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Key Tronic Corporation Announces Results for the First Quarter of Fiscal Year 2020

975 Days ago

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.”

Business Outlook

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.

Conference Call

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.

(In thousands, except per share amounts)
  Three Months Ended
  September 28, 2019   September 29, 2018
Net sales $ 105,285     $ 127,472  
Cost of sales 96,012     117,939  
Gross profit 9,273     9,533  
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  
Operating income 2,539     2,545  
Interest expense, net 710     677  
Income before income taxes 1,829     1,868  
Income tax provision 277     275  
Net income $ 1,552     $ 1,593  
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  

(In thousands)
  September 28, 2019   June 29, 2019
Current assets:      
Cash and cash equivalents $ 504     $ 601  
Trade receivables, net of allowance for doubtful accounts of $58 and $58 66,781     58,429  
Contract assets 21,762     22,161  
Inventories, net 117,737     100,431  
Other 17,735     16,477  
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      
Other assets:      
Deferred income tax asset 8,476     7,840  
Other intangible assets, net     657  
Other 2,092     2,301  
Total other assets 10,568     10,798  
Total assets $ 281,127     $ 238,310  
Current liabilities:      
Accounts payable $ 87,214     $ 73,571  
Accrued compensation and vacation 7,359     6,759  
Current portion of debt, net 7,508     5,841  
Other 12,746     7,233  
Total current liabilities 114,827     93,404  
Long-term liabilities:      
Term loans 8,964     7,091  
Revolving loan 31,313     23,356  
Operating lease liabilities 10,885      
Total long-term liabilities 51,162     30,447  
Total liabilities 165,989     123,851  
Shareholders’ equity:      
Common stock, no par value—shares authorized 25,000; issued and outstanding
10,760 and 10,760 shares, respectively
46,754     46,680  
Retained earnings 66,905     65,353  
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

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