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Favorable Product Mix and Improved Efficiencies; Expecting Revenue Growth in the Second Quarter
SPOKANE VALLEY, Wash., Oct. 29, 2019 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended September 28, 2019.
For the first quarter of fiscal year 2020, Key Tronic reported total revenue of $105.3 million, compared to $127.5 million in the same period of fiscal year 2019. An unanticipatedly strong increase in the demand for sheet metals from both new and existing customers caused workload balancing challenges. The resulting capacity constraints caused production delays and were the primary reason for the unexpected shortfall in revenue.
Despite the revenue shortfall, margin percentages improved when compared with the prior year on far less revenue as a result of favorable product mix and productivity efficiencies. For the first quarter of fiscal year 2020, gross margin was 8.8% and operating margin was 2.4%, compared to 7.5% and 2.0%, respectively, in the same period of fiscal 2019. For the first quarter of fiscal year 2020, net income was $1.6 million or $0.14 per share, compared to net income of $1.6 million or $0.15 per share for the same period of fiscal year 2019.
“As the result of concerns over tariffs and trade tension between the US and China, a number of existing and new customers have accelerated their plans to transition from China facilities to our expanding facilities in Mexico and Vietnam,” said Craig Gates, President and Chief Executive Officer. “While this transition and increasing demands in sheet metals caused delays in production during the first quarter, we see this trend as an important and very positive sign over the longer term, as customers see the increasing advantages of our North American and Vietnam based production. We continue to invest in enabling and accelerating this transition as we capitalize on the successful ramp up of our Vietnam facility.
“During the first quarter of fiscal 2020, we continued to win significant new business from EMS competitors and from existing customers, including new programs involving electric vehicle charging infrastructure, LED lighting, oil and gas sensors, and flight controls for experimental aircrafts. To prepare for growth in coming quarters, we continue to invest in new capacity in our Mexico, US and new Vietnam facilities, including a significant increase in our sheet metal capacity to address demand. We remain optimistic about our opportunities for growth in fiscal 2020 and beyond.”
For the second quarter of fiscal year 2020, the Company expects to report revenue in the range of $117 million to $122 million, and earnings in the range of $0.13 to $0.18 per diluted share. These expected results assume an effective tax rate of 20% in the quarter.
Key Tronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) on October 29, 2019. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 800-367-2403 or +1-334-777-6978 (Access Code: 7136826). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 7136826).
About Key Tronic
Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China, and Vietnam. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world’s leading original equipment manufacturers. For more information about Key Tronic visit: www.keytronic.com.
Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all passages containing verbs such as aims, anticipates, believes, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs. Forward-looking statements also include other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this release include, without limitation, the Company’s statements regarding its expectations with respect to quarterly and yearly revenue and earnings during periods of fiscal year 2020, effects of recent tax reform, tariff measures, and trade tensions, business from new customers and new programs, improvement in supply chain deliveries, impairment charges of goodwill and intangibles, and operational streamlining. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to the future of the global economic environment and its impact on our customers and suppliers; the availability of parts from the supply chain; the accuracy of customers’ forecasts; success of customers’ programs; timing and effectiveness of ramping of new programs; development and success of new-product introductions; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of tax reform and related activities and the other risks and uncertainties detailed from time to time in the Company’s SEC filings.
|KEY TRONIC CORPORATION AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF INCOME|
|(In thousands, except per share amounts)|
|Three Months Ended|
|September 28, 2019||September 29, 2018|
|Cost of sales||96,012||117,939|
|Research, development and engineering expenses||1,660||1,700|
|Selling, general and administrative expenses||5,074||5,288|
|Impairment of goodwill and intangibles||—||—|
|Total operating expenses||6,734||6,988|
|Interest expense, net||710||677|
|Income before income taxes||1,829||1,868|
|Income tax provision||277||275|
|Net income per share — Basic||$||0.14||$||0.15|
|Weighted average shares outstanding — Basic||10,760||10,760|
|Net income per share — Diluted||$||0.14||$||0.15|
|Weighted average shares outstanding — Diluted||10,805||10,979|
|KEY TRONIC CORPORATION AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS|
|September 28, 2019||June 29, 2019|
|Cash and cash equivalents||$||504||$||601|
|Trade receivables, net of allowance for doubtful accounts of $58 and $58||66,781||58,429|
|Total current assets||224,519||198,099|
|Property, plant and equipment, net||29,984||29,413|
|Operating lease right-of-use assets, net||16,056||—|
|Deferred income tax asset||8,476||7,840|
|Other intangible assets, net||—||657|
|Total other assets||10,568||10,798|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Accrued compensation and vacation||7,359||6,759|
|Current portion of debt, net||7,508||5,841|
|Total current liabilities||114,827||93,404|
|Operating lease liabilities||10,885||—|
|Total long-term liabilities||51,162||30,447|
|Common stock, no par value—shares authorized 25,000; issued and outstanding
10,760 and 10,760 shares, respectively
|Accumulated other comprehensive gain||1,479||2,426|
|Total shareholders’ equity||115,138||114,459|
|Total liabilities and shareholders’ equity||$||281,127||$||238,310|
|CONTACTS:||Brett Larsen||Michael Newman|
|Chief Financial Officer||Investor Relations|
|Key Tronic Corporation||StreetConnect|
|(509) 927-5500||(206) 729-3625|