Growth in Revenue and Earnings; Continued Customer Diversification
SPOKANE VALLEY, Wash., Oct. 30, 2018 (GLOBE NEWSWIRE) -- Key Tronic Corporation ( KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended September 29, 2018.
For the first quarter of fiscal year 2019, Key Tronic reported total revenue of $127.5 million, up from $117.0 million in the prior quarter and from $109.2 million in the same period of fiscal year 2018.
For the first quarter of fiscal year 2019, the Company had net income of $1.6 million or $0.15 per share, compared to net income of $0.4 million or $0.04 per share for the same period of fiscal year 2018. For the first quarter of fiscal year 2019, gross margin was 7.5% and operating margin was 2.0%, compared to 7.2% and 1.1%, respectively, in the same period of fiscal 2018. During the first quarter of fiscal year 2019, margins were adversely impacted by rising utility costs in Mexico.
“For the first quarter of fiscal 2019, our new programs continued to ramp, including a strong contribution from Skybell Technologies, despite the continued industry-wide supply chain issues for key components that hampered our growth. During the first quarter, results were adversely impacted by rising utility costs in Mexico and increasing labor costs,” said Craig Gates, President and Chief Executive Officer. “However, we also continued to win new business from EMS competitors, including new programs involving industrial motion control products, power metering, and fire protection systems.
"Moving into the second quarter of fiscal year 2019, although we continue to face industry-wide supply chain issues and increased production costs, we are making significant investments in new equipment and processes to be more productive in both our Mexico and U.S. facilities in anticipation of future growth. Although the details of the tariff situation remain unclear, it seems highly probable that the final outcome will be favorable for our U.S. and Mexican operations. Additionally, customers utilizing our facility in China, who are considering repatriating their business back to North America, are finding our centralized systems and controls to be highly advantageous. For these customers, a move back to our facilities in Mexico or the U.S. can be easily implemented.”
During the quarter the Company adopted the new revenue recognition standard, ASU 2014-09 Revenue from Contracts with Customers (Topic 606), beginning July 1, 2018. The impact of the adoption resulted in the recognition of $4.9 million in accelerated revenue as the standard requires. This new standard is not expected to materially affect future quarters.
Business Outlook
For the second 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 877-260-1479 or +1-334-323-0522 (Access Code: 1785716). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 1785716).
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.
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | |||||||
| September 29, 2018 | September 30, 2017 | ||||||
| Net sales | $ | 127,472 | $ | 109,217 | |||
| Cost of sales | 117,939 | 101,372 | |||||
| Gross profit | 9,533 | 7,845 | |||||
| Research, development and engineering expenses | 1,700 | 1,510 | |||||
| Selling, general and administrative expenses | 5,288 | 5,171 | |||||
| Total operating expenses | 6,988 | 6,681 | |||||
| Operating income | 2,545 | 1,164 | |||||
| Interest expense, net | 677 | 594 | |||||
| Income before income taxes | 1,868 | 570 | |||||
| Income tax provision | 275 | 138 | |||||
| Net income | $ | 1,593 | $ | 432 | |||
| Net income per share — Basic | $ | 0.15 | $ | 0.04 | |||
| Weighted average shares outstanding — Basic | 10,760 | 10,760 | |||||
| Net income per share — Diluted | $ | 0.15 | $ | 0.04 | |||
| Weighted average shares outstanding — Diluted | 10,979 | 10,760 | |||||
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| September 29, 2018 | June 30, 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,359 | $ | 343 | ||||
| Trade receivables | 68,133 | 70,262 | ||||||
| Contract assets | 16,772 | — | ||||||
| Inventories, net | 99,534 | 110,315 | ||||||
| Other | 17,026 | 13,600 | ||||||
| Total current assets | 202,824 | 194,520 | ||||||
| Property, plant and equipment, net | 27,606 | 27,548 | ||||||
| Other assets: | ||||||||
| Deferred income tax asset | 7,145 | 7,882 | ||||||
| Goodwill | 9,957 | 9,957 | ||||||
| Other intangible assets, net | 3,496 | 3,726 | ||||||
| Other | 3,490 | 2,895 | ||||||
| Total other assets | 24,088 | 24,460 | ||||||
| Total assets | $ | 254,518 | $ | 246,528 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 81,117 | $ | 76,198 | ||||
| Accrued compensation and vacation | 7,199 | 8,105 | ||||||
| Current portion of debt, net | 5,841 | 5,841 | ||||||
| Other | 6,977 | 8,769 | ||||||
| Total current liabilities | 101,134 | 98,913 | ||||||
| Long-term liabilities: | ||||||||
| Term loans | 11,472 | 12,932 | ||||||
| Revolving loan | 18,170 | 16,222 | ||||||
| Other long-term obligations | 322 | 380 | ||||||
| Total long-term liabilities | 29,964 | 29,534 | ||||||
| Total liabilities | 131,098 | 128,447 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value—shares authorized 25,000; issued and outstanding 10,760 and 10,760 shares, respectively | 46,412 | 46,244 | ||||||
| Retained earnings | 74,928 | 72,806 | ||||||
| Accumulated other comprehensive gain (loss) | 2,080 | (969 | ) | |||||
| Total shareholders’ equity | 123,420 | 118,081 | ||||||
| Total liabilities and shareholders’ equity | $ | 254,518 | $ | 246,528 | ||||
| CONTACTS: | Brett Larsen | Michael Newman | ||
| Chief Financial Officer | Investor Relations | |||
| Key Tronic Corporation | StreetConnect | |||
| (509) 927-5500 | (206) 729-3625 |
