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Key Tronic Corporation Announces Results for the Second Quarter of Fiscal Year 2019

1248 Days ago

Strong Year-over-year Revenue and Earnings Growth; Continued Diversification of Global Manufacturing and Customer Base

SPOKANE VALLEY, Wash., Jan. 29, 2019 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 29, 2018.

For the second quarter of fiscal year 2019, Key Tronic reported total revenue of $123.0 million, up 10% from $111.7 million in the same period of fiscal year 2018. For the first six months of fiscal year 2019, total revenue was $250.5 million, up 13% from $220.9 million in the same period of fiscal year 2018. The results for the first six months of fiscal year 2019 included approximately $7.2 million in accelerated revenue as a result of the Company adopting the new revenue recognition standard.

For the second quarter of fiscal year 2019, the Company had net income of $1.6 million or $0.15 per share, compared to net loss of $(0.2) million or $(0.02) per share for the same period of fiscal year 2018. For the first six months of fiscal year 2019, net income was $3.2 million or $0.29 per share, up from $0.2 million or $0.02 per share for the same period of fiscal year 2018.

For the second quarter of fiscal year 2019, gross margin was 8.0% and operating margin was 2.1%, up from 7.9% and 1.5%, respectively, in the same period of fiscal 2018.

“For the second quarter of fiscal 2019, our new programs continued to ramp, driving growing revenue, improving margins and increased profitability,” said Craig Gates, President and Chief Executive Officer. “Despite the continued industry-wide shortages for key components, we have made the necessary adjustments for adequate lead-times across our supply chain and have brought inventory levels more in line with revenue levels.”

“During the quarter, we continued to win new business from EMS competitors, including new programs involving industrial cleaning equipment, express delivery services and industrial monitoring systems. We believe the tariffs on production in China have made our North American-based production more appealing to potential new customers. Moreover, our plans to add additional capacity in Vietnam will significantly reduce production costs, diversify our global manufacturing base and provide an additional hedge against uncertainty in a lingering or future trade war with China.”

Business Outlook

For the third quarter of fiscal year 2019, the Company expects to report revenue in the range of $120 million to $125 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 today to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern). A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 888-204-4368 or +1-323-794-2423 (Access Code: 4555337).  A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 4555337).

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 and China. 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 revenue and earnings during periods of fiscal year 2019, effects of recent tax reform measures, business from new customers and programs, and impacts from legal proceedings 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; 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   Six Months Ended
  December 29, 2018   December 30, 2017   December 29, 2018   December 30, 2017
Net sales $ 123,037     $ 111,725     $ 250,509     $ 220,942  
Cost of sales 113,157     102,925     231,096     204,297  
Gross profit 9,880     8,800     19,413     16,645  
Research, development and engineering expenses 1,857     1,495     3,557     3,005  
Selling, general and administrative expenses 5,399     5,654     10,687     10,825  
Total operating expenses 7,256     7,149     14,244     13,830  
Operating income 2,624     1,651     5,169     2,815  
Interest expense, net 708     616     1,385     1,210  
Income before income taxes 1,916     1,035     3,784     1,605  
Income tax provision 327     1,259     602     1,397  
Net income (loss) $ 1,589     $ (224 )   $ 3,182     $ 208  
Net income (loss) per share — Basic $ 0.15     $ (0.02 )   $ 0.30     $ 0.02  
Weighted average shares outstanding — Basic 10,760     10,760     10,760     10,760  
Net income (loss) per share — Diluted $ 0.15     $ (0.02 )   $ 0.29     $ 0.02  
Weighted average shares outstanding — Diluted 10,881     10,760     10,986     10,760  

(In thousands)
  December 29, 2018   June 30, 2018
Current assets:      
Cash and cash equivalents $ 192     $ 343  
Trade receivables 72,248     70,262  
Contract assets 19,118      
Inventories, net 91,615     110,315  
Other 18,264     13,600  
Total current assets 201,437     194,520  
Property, plant and equipment, net 27,903     27,548  
Other assets:      
Deferred income tax asset 7,256     7,882  
Goodwill 9,957     9,957  
Other intangible assets, net 3,300     3,726  
Other 2,976     2,895  
Total other assets 23,489     24,460  
Total assets $ 252,829     $ 246,528  
Current liabilities:      
Accounts payable $ 73,094     $ 76,198  
Accrued compensation and vacation 7,755     8,105  
Current portion of debt, net 5,841     5,841  
Other 7,048     8,769  
Total current liabilities 93,738     98,913  
Long-term liabilities:      
Term loans 10,011     12,932  
Revolving loan 24,378     16,222  
Other long-term obligations 476     380  
Total long-term liabilities 34,865     29,534  
Total liabilities 128,603     128,447  
Shareholders’ equity:      
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,760 and 10,760 shares, respectively 46,518     46,244  
Retained earnings 76,517     72,806  
Accumulated other comprehensive gain (loss) 1,191     (969 )
Total shareholders’ equity 124,226     118,081  
Total liabilities and shareholders’ equity $ 252,829     $ 246,528  

CONTACTS:   Brett Larsen   Michael Newman
    Chief Financial Officer   Investor Relations
    Key Tronic Corporation   StreetConnect
    (509) 927-5500   (206) 729-3625

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