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•	Records - new highs for sales and profit.

•	Sales Growth - double-digit increase including new business wins from both existing and new customers.

•	Effective Integration - operational and performance progress of our recent acquisitions.

•	Employee Satisfaction - high scores in our Guiding Principles surveys.

•	Customer Loyalty - increased sales and number of customers that have been doing business with us for over 10 years.

•	Service and Performance Excellence Recognition - CIRCUITS ASSEMBLY 2016 EMS Company of the Year.

•	Investments for Future Growth - deployed capital to support our new business awards, added production lines in our new facility in Romania, and added plastic injection molding and metal fabrication capabilities.

•	Strategy Development - worked with a third party strategy consultant to sharpen our strategic plan for our core EMS business and explore new strategic platforms and capabilities.

•	Net Sales - $930,914,000, an 11% increase over last fiscal year.

•	Vertical market sales increases:

◦	Automotive - up 16%.

◦	Medical - up 3%.

◦	Industrial - up 10%.

◦	Public Safety - up 15%.

•	Operating income of 4.6% - above our goal of 4.0%.

•	Net income up $11.9 million to $34.2 million.

•	Diluted earnings per share up 48 cents to $1.24.

•	Return on invested capital of 10.4% - up from 9.0% last year; however, below our long-term goal of 12.5%.

•	Operating cash flow - $47 million - increased from $37 million for fiscal year 2016.

•	Capital expenditures - $34 million.

•	Share repurchases - $22 million.

•	Net cash position at end of the fiscal year - $35 million.

•	Our customer is our business.

•	Our people are the company.

•	The environment is our home.

•	Profits are the ultimate measure.

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•	Financial - for evaluation of financial performance, capital investments, and capital structure.

•	International - for evaluation of global operations and expansion.

•	Technology - for evaluation of technology investments and cybersecurity risks.

•	Operations - for evaluation of our manufacturing operating plans and strategies.

•	Human Resources - for evaluation of our human capital resources, needs, and compensation programs.

•	Public Company Experience - for evaluation of corporate governance policies, regulatory structures, and Share Owner relations.

•	Marketing - for evaluation of our business development, customer relationships, and end-market strategies.

•	Risk Management - for evaluation of our business risks and mitigation strategies.

•	Leadership - for evaluation of management leadership and succession planning.

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•	Value Preservation — recognizing and mitigating as much as possible the risk of potential for loss or harm to any element of our business.

•	Value Creation — embracing the risks inherent in any business endeavor in order to reap the rewards of growth and profitability.

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(1)

Represents fees paid during fiscal year 2017, and includes the following amount of shares for which the director elected to receive Common Stock in lieu of cash: Mr. Lampert 5,397, Ms. Repplier 4,762, and Mr. Stringer 5,397. These shares were valued using the per share price of $15.75, the market value for such shares on November 10, 2016. Mr. Lampert and Ms. Repplier elected to defer receipt of all their above shares under the Deferral Plan.

(2)

Represents the value of the equity retainer awards granted during the year which amounted to 2,540 shares for each non-employee director, except for Mr. Thaxton, using the per share price of $15.75, the market value for such shares on November 10, 2016. Mr. Thaxton’s equity retainer award granted during the fiscal year amounted to 1,428 shares using the per share price of $16.35, the market value for such shares on April 17, 2017. Mr. Lampert, Ms. Repplier, Mr. Thaxton, and Ms. Vujovich elected to have all their fiscal year 2017 equity retainer awards deferred under the Deferral Plan.

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(a)	Audit fees includes fees and out of pocket expenses paid, or expected to be paid, for the audit of the annual consolidated financial statements and for the statutory audits of international subsidiaries.

(b)	Audit-related fees consist primarily of fees paid, or expected to be paid, for the audit of various benefit plans.

(c)	Consists of fees paid, or expected to be paid, for tax compliance and related tax services.

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(1)	Stock awards consist of performance shares:

•

The compensation reported in the above table represents targeted performance share compensation for each of our NEOs, which does not reflect compensation actually received or earned by the NEOs in the respective years. The amounts included above represent the value at the grant date based upon the probable outcome of the performance conditions, which is estimated based on a payout at the target (Tier 4) level, or 40% of the maximum award opportunity for Annual Performance Shares (“APS”) and 100% of the maximum award opportunity for Long-Term Performance Shares (“LTPS”).

•

In June 2017, the Company changed its award timing policy to award performance shares in August to align the granting of the shares earned in the prior fiscal year with the stock awards for the current fiscal year. The prior policy awarded performance shares in June. This transition eliminated the amounts reported in the “Stock Awards” column in 2017 as these awards will now be reported as fiscal year 2018 awards. The performance shares awarded that will be reported for fiscal year 2018 as valued on the August 21, 2017, grant date based upon the probable outcome of the performance conditions were for Mr. Charron $1,360,623, for Mr. Kahle, $490,477, for Mr. Korn $283,522, for Mr. Sergesketter $273,548, and for Mr. Thyen $266,997.

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•

The grant date fair value of the maximum number of performance shares that could have been earned in fiscal year 2017 was $811,466 for Mr. Charron, $403,307 for Mr. Kahle, $169,994 for Mr. Korn, $163,886 for Mr. Sergesketter, and $161,654 for Mr. Thyen. The grant date fair value of the maximum number of performance shares that could have been earned in fiscal year 2016 was $741,365 for Mr. Charron, $564,290 for Mr. Kahle, $158,035 for Mr. Korn, $153,224 for Mr. Sergesketter, and $153,784 for Mr. Thyen. The grant date fair value of the maximum number of performance shares that could have been earned in fiscal year 2015 was $466,666 for Mr. Charron, $476,479 for Mr. Kahle, $191,479 for Mr. Korn, $169,609 for Mr. Sergesketter, and $173,511 for Mr. Thyen.

•	The assumptions used to calculate the grant date fair values are set forth in Note 9 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017.

(2)	Amounts consist of cash incentive compensation earned for services rendered in the applicable fiscal year. The amounts are paid in five installments over the succeeding fiscal year, pursuant to the Incentive Bonus Plan, with 50% payable in August and 12.5% payable in each of the following months of September, January, April, and June.

(3)

Includes benefits received by the NEOs from executive financial services programs, supplemental medical reimbursement, the value of the services and related benefits provided pursuant to the Executive Preventive Healthcare Program, Company contributions earned for the Retirement Plans and SERP plans, and de minimus Christmas bonus and life insurance premiums paid by the Company. SERP and Retirement Plan Company contribution amounts earned for fiscal year 2017 for Messrs. Charron, Kahle, Korn, Sergesketter, and Thyen were $33,179, $19,930, $15,084, $14,634, and $13,966, respectively.

(a)	Three remaining annual vesting dates beginning 8/21/2017

(b)	Two remaining annual vesting dates beginning 8/21/2017

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(i)	base salary through the date of termination of employment;

(ii)

(a) unless the executive’s termination occurs during the one-year period before a Change in Control (as defined below) of the Company or during the two-year period following a Change in Control, severance pay equal to the sum of the executive’s annual base salary at the highest rate in effect during the three years immediately preceding the last day of employment and the higher of either the executive’s target cash incentive for the period in which the last day of employment occurs or the executive’s average annual cash incentive award for the three annual cash incentive periods immediately preceding the last day of employment, plus a reimbursement payment of $50,000 (subject to cost-of-living adjustment) in lieu of continued welfare and fringe benefits; or

(iii)	reimbursement for up to $25,000 of the costs of outplacement services during the first twelve months following the termination date;

(iv)	Service-Based Incentive Plan Rights. As of the Termination Date,

(v)	Performance-Based Incentive Plan Rights.

(vi)	payment of all SERP benefit amounts, which will become fully vested.

•	the executive’s willful and continued failure to perform substantially the duties of executive’s position or to follow lawful instructions of a senior executive or the Board that continues for five days after the executive receives written notice identifying such failure;

•	the executive’s conviction of a felony or of another crime that reflects adversely on the Company;

•	the executive’s engaging in fraudulent or dishonest conduct, gross misconduct that is injurious to the Company, or any misconduct that involves moral turpitude; or

•	the executive’s material breach of his obligations under the employment agreement.

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•	a material adverse change in the nature or scope of the executive’s responsibilities;

•	a reduction in the executive’s salary rate or target cash incentive amount;

•	a reduction of 5% or more in the aggregate benefits provided to the executive and his dependents under the Company’s employee benefit plans;

•	a significant diminution in the executive’s position, authority, duties, or responsibilities;

•	a relocation of the executive’s principal site of employment to a location more than fifty (50) miles from the principal site of employment; or

•	failure by the Company to obtain an assumption agreement regarding the executive’s employment agreement from any successor of the Company.

•

the acquisition, by any one person or more than one person acting as a group, of ownership interests representing more than 50% of the total fair market value or of the total voting power of all ownership interests (the “Majority Ownership”) of the Company, any affiliate of the Company that employs the executive, any entity that has a Majority Ownership of either the Company or such affiliate, or any entity in an uninterrupted chain of Majority Ownership culminating in the ownership of the Company or such affiliate (each, a “Relevant Company”) through merger, consolidation, or stock transfer;

•	the acquisition during any 12-month period, by any one person or more than one person acting as a group, of ownership interests in a Relevant Company possessing 35% or more of the total voting power of all ownership interests in the Relevant Company;

•	the acquisition of ownership during any 12-month period, by any one person or more than one person acting as a group, of 40% or more of the total gross fair market value of the assets of a Relevant Company; or

•	the replacement of a majority of members of the Board during any 12-month period, by members whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.

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(1)	Consists of performance share awards under the Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan. The number of performance shares assumes the maximum number of shares which the participant is eligible to receive if applicable profitability levels are achieved.

(2)

Consists of phantom stock units granted to non-employee directors under the Kimball Electronics, Inc. Non-Employee Directors Stock Compensation Deferral Plan (the “Deferral Plan”), which are participating securities and are payable in common stock upon a director’s retirement or termination from the Board or death. The Deferral Plan is a nonqualified plan approved by the Board of Directors on October 20, 2016, which allows non-employee directors to defer all, or a portion of, their retainer fees in stock until retirement or termination from the Board or death. The Deferral Plan allows for issuance of up to 1.0 million shares of the Company’s common stock.

(3)	There is no exercise price for performance share awards or phantom stock units.

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(a)	Based upon information obtained from the executive officers, directors, and beneficial owners (according to the definition of “beneficial ownership” under the regulations of the SEC). On August 18, 2017, there were outstanding 26,814,557 shares of Common Stock.

(b)

The “Sole Voting and Investment Power” column includes shares owned by the spouses living in the households of the individuals listed. The “Shared Voting and Investment Power” column includes shares held by limited partnerships, foundations, and trusts over which listed individuals have shared voting and investment power. Beneficial ownership is disclaimed as to such shares and as to all other shares over which the named person does not have full beneficial rights.

(c)

Shares include performance shares which are receivable as of August 18, 2017, as follows: Donald D. Charron 67,230 shares; John H. Kahle 33,414 shares; Steven T. Korn 14,084 shares; Michael K. Sergesketter 13,578 shares; Christopher J. Thyen 13,393 shares and all executive officers, as a group 182,549 shares. These share amounts have not been reduced by the following shares withheld to satisfy tax withholding obligations upon their vesting on August 21, 2017: Donald D. Charron 25,801 shares; John H. Kahle 10,552 shares; Steven T. Korn 4,448 shares; Michael K. Sergesketter 4,288 shares and Christopher J. Thyen 4,230 shares. The percentage of shares owned by each person, or group, is determined by including in the number of shares outstanding, those performance shares issuable to such person or group as of August 18, 2017.

(d)	Totals are under one percent of the outstanding shares.

(e)

This information is derived from the Schedule 13G/A filed by such Share Owner with the SEC on February 9, 2017, indicating beneficial ownership as of December 31, 2016. The Share Owner reports that it has the sole power to vote or direct the vote of 2,148,493 shares and the sole power to dispose or direct the disposition of 2,230,274 shares but also notes that it is an investment advisor registered under the Investment Advisors Act of 1940 and furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-advisor to certain other commingled funds, group trusts, and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an advisor or sub-advisor to certain Funds. In its role as investment advisor, sub-advisor and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the Company’s shares held by the Funds. However, all of the Company’s shares reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership of such securities.

(f)

This information is derived from the Schedule 13G/A filed by such Share Owner with the SEC on January 25, 2017, indicating beneficial ownership as of December 31, 2016. The Share Owner reports that it has the sole power to vote or direct the vote of 1,721,004 shares and the sole power to dispose or direct the disposition of 1,779,864 shares but also notes that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Company’s shares and that no one person’s interest in the Company’s shares is more than 5% of the total outstanding shares of the Company. BlackRock, Inc. reports that the following of its subsidiaries acquired the shares: BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., and BlackRock Investment Management, LLC.

(g)

Shares do not include phantom stock units. Each phantom stock unit is equivalent of one share of common stock. Such units of phantom stock were acquired under the Kimball Electronics, Inc. Non-Employee Directors Stock Compensation Deferral Plan. Phantom stock units granted as of August 18, 2017: Christine M. Vujovich 2,540 units; Colleen C. Repplier 7,302 units; Gregory J. Lampert 7,937 units; and Gregory A. Thaxton 1,428 units.

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