 31, 2015 compared to March 31, 2014 as the expected decline in open orders to JCI was more than offset by increased open orders to other customers. Open orders at a point in time may not be indicative of future sales trends due to the contract nature of our business.

Third quarter fiscal year 2015 gross profit as a percent of net sales improved 0.3 of a percentage point when compared to the third quarter of fiscal year 2014 from leverage gained on the higher revenue and lower incentive compensation costs. Fiscal year-to-date 2015 gross profit as a percent of net sales improved 1.0 percentage point when compared to fiscal year-to-date 2014 due to the positive impact from leverage gained on higher revenue and cost productivity.

Selling and administrative expenses in the third quarter of fiscal year 2015 compared to the third quarter of fiscal year 2014 decreased 1.0 percentage point as a percent of net sales and decreased 12% in absolute dollars. Third quarter fiscal year 2015 spin-off expenses of $0.3 million declined $0.5 million from the third quarter fiscal year 2014 spin-off expenses of $0.8 million. In addition, selling and administrative expenses in the third quarter of fiscal year 2014 included non-spin related charges and allocations from former Parent, which included incentive compensation costs. The favorable impact from not having any non-spin related charges and allocations from former Parent to selling and administrative expenses in the third quarter of fiscal year 2015 was greater than the increase in employee salary and benefit costs resulting from the spin-off.

For the first nine months of fiscal year 2015, the selling and administrative expenses as a percent of net sales decreased 0.2 of a percentage point although they increased 5% in absolute dollars compared to the first nine months of fiscal year 2014. Current year-to-date selling and administrative expenses included spin-off expenses of $2.6 million which were $1.8 million higher than the prior year-to-date spin-off expenses of $0.8 million in addition to higher salary and employee benefit expense. The year-to-date increase in salary and employee benefit expense as a result of the spin-off was more than offset by the decline in non-spin related charges and allocations from former Parent, which included incentive compensation costs.

Other General Income in the third quarter and first nine months of fiscal year 2014 included $0.7 million and $5.7 million of pre-tax income, respectively, or $0.4 million and $3.5 million after-tax, resulting from settlements received related to two antitrust class action lawsuits in which Kimball Electronics was a class member. We recorded no Other General Income during the three and nine months ended March 31, 2015.

Other Income (Expense) consisted of the following:

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Interest income	$	10		$	6		$	22		$	32
Interest expense	—			(1		)	(5		)	(2		)
Foreign currency/derivative gain (loss)	(920		)	114			(1,151		)	368
Gain on supplemental employee retirement plan (“SERP”) investments	154			46			203			521
Other	(130		)	(62		)	(298		)	(229		)
Other income (expense), net	$	(886	)	$	103		$	(1,229	)	$	690

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 was no effect on net income.

Our income before income taxes and effective tax rate were comprised of the following U.S. and foreign components:

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	For the Nine Months Ended
	March 31, 2015				March 31, 2014
(Amounts in Thousands)	Income Before Taxes		Effective Tax Rate		Income Before Taxes		Effective Tax Rate
United States	$	1,102	50.3	%	$	3,933	31.9	%
Foreign	24,974		26.9	%	18,966		12.6	%
Total	$	26,076	27.9	%	$	22,899	15.9	%

The effective tax rate for the nine months of fiscal year 2015 of 27.9% was unfavorably impacted by the spin-off expenses, which are largely nondeductible in the U.S., and favorably impacted by a high mix of earnings in foreign jurisdictions which have lower statutory rates than the U.S and adjustments for domestic tax credits. The effective tax rate for the first nine months of fiscal year 2014 of 15.9% was favorably impacted by a high mix of earnings in foreign jurisdictions which have lower statutory tax rates than the U.S. The foreign effective tax rate for the first nine months of fiscal year 2014 was favorably impacted by $1.6 million of adjustments primarily related to decreases in foreign deferred tax asset valuation allowances and a tax law change in Mexico. Our overall effective tax rate will fluctuate depending on the geographic distribution of our worldwide earnings.

A significant amount of sales to Philips, TRW, and JCI accounted for the following portions of our net sales:

	Three Months Ended		Nine Months Ended
	March 31		March 31
	2015	2014	2015	2014
Philips	16%	14%	16%	13%
TRW	9%	11%	8%	9%
Johnson Controls, Inc.	2%	11%	4%	14%

The nature of the EMS industry is such that the start-up of new customers and new programs to replace expiring programs occurs frequently. New customers and program start-ups generally cause losses early in the life of a program, which are generally recovered as the program becomes established and matures. Volumes for one of our largest contracts with JCI, which accounted for approximately $0.2 million in the third quarter of fiscal year 2015 and approximately $6.1 million in the nine months ended March 31, 2015, have declined in fiscal year 2015 as certain JCI programs reached end-of-life. In addition, during the second quarter of our prior fiscal year, due to available capacity, JCI decided to in-source other programs that are manufactured by us which accounted for approximately $2.0 million in sales in the third quarter of fiscal year 2015 and approximately $15.4 million in the nine months ended March 31, 2015. The transition to JCI’s in-sourcing occurred in stages and began in our fourth quarter of fiscal year 2014 with the transition substantially completed in the third quarter of fiscal year 2015. Gross profit as a percent of net sales on the JCI product approximates the overall Kimball Electronics gross margin percentage. A significant portion of that volume already has been and is expected to continue to be replaced with new business.

Comparing the balance sheet as of March 31, 2015 to June 30, 2014, cash and cash equivalents increased $35.4 million primarily as a result of the net distributions of cash made from former Parent to us of $44.3 million upon the completion of the spin-off. The $10.8 million increase in accounts receivable was primarily a result of increased sales volumes, and our inventory balance increased $6.6 million primarily to support increased production volumes. Our accounts payable balance increased $3.7 million primarily on the increased inventory purchases. A $14.2 million change in Accumulated other comprehensive income (loss) was primarily driven by foreign currency translation adjustments.

Liquidity and Capital Resources

Cash & Cash Equivalents

In connection with the spin-off, net distributions of cash were made from former Parent to us of $44.3 million on or around October 31, 2014. For purposes of the historical Condensed Consolidated Financial Statements, Kimball International, Inc. did not allocate to us the cash and cash equivalents held at the corporate level for any of the periods presented prior to the spin-off on October 31, 2014. Cash and cash equivalents in our Condensed Consolidated Balance Sheet at June 30, 2014 primarily represents cash held by our international entities at the local level.

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Cash Flows

The following table reflects the major categories of cash flows for the first nine months of fiscal years 2015 and 2014.

	Nine Months Ended
	March 31
(Amounts in thousands)	2015			2014
Net cash provided by operating activities	$	11,250		$	32,886
Net cash used for investing activities	$	(22,668	)	$	(13,103	)
Net cash provided by (used for) financing activities	$	50,172		$	(842	)

Cash Flows from Operating Activities

For the first nine months of fiscal year 2015, net cash provided by operating activities was $11.3 million and in the first nine months of fiscal year 2014, net cash provided by operating activities was $32.9 million, primarily driven by net income adjusted for non-cash items. Changes in working capital used $23.2 million of cash in the first nine months of fiscal year 2015 and provided $0.6 million in the first nine months of fiscal year 2014.

The usage of $23.2 million cash from changes in working capital balances in the first nine months of fiscal year 2015 was primarily due to fluctuations in our accounts receivable and inventory. An increase in accounts receivable used cash of $14.8 million which resulted primarily from increased sales volumes. An increase in inventory used cash of $10.4 million primarily to support increased volumes. Partially offsetting these usages was an increase in accounts payable which provided cash of $6.7 million primarily related to the increased inventory purchases.

Our measure of accounts receivable performance, also referred to as Days Sales Outstanding (“DSO”), for the nine-month period ended March 31, 2015 was 58.6 days compared to 57.0 days for the nine-month period ended March 31, 2014. We define DSO as the average of monthly trade accounts and notes receivable divided by an average day’s net sales.

Cash Flows from Investing Activities

For the first nine months of fiscal year 2015 and 2014, net cash used for investing activities was $22.7 million and $13.1 million, respectively. During the first nine months of fiscal year 2015 and 2014, we reinvested $23.0 million and $13.9 million, respectively, into capital investments for the future with the largest expenditures in each period being for manufacturing equipment.

Cash Flows from Financing Activities

For each period shown in the table above, net cash provided by or used for financing activities primarily represents net transfers from and to former Parent. As former Parent provided centralized treasury functions for us, cash was regularly transferred both to and from former Parent’s subsidiaries, as necessary. In connection with the spin-off, net distributions of cash were made from former Parent to us of $44.3 million on or around October 31, 2014.

Credit Facilities

In connection with the spin-off, the Company entered into a new U.S. primary credit facility (the “primary facility”) dated as of October 31, 2014 with JPMorgan Chase Bank National Association, as administrative agent, and other lenders party thereto. The credit facility has a maturity date of October 31, 2019 and allows for up to $50 million in borrowings, with an option to increase the amount available for borrowing to $75 million at the Company’s request, subject to participating banks’ consent.

The proceeds of the revolving credit loans are to be used for general corporate purposes of the Company including potential acquisitions. A portion of the credit facility, not to exceed $15 million of the principal amount, will be available for the issuance of letters of credit. A commitment fee on the unused portion of the principal amount of the credit facility is payable at a rate that ranges from 20.0 to 25.0 basis points per annum as determined by the Company’s ratio of consolidated total indebtedness to adjusted consolidated EBITDA. The interest rate on borrowings is dependent on the type of borrowings.

At March 31, 2015, we had no short-term borrowings under the primary facility and $0.3 million in letters of credit against the primary credit facility.

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The Company’s financial covenants under the primary credit facility require:

•a ratio of consolidated total indebtedness minus unencumbered U.S. cash on hand in the U.S. in excess of $15 million to adjusted consolidated EBITDA, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be greater than 3.0 to 1.0, and

•a fixed charge coverage ratio, determined as of the end of each of its fiscal quarters for the then most recently ended four fiscal quarters, to not be less than 1.10 to 1.00.

We were in compliance with the financial covenants during the period beginning with the commencement of the primary facility through March 31, 2015.

Kimball Electronics utilizes foreign credit facilities to satisfy short-term cash needs at specific foreign locations rather than funding from intercompany sources. As of March 31, 2015, we maintained a Thailand overdraft credit facility which allows for borrowings up to 90 million Thai Baht (approximately $2.8 million at March 31, 2015 exchange rates). We had no borrowings under this foreign credit facility as of March 31, 2015 or June 30, 2014. We previously maintained a credit facility for our operation in Poland which allowed for multi-currency borrowings up to a 6 million Euro equivalent, and as of October 31, 2014, the Poland credit facility was canceled by mutual agreement between us and the bank. We had no borrowings under the Poland foreign credit facility at June 30, 2014.

Our short-term liquidity available, represented as cash and cash equivalents plus the unused amount of our credit facilities, totaled $114.2 million at March 31, 2015.

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 credit facilities will be sufficient to meet our working capital and other operating needs for at least the next 12 months. We expect to continue to invest in capital expenditures prudently, particularly for projects, including potential acquisitions, that would enhance our capabilities and diversification while providing an opportunity for growth and improved profitability. We intend to invest in an expansion of our manufacturing capacity in Europe beginning this fiscal year 2015 with a greenfield startup facility in Romania, expected to be completed in the first half of our fiscal year 2016. Operations at the Romania facility are anticipated to begin mid-fiscal year 2016.

At March 31, 2015, our capital expenditure commitments were approximately $15 million, consisting primarily of commitments for manufacturing equipment in anticipation of future growth, including new program wins. We anticipate our funds on hand and funds provided by operations will be sufficient to fund these capital expenditures.

At March 31, 2015, our foreign operations held cash totaling $26.0 million. Except for the nontaxable repayment of intercompany loans, our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate these funds to our U.S. operations. However, if these funds were repatriated, the amount remitted would be subject to U.S. income taxes and applicable non-U.S. income and withholding taxes.

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, the ability of Kimball Electronics to generate profits, 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.

The preceding statements include forward-looking statements under the Private Securities Litigation Reform Act of 1995. Certain factors could cause actual results to differ materially from forward-looking statements.

Fair Value

During the third quarter of fiscal year 2015, 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 derivatives, which were classified as level 2 assets/liabilities, 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 6 - Fair Value of Notes to Condensed Consolidated Financial Statements for additional information.

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Contractual Obligations

There have been no material changes outside the ordinary course of business to Kimball Electronics’ summary of contractual obligations under the caption, “Contractual Obligations” in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements other than standby letters of credit and operating leases entered into in the normal course of business. These arrangements do not have a material current effect and are not reasonably likely to have a material future effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. See Note 5 - Commitments and Contingent Liabilities of Notes to Condensed Consolidated Financial Statements for more information on standby letters of credit. We do not have material exposures to trading activities of non-exchange traded contracts.

The preceding statements are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Certain factors could cause actual results to differ materially from forward-looking statements.

Critical Accounting Policies

Kimball Electronics’ Condensed 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 Condensed 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 Condensed Consolidated Financial Statements and are the policies that are most critical in the portrayal of our financial position and results of operations.

Revenue recognition – Kimball Electronics recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract. Title and risk of loss are transferred upon shipment to or receipt at our customers’ locations, or in limited circumstances, as determined by other specific sales terms of the transaction. Shipping and handling fees billed to customers are recorded as sales while the related shipping and handling costs are included in cost of goods sold. We recognize sales net of applicable sales tax.

Allowance for doubtful accounts – Our estimate for the allowance for credit losses on trade accounts receivable and notes receivable includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt experience. Management uses these specific analyses in conjunction with an evaluation of the general economic and market conditions to determine the final allowance for credit losses on the trade accounts receivable and notes receivable. The allowance for doubtful accounts at March 31, 2015 and June 30, 2014 was $0.1 million and $0.2 million, respectively. This reserve was less than 0.5% of gross trade accounts receivable during the two-year period preceding March 31, 2015.

Excess and obsolete inventory – Inventories were valued at lower of first-in, first-out (FIFO) cost or market value. Inventories recorded on our balance sheet are adjusted for excess and obsolete inventory. In general, we purchase materials and finished goods for contract-based business from customer orders and projections, primarily in the case of long lead time items, and we have a general philosophy to only purchase materials to the extent covered by a written commitment from our customers.

However, there are times when inventory is purchased beyond customer commitments due to minimum lot sizes and inventory lead time requirements, or where component allocation or other procurement issues may exist. We may also purchase additional inventory to support transfers of production between manufacturing facilities. Evaluation of excess inventory includes such factors as anticipated usage, inventory turnover, inventory levels, and product demand levels. Factors considered when evaluating inventory obsolescence include the age of on-hand inventory and reduction in value due to damage, design changes, or cessation of product lines. When we estimate that the current market value is below cost or determine that future demand is lower than current inventory levels, based on our evaluation of the above factors or other relevant current and projected factors associated with current economic conditions, a reduction in inventory cost to estimated net realizable value will be recorded as expense in Cost of Sales.

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Self-insurance reserves – We are self-insured up to certain limits for auto and general liability, workers’ compensation, and certain employee health benefits such as medical, short-term disability, and dental with the related liabilities included in the accompanying financial statements. For the employee health benefits noted above, we remained under the policies and programs administered by former Parent through December 31, 2014, with our own, separate policies and programs implemented on January 1, 2015. The related liabilities for employees of Kimball Electronics transferred to us as part of the spin-off. For auto and general liability and workers’ compensation, we remained under the policies and programs administered by our former Parent until the spin-off occurred.

Our policy is to estimate reserves based upon a number of factors including known claims, estimated incurred but not reported claims, and other analyses, which are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as increased medical costs and changes in actual experience could cause these estimates to change and reserve levels to be adjusted accordingly. At March 31, 2015, accrued liabilities for self-insurance exposure were $0.8 million. At June 30, 2014, accrued liabilities for self-insurance exposure as allocated to Kimball Electronics by former Parent were $1.6 million.

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 allocated to us by former Parent, including accrued interest and penalties on those positions at June 30, 2014 was $1.0 million. At the spin-off date, the liability for the tax provision remained with the former Parent in accordance with the Tax Matters Agreement. At March 31, 2015, the liability for uncertain income tax and other tax positions was less than $0.1 million.

New Accounting Standards

See Note 1 - Business Description and Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements 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 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,” “will,” and similar expressions. These forward-looking statements are subject to risks and uncertainties including, but not limited to, realizing benefits from the spin-off from Kimball International, Inc., adverse changes in the global economic conditions, significant volume reductions from key contract customers, significant reduction in customer order patterns, loss of key customers or suppliers within specific industries, financial stability of key customers and suppliers, availability or cost of raw materials and components, increased competitive pricing pressures reflecting excess industry capacities, changes in the regulatory environment, or similar unforeseen events. Additional cautionary statements regarding other risk factors that could have an effect on the future performance of Kimball Electronics are contained in our Form 10.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Rate Risk: Kimball Electronics operates internationally and thus is subject to potentially adverse movements in foreign currency rate changes. Our risk management strategy includes the use of derivative financial instruments to hedge certain foreign currency exposures. Derivatives are used only to manage underlying exposures and are not used in a speculative manner. Further information on derivative financial instruments is provided in Note 7 - Derivative Instruments of Notes to Condensed Consolidated Financial Statements. We estimate that a hypothetical 10% adverse change in foreign currency exchange rates relative to non-functional currency balances of monetary instruments, to the extent not hedged by derivative instruments, would not have a material impact on profitability over an entire year.

Item 4. Controls and Procedures

(a)Evaluation of disclosure controls and procedures.

Kimball Electronics maintains controls and procedures designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon their evaluation of those controls and procedures performed as of March 31, 2015, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective.

(b)Changes in internal control over financial reporting.

Before the spin-off on October 31, 2014, we relied on certain financial information and resources of Kimball International to manage aspects of our business and to report financial results. As a result of the spin-off, several areas of internal control over financial reporting changed. New corporate and oversight functions have been implemented, such as external financial reporting, legal, Board of Directors, and treasury functions. Functions such as tax, accounting, and human resources have also been enhanced to include corporate-level activities previously performed by Kimball International and to meet all regulatory requirements for a stand-alone company. Controls and procedures related to these new functions have been, or are in the process of being, implemented. Additionally, we entered into a transition services agreement with Kimball International on October 31, 2014, pursuant to which Kimball International agreed to provide us certain information technology, accounting, and other services to facilitate certain accounting and reporting functions for a limited time after the spin-off.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We may, from time to time, be involved in legal proceedings arising in the normal course of business. Other than proceedings incidental to our business, we are not a party to, nor is any of our property the subject of, any material pending legal proceedings and no such proceedings are, to our knowledge, threatened against us.

Item 1A. 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 Form 10. There have been no material changes to the risk factors disclosed in our Form 10.

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Item 6. Exhibits

Exhibits (numbered in accordance with Item 601 of Regulation S-K)

3.1 Amended and Restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K/A filed October 23, 2014)

3.2 Amended and Restated By-laws of the Company (Incorporated by reference to Exhibit 4.2 to the Company’s Form S-8 for the Company’s 2014 Stock Option and Incentive Plan filed on October 30, 2014)

10.1^*  Summary of Director and Named Executive Officer Compensation

10.2^*  Form of Annual Performance Share Award Agreement

10.3^*  Form of Employment Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 2, 2015)

31.1 Certification filed by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification filed by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification furnished by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification furnished by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

* Constitutes management contract or compensatory arrangement

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KIMBALL ELECTRONICS, INC.
By:	/s/ DONALD D. CHARRON
	Donald D. Charron Chairman of the Board, Chief Executive Officer
	May 12, 2015
By:	/s/ MICHAEL K. SERGESKETTER
	Michael K. Sergesketter Vice President, Chief Financial Officer
	May 12, 2015

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Kimball Electronics, Inc.

Exhibit Index

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K/A filed October 23, 2014)
3.2	Amended and Restated By-laws of the Company (Incorporated by reference to Exhibit 4.2 to the Company’s Form S-8 for the Company’s 2014 Stock Option and Incentive Plan filed on October 30, 2014)
10.1*	Summary of Director and Named Executive Officer Compensation
10.2*	Form of Annual Performance Share Award Agreement
10.3*	Form of Employment Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 2, 2015)
31.1	Certification filed by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification filed by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification furnished by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification furnished by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
* Constitutes management contract or compensatory arrangement

36

EX-10.1

Exhibit 10.1

SUMMARY OF DIRECTOR AND NAMED EXECUTIVE OFFICER COMPENSATION

This summary sets forth the compensation of the Directors of Kimball Electronics, Inc. (the “Company”). The summary also includes compensation of the Company’s current Chief Executive Officer, Chief Financial Officer, and the three other most highly compensated executive officers, who will be referred to herein as our “Named Executive Officers.”

For a detailed description of the compensation arrangements that the Directors and Named Executive Officers participate in, refer to the Company’s registration statement on Form 10, which the Securities and Exchange Commission declared effective on October 7, 2014 (“Form 10”). The Company was a wholly owned subsidiary of Kimball International, Inc. (“former Parent”) and as of 5:00 p.m. New York time on October 31, 2014 became a stand-alone public company upon the completion of a spin-off from former Parent.

Director Compensation

All Outside (non-employee) Directors receive annual compensation of $75,000 for the year for service as Directors. For the initial organizational activities relating to the Spin, the Directors received a one-time addition to the annual retainer of $5,000. The Chairperson of the Audit Committee of the Board of Directors and the Chairperson of the Compensation and Governance Committee of the Board of Directors each receive an additional $10,000 annual retainer fee.

The Directors can elect to receive some or all of their annual retainer fees in shares of Common Stock under the Company’s 2014 Stock Option and Incentive Plan. Directors are also reimbursed for travel expenses incurred in connection with Board and Committee meeting attendance.

An Outside Director is a director who is not an employee of the Company or one of its subsidiaries. Donald D. Charron, Chairman of the Board and Chief Executive Officer, is a Director of the Company but does not receive compensation for his service as a Director.

Named Executive Officer Compensation

Base Pay

Periodically, the Compensation and Governance Committee of the Board of Directors reviews and approves the salaries that are paid to the Company’s executive officers. The following are the current annualized base salaries for the Company’s Named Executive Officers:

Donald D. Charron, Chairman of the Board, Chief Executive Officer	$	642,876
John H. Kahle, Vice President, General Counsel and Secretary	$	397,800
Steven T. Korn, Vice President, North American Operations	$	288,132
Michael K. Sergesketter, Vice President, Chief Financial Officer	$	262,704
Christopher J. Thyen, Vice President, Business Development	$	265,668

Cash Incentive Compensation

Each of the Named Executive Officers was eligible to participate in former Parent’s Profit Sharing Incentive Bonus Plan (the “former Parent’s Plan”) during fiscal year 2014. Under the former Parent’s Plan, cash incentives are accrued annually and paid in five installments over the succeeding fiscal year. Except for provisions relating to retirement, death, permanent disability, and certain other circumstances described in a participant’s employment agreement, participants must be actively employed on each payment date to be eligible to receive any unpaid cash incentive installment. The total amount of cash incentives accrued and authorized to be paid to the Named Executive Officers based on former Parent’s fiscal year 2014 results is listed below. The Named Executive Officers received an installment of 50% of the payment in August 2014, 12.5% was paid in each of September 2014, January 2015, and April 2015, and the remaining 12.5% will be paid in June 2015.

Donald D. Charron, Chairman of the Board, Chief Executive Officer	$	548,912
John H. Kahle, Vice President, General Counsel and Secretary	$	338,130
Steven T. Korn, Vice President, North American Operations	$	247,034
Michael K. Sergesketter, Vice President, Chief Financial Officer	$	220,909
Christopher J. Thyen, Vice President, Business Development	$	219,204

Stock Compensation

The Named Executive Officers may also receive a variety of stock incentive benefits under the Company’s 2014 Stock Option and Incentive Plan consisting of: incentive stock options, stock appreciation rights, restricted shares, unrestricted shares, restricted share units, or performance shares and performance units.

During August 2013, the Named Executive Officers were awarded grants of performance shares under former Parent’s 2003 Amended and Restated Stock Option and Incentive Plan (the “former Parent’s 2003 Plan”). Under the former Parent’s 2003 Plan, performance shares include both an annual performance share (“APS”) award and a long-term performance share (“LTPS”) award with one-fifth (1/5) of the LTPS award vesting annually over the succeeding five-year period.

The following table summarizes the performance shares issued in former Parent’s Common Stock during August 2014 to the Company’s Named Executive Officers pursuant to their August 2013 performance share awards, which were applicable to fiscal year 2014 performance under former Parent’s 2003 Plan:

	FY 2014 APS Grant (Shares Issued) (1)	FY 2014 LTPS Grant (Shares Issued) (1)
Donald D. Charron, Chairman of the Board, Chief Executive Officer	6,825	30,700
John H. Kahle, Vice President, General Counsel and Secretary	6,375	31,300
Steven T. Korn, Vice President, North American Operations	3,185	5,900
Michael K. Sergesketter, Vice President, Chief Financial Officer	3,185	5,900
Christopher J. Thyen, Vice President, Business Development	3,185	5,900
(1) Shares have not been reduced by the number of shares withheld to satisfy tax withholding obligations.

Pursuant to the Company’s 2014 Stock Option and Incentive Plan, performance shares include both an annual performance share (“APS”) award and a long-term performance share (“LTPS”) award with the award vesting annually over a specified period.

The following table summarizes the maximum number of performance shares granted in June 2014 and February 2015 to the Company’s Named Executive Officers for fiscal year 2015:

	APS Award  (number of  shares) (1)	APS Award  (number of  shares) (2)	LTPS Award  (number of  shares) (1)
Donald D. Charron, Chairman of the Board, Chief Executive Officer	10,282	—	32,980
John H. Kahle, Vice President, General Counsel and Secretary	10,282	—	32,980
Steven T. Korn, Vice President, North American Operations	4,850	5,563	6,596
Michael K. Sergesketter, Vice President, Chief Financial Officer	4,850	3,949	6,596
Christopher J. Thyen, Vice President, Business Development	4,850	4,237	6,596
(1) Shares granted in June 2014 for the fiscal year 2015 performance period under former Parent’s 2003 Plan in former Parent’s stock. On December 2, 2014, these outstanding awards were amended to provide an equitable adjustment and to be granted in the Company’s stock. These shares have been increased due to the spin-off by an adjustment factor of 1.94 in accordance with the terms of the plans.
(2) Additional shares granted in February 2015 for the fiscal year 2015 performance period under the Company’s 2014 Stock Option and Incentive Plan. The purpose is to bring certain members of the Company’s management team and other key employees closer to their market value for total compensation and compensation mix as well as to recognize exceptional performance and contributions during the spin-off.

The number of shares to be issued will be dependent upon the percentage payout under the Company’s 2014 Stock Option and Incentive Plan. The annual performance shares vest after the end of the Company’s fiscal year. Refer to the Company’s registration statement on Form 10 for further details.

Retirement Plans

The Named Executive Officers participate in a defined contribution, participant-directed retirement plan that all domestic employees are eligible to participate in (the “Retirement Plan”). The Retirement Plan provides for voluntary employee contributions as well as a discretionary Company contribution which is determined annually by the Compensation and Governance Committee of the Board of Directors. Each eligible employee’s Company contribution is defined as a percent of eligible compensation, the percent being identical for all eligible employees, including Named Executive Officers. Participant contributions are fully vested immediately, and Company contributions are fully vested after five years of participation. All Named Executive Officers are fully vested. The Retirement Plan is fully funded. For those eligible employees who, under the 1986 Tax Reform Act, are deemed to be highly compensated, their individual Company contribution under the Retirement Plan is reduced. For employees who are eligible, including all Named Executive Officers, there is a nonqualified, Supplemental Employee Retirement Plan (“SERP”) in which the Company contributes to the account of each individual an amount equal to the reduction in the contribution under the Retirement Plan arising from the provisions of the 1986 Tax Reform Act. The SERP investment is primarily composed of employee contributions.

EX-10.2

Exhibit 10.2

KIMBALL ELECTRONICS, INC.

ANNUAL PERFORMANCE SHARE AWARD

This Annual Performance Share Award (the “APSA”) dated March 30, 2015 is awarded by Kimball Electronics, Inc. (“Company”), an Indiana corporation, to _______________________________ (“Participant”) pursuant to the terms of the Company’s 2014 Stock Option and Incentive Plan (“Plan”).

WHEREAS, the Compensation & Governance Committee of the Company (“Committee”) believes it to be in the best interests of the Company and its shareowners for its managers to obtain or increase their shareowner interests in the Company in order that they will have a greater incentive to work for and manage the Company’s affairs in such a way that its shares may become more valuable, thereby aligning the personal interests of Participants with the Company shareowners; and

WHEREAS, the Participant is employed by the Company or one of its subsidiaries;

NOW, THEREFORE, in consideration of these premises and of services to be performed by the Participant, the Company hereby makes this APSA to the Participant on the following terms and conditions hereafter expressed and subject to the terms of the Plan.

AWARD

The Company hereby awards to the Participant a total of __________________________ (__________) shares of Common Stock (“Common Stock”) of the Company.

EXPIRATION OF AWARD

The APSA expires upon the final grant of shares or forfeiture of award, as the case may be, pursuant to the terms of this Agreement.

SHARES OF AWARD

Shares of the APSA received will be determined by the bonus percentage computed under the Company’s 2014 Profit Sharing Incentive Bonus Plan (“Bonus Plan”) for the fiscal year ended June 30, 2015, for the Participant at the Category 1 bonus level (“Bonus Percent”). Shares granted are determined by multiplying the shares awarded times the Bonus Percent. In computing the shares received, the shares will be rounded down to a full share excluding any fractional shares. The resulting shares will be granted within 2 ½ months after the end of the Company's fiscal year.

FORFEITURE OF AWARD

To be granted shares under the terms of this APSA, the Participant must be a full time and eligible employee of the Company at the time shares are granted, except for:

• Death.

• Permanent Disability.

• Retirement after attaining the minimum retirement age under the governmental retirement system for the applicable country (age 62 in the U.S.).

• Determination of Ineligibility by the Company.

If during the period of July 1, 2014, through June 30, 2015, a Participant’s employment is terminated because of Death, Permanent Disability, or Retirement, or Ineligibility is Determined, the Participant’s shares are determined by multiplying the APSA shares computed for the fiscal year ending June 30, 2015, by a fraction determined by:

• Numerator = number of months in the current fiscal year that the Participant was a full time and eligible employee, including the month in which the termination of employment or eligibility ends, which shall be considered a full month.

• Denominator = 12 months.

In such cases, the Participant’s (or beneficiary, in the event of Participant’s death) shares will be granted within 2 ½ months after the end of the Company’s fiscal year.

TAXES

The taxable value of the shares granted will be the number of shares received multiplied by the share price (determined under the applicable tax regulations) as of the date of the issuance.

Taxes due will be satisfied by having shares withheld equal in value to the minimum amount of federal, state and local taxes required by the taxing authorities.

The value of the shares withheld will be determined by using the appropriate method under applicable tax regulations.

RESTRICTIONS ON GRANTED SHARES

There will be no restrictions on the shares of Common Stock granted under the APSA.

2

NON-TRANSFERABILITY - DEATH

This APSA is not transferable by the Participant otherwise than by will or the laws of descent and distribution.

SHARE CHANGES

If the Company shall at any time change the number of shares of its Common Stock without new consideration to the Company (such as by stock dividend or stock split), the total number of shares subject to the APSA hereunder shall be changed in proportion to the change in issued shares. If, during the term of this APSA, the Common Stock of the Company shall be changed into another kind of securities of the Company or into cash, securities, or evidences of indebtedness of another corporation, other property, or any combination thereof, whether as a result of reorganization, sale, merger, consolidation, or other similar transaction, the Company shall cause adequate provision to be made whereby the Participant shall thereafter be entitled to receive, upon expiration of the APSA, the cash, securities, evidences of indebtedness, other property, or any combination thereof, the Participant would have been entitled to receive for Common Stock acquired through this APSA immediately prior to the effective date of such transaction. If appropriate, the number of shares of this APSA following such reorganization, sale, merger, consolidation, or other similar transaction, may be adjusted in each case in such equitable manner as the Committee may select.

AMENDMENT

In the event any new modifications or changes are made to existing laws that render any or all of this Agreement illegal or unenforceable, this Agreement may be amended to the extent necessary in order to carry out the intention of the APSA to the Participant. The Committee may amend this Agreement in other respects, without the Participant's consent, if the amendment will not have an adverse effect on the Participant's rights under this Agreement as in effect immediately before the amendment.

PLAN CONTROLLING

The APSA is subject to all of the terms and conditions of the Plan except to the extent that those terms and conditions are supplemented or modified by this Agreement as authorized by the Plan. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Plan. All determinations and interpretations of the Committee shall be binding and conclusive upon the Participant and his or her legal representatives.

3

QUALIFICATION OF RIGHTS

Neither this Agreement nor the existence of the APSA shall be construed as giving the Participant any right (a) to be retained as an employee of the Company; or (b) as a shareholder with respect to the shares of Common Stock underlying the APSA until the certificates for the Common Stock have been issued and delivered to the Participant.

GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana.

SUCCESSORS AND ASSIGNS

This agreement shall be binding upon and inure to the benefit of the successors, assigns and heirs of the respective parties, subject to the other provisions hereof.

WAIVER

The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

TITLES

Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Agreement.

IN WITNESS WHEREOF, the Company and the Participant have agreed to the terms and conditions of this Award all as of the day and date first above written.

	KIMBALL ELECTRONICS, INC.
By:	/s/ John H. Kahle	By:
Name:	John H. Kahle		Participant
Title:	Vice President, Secretary

4

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Donald D. Charron, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Kimball Electronics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 12, 2015
		/s/ DONALD D. CHARRON
		DONALD D. CHARRON Chairman of the Board, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a)/15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael K. Sergesketter, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Kimball Electronics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 12, 2015
		/s/ MICHAEL K. SERGESKETTER
		MICHAEL K. SERGESKETTER Vice President, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Kimball Electronics, Inc. (the “Company”) for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Donald D. Charron, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	May 12, 2015
		/s/ DONALD D. CHARRON
		DONALD D. CHARRON Chairman of the Board, Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Kimball Electronics, Inc. (the “Company”) for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael K. Sergesketter, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	May 12, 2015
		/s/ MICHAEL K. SERGESKETTER
		MICHAEL K. SERGESKETTER Vice President, Chief Financial Officer

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Note 2. Related Party Transactions (Details) (USD $)	3 Months Ended	9 Months Ended
	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Oct. 31, 2014	Jun. 30, 2014	Jun. 30, 2013
Related Party Transaction [Line Items]
Related Party Transactions Selling and Administrative Expenses Excluding Incentive Compensation	$ 3,200,000	$ 4,500,000	$ 8,600,000
Related Party Transactions Selling and Administrative Incentive Compensation	600,000	2,100,000	3,600,000
Cash and cash equivalents	37,636,000	61,670,000	37,636,000	63,000,000	26,260,000	18,424,000
Cash Distribution from Parent				$ 44,300,000

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Note 9. Postemployment Benefits (Details) (USD $)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Jun. 30, 2014
Components of Net Periodic Benefit Cost (before tax):
Defined Benefit Plan, Assets for Plan Benefits	$ 0		$ 0		$ 0
Service cost	91,000	66,000	239,000	201,000
Interest cost	14,000	10,000	36,000	29,000
Amortization of prior service costs	6,000	10,000	26,000	30,000
Amortization of actuarial (gain) loss	(44,000)	(28,000)	(89,000)	46,000
Net periodic benefit cost	$ 67,000	$ 58,000	$ 212,000	$ 306,000

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Note 7. Derivative Instruments - Textuals (Details) (Foreign Exchange Contract) In Millions, unless otherwise specified	9 Months Ended	12 Months Ended
	Mar. 31, 2015 USD ($)	Jun. 30, 2014	Mar. 31, 2015 EUR (€)
Derivatives, Fair Value
Cash Flow Hedge Gain (Loss) to be Reclassified within Twelve Months	$ 0.9
Derivative, Notional Amount	$ 31.9		€ 46.8
Derivative Instruments, Gain (Loss) Reclassification from Accumulated OCI to Income, Estimate of Time to Transfer	12 months	12 months

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Note 10. Stock Compensation Plan - Stock Compensation Awards (Details) (USD $)	3 Months Ended
	Mar. 31, 2015		Dec. 31, 2014
Annual Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award
Stock Compensation, Grant Date Fair Value	$ 13.55	[1],[2]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	57,379	[2]
Unrestricted Shares Director Compensation
Share-based Compensation Arrangement by Share-based Payment Award
Stock Compensation, Grant Date Fair Value			$ 10.76	[1],[3]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			28,700	[3]

[1] The grant date fair value of the annual performance shares and the unrestricted shares was based on the stock price at the date of the award.

[2] Additional annual performance shares were awarded to bring certain members of the Company's management team and other key employees closer to their market value for total compensation and compensation mix as well as to recognize exceptional performance and contributions during the spin-off. Similar to the annual performance shares awarded in June 2014, payouts will be determined by the bonus percentage computed under the Company's 2014 Profit Sharing Incentive Bonus Plan for fiscal year 2015. The number of shares issued will be less than the maximum shares issuable if the maximum bonus percentages are not achieved. The annual performance shares vest after the end of the Company's fiscal year.

[3] Unrestricted shares which were awarded to non-employee members of the Company’s Board of Directors as compensation for director’s fees as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. Director’s fees are expensed over the period that directors earn the compensation. Unrestricted shares do not have vesting periods, holding periods, restrictions on sale, or other restrictions.

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Note 6. Fair Value - Recurring Fair Value Measurments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Recurring Fair Value Measurements:
Derivative Asset	$ 5,678	$ 800
Trading Securities, Total	5,733	5,260
Derivative Liability	1,309	699
Fair Value, Measurements, Recurring
Recurring Fair Value Measurements:
Cash Equivalents, at Carrying Value	34,950
Trading Securities, Total	5,733	5,260
Total assets at fair value	46,361	6,060
Total liabilities at fair value	1,309	699
Fair Value, Measurements, Recurring | Foreign Exchange Contract
Recurring Fair Value Measurements:
Derivative Asset	5,678	800
Derivative Liability	1,309	699
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Recurring Fair Value Measurements:
Cash Equivalents, at Carrying Value	34,950
Trading Securities, Total	5,733	5,260
Total assets at fair value	40,683	5,260
Total liabilities at fair value	0	0
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Recurring Fair Value Measurements:
Total assets at fair value	5,678	800
Total liabilities at fair value	1,309	699
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | Foreign Exchange Contract
Recurring Fair Value Measurements:
Derivative Asset	5,678	800
Derivative Liability	$ 1,309	$ 699

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Note 8. Investments (Tables)

9 Months Ended

Mar. 31, 2015

Investments [Abstract]

Trading Securities (and Certain Trading Assets)

SERP asset and liability balances applicable to Kimball Electronics participants were as follows:

(Amounts in Thousands)	March 31, 2015		June 30, 2014
SERP investments - current asset	$	191	$	167
SERP investments - other long-term asset	5,542		5,093
Total SERP investments	$	5,733	$	5,260
SERP obligation - current liability	$	191	$	167
SERP obligation - other long-term liability	5,542		5,093
Total SERP obligation	$	5,733	$	5,260

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Note 11. Share Owners' Equity (Details) (USD $)	0 Months Ended	9 Months Ended
	Oct. 31, 2014	Mar. 31, 2015	Oct. 16, 2014	Oct. 03, 2014	Jun. 30, 2014
Net Parent Contribution		$ 45,632,000
Total Shares Authorized			165,000,000
Common Stock, Shares, Outstanding			29,100,000
Preferred Stock, Shares Authorized		15,000,000	15,000,000		15,000,000
Common Stock, Shares Authorized		150,000,000	150,000,000		150,000,000
Common Shares Outstanding Prior to Stock Split			50,000
Common Stock Dividends, Shares	29,100,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				4,500,000
Additional Paid-in Capital
Net Parent Contribution		45,632,000
Net Parent Contribution, Non-Cash		$ 4,700,000

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Note 7. Derivative Instruments (Policies)

9 Months Ended

Mar. 31, 2015

Derivative Instruments [Abstract]

Derivatives, Policy

Our primary means of managing this exposure is to utilize natural hedges, such as aligning currencies used in the supply chain with the sale currency. To the extent natural hedging techniques do not fully offset currency risk, we use derivative instruments with the objective of reducing the residual exposure to certain foreign currency rate movements. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness, and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes.

We use forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency. Foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances denominated in currencies other than the functional currencies.

Derivatives, Hedge Discontinuances

In limited cases due to unexpected changes in forecasted transactions, cash flow hedges may cease to meet the criteria to be designated as cash flow hedges. Depending on the type of exposure hedged, we may either purchase a derivative contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the currency revaluation impact of foreign currency denominated liabilities.

Derivatives, Reporting of Derivative Activity

The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability. When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flow is impacted for the net settlement. For derivative instruments that meet the criteria of hedging instruments under FASB guidance, the effective portions of the gain or loss on the derivative instrument are initially recorded net of related tax effect in Accumulated Other Comprehensive Income (Loss), a component of Share Owners’ Equity, and are subsequently reclassified into earnings in the period or periods during which the hedged transaction is recognized in earnings. The ineffective portion of the derivative gain or loss is reported in the Non-operating income (expense), net line item on the Condensed Consolidated Statements of Income immediately. The gain or loss associated with derivative instruments that are not designated as hedging instruments or that cease to meet the criteria for hedging under FASB guidance is also reported in the Non-operating income (expense), net line item on the Condensed Consolidated Statements of Income immediately.

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Note 7. Derivative Instruments - The Effect of Derivative Instruments on Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Derivative Instruments, Gain (Loss)
Derivative Instruments, Pre-Tax Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion	$ 4,537	$ 362	$ 6,421	$ (536)
Foreign Exchange Contract
Derivative Instruments, Gain (Loss)
Derivative Instruments, Pre-Tax Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion	$ 4,537	$ 362	$ 6,421	$ (536)

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Note 4. Accumulated Other Comprehensive Income (Loss) - Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Income (Loss)			$ 1,619	$ (3,276)
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax			(10,605)	3,979
Reclassification to (earnings) loss	(1,865)	333	(3,613)	882
Net current-period other comprehensive income (loss)			(14,218)	4,861
Accumulated Other Comprehensive Income (Loss)	(12,599)	1,585	(12,599)	1,585
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Income (Loss)			4,925	1,038
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax			(16,482)	4,466
Reclassification to (earnings) loss			0	0
Net current-period other comprehensive income (loss)			(16,482)	4,466
Accumulated Other Comprehensive Income (Loss)	(11,557)	5,504	(11,557)	5,504
Derivative Gain (Loss)
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Income (Loss)			(3,406)	(4,360)
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax			5,599	(426)
Reclassification to (earnings) loss			(3,577)	836
Net current-period other comprehensive income (loss)			2,022	410
Accumulated Other Comprehensive Income (Loss)	(1,384)	(3,950)	(1,384)	(3,950)
Postemployment Benefits, Prior Service Costs
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Income (Loss)			(35)	(59)
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax			0	0
Reclassification to (earnings) loss			17	18
Net current-period other comprehensive income (loss)			17	18
Accumulated Other Comprehensive Income (Loss)	(18)	(41)	(18)	(41)
Postemployment Benefits, Net Actuarial Gain (Loss)
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Accumulated Other Comprehensive Income (Loss)			135	105
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax			278	(61)
Reclassification to (earnings) loss			(53)	28
Net current-period other comprehensive income (loss)			225	(33)
Accumulated Other Comprehensive Income (Loss)	$ 360	$ 72	$ 360	$ 72

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Note 1. Business Description and Summary of Significant Accounting Policies - Components of Non-operating income (expense), net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Foreign Currency/Derivative Gain (Loss)	$ (920)	$ 114	$ (1,151)	$ 368
Gain on supplemental employee retirement plan investments	154	46	203	521
Other	(130)	(62)	(298)	(229)
Non-operating income (expense), net	$ (896)	$ 98	$ (1,246)	$ 660

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Note 8. Investments - Supplemental Employee Retirement Investments Textuals (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Schedule of Trading Securities and Other Trading Assets
Trading Securities, Change in net unrealized holding gains (losses)	$ (13)	$ 219

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Note 6. Fair Value - Textuals (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Fair Value, Purchases and Sales of Level 3 Assets	$ 0
Fair Value, Transfers Between Levels, Amount	0
Property, Plant and Equipment, Other Types | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Impairment of Long-Lived Assets to be Disposed of	$ 0

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Note 1. Business Description and Summary of Significant Accounting Policies

9 Months Ended

Mar. 31, 2015

Summary of Significant Accounting Policies [Abstract]

Significant Accounting Policies

Business Description and Summary of Significant Accounting Policies

Business Description:

Kimball Electronics, Inc. (also referred to herein as “Kimball Electronics”, the “Company”, “we”, “us” or “our”) is a global contract electronic manufacturing services (“EMS”) company that specializes in producing durable electronics for the automotive, medical, industrial, and public safety markets. We offer a package of value that begins with our core competency of producing “durable electronics” and includes our set of robust processes and procedures that help us ensure that we deliver the highest levels of quality, reliability, and service throughout the entire life cycle of our customers’ products. We have been producing safety critical electronic assemblies for our automotive customers for over 30 years. We are well recognized by customers and industry trade publications for our excellent quality, reliability, and innovative service.

Kimball Electronics, Inc. was a wholly owned subsidiary of Kimball International, Inc. (“former Parent” or “Kimball International”) and as of 5:00 p.m. New York time on October 31, 2014 became a stand-alone public company upon the completion of a spin-off from former Parent. In conjunction with the spin-off, on October 31, 2014, Kimball International distributed 29.1 million shares of Kimball Electronics common stock to Kimball International Share Owners. Holders of Kimball International common stock received three shares of Kimball Electronics common stock for every four shares of Kimball International common stock held on October 22, 2014. Kimball International structured the distribution to be tax free to its U.S. Share Owners for U.S. federal income tax purposes.

Basis of Presentation:

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of March 31, 2015 and June 30, 2014, results of operations for the three and nine months ended March 31, 2015 and 2014, and cash flows for the nine months ended March 31, 2015 and 2014. The financial data presented herein is unaudited and should be read in conjunction with the annual Combined Financial Statements as of and for the year then ended June 30, 2014 and related notes thereto included in our registration statement on Form 10, which the Securities and Exchange Commission (the “SEC”) declared effective on October 7, 2014 (“Form 10”). As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted, although we believe that the disclosures are adequate to make the information presented not misleading. Intercompany transactions and balances have been eliminated. Management believes the financial statements include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly the financial statements for the interim periods. The results of operations for the interim periods shown in this report are not necessarily indicative of results for any future interim period or for the entire fiscal year.

On September 30, 2014, the shares of Kimball Electronics Mexico, S.A. de C.V., a wholly owned subsidiary of former Parent, were contributed in a capital transaction to Kimball Electronics Mexico, Inc., a wholly owned subsidiary of Kimball Electronics, Inc. The financial results for Kimball Electronics Mexico, S.A. de C.V. are included in the Condensed Consolidated Financial Statements herein for all periods presented. Assets and liabilities were recorded at historical costs or carrying value.

The Condensed Consolidated Financial Statements include allocations from former Parent for direct costs and indirect costs attributable to the operations of the Company through October 31, 2014, the spin-off date. These allocations were made on a direct usage or cost incurred basis when appropriate, with the remainder allocated using various drivers including average capital deployed, payroll, revenue less material costs, headcount, or other measures. While we believe such allocations are reasonable, these financial statements do not purport to reflect what the results of operations, comprehensive income, financial position, equity, or cash flows would have been had the Company operated as a stand-alone public company for the entirety of the periods presented. Note 2 - Related Party Transactions of Notes to Condensed Consolidated Financial Statements provides information regarding direct and indirect cost allocations.

Cash and Cash Equivalents:

Cash equivalents consist primarily of highly liquid investments with original maturities of three months or less at the time of acquisition. Cash and cash equivalents consist of bank accounts and money market funds. Bank accounts are stated at cost, which approximates fair value, and money market funds are stated at fair value.

Notes Receivable and Trade Accounts Receivable:

Notes receivable and trade accounts receivable are recorded per the terms of the agreement or sale, and accrued interest is recognized when earned. We determine on a case-by-case basis the cessation of accruing interest, the resumption of accruing interest, the method of recording payments received on nonaccrual receivables, and the delinquency status for our limited number of notes receivable.

Our policy for estimating the allowance for credit losses on trade accounts receivable and notes receivable includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt experience. Management uses these specific analyses in conjunction with an evaluation of the general economic and market conditions to determine the final allowance for credit losses on the trade accounts receivable and notes receivable. Trade accounts receivable and notes receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. Our limited amount of notes receivable allows management to monitor the risks, credit quality indicators, collectability, and probability of impairment on an individual basis. Adjustments to the allowance for credit losses are recorded in Selling and Administrative Expenses.

In the ordinary course of business, customers periodically negotiate extended payment terms on trade accounts receivable. Customary terms require payment within 30 to 45 days, with any terms beyond 45 days being considered extended payment terms. We may utilize accounts receivable factoring arrangements with third-party financial institutions in order to extend terms for the customer without negatively impacting our cash flow.  In all cases, these arrangements 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 nine months ended March 31, 2015 and 2014, respectively, we sold, without recourse, $100.1 million and $150.4 million of accounts receivable. Factoring fees were not material.

Other General Income:

Other General Income in the three and nine months ended March 31, 2014 included $0.7 million and $5.7 million, respectively, of pre-tax income resulting from settlements received related to two antitrust class action lawsuits in which Kimball Electronics was a class member. The lawsuits alleged that certain suppliers of 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. No Other General Income was recorded in the three and nine months ended March 31, 2015.

Non-operating Income (Expense), net:

The Non-operating income (expense), net line item includes the impact of such items as foreign currency rate movements and related derivative gain or loss, fair value adjustments on supplemental employee retirement plan (“SERP”) investments, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations. The gain on SERP investments is offset by a change in the SERP liability that is recognized in Selling and Administrative Expenses.

Components of Non-operating income (expense), net:

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Foreign currency/derivative gain (loss)	$	(920	)	$	114		$	(1,151	)	$	368
Gain on supplemental employee retirement plan investments	154			46			203			521
Other	(130		)	(62		)	(298		)	(229		)
Non-operating income (expense), net	$	(896	)	$	98		$	(1,246	)	$	660

Income Taxes:

In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on expected annual income, statutory tax rates, and available tax planning opportunities in the various jurisdictions in which we operate. Unusual or infrequently occurring items are separately recognized in the quarter in which they occur.

In September 2013, the United States Treasury Department and the Internal Revenue Service (the “IRS”) issued final regulations effective for our first quarter of fiscal year 2015, which provide guidance on a number of matters with regard to tangible property, including whether expenditures qualify as deductible repairs, the treatment of materials and supplies, capitalization of tangible property, dispositions of property, and related elections.  The regulations as issued did not have a material effect on our Condensed Consolidated Financial Statements.

“Emerging Growth Company” Reporting Requirements:

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as a company is deemed to be an “emerging growth company,” it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

Section 107 of the JOBS Act also provides that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We would cease to be an “emerging growth company” upon the earliest of:

• the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act;

• the last day of the fiscal year in which our total annual gross revenues exceed $1 billion;

• the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or

• the date on which we become a “large accelerated filer,” as defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock held by non-affiliates exceeds $700 million as of the last day of our most recently completed second fiscal quarter.

New Accounting Standards:

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance to customers of cloud computing arrangements about whether an arrangement includes a software license. If a software license exists in the arrangement, the guidance requires the software license element of the arrangement to be accounted for consistently with the acquisition of other software licenses by the customer. Otherwise, the customer should account for the arrangement as a service contract. The guidance is effective for our fiscal year 2017 financial statements using either of two acceptable adoption methods: (i) retrospective adoption; or (ii) prospective adoption to all arrangements entered into or materially modified after the effective date. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In April 2015, the FASB issued guidance on presentation of debt issuance costs. Under the new guidance, debt issuance costs related to a recognized debt liability must be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. In addition, amortization of debt issuance costs must be reported as interest expense. The guidance is effective retrospectively for our fiscal year 2017 financial statements. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In June 2014, the FASB provided explicit guidance on how to account for share-based payments granted to employees in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The guidance will be applied prospectively for our first quarter fiscal year 2017 financial statements.  We do not expect the adoption to have a material effect on our financial statements.

In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. To achieve this core principle, the guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance addresses several areas including transfer of control, contracts with multiple performance obligations, and costs to obtain and fulfill contracts. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The guidance is effective for our fiscal year 2019 financial statements using either of two acceptable adoption methods: (i) retrospective adoption to each prior reporting period presented with the option to elect certain practical expedients; or (ii) adoption with the cumulative effect of initially applying the guidance recognized at the date of initial application and providing certain additional disclosures. We have not yet selected a transition method nor determined the effect of this guidance on our financial statements.

In April 2014, the FASB issued guidance on reporting discontinued operations and disclosures of disposals of components of an entity. Under the new guidance, a disposal that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results is a discontinued operation. The new guidance requires expanded disclosures that will provide more information about the assets, liabilities, income, and expenses of discontinued operations, and also requires disclosures of significant disposals that do not qualify for discontinued operations reporting. The guidance is effective prospectively for disposals or components of our business classified as held for sale during fiscal year 2016. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In July 2013, the FASB issued guidance to eliminate the diversity in practice related to the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The guidance became effective prospectively for our first quarter fiscal year 2015 financial statements. The adoption did not have a material effect on our Condensed Consolidated Financial Statements.

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Note 4. Accumulated Other Comprehensive Income (Loss) - Reclassifications from Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Mar. 31, 2015		Mar. 31, 2014		Mar. 31, 2015		Mar. 31, 2014
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Amortization of Prior Service Costs	$ (6)		$ (10)		$ (26)		$ (30)
Amortization of Actuarial (Gain) Loss	44		28		89		(46)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	1,865		(333)		3,613		(882)
Cost of Sales
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Amortization of Prior Service Costs	(4)	[1]	(8)	[1]	(17)	[1]	(21)	[1]
Amortization of Actuarial (Gain) Loss	27	[1]	21	[1]	55	[1]	(32)	[1]
Selling and Administrative Expenses
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Amortization of Prior Service Costs	(2)	[1]	(2)	[1]	(9)	[1]	(9)	[1]
Amortization of Actuarial (Gain) Loss	17	[1]	7	[1]	34	[1]	(14)	[1]
Benefit (Provision) for Income Taxes
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Amortization of Prior Service Costs	2		4		9		12
Amortization of Actuarial (Gain) Loss	(18)		(10)		(36)		18
Net of Tax
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Amortization of Prior Service Costs	(4)		(6)		(17)		(18)
Amortization of Actuarial (Gain) Loss	26		18		53		(28)
Cash Flow Hedging
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	2,155		(468)		4,259		(1,085)
Foreign Exchange Contract | Cash Flow Hedging | Cost of Sales
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	285	[2]	(465)	[2]	664	[2]	(848)	[2]
Foreign Exchange Contract | Cash Flow Hedging | Non-Operating Income (Expense)
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Net	1,870		(3)		3,594		(237)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	1,870	[2]	(3)	[2]	3,595	[2]	(237)	[2]
Foreign Exchange Contract | Cash Flow Hedging | Benefit (Provision) for Income Taxes
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Net	(312)		123		(681)		249
Foreign Exchange Contract | Cash Flow Hedging | Net of Tax
Reclassification Adjustment out of Accumulated Other Comprehensive Income (Loss)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Net	$ 1,843		$ (345)		$ 3,577		$ (836)

[1] See Note 9 - Postemployment Benefits of Notes to Condensed Consolidated Financial Statements for further information on postemployment benefit plans.

[2] See Note 7 - Derivative Instruments of Notes to Condensed Consolidated Financial Statements for further information on derivative instruments.

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Note 4. Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Mar. 31, 2015

Accumulated Other Comprehensive Income (Loss) [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

During the nine months ended March 31, 2015 and 2014, the changes in the balances of each component of Accumulated Other Comprehensive Income (Loss), net of tax, were as follows:

Accumulated Other Comprehensive Income (Loss)							Postemployment Benefits
(Amounts in Thousands)	Foreign Currency Translation Adjustments			Derivative Gain (Loss)			Prior Service Costs			Net Actuarial Gain			Accumulated Other Comprehensive Income (Loss)
Balance at June 30, 2014	$	4,925		$	(3,406	)	$	(35	)	$	135		$	1,619
Other comprehensive income (loss) before reclassifications	(16,482		)	5,599			—			278			(10,605		)
Reclassification to (earnings) loss	—			(3,577		)	17			(53		)	(3,613		)
Net current-period other comprehensive income (loss)	(16,482		)	2,022			17			225			(14,218		)
Balance at March 31, 2015	$	(11,557	)	$	(1,384	)	$	(18	)	$	360		$	(12,599	)
Balance at June 30, 2013	$	1,038		$	(4,360	)	$	(59	)	$	105		$	(3,276	)
Other comprehensive income (loss) before reclassifications	4,466			(426		)	—			(61		)	3,979
Reclassification to (earnings) loss	—			836			18			28			882
Net current-period other comprehensive income (loss)	4,466			410			18			(33		)	4,861
Balance at March 31, 2014	$	5,504		$	(3,950	)	$	(41	)	$	72		$	1,585

Reclassification out of Accumulated Other Comprehensive Income (Loss)

The following reclassifications were made from Accumulated Other Comprehensive Income (Loss) to the Condensed Consolidated Statements of Income:

Reclassifications from Accumulated Other Comprehensive Income (Loss)	Three Months Ended						Nine Months Ended						Affected Line Item in the Condensed Consolidated Statements of Income
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Derivative gain (loss) (1)	$	285		$	(465	)	$	664		$	(848	)	Cost of Sales
	1,870			(3		)	3,594			(237		)	Non-operating income (expense), net
	(312		)	123			(681		)	249			Benefit (Provision) for Income Taxes
	$	1,843		$	(345	)	$	3,577		$	(836	)	Net of Tax
Postemployment Benefits:
Amortization of prior service costs (2)	$	(4	)	$	(8	)	$	(17	)	$	(21	)	Cost of Sales
	(2		)	(2		)	(9		)	(9		)	Selling and Administrative Expenses
	2			4			9			12			Benefit (Provision) for Income Taxes
	$	(4	)	$	(6	)	$	(17	)	$	(18	)	Net of Tax
Amortization of actuarial gain (loss) (2)	$	27		$	21		$	55		$	(32	)	Cost of Sales
	17			7			34			(14		)	Selling and Administrative Expenses
	(18		)	(10		)	(36		)	18			Benefit (Provision) for Income Taxes
	$	26		$	18		$	53		$	(28	)	Net of Tax
Total reclassifications for the period	$	1,865		$	(333	)	$	3,613		$	(882	)	Net of Tax

Amounts in parentheses indicate reductions to income.

(1) See Note 7 - Derivative Instruments of Notes to Condensed Consolidated Financial Statements for further information on derivative instruments.

(2) See Note 9 - Postemployment Benefits of Notes to Condensed Consolidated Financial Statements for further information on postemployment benefit plans.

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Note 3. Inventories (Tables)

9 Months Ended

Mar. 31, 2015

Inventories [Abstract]

Schedule of Inventory, Current

Inventory components were as follows:

(Amounts in Thousands)	March 31, 2015		June 30, 2014
Finished products	$	18,366	$	18,818
Work-in-process	11,675		12,530
Raw materials	92,758		84,811
Total inventory	$	122,799	$	116,159

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Note 10. Stock Compensation Plan - Textuals (Details) (USD $)	9 Months Ended
	Mar. 31, 2015	Oct. 03, 2014
Share-based Compensation Arrangement by Share-based Payment Award
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized		4,500,000
Unrestricted Shares Director Compensation | Common Class B
Share-based Compensation Arrangement by Share-based Payment Award
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Allocated by Parent	8,147
Stock Compensation, Grant Date Fair Value, Allocated by Parent	$ 16.01

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Note 5. Commitments and Contingent Liabilities - Commitments and Contingent Liabilities Textuals (Details) (USD $)	Mar. 31, 2015	Jun. 30, 2014
Financial Standby Letter of Credit
Guarantor Obligations
Letters of Credit, Amount	$ 300,000
Loss Contingency Accrual, at Carrying Value	0
Guarantee Obligations
Guarantor Obligations
Loss Contingency Accrual, at Carrying Value	0	0
Affiliated Entity
Guarantor Obligations
Line of Credit, Current		0
Affiliated Entity | Guarantee Obligations
Guarantor Obligations
Loss Contingency Accrual, at Carrying Value		$ 0

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Note 5. Commitments and Contingent Liabilities (Tables)

9 Months Ended

Mar. 31, 2015

Commitments and Contingent Liabilities [Abstract]

Schedule of Product Warranty Liability

Changes in the product warranty accrual for the nine months ended March 31, 2015 and 2014 were as follows:

	Nine Months Ended
	March 31
(Amounts in Thousands)	2015			2014
Product warranty liability at the beginning of the period	$	911		$	507
Additions to warranty accrual (including changes in estimates)	735			(155		)
Settlements made (in cash or in kind)	(756		)	(59		)
Product warranty liability at the end of the period	$	890		$	293

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Note 6. Fair Value (Tables)

9 Months Ended

Mar. 31, 2015

Fair Value [Abstract]

Fair Value Measurements, Recurring, Valuation Techniques

The following methods and assumptions were used to measure fair value:

Financial Instrument	Level	Valuation Technique/Inputs Used
Cash equivalents	1	Market - Quoted market prices.
Derivative assets: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates, considering counterparty credit risk.
Trading securities: mutual funds held by nonqualified supplemental employee retirement plan (SERP)	1	Market - Quoted market prices within active markets.
Derivative liabilities: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates adjusted for Kimball Electronics’ non-performance risk.

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

As of March 31, 2015 and June 30, 2014, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

	March 31, 2015
(Amounts in Thousands)	Level 1		Level 2		Total
Assets
Cash equivalents	$	34,950	$	—	$	34,950
Derivatives: foreign exchange contracts	—		5,678		5,678
Trading securities: mutual funds held in nonqualified SERP	5,733		—		5,733
Total assets at fair value	$	40,683	$	5,678	$	46,361
Liabilities
Derivatives: foreign exchange contracts	$	—	$	1,309	$	1,309
Total liabilities at fair value	$	—	$	1,309	$	1,309
	June 30, 2014
(Amounts in Thousands)	Level 1		Level 2		Total
Assets
Derivatives: foreign exchange contracts	$	—	$	800	$	800
Trading securities: mutual funds held in nonqualified SERP	5,260		—		5,260
Total assets at fair value	$	5,260	$	800	$	6,060
Liabilities
Derivatives: foreign exchange contracts	$	—	$	699	$	699
Total liabilities at fair value	$	—	$	699	$	699

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

Financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value that have carrying amounts which approximate fair value include the following:

Financial Instrument	Level	Valuation Technique/Inputs Used
Notes receivable	2	Market - Price approximated based on the assumed collection of receivables in the normal course of business, taking into account non-performance risk.

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Condensed Consolidated Statement of Equity Parentheticals (Unrestricted Shares Director Compensation)	9 Months Ended
	Mar. 31, 2015
Unrestricted Shares Director Compensation
Issuance of non-restricted stock, Shares	28,700

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Note 7. Derivative Instruments (Tables)

9 Months Ended

Mar. 31, 2015

Derivative Instruments [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

Fair Value of Derivative Instruments on the Condensed Consolidated Balance Sheets

	Asset Derivatives					Liability Derivatives
		Fair Value As of					Fair Value As of
(Amounts in Thousands)	Balance Sheet Location	March 31, 2015		June 30, 2014		Balance Sheet Location	March 31, 2015		June 30, 2014
Derivatives Designated as Hedging Instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	3,240	$	599	Accrued expenses	$	1,306	$	241
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	2,438		201		Accrued expenses	3		458
Total derivatives		$	5,678	$	800		$	1,309	$	699

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The Effect of Derivative Instruments on Other Comprehensive Income (Loss)

	Three Months Ended				Nine Months Ended
	March 31				March 31
(Amounts in Thousands)	2015		2014		2015		2014
Amount of Pre-Tax Gain or (Loss) Recognized in Other Comprehensive Income (Loss) (OCI) on Derivatives (Effective Portion):
Foreign exchange contracts	$	4,537	$	362	$	6,421	$	(536	)

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The Effect of Derivative Instruments on Condensed Consolidated Statements of Income

		Three Months Ended					Nine Months Ended
(Amounts in Thousands)		March 31					March 31
Derivatives in Cash Flow Hedging Relationships	Location of Gain or (Loss)	2015		2014			2015			2014
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion):
Foreign exchange contracts	Cost of Sales	$	285	$	(465	)	$	664		$	(848	)
Foreign exchange contracts	Non-operating income (expense)	1,870		(3		)	3,595			(237		)
Total		$	2,155	$	(468	)	$	4,259		$	(1,085	)
Amount of Pre-Tax Loss Reclassified from Accumulated OCI into Income (Ineffective Portion):
Foreign exchange contracts	Non-operating income (expense)	$	—	$	—		$	(1	)	$	—
Derivatives Not Designated as Hedging Instruments
Amount of Pre-Tax Gain or (Loss) Recognized in Income on Derivatives:
Foreign exchange contracts	Non-operating income (expense)	$	965	$	174		$	2,006		$	(664	)
Total		$	965	$	174		$	2,006		$	(664	)
Total Derivative Pre-Tax Gain (Loss) Recognized in Income		$	3,120	$	(294	)	$	6,264		$	(1,749	)

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Note 2. Related Party Transactions Former Parent (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015
Nontrade Receivables, Noncurrent	$ 0.6
Nontrade Receivables	$ 0.8

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Note 8. Investments - Supplemental Employee Retirement Plan Investments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Schedule of Trading Securities and Other Trading Assets
SERP investments - current asset	$ 191	$ 167
SERP investments - other long-term asset	5,542	5,093
Total SERP investments	5,733	5,260
SERP obligation - current liability	191	167
SERP obligation - other long-term liability	5,542	5,093
Total SERP obligation	$ 5,733	$ 5,260

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Current Assets:
Cash and cash equivalents	$ 61,670	$ 26,260
Receivables, net of allowances of $240 and $352, respectively	139,196	128,425
Inventories	122,799	116,159
Prepaid Expense and Other Assets, Current	23,488	20,490
Total current assets	347,153	291,334
Property and Equipment, net of accumulated depreciation of $147,842 and $151,747, respectively	94,770	97,934
Goodwill	2,564	2,564
Other Intangible Assets, net of accumulated amortization of $24,759 and $28,606, respectively	4,271	1,830
Other Assets	15,777	15,068
Total Assets	464,535	408,730
Current Liabilities:
Accounts payable	123,537	119,853
Accrued expenses	27,226	26,602
Total current liabilities	150,763	146,455
Other Liabilities:
Other long-term liabilities	10,117	9,903
Liabilities	160,880	156,358
Share Owners’ Equity:
Preferred stock-no par value	0	0
Common stock-no par value	0	0
Additional paid-in capital	297,443	0
Net Parent investment	0	250,753
Retained earnings	18,811	0
Accumulated other comprehensive income (loss)	(12,599)	1,619
Total Share Owners’ Equity	303,655	252,372
Total Liabilities and Share Owners’ Equity	$ 464,535	$ 408,730

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Note 5. Commitments and Contingent Liabilities - Product Warranty (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Product warranty liability at the beginning of the period	$ 911	$ 507
Additions to warranty accrual (including changes in estimates)	735	(155)
Settlements made (in cash or in kind)	(756)	(59)
Product warranty liability at the end of the period	$ 890	$ 293

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash Flows From Operating Activities:
Net income	$ 18,811	$ 19,254
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,649	13,259
(Gain) loss on sales of assets	(46)	97
Restructuring	0	311
Deferred income tax and other deferred charges	(1,867)	(1,505)
Deferred tax valuation allowance	0	(1,401)
Stock-based compensation	2,719	2,406
Other, net	193	(164)
Change in operating assets and liabilities:
Receivables	(14,799)	1,797
Inventories	(10,395)	(6,358)
Prepaid expenses and other current assets	(1,698)	(753)
Accounts payable	6,661	1,336
Accrued expenses	(2,978)	4,607
Net cash provided by operating activities	11,250	32,886
Cash Flows From Investing Activities:
Capital expenditures	(19,450)	(13,608)
Proceeds from sales of assets	282	201
Purchases of capitalized software	(3,551)	(295)
Other, net	51	599
Net cash used for investing activities	(22,668)	(13,103)
Cash Flows From Financing Activities:
Net transfers from (to) Kimball International, Inc.	50,295	(842)
Debt issuance costs	(123)	0
Net cash provided by (used for) financing activities	50,172	(842)
Effect of Exchange Rate Change on Cash	(3,344)	271
Net Increase in Cash and Cash Equivalents	35,410	19,212
Cash and Cash Equivalents at Beginning of Period	26,260	18,424
Cash and Cash Equivalents at End of Period	61,670	37,636
Cash paid during the period for:
Interest expense	5	2
Income taxes	$ 8,223	$ 3,738

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Note 12. Earnings Per Share Textuals (Details)	Oct. 30, 2014
Earnings Per Share Textuals [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	0

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Note 10. Stock Compensation Plan (Tables)

9 Months Ended

Mar. 31, 2015

Stock Compensation Plan [Abstract]

Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Grants in Period

Performance Shares	Quarter Awarded	Shares	Grant Date Fair Value (3)
Annual Performance Shares (1)	3rd Quarter	57,379		$13.55
Unrestricted Shares (2)	Quarter Awarded	Shares	Grant Date Fair Value (3)
Unrestricted shares (director compensation)	2nd Quarter	28,700		$10.76

(1) Additional annual performance shares were awarded to bring certain members of the Company's management team and other key employees closer to their market value for total compensation and compensation mix as well as to recognize exceptional performance and contributions during the spin-off. Similar to the annual performance shares awarded in June 2014, payouts will be determined by the bonus percentage computed under the Company's 2014 Profit Sharing Incentive Bonus Plan for fiscal year 2015. The number of shares issued will be less than the maximum shares issuable if the maximum bonus percentages are not achieved. The annual performance shares vest after the end of the Company's fiscal year.

(2) Unrestricted shares which were awarded to non-employee members of the Company’s Board of Directors as compensation for director’s fees as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. Director’s fees are expensed over the period that directors earn the compensation. Unrestricted shares do not have vesting periods, holding periods, restrictions on sale, or other restrictions.

(3) The grant date fair value of the annual performance shares and the unrestricted shares was based on the stock price at the date of the award.

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Note 3. Inventories (Policies)

9 Months Ended

Mar. 31, 2015

Inventories [Abstract]

Inventory

Inventories are valued using the lower of first-in, first-out (FIFO) cost or market value.

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Note 12. Earnings Per Share (Tables)

9 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

Basic and diluted earnings per share were calculated as follows:

	Three Months Ended				Nine Months Ended
	March 31				March 31
(Amounts in thousands, except per share data)	2015		2014		2015		2014
Basic and Diluted Earnings Per Share:
Net Income	$	7,191	$	6,356	$	18,811	$	19,254
Basic weighted average common shares outstanding	29,172		29,143		29,159		29,143
Dilutive effect of average outstanding performance shares	146		—		185		—
Dilutive weighted average shares outstanding	29,318		29,143		29,344		29,143
Earnings Per Share of Common Stock:
Basic	$	0.25	$	0.22	$	0.65	$	0.66
Diluted	$	0.25	$	0.22	$	0.64	$	0.66

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Note 6. Fair Value (Policies)

9 Months Ended

Mar. 31, 2015

Fair Value [Abstract]

Fair Value

The Company categorizes assets and liabilities measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas level 3 generally requires significant management judgment. The three levels are defined as follows:

• Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

• Level 2: Observable inputs other than those included in level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

• Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Our policy is to recognize transfers between these levels as of the end of each quarterly reporting period. There were no transfers between these levels during the nine months ended March 31, 2015. There were also no changes in the inputs or valuation techniques used to measure fair values during the nine months ended March 31, 2015.

Financial Instruments Recognized at Fair Value:

The following methods and assumptions were used to measure fair value:

Financial Instrument	Level	Valuation Technique/Inputs Used
Cash equivalents	1	Market - Quoted market prices.
Derivative assets: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates, considering counterparty credit risk.
Trading securities: mutual funds held by nonqualified supplemental employee retirement plan (SERP)	1	Market - Quoted market prices within active markets.
Derivative liabilities: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates adjusted for Kimball Electronics’ non-performance risk.

Fair Value of Financial Instruments Not Carried at Fair Value

Financial Instruments Not Carried At Fair Value:

Financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value that have carrying amounts which approximate fair value include the following:

Financial Instrument	Level	Valuation Technique/Inputs Used
Notes receivable	2	Market - Price approximated based on the assumed collection of receivables in the normal course of business, taking into account non-performance risk.

The carrying value of our cash deposit accounts, trade accounts receivable, and trade accounts payable approximates fair value due to the relatively short maturity and immaterial non-performance risk.

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Condensed Consolidated Statement of Equity Statement (USD $) In Thousands, unless otherwise specified	Total	Additional Paid-in Capital	Net Parent Investment	Retained Earnings	Accumulated Other Comprehensive Income (Loss)
Total Share Owners’ Equity at Jun. 30, 2014	$ 252,372	$ 0	$ 250,753	$ 0	$ 1,619
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of Net Parent Investment to Additional Paid In Capital	0	250,753	(250,753)
Net income	18,811			18,811
Other Comprehensive Income (Loss), Net of Tax	(14,218)				(14,218)
Net Parent Contribution	45,632	45,632
Issuance of non-restricted stock (29,000 shares)	309	309
Compensation expense related to stock compensation plan	749	749
Total Share Owners’ Equity at Mar. 31, 2015	$ 303,655	$ 297,443	$ 0	$ 18,811	$ (12,599)

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Condensed Consolidated Balance Sheets Parentheticals (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
ASSETS
Allowance for Doubtful Accounts, Premiums and Other Receivables	$ 240	$ 352
Property and Equipment Accumulated Depreciation	147,842	151,747
Other Intangible Assets Accumulated Amortization	$ 24,759	$ 28,606
Share Owners' Equity
Common Stock, Par Value Per Share	$ 0.00	$ 0.00
Preferred Stock, Par or Stated Value Per Share	$ 0.00	$ 0.00
Common Stock, Shares Authorized	150,000,000	150,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Authorized	15,000,000	15,000,000
Common Stock, Shares, Issued	29,172,000	29,143,000

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Note 9. Postemployment Benefits

9 Months Ended

Mar. 31, 2015

Postemployment Benefits [Abstract]

Postemployment Benefits Disclosure

Postemployment Benefits

The Company maintains severance plans for all domestic employees, and prior to the spin-off, the Company’s employees participated in severance plans sponsored by former Parent. These plans cover domestic employees and provide severance benefits to eligible employees meeting the plans’ qualifications, primarily involuntary termination without cause. There are no statutory requirements for us or former Parent to contribute to the plans, nor do employees contribute to the plans. The plans hold no assets. Benefits are paid using available cash on hand when eligible employees meet plan qualifications for payment. Benefits are based upon on employee’s years of service and accumulate up to certain limits specified in the plans and include both salary and an allowance for medical benefits. The benefit obligation for periods prior to the spin-off was determined in total for each of the plans and allocated by the number of Kimball Electronics domestic employees participating in the plans. In conjunction with the spin-off, these plans were legally separated and were remeasured. There were no significant changes to the actuarial assumptions used in the remeasurement.

The components of net periodic postemployment benefit cost applicable to Kimball Electronics participants were as follows:

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Service cost	$	91		$	66		$	239		$	201
Interest cost	14			10			36			29
Amortization of prior service costs	6			10			26			30
Amortization of actuarial (gain) loss	(44		)	(28		)	(89		)	46
Net periodic benefit cost	$	67		$	58		$	212		$	306

The benefit cost in the above table includes only normal recurring levels of severance activity. Unusual or non-recurring severance actions are not estimable using actuarial methods and are expensed in accordance with the applicable U.S. GAAP.

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Document and Entity Information Document	9 Months Ended
	Mar. 31, 2015	May 04, 2015
Document Information
Entity Registrant Name	Kimball Electronics, Inc.
Entity Central Index Key	0001606757
Current Fiscal Year End Date	--06-30
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		29,171,749

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Note 10. Stock Compensation Plan

9 Months Ended

Mar. 31, 2015

Stock Compensation Plan [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments

Stock Compensation Plan

A stock compensation plan similar to the former Parent plan was created and adopted by the Company’s Board of Directors on October 3, 2014. The Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan (the “Plan”) allows for the issuance of up to 4.5 million shares and may be awarded in the form of incentive stock options, stock appreciation rights, restricted shares, unrestricted shares, restricted share units, or performance shares and performance units. The Plan is a ten-year plan with no further awards allowed to be made under the Plan after October 1, 2024.

On December 2, 2014, Performance Share Awards issued and outstanding to Kimball Electronics employees under the previous Kimball International Incentive Plans were amended, in accordance with the terms of the plans, to provide an equitable adjustment as a result of the spin-off. The awards will be granted in shares of the Company stock instead of Kimball International, Inc. shares under the Kimball Electronics Plan. The amended awards retained the same terms and conditions and vesting schedule, issuance dates, and expiration dates of the original Kimball International awards.

During the first nine months of fiscal year 2015, the following stock compensation was awarded to officers and key employees as well as non-employee members of the Company’s Board of Directors as compensation for director’s fees as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. The awards were granted under the Company’s 2014 Stock Option and Incentive Plan.

Performance Shares	Quarter Awarded	Shares	Grant Date Fair Value (3)
Annual Performance Shares (1)	3rd Quarter	57,379		$13.55
Unrestricted Shares (2)	Quarter Awarded	Shares	Grant Date Fair Value (3)
Unrestricted shares (director compensation)	2nd Quarter	28,700		$10.76

(1) Additional annual performance shares were awarded to bring certain members of the Company's management team and other key employees closer to their market value for total compensation and compensation mix as well as to recognize exceptional performance and contributions during the spin-off. Similar to the annual performance shares awarded in June 2014, payouts will be determined by the bonus percentage computed under the Company's 2014 Profit Sharing Incentive Bonus Plan for fiscal year 2015. The number of shares issued will be less than the maximum shares issuable if the maximum bonus percentages are not achieved. The annual performance shares vest after the end of the Company's fiscal year.

(2) Unrestricted shares which were awarded to non-employee members of the Company’s Board of Directors as compensation for director’s fees as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. Director’s fees are expensed over the period that directors earn the compensation. Unrestricted shares do not have vesting periods, holding periods, restrictions on sale, or other restrictions.

(3) The grant date fair value of the annual performance shares and the unrestricted shares was based on the stock price at the date of the award.

During the first nine months of fiscal year 2015 and prior to the spin-off, former Parent allocated to the Company stock compensation related to unrestricted shares of Kimball International, Inc. Class B common stock awarded to non-employee members of former Parent’s Board of Directors as compensation for director’s fees. The stock compensation allocated to the Company consisted of 8,147 unrestricted shares of Kimball International, Inc. Class B common stock with a grant date fair value of $16.01, and all awards were granted under former Parent’s Amended and Restated 2003 Stock Option and Incentive Plan.

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Condensed Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Average Number of Shares Outstanding [Abstract]
Weighted Average Number of Shares Outstanding, Diluted	29,318	29,143	29,344	29,143
Weighted Average Number of Shares Outstanding, Basic	29,172	29,143	29,159	29,143
Statement [Line Items]
Net Sales	$ 206,858	$ 185,680	$ 618,224	$ 542,581
Cost of Sales	187,905	169,127	563,510	499,666
Gross Profit	18,953	16,553	54,714	42,915
Selling and Administrative Expenses	8,132	9,197	27,409	25,992
Other General Income	0	(666)	0	(5,688)
Restructuring Expense	0	0	0	402
Operating Income	10,821	8,022	27,305	22,209
Other Income (Expense):
Interest income	10	6	22	32
Interest expense	0	(1)	(5)	(2)
Non-operating income (expense), net	(896)	98	(1,246)	660
Other income (expense), net	(886)	103	(1,229)	690
Income Before Taxes on Income	9,935	8,125	26,076	22,899
Provision for Income Taxes	2,744	1,769	7,265	3,645
Net Income	$ 7,191	$ 6,356	$ 18,811	$ 19,254
Earnings Per Share of Common Stock:
Earnings Per Share, Diluted	$ 0.25	$ 0.22	$ 0.64	$ 0.66
Earnings Per Share, Basic	$ 0.25	$ 0.22	$ 0.65	$ 0.66

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Note 4. Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Mar. 31, 2015

Accumulated Other Comprehensive Income (Loss) [Abstract]

Accumulated Comprehensive Income (Loss)

Accumulated Other Comprehensive Income (Loss)

During the nine months ended March 31, 2015 and 2014, the changes in the balances of each component of Accumulated Other Comprehensive Income (Loss), net of tax, were as follows:

Accumulated Other Comprehensive Income (Loss)							Postemployment Benefits
(Amounts in Thousands)	Foreign Currency Translation Adjustments			Derivative Gain (Loss)			Prior Service Costs			Net Actuarial Gain			Accumulated Other Comprehensive Income (Loss)
Balance at June 30, 2014	$	4,925		$	(3,406	)	$	(35	)	$	135		$	1,619
Other comprehensive income (loss) before reclassifications	(16,482		)	5,599			—			278			(10,605		)
Reclassification to (earnings) loss	—			(3,577		)	17			(53		)	(3,613		)
Net current-period other comprehensive income (loss)	(16,482		)	2,022			17			225			(14,218		)
Balance at March 31, 2015	$	(11,557	)	$	(1,384	)	$	(18	)	$	360		$	(12,599	)
Balance at June 30, 2013	$	1,038		$	(4,360	)	$	(59	)	$	105		$	(3,276	)
Other comprehensive income (loss) before reclassifications	4,466			(426		)	—			(61		)	3,979
Reclassification to (earnings) loss	—			836			18			28			882
Net current-period other comprehensive income (loss)	4,466			410			18			(33		)	4,861
Balance at March 31, 2014	$	5,504		$	(3,950	)	$	(41	)	$	72		$	1,585

The following reclassifications were made from Accumulated Other Comprehensive Income (Loss) to the Condensed Consolidated Statements of Income:

Reclassifications from Accumulated Other Comprehensive Income (Loss)	Three Months Ended						Nine Months Ended						Affected Line Item in the Condensed Consolidated Statements of Income
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Derivative gain (loss) (1)	$	285		$	(465	)	$	664		$	(848	)	Cost of Sales
	1,870			(3		)	3,594			(237		)	Non-operating income (expense), net
	(312		)	123			(681		)	249			Benefit (Provision) for Income Taxes
	$	1,843		$	(345	)	$	3,577		$	(836	)	Net of Tax
Postemployment Benefits:
Amortization of prior service costs (2)	$	(4	)	$	(8	)	$	(17	)	$	(21	)	Cost of Sales
	(2		)	(2		)	(9		)	(9		)	Selling and Administrative Expenses
	2			4			9			12			Benefit (Provision) for Income Taxes
	$	(4	)	$	(6	)	$	(17	)	$	(18	)	Net of Tax
Amortization of actuarial gain (loss) (2)	$	27		$	21		$	55		$	(32	)	Cost of Sales
	17			7			34			(14		)	Selling and Administrative Expenses
	(18		)	(10		)	(36		)	18			Benefit (Provision) for Income Taxes
	$	26		$	18		$	53		$	(28	)	Net of Tax
Total reclassifications for the period	$	1,865		$	(333	)	$	3,613		$	(882	)	Net of Tax

Amounts in parentheses indicate reductions to income.

(1) See Note 7 - Derivative Instruments of Notes to Condensed Consolidated Financial Statements for further information on derivative instruments.

(2) See Note 9 - Postemployment Benefits of Notes to Condensed Consolidated Financial Statements for further information on postemployment benefit plans.

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Note 3. Inventories

9 Months Ended

Mar. 31, 2015

Inventories [Abstract]

Inventory Disclosure

Inventories

Inventories are valued using the lower of first-in, first-out (FIFO) cost or market value. Inventory components were as follows:

(Amounts in Thousands)	March 31, 2015		June 30, 2014
Finished products	$	18,366	$	18,818
Work-in-process	11,675		12,530
Raw materials	92,758		84,811
Total inventory	$	122,799	$	116,159

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Note 5. Commitments and Contingent Liabilities (Policies)

9 Months Ended

Mar. 31, 2015

Commitments and Contingent Liabilities [Abstract]

Product Warranties

We estimate product warranty liability at the time of sale based on historical repair or replacement cost trends in conjunction with the length of the warranty offered. Management refines the warranty liability periodically based on changes in historical cost trends and in certain cases where specific warranty issues become known.

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Note 11. Share Owners' Equity (Notes)

9 Months Ended

Mar. 31, 2015

Share Owners' Equity [Abstract]

Stockholders' Equity Note Disclosure

Share Owners’ Equity

Effective October 16, 2014, the Company’s authorized capital was increased to 165 million shares comprised of 15 million preferred shares without par value and 150 million common shares without par value. On the same day, 50 thousand common shares outstanding were split into 29.1 million common shares. On October 31, 2014, Kimball International, Inc., the Company’s sole Share Owner, distributed all 29.1 million outstanding shares of Kimball Electronics common stock to Kimball International Share Owners in connection with the spin-off. Upon the spin-off, holders of Kimball International common stock received three shares of Kimball Electronics common stock for every four shares of Kimball International common stock held on October 22, 2014. Preferred and common shares were retrospectively restated for the number of Kimball Electronics shares authorized and outstanding immediately following these events.

A stock compensation plan similar to the former Parent plan was created and adopted by the Company’s Board of Directors on October 3, 2014. The Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan (the “Plan”) allows for the issuance of up to 4.5 million shares and may be awarded in the form of incentive stock options, stock appreciation rights, restricted shares, unrestricted shares, restricted share units, or performance shares and performance units. For additional information, see Note 10 - Stock Compensation Plan of Notes to Condensed Consolidated Financial Statements.

Net Parent investment in the Condensed Consolidated Financial Statements represents former Parent’s historical investment in us, our accumulated net earnings after taxes, and the net effect of the transactions with and allocations from former Parent. As of July 1, 2014, Net Parent investment was converted to Additional paid-in capital. During the nine months ended March 31, 2015, Net contribution from Parent of $45.6 million included non-cash net transfers to Parent of $4.7 million including net transfers of assets and liabilities and allocation of stock compensation. For additional information, see Note 1 – Business Description and Summary of Significant Accounting Policies, as well as Note 2 – Related Party Transactions of Notes to Condensed Consolidated Financial Statements.

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Note 7. Derivative Instruments

9 Months Ended

Mar. 31, 2015

Derivative Instruments [Abstract]

Derivative Instruments and Hedging Activities Disclosure

Derivative Instruments

Foreign Exchange Contracts:

We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of business. Our primary means of managing this exposure is to utilize natural hedges, such as aligning currencies used in the supply chain with the sale currency. To the extent natural hedging techniques do not fully offset currency risk, we use derivative instruments with the objective of reducing the residual exposure to certain foreign currency rate movements. Factors considered in the decision to hedge an underlying market exposure include the materiality of the risk, the volatility of the market, the duration of the hedge, the degree to which the underlying exposure is committed to, and the availability, effectiveness, and cost of derivative instruments. Derivative instruments are only utilized for risk management purposes and are not used for speculative or trading purposes.

We use forward contracts designated as cash flow hedges to protect against foreign currency exchange rate risks inherent in forecasted transactions denominated in a foreign currency. Foreign exchange contracts are also used to hedge against foreign currency exchange rate risks related to intercompany balances denominated in currencies other than the functional currencies. As of March 31, 2015, we had outstanding foreign exchange contracts to hedge currencies against the U.S. dollar in the aggregate notional amount of $31.9 million and to hedge currencies against the Euro in the aggregate notional amount of 46.8 million Euro. The notional amounts are indicators of the volume of derivative activities but may not be indicators of the potential gain or loss on the derivatives.

In limited cases due to unexpected changes in forecasted transactions, cash flow hedges may cease to meet the criteria to be designated as cash flow hedges. Depending on the type of exposure hedged, we may either purchase a derivative contract in the opposite position of the undesignated hedge or may retain the hedge until it matures if the hedge continues to provide an adequate offset in earnings against the currency revaluation impact of foreign currency denominated liabilities.

The fair value of outstanding derivative instruments is recognized on the balance sheet as a derivative asset or liability. When derivatives are settled with the counterparty, the derivative asset or liability is relieved and cash flow is impacted for the net settlement. For derivative instruments that meet the criteria of hedging instruments under FASB guidance, the effective portions of the gain or loss on the derivative instrument are initially recorded net of related tax effect in Accumulated Other Comprehensive Income (Loss), a component of Share Owners’ Equity, and are subsequently reclassified into earnings in the period or periods during which the hedged transaction is recognized in earnings. The ineffective portion of the derivative gain or loss is reported in the Non-operating income (expense), net line item on the Condensed Consolidated Statements of Income immediately. The gain or loss associated with derivative instruments that are not designated as hedging instruments or that cease to meet the criteria for hedging under FASB guidance is also reported in the Non-operating income (expense), net line item on the Condensed Consolidated Statements of Income immediately.

Based on fair values as of March 31, 2015, we estimate a $0.9 million pre-tax derivative gain deferred in Accumulated Other Comprehensive Income (Loss) will be reclassified into earnings, along with the earnings effects of related forecasted transactions, within the next 12 months. Gains on foreign exchange contracts are generally offset by losses in operating income in the income statement when the underlying hedged transaction is recognized in earnings. Because gains or losses on foreign exchange contracts fluctuate partially based on currency spot rates, the future effect on earnings of the cash flow hedges alone is not determinable, but in conjunction with the underlying hedged transactions, the result is expected to be a decline in currency risk. The maximum length of time we had hedged our exposure to the variability in future cash flows was 12 months as of both March 31, 2015 and June 30, 2014.

See Note 6 - Fair Value of Notes to Condensed Consolidated Financial Statements for further information regarding the fair value of derivative assets and liabilities and the Condensed Consolidated Statements of Comprehensive Income for the changes in deferred derivative gains and losses. Information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets and derivative gains and losses in the Condensed Consolidated Statements of Income are presented below.

Fair Value of Derivative Instruments on the Condensed Consolidated Balance Sheets

	Asset Derivatives					Liability Derivatives
		Fair Value As of					Fair Value As of
(Amounts in Thousands)	Balance Sheet Location	March 31, 2015		June 30, 2014		Balance Sheet Location	March 31, 2015		June 30, 2014
Derivatives Designated as Hedging Instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	$	3,240	$	599	Accrued expenses	$	1,306	$	241
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Prepaid expenses and other current assets	2,438		201		Accrued expenses	3		458
Total derivatives		$	5,678	$	800		$	1,309	$	699

The Effect of Derivative Instruments on Other Comprehensive Income (Loss)

	Three Months Ended				Nine Months Ended
	March 31				March 31
(Amounts in Thousands)	2015		2014		2015		2014
Amount of Pre-Tax Gain or (Loss) Recognized in Other Comprehensive Income (Loss) (OCI) on Derivatives (Effective Portion):
Foreign exchange contracts	$	4,537	$	362	$	6,421	$	(536	)

The Effect of Derivative Instruments on Condensed Consolidated Statements of Income

		Three Months Ended					Nine Months Ended
(Amounts in Thousands)		March 31					March 31
Derivatives in Cash Flow Hedging Relationships	Location of Gain or (Loss)	2015		2014			2015			2014
Amount of Pre-Tax Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion):
Foreign exchange contracts	Cost of Sales	$	285	$	(465	)	$	664		$	(848	)
Foreign exchange contracts	Non-operating income (expense)	1,870		(3		)	3,595			(237		)
Total		$	2,155	$	(468	)	$	4,259		$	(1,085	)
Amount of Pre-Tax Loss Reclassified from Accumulated OCI into Income (Ineffective Portion):
Foreign exchange contracts	Non-operating income (expense)	$	—	$	—		$	(1	)	$	—
Derivatives Not Designated as Hedging Instruments
Amount of Pre-Tax Gain or (Loss) Recognized in Income on Derivatives:
Foreign exchange contracts	Non-operating income (expense)	$	965	$	174		$	2,006		$	(664	)
Total		$	965	$	174		$	2,006		$	(664	)
Total Derivative Pre-Tax Gain (Loss) Recognized in Income		$	3,120	$	(294	)	$	6,264		$	(1,749	)

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Note 5. Commitments and Contingent Liabilities

9 Months Ended

Mar. 31, 2015

Commitments and Contingent Liabilities [Abstract]

Commitments and Contingencies Disclosure

Commitments and Contingent Liabilities

Prior to the spin-off on October 31, 2014, the Company and certain of its subsidiaries guaranteed former Parent’s obligations under a former Parent credit facility. As of June 30, 2014, former Parent had no borrowings under its credit facility, and as a result, the potential obligation under this guarantee was not deemed to be material and no liability was recorded. As of October 31, 2014, in connection with the spin-off, the Company and former Parent entered into new separate credit facilities, and the Company no longer guarantees former Parent’s obligations under former Parent’s credit facility. No other guarantees existed which were contingent on the future performance of another entity as of March 31, 2015 and June 30, 2014.

Standby letters of credit are issued to third-party suppliers, lessors, and insurance institutions and can only be drawn upon in the event of the Company’s failure to pay its obligations to a beneficiary. As of March 31, 2015, we had a maximum financial exposure from unused standby letters of credit totaling $0.3 million. We are not aware of circumstances that would require us to perform under any of these arrangements and believe that the resolution of any claims that might arise in the future, either individually or in the aggregate, would not materially affect our Condensed Consolidated Financial Statements. Accordingly, no liability has been recorded as of March 31, 2015 with respect to the standby letters of credit. The Company also may enter into commercial letters of credit to facilitate payments to vendors and from customers.

We maintain a provision for limited warranty repair or replacement of products manufactured and sold, which is established in specific manufacturing contract agreements. We estimate product warranty liability at the time of sale based on historical repair or replacement cost trends in conjunction with the length of the warranty offered. Management refines the warranty liability periodically based on changes in historical cost trends and in certain cases where specific warranty issues become known.

Changes in the product warranty accrual for the nine months ended March 31, 2015 and 2014 were as follows:

	Nine Months Ended
	March 31
(Amounts in Thousands)	2015			2014
Product warranty liability at the beginning of the period	$	911		$	507
Additions to warranty accrual (including changes in estimates)	735			(155		)
Settlements made (in cash or in kind)	(756		)	(59		)
Product warranty liability at the end of the period	$	890		$	293

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Note 6. Fair Value

9 Months Ended

Mar. 31, 2015

Fair Value [Abstract]

Fair Value Disclosures

Fair Value

The Company categorizes assets and liabilities measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas level 3 generally requires significant management judgment. The three levels are defined as follows:

• Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

• Level 2: Observable inputs other than those included in level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

• Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Our policy is to recognize transfers between these levels as of the end of each quarterly reporting period. There were no transfers between these levels during the nine months ended March 31, 2015. There were also no changes in the inputs or valuation techniques used to measure fair values during the nine months ended March 31, 2015.

Financial Instruments Recognized at Fair Value:

The following methods and assumptions were used to measure fair value:

Financial Instrument	Level	Valuation Technique/Inputs Used
Cash equivalents	1	Market - Quoted market prices.
Derivative assets: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates, considering counterparty credit risk.
Trading securities: mutual funds held by nonqualified supplemental employee retirement plan (SERP)	1	Market - Quoted market prices within active markets.
Derivative liabilities: foreign exchange contracts	2	Market - Based on observable market inputs using standard calculations, such as time value, forward interest rate yield curves, and current spot rates adjusted for Kimball Electronics’ non-performance risk.

Recurring Fair Value Measurements:

As of March 31, 2015 and June 30, 2014, the fair values of financial assets and liabilities that are measured at fair value on a recurring basis using the market approach are categorized as follows:

	March 31, 2015
(Amounts in Thousands)	Level 1		Level 2		Total
Assets
Cash equivalents	$	34,950	$	—	$	34,950
Derivatives: foreign exchange contracts	—		5,678		5,678
Trading securities: mutual funds held in nonqualified SERP	5,733		—		5,733
Total assets at fair value	$	40,683	$	5,678	$	46,361
Liabilities
Derivatives: foreign exchange contracts	$	—	$	1,309	$	1,309
Total liabilities at fair value	$	—	$	1,309	$	1,309
	June 30, 2014
(Amounts in Thousands)	Level 1		Level 2		Total
Assets
Derivatives: foreign exchange contracts	$	—	$	800	$	800
Trading securities: mutual funds held in nonqualified SERP	5,260		—		5,260
Total assets at fair value	$	5,260	$	800	$	6,060
Liabilities
Derivatives: foreign exchange contracts	$	—	$	699	$	699
Total liabilities at fair value	$	—	$	699	$	699

We had no Level 3 assets during the nine months ended March 31, 2015.

Nonqualified supplemental employee retirement plan (SERP) assets consist primarily of equity funds, balanced funds, a bond fund, and a money market fund. The SERP investment assets are offset by a SERP liability which represents Kimball Electronics’ obligation to distribute SERP funds to participants. See Note 8 - Investments of Notes to Condensed Consolidated Financial Statements for further information regarding the SERP.

Non-Recurring Fair Value Measurements:

During the nine months ended March 31, 2015, we had no fair value adjustments applicable to items that are subject to non-recurring fair value measurement after the initial measurement date.

Financial Instruments Not Carried At Fair Value:

Financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value that have carrying amounts which approximate fair value include the following:

Financial Instrument	Level	Valuation Technique/Inputs Used
Notes receivable	2	Market - Price approximated based on the assumed collection of receivables in the normal course of business, taking into account non-performance risk.

The carrying value of our cash deposit accounts, trade accounts receivable, and trade accounts payable approximates fair value due to the relatively short maturity and immaterial non-performance risk.

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Note 8. Investments

9 Months Ended

Mar. 31, 2015

Investments [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure

Investments

Prior to the spin-off, former Parent maintained a self-directed supplemental employee retirement plan (SERP) in which the Company’s executive employees were eligible to participate. Subsequent to the spin-off and during the second quarter of fiscal year 2015, the assets and liabilities of former Parent’s SERP related to Kimball Electronics’ employees were transferred to a Company sponsored SERP. The SERP utilizes a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy. The Company recognizes SERP investment assets on the balance sheet at current fair value. A SERP liability of the same amount is recorded on the balance sheet representing an obligation to distribute SERP funds to participants. The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in income in the Other Income (Expense) category. Adjustments made to revalue the SERP liability are also recognized in income as selling and administrative expenses and offset valuation adjustments on SERP investment assets. The change in net unrealized holding gains (losses) for the nine months ended March 31, 2015 and 2014 was, in thousands, $(13) and $219, respectively.

SERP asset and liability balances applicable to Kimball Electronics participants were as follows:

(Amounts in Thousands)	March 31, 2015		June 30, 2014
SERP investments - current asset	$	191	$	167
SERP investments - other long-term asset	5,542		5,093
Total SERP investments	$	5,733	$	5,260
SERP obligation - current liability	$	191	$	167
SERP obligation - other long-term liability	5,542		5,093
Total SERP obligation	$	5,733	$	5,260

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Note 9. Postemployment Benefits (Tables)

9 Months Ended

Mar. 31, 2015

Postemployment Benefits [Abstract]

Schedule of Changes in Projected Benefit Obligations

The components of net periodic postemployment benefit cost applicable to Kimball Electronics participants were as follows:

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Service cost	$	91		$	66		$	239		$	201
Interest cost	14			10			36			29
Amortization of prior service costs	6			10			26			30
Amortization of actuarial (gain) loss	(44		)	(28		)	(89		)	46
Net periodic benefit cost	$	67		$	58		$	212		$	306

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Note 7. Derivative Instruments - The Effect of Derivative Instruments on Consolidated Statements of Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Mar. 31, 2015		Mar. 31, 2014		Mar. 31, 2015		Mar. 31, 2014
Derivative Instruments, Gain (Loss)
Total Derivative Pre-Tax Gain (Loss) Recognized in Income	$ 3,120		$ (294)		$ 6,264		$ (1,749)
Derivatives Not Designated as Hedging Instruments, Pre-Tax Gain (Loss) Recognized in Income	965		174		2,006		(664)
Foreign Exchange Contract | Non-Operating Income (Expense)
Derivative Instruments, Gain (Loss)
Derivatives Not Designated as Hedging Instruments, Pre-Tax Gain (Loss) Recognized in Income	965		174		2,006		(664)
Cash Flow Hedging
Derivative Instruments, Gain (Loss)
Derivatives, Pre-Tax Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion	2,155		(468)		4,259		(1,085)
Cash Flow Hedging | Foreign Exchange Contract | Cost of Sales
Derivative Instruments, Gain (Loss)
Derivatives, Pre-Tax Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion	285	[1]	(465)	[1]	664	[1]	(848)	[1]
Cash Flow Hedging | Foreign Exchange Contract | Non-Operating Income (Expense)
Derivative Instruments, Gain (Loss)
Derivatives, Pre-Tax Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion	1,870	[1]	(3)	[1]	3,595	[1]	(237)	[1]
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net	$ 0		$ 0		$ (1)		$ 0

[1] See Note 7 - Derivative Instruments of Notes to Condensed Consolidated Financial Statements for further information on derivative instruments.

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Note 1. Business Description and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Mar. 31, 2015

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation:

The Condensed Consolidated Financial Statements presented herein reflect the consolidated financial position as of March 31, 2015 and June 30, 2014, results of operations for the three and nine months ended March 31, 2015 and 2014, and cash flows for the nine months ended March 31, 2015 and 2014. The financial data presented herein is unaudited and should be read in conjunction with the annual Combined Financial Statements as of and for the year then ended June 30, 2014 and related notes thereto included in our registration statement on Form 10, which the Securities and Exchange Commission (the “SEC”) declared effective on October 7, 2014 (“Form 10”). As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted, although we believe that the disclosures are adequate to make the information presented not misleading. Intercompany transactions and balances have been eliminated. Management believes the financial statements include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly the financial statements for the interim periods. The results of operations for the interim periods shown in this report are not necessarily indicative of results for any future interim period or for the entire fiscal year.

On September 30, 2014, the shares of Kimball Electronics Mexico, S.A. de C.V., a wholly owned subsidiary of former Parent, were contributed in a capital transaction to Kimball Electronics Mexico, Inc., a wholly owned subsidiary of Kimball Electronics, Inc. The financial results for Kimball Electronics Mexico, S.A. de C.V. are included in the Condensed Consolidated Financial Statements herein for all periods presented. Assets and liabilities were recorded at historical costs or carrying value.

The Condensed Consolidated Financial Statements include allocations from former Parent for direct costs and indirect costs attributable to the operations of the Company through October 31, 2014, the spin-off date. These allocations were made on a direct usage or cost incurred basis when appropriate, with the remainder allocated using various drivers including average capital deployed, payroll, revenue less material costs, headcount, or other measures. While we believe such allocations are reasonable, these financial statements do not purport to reflect what the results of operations, comprehensive income, financial position, equity, or cash flows would have been had the Company operated as a stand-alone public company for the entirety of the periods presented. Note 2 - Related Party Transactions of Notes to Condensed Consolidated Financial Statements provides information regarding direct and indirect cost allocations.

Cash and Cash Equivalents

Cash and Cash Equivalents:

Cash equivalents consist primarily of highly liquid investments with original maturities of three months or less at the time of acquisition. Cash and cash equivalents consist of bank accounts and money market funds. Bank accounts are stated at cost, which approximates fair value, and money market funds are stated at fair value.

Notes Receivable and Trade Accounts Receivable

Notes Receivable and Trade Accounts Receivable:

Notes receivable and trade accounts receivable are recorded per the terms of the agreement or sale, and accrued interest is recognized when earned. We determine on a case-by-case basis the cessation of accruing interest, the resumption of accruing interest, the method of recording payments received on nonaccrual receivables, and the delinquency status for our limited number of notes receivable.

Our policy for estimating the allowance for credit losses on trade accounts receivable and notes receivable includes analysis of such items as aging, credit worthiness, payment history, and historical bad debt experience. Management uses these specific analyses in conjunction with an evaluation of the general economic and market conditions to determine the final allowance for credit losses on the trade accounts receivable and notes receivable. Trade accounts receivable and notes receivable are written off after exhaustive collection efforts occur and the receivable is deemed uncollectible. Our limited amount of notes receivable allows management to monitor the risks, credit quality indicators, collectability, and probability of impairment on an individual basis. Adjustments to the allowance for credit losses are recorded in Selling and Administrative Expenses.

In the ordinary course of business, customers periodically negotiate extended payment terms on trade accounts receivable. Customary terms require payment within 30 to 45 days, with any terms beyond 45 days being considered extended payment terms. We may utilize accounts receivable factoring arrangements with third-party financial institutions in order to extend terms for the customer without negatively impacting our cash flow.  In all cases, these arrangements 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.

Other General Income

Other General Income:

Other General Income in the three and nine months ended March 31, 2014 included $0.7 million and $5.7 million, respectively, of pre-tax income resulting from settlements received related to two antitrust class action lawsuits in which Kimball Electronics was a class member. The lawsuits alleged that certain suppliers of 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. No Other General Income was recorded in the three and nine months ended March 31, 2015.

Non-operating Income (Expense), net

Non-operating Income (Expense), net:

The Non-operating income (expense), net line item includes the impact of such items as foreign currency rate movements and related derivative gain or loss, fair value adjustments on supplemental employee retirement plan (“SERP”) investments, bank charges, and other miscellaneous non-operating income and expense items that are not directly related to operations. The gain on SERP investments is offset by a change in the SERP liability that is recognized in Selling and Administrative Expenses.

Income Taxes

Income Taxes:

In determining the quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on expected annual income, statutory tax rates, and available tax planning opportunities in the various jurisdictions in which we operate. Unusual or infrequently occurring items are separately recognized in the quarter in which they occur.

In September 2013, the United States Treasury Department and the Internal Revenue Service (the “IRS”) issued final regulations effective for our first quarter of fiscal year 2015, which provide guidance on a number of matters with regard to tangible property, including whether expenditures qualify as deductible repairs, the treatment of materials and supplies, capitalization of tangible property, dispositions of property, and related elections.  The regulations as issued did not have a material effect on our Condensed Consolidated Financial Statements.

Emerging Growth Company Reporting Requirements

“Emerging Growth Company” Reporting Requirements:

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as a company is deemed to be an “emerging growth company,” it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

Section 107 of the JOBS Act also provides that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

New Accounting Standards

New Accounting Standards:

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance to customers of cloud computing arrangements about whether an arrangement includes a software license. If a software license exists in the arrangement, the guidance requires the software license element of the arrangement to be accounted for consistently with the acquisition of other software licenses by the customer. Otherwise, the customer should account for the arrangement as a service contract. The guidance is effective for our fiscal year 2017 financial statements using either of two acceptable adoption methods: (i) retrospective adoption; or (ii) prospective adoption to all arrangements entered into or materially modified after the effective date. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In April 2015, the FASB issued guidance on presentation of debt issuance costs. Under the new guidance, debt issuance costs related to a recognized debt liability must be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. In addition, amortization of debt issuance costs must be reported as interest expense. The guidance is effective retrospectively for our fiscal year 2017 financial statements. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In June 2014, the FASB provided explicit guidance on how to account for share-based payments granted to employees in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The guidance will be applied prospectively for our first quarter fiscal year 2017 financial statements.  We do not expect the adoption to have a material effect on our financial statements.

In May 2014, the FASB issued guidance on the recognition of revenue from contracts with customers. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. To achieve this core principle, the guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance addresses several areas including transfer of control, contracts with multiple performance obligations, and costs to obtain and fulfill contracts. The guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The guidance is effective for our fiscal year 2019 financial statements using either of two acceptable adoption methods: (i) retrospective adoption to each prior reporting period presented with the option to elect certain practical expedients; or (ii) adoption with the cumulative effect of initially applying the guidance recognized at the date of initial application and providing certain additional disclosures. We have not yet selected a transition method nor determined the effect of this guidance on our financial statements.

In April 2014, the FASB issued guidance on reporting discontinued operations and disclosures of disposals of components of an entity. Under the new guidance, a disposal that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results is a discontinued operation. The new guidance requires expanded disclosures that will provide more information about the assets, liabilities, income, and expenses of discontinued operations, and also requires disclosures of significant disposals that do not qualify for discontinued operations reporting. The guidance is effective prospectively for disposals or components of our business classified as held for sale during fiscal year 2016. We are currently evaluating the impact of the adoption of this guidance on our financial statements.

In July 2013, the FASB issued guidance to eliminate the diversity in practice related to the financial statement presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The guidance became effective prospectively for our first quarter fiscal year 2015 financial statements. The adoption did not have a material effect on our Condensed Consolidated Financial Statements.

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Note 8. Investments SERP Investments (Policies)

9 Months Ended

Mar. 31, 2015

Investments, All Other Investments [Abstract]

Investment, Policy

The SERP utilizes a rabbi trust, and therefore assets in the SERP portfolio are subject to creditor claims in the event of bankruptcy. The Company recognizes SERP investment assets on the balance sheet at current fair value. A SERP liability of the same amount is recorded on the balance sheet representing an obligation to distribute SERP funds to participants. The SERP investment assets are classified as trading, and accordingly, realized and unrealized gains and losses are recognized in income in the Other Income (Expense) category. Adjustments made to revalue the SERP liability are also recognized in income as selling and administrative expenses and offset valuation adjustments on SERP investment assets.

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Note 7. Derivative Instruments - Fair Values of Derivative Instruments on the Consolidated Balance Sheet (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Derivatives, Fair Value
Derivative Asset	$ 5,678	$ 800
Derivative Liability	1,309	699
Foreign Exchange Contract | Fair Value, Measurements, Recurring
Derivatives, Fair Value
Derivative Asset	5,678	800
Derivative Liability	1,309	699
Designated as Hedging Instrument | Foreign Exchange Contract | Prepaid Expenses and Other Current Assets
Derivatives, Fair Value
Derivative Asset	3,240	599
Designated as Hedging Instrument | Foreign Exchange Contract | Accrued Liabilities
Derivatives, Fair Value
Derivative Liability	1,306	241
Not Designated as Hedging Instrument | Foreign Exchange Contract | Prepaid Expenses and Other Current Assets
Derivatives, Fair Value
Derivative Asset	2,438	201
Not Designated as Hedging Instrument | Foreign Exchange Contract | Accrued Liabilities
Derivatives, Fair Value
Derivative Liability	$ 3	$ 458

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Note 3. Inventories - Inventory Components (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Inventory, Finished Goods, Net of Reserves	$ 18,366	$ 18,818
Inventory, Work in Process, Net of Reserves	11,675	12,530
Inventory, Raw Materials, Net of Reserves	92,758	84,811
Total inventory	$ 122,799	$ 116,159

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Net income	$ 7,191	$ 6,356	$ 18,811	$ 19,254
Other comprehensive income (loss):
Foreign currency translation adjustments, Pre-tax	(7,955)	54	(16,466)	4,937
Foreign currency translation adjustments, Tax	0	(154)	(16)	(471)
Foreign currency translation adjustments, Net of Tax	(7,955)	(100)	(16,482)	4,466
Postemployment severance actuarial change, Pre-tax	201	128	449	(100)
Postemployment severance actuarial change, Tax	(76)	(48)	(171)	39
Postemployment severance actuarial change, Net of Tax	125	80	278	(61)
Derivative gain (loss), Pre-tax	4,537	362	6,421	(536)
Derivative gain (loss), Tax	(761)	(72)	(822)	110
Derivative gain (loss), Net of Tax	3,776	290	5,599	(426)
Reclassification to (earnings) loss:
Derivatives, Reclassification to (earnings) loss, Pre-tax	(2,155)	468	(4,258)	1,085
Derivatives, Reclassification to (earnings) loss, Tax	312	(123)	681	(249)
Derivatives, Reclassification to (earnings) loss, Net of Tax	(1,843)	345	(3,577)	836
Amortization of prior service cost, Pre-tax	6	10	26	30
Amortization of prior service cost, Tax	(2)	(4)	(9)	(12)
Amortization of prior service cost, Net of Tax	4	6	17	18
Amortization of actuarial change, Pre-tax	(44)	(28)	(89)	46
Amortization of actuarial change, Tax	18	10	36	(18)
Amortization of actuarial change, Net of Tax	(26)	(18)	(53)	28
Other comprehensive income (loss), Pre-tax	(5,410)	994	(13,917)	5,462
Other comprehensive income (loss), Tax	(509)	(391)	(301)	(601)
Other comprehensive income (loss), Net of Tax	(5,919)	603	(14,218)	4,861
Total comprehensive income (loss)	1,272	6,959	4,593	24,115
Foreign Exchange Contract
Other comprehensive income (loss):
Derivative gain (loss), Pre-tax	$ 4,537	$ 362	$ 6,421	$ (536)

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Note 2. Related Party Transactions (Notes)

9 Months Ended

Mar. 31, 2015

Related Party Transactions [Abstract]

Related Party Transactions Disclosure

Related Party Transactions

Services Provided by Kimball International, Inc.:

Prior to the spin-off on October 31, 2014, Kimball Electronics operated as a reportable segment within Kimball International. The Condensed Consolidated Financial Statements include allocations of general corporate expenses from former Parent including, but not limited to, spin-off costs, finance, legal, information technology, human resources, employee benefits administration, treasury, risk management, and other shared services. The allocations were primarily made using various drivers including average capital deployed, payroll, revenue less material costs, headcount, or other measures, with the remainder allocated on a direct usage or cost incurred basis when appropriate. Former Parent charged us for such services and indirect general and corporate overhead expenses of approximately $3.2 million for the three months ended March 31, 2014, and for the nine months ended March 31, 2015 and 2014, we were charged approximately $4.5 million and $8.6 million, respectively. Additionally, former Parent charged us approximately $0.6 million for the three months ended March 31, 2014 for corporate incentive plan expenses, including stock-based compensation, and approximately $2.1 million and $3.6 million in the nine months ended March 31, 2015 and 2014, respectively. These costs are primarily included in Selling and Administrative Expenses and were charged through October 31, 2014, the spin-off date.

We consider the basis on which the expenses were allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us through the spin-off date. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly traded company through the spin-off date. Actual costs that might have been incurred had we been a stand-alone company would depend on a number of factors, including what functions we might have performed ourselves or outsourced and strategic decisions we might have made in areas such as information technology and infrastructure. As an independent company, we are performing these functions using our own resources or purchased services from third parties, or, for a limited time, former Parent.

Taxes:

The Company entered into a Tax Matters Agreement with former Parent that governs the Company’s rights and obligations after the spin-off with respect to tax liabilities and benefits, tax attributes, tax contests, and other tax sharing regarding income taxes, other tax matters, and related tax returns. The Company will continue to have joint and several liabilities with former Parent with the IRS and certain U.S. state tax authorities for U.S. federal income and state taxes for the taxable periods in which the Company was a part of former Parent’s consolidated group. The tax matters agreement specifies the portion, if any, of this liability for which the Company bears responsibility, and former Parent has agreed to indemnify the Company against any amounts for which the Company is not responsible. As of March 31, 2015, the Company has a receivable from Kimball International recorded for $0.8 million, of which $0.6 million is a long-term receivable and was recorded in Other Assets on the balance sheet, relating to benefits from federal and state research and development tax credits.

Cash Management:

For purposes of the historical Condensed Consolidated Financial Statements, former Parent did not allocate to us the cash and cash equivalents held at former Parent’s corporate level for the periods presented prior to the spin-off. Cash in our Condensed Consolidated Balance Sheet as of June 30, 2014 primarily represents cash held by international entities at the local level. In connection with the spin-off, net distributions of cash were made from former Parent to us of $44.3 million on or around October 31, 2014. We began operations as an independent company with approximately $63 million of cash, including cash held by our foreign facilities.

Former Parent provided centralized treasury functions for us, whereby, former Parent regularly transferred cash both to and from our subsidiaries, as necessary. Intercompany receivables/payables from/to related parties arising from the corporate overhead activity described above were included in Net Parent investment in the Condensed Consolidated Financial Statements. As of July 1, 2014, Net Parent investment was converted to Additional paid-in capital. For additional information, see Note 1 – Business Description and Summary of Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.

Agreements with Kimball International, Inc.:

As part of the spin-off, the Company entered into various agreements with former Parent which provide for the allocation between the Company and former Parent of the assets, liabilities, and obligations, of former Parent and its subsidiaries, and govern the relationship between former Parent and the Company after the spin-off. These agreements became effective on October 31, 2014 and included the following:

Separation and Distribution Agreement:

The Separation and Distribution Agreement, among other things, (1) provides for the transfers of assets and assumptions of liabilities; (2) governs the rights and obligations of the parties regarding the distribution; (3) provides that following the spin-off the Company is responsible for obtaining and maintaining its own insurance coverage; and (4) governs other matters, including, but not limited to access and provision of records, intellectual property, confidentiality, treatment of outstanding guarantees and similar credit support, and dispute resolution procedures.

Employee Matters Agreement:

The Employee Matters Agreement provides (1) that generally the Company has responsibility for its own employees and compensation plans, subject to certain exceptions; (2) that following the spin-off, the Company’s employees will generally participate in various retirement, welfare, and other employee benefit and compensation plans established and maintained by the Company; (3) for the treatment of outstanding equity awards in connection with the spin-off; (4) for the assumption of certain employment related contracts that the Company’s employees originally entered into with former Parent; and (5) the allocation of certain employee liabilities and the cooperation between the Company and former Parent in sharing employee information.

Transition Services Agreement:

The Transition Services Agreement provides the Company and former Parent will provide to each other specified services on a transitional basis to help ensure an orderly transition following the spin-off. These services include information technology, financial, telecommunications, benefits support services, and other specified services. The services will be provided at cost and are planned to extend for a period of six to eighteen months in most circumstances.

Tax Matters Agreement:

See section entitled “Taxes” above for information on the Tax Matters Agreement.

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Note 12. Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Net income	$ 7,191	$ 6,356	$ 18,811	$ 19,254
Weighted Average Number of Shares Outstanding, Diluted	29,318	29,143	29,344	29,143
Weighted Average Number of Shares Outstanding, Basic	29,172	29,143	29,159	29,143
Dilutive effect of average outstanding performance shares	146	0	185	0
Earnings Per Share, Diluted	$ 0.25	$ 0.22	$ 0.64	$ 0.66
Earnings Per Share, Basic	$ 0.25	$ 0.22	$ 0.65	$ 0.66

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Note 1. Business Description and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Mar. 31, 2015

Summary of Significant Accounting Policies [Abstract]

Components of Non-operating income (expense), net

Components of Non-operating income (expense), net:

	Three Months Ended						Nine Months Ended
	March 31						March 31
(Amounts in Thousands)	2015			2014			2015			2014
Foreign currency/derivative gain (loss)	$	(920	)	$	114		$	(1,151	)	$	368
Gain on supplemental employee retirement plan investments	154			46			203			521
Other	(130		)	(62		)	(298		)	(229		)
Non-operating income (expense), net	$	(896	)	$	98		$	(1,246	)	$	660

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Note 1. Business Description and Summary of Significant Accounting Policies - Textuals (Details) (USD $) Share data in Millions, unless otherwise specified	0 Months Ended	3 Months Ended		9 Months Ended
	Oct. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Accounts Receivable, Extended Payment Terms				45 days
Common Stock Dividends, Shares	29.1
Accounts Receivable Sold Without Recourse				$ 100,100,000	$ 150,400,000
Total Annual Gross Revenue on Last Day of Fiscal Year Based on Which Entity Will Cease Status of Emerging Growth Company				1,000,000,000
Other General Expense		0	(666,000)	0	(5,688,000)
Non-Convertible Debt Securities Issued in Specified Period upon Which Company Will Cease Status of Emerging Growth Company				1,000,000,000
Market Value of Common Stock Held by Non-Affiliates upon Which Company Will Cease Status of Emerging Growth Company				$ 700,000,000
Minimum
Accounts Receivable, Customary Payment Terms				30 days
Maximum
Accounts Receivable, Customary Payment Terms				45 days

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Note 12. Earnings Per Share (Notes)

9 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic and diluted earnings per share were calculated as follows:

	Three Months Ended				Nine Months Ended
	March 31				March 31
(Amounts in thousands, except per share data)	2015		2014		2015		2014
Basic and Diluted Earnings Per Share:
Net Income	$	7,191	$	6,356	$	18,811	$	19,254
Basic weighted average common shares outstanding	29,172		29,143		29,159		29,143
Dilutive effect of average outstanding performance shares	146		—		185		—
Dilutive weighted average shares outstanding	29,318		29,143		29,344		29,143
Earnings Per Share of Common Stock:
Basic	$	0.25	$	0.22	$	0.65	$	0.66
Diluted	$	0.25	$	0.22	$	0.64	$	0.66

Basic and diluted earnings per share and the average number of common shares outstanding for the three and nine months ended March 31, 2014 were retrospectively restated adjusting the number of Kimball Electronics shares outstanding for the stock split effective on October 16, 2014. See Note 11 - Share Owners’ Equity of Notes to Condensed Consolidated Financial Statements for more information regarding the stock split. The same number of shares was used to calculate basic and diluted earnings per share for the three and nine months ended March 31, 2014 since no Kimball Electronics stock-based awards were outstanding prior to the spin-off.