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Key Tronic Corporation Announces Results for the Third Quarter of Fiscal Year 2017

Winning Established Programs from Competitors;
Investing for Growth in Coming Fiscal Year

/EIN News/ -- SPOKANE VALLEY, Wash., May 02, 2017 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended April 1, 2017.

For the third quarter of fiscal year 2017, Key Tronic reported total revenue of $113.6 million, compared to $118.4 million in the same period of fiscal year 2016. For the first nine months of fiscal year 2017, total revenue was $349.3 million, compared to $361.1 million in the same period of fiscal year 2016.

Net income for the third quarter of fiscal year 2017 was $1.0 million or $0.09 per share, compared to $1.8 million or $0.16 per share for the third quarter of fiscal year 2016. For the first nine months of fiscal year 2017, net income was $4.3 million or $0.39 per share, compared to $4.4 million or $0.39 per share for the same period of fiscal year 2016.

For the third quarter of fiscal year 2017, gross margin was 8.0% and operating margin was 1.6%, compared to 8.4% and 2.3%, respectively, in the same period of fiscal 2016.

“During the third quarter of fiscal 2017, our new programs continued to ramp, despite a slowdown in demand from a few longstanding customers, which has also impacted our margins,” said Craig Gates, President and Chief Executive Officer. “At the same time, we continued to ramp significant new business from other EMS competitors that we expect will set up revenue growth in fiscal 2018.”

“We recently won two new programs involving electronic scheduling devices and pool controllers. Moving into the fourth quarter, we continue to see a strong pipeline of potential new business and our new programs continue to ramp, offsetting softening demand for a few current programs. At the same time, we continue to invest in expanding our SMT, sheet metal and plastic molding capabilities in preparation for future growth.”

Business Outlook

For the fourth quarter of fiscal year 2017, the Company expects to report revenue in the range of $112 million to $117 million, and earnings in the range of $0.10 to $0.15 per diluted share. These expected results assume an effective tax rate of 25% 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 888-221-3894 or +1-913-312-0683 (Access Code: 8039313).  A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 8039313).

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 or targets 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 fiscal year 2017. 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, legal and regulatory 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 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; 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   Nine Months Ended
  April 1, 2017   April 2, 2016   April 1, 2017   April 2, 2016
Net sales $ 113,601     $ 118,448     $ 349,253     $ 361,060  
Cost of sales 104,462     108,493     320,793     333,076  
Gross profit 9,139     9,955     28,460     27,984  
Research, development and engineering expenses 1,569     1,634     4,756     4,696  
Selling, general and administrative expenses 5,721     5,564     16,518     16,348  
Total operating expenses 7,290     7,198     21,274     21,044  
Operating income 1,849     2,757     7,186     6,940  
Interest expense, net 566     620     1,707     1,674  
Income before income taxes 1,283     2,137     5,479     5,266  
Income tax provision 322     354     1,198     879  
Net income $ 961     $ 1,783     $ 4,281     $ 4,387  
Net income per share — Basic $ 0.09     $ 0.17     $ 0.40     $ 0.41  
Weighted average shares outstanding — Basic 10,759     10,711     10,755     10,709  
Net income per share — Diluted $ 0.09     $ 0.16     $ 0.39     $ 0.39  
Weighted average shares outstanding — Diluted 10,957     11,068     10,916     11,298  
                       


KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
         
    April 1, 2017   July 2, 2016
ASSETS        
Current assets:        
Cash and cash equivalents   $ 911     $ 1,018  
Trade receivables, net of allowance for doubtful accounts of $138 and $135   62,331     61,678  
Inventories   98,806     107,006  
Other   11,233     11,757  
Total current assets   173,281     181,459  
Property, plant and equipment, net   31,030     27,925  
Other assets:        
Deferred income tax asset   8,507     8,982  
Goodwill   9,957     9,957  
Other intangible assets   5,082     5,928  
Other   1,821     1,673  
Total other assets   25,367     26,540  
Total assets   $ 229,678     $ 235,924  
LIABILITIES AND SHAREHOLDERS EQUITY        
Current liabilities:        
Accounts payable   $ 49,390     $ 58,967  
Accrued compensation and vacation   7,967     9,571  
Current portion of debt   5,841     5,000  
Other   12,167     10,572  
Total current liabilities   75,365     84,110  
Long-term liabilities:        
Term loan - long term   20,233     21,250  
Revolving loan   18,233     18,073  
Other long-term obligations   3,085     6,909  
Total long-term liabilities   41,551     46,232  
Total liabilities   116,916     130,342  
Shareholders’ equity:        
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,760 and 10,725 shares, respectively   45,629     45,227  
Retained earnings   72,209     67,928  
Accumulated other comprehensive loss   (5,076 )   (7,573 )
Total shareholders’ equity   112,762     105,582  
Total liabilities and shareholders’ equity   $ 229,678     $ 235,924  
                 
CONTACTS:
                    Brett Larsen
                    Chief Financial Officer
                    Key Tronic Corporation
                    (509) 927-5500
                    
                    Michael Newman
                    Investor Relations
                    StreetConnect
                    (206) 729-3625

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