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Key Tronic Corporation Announces Results for the First Quarter of Fiscal Year 2016

SPOKANE VALLEY, Wash., Oct. 27, 2015 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the three months ended September 26, 2015.

For the first quarter of fiscal year 2016, Key Tronic reported total revenue of $126.2 million, up 46% from $86.3 million in the same period of fiscal year 2015. Results for the first quarters of fiscal years 2016 and 2015 included approximately $35 million and $11 million, respectively, in revenue from the acquisition of Ayrshire.

As previously announced, the Company had approximately $2.0 million of unanticipated expenses and erosion of gross margin related to a single longstanding customer that requested a significant and immediate increase in production volumes for a new program at the start of the quarter and then later abruptly cancelled those orders.

For the first quarter of fiscal year 2016, gross margin was 7.1% and operating margin was 1.4%, compared to 4.9% and (2.0)%, respectively, in the same period of fiscal year 2015. Net income for the first quarter of fiscal year 2016 was $0.8 million or $0.07 per share, up from $(1.5) million or $(0.14) per share for the first quarter of fiscal year 2015.

“While the sudden and unanticipated impact from the unusual volatility in demand of a certain customer in the first quarter was disappointing, our new programs continue to ramp and we continue to diversify our customer base,” said Craig Gates, President and Chief Executive Officer. “In the first quarter of fiscal year 2016, our top five customers represented 47% of our total revenue compared to 50% a year ago and 64% two years ago. We also continued to see a healthy pipeline of potential new business, winning new programs involving telecommunications and security equipment.

“In the second and third quarters, we expect the decline from the same longstanding customer to continue to impact our growth. By the fourth quarter, we expect the lost revenue from this program to be more than offset by new revenue from the continued ramp of new programs. At the same time, we anticipate increased operating efficiencies and profitability in coming periods.”

Business Outlook

For the second quarter of fiscal year 2016, the Company expects to report revenue in the range of $115 million to $120 million, and earnings in the range of $0.08 to $0.13 per diluted share. These expected results assume an effective tax rate of 35%.

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 888-438-5453 or +1-719-457-1512 (Access Code: 368895). A replay will be available by calling 888-203-1112 or +1 719-457-0820 (Access Code: 368895). A replay will also be available on the Company’s Web site.

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 2016. 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 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 (LOSS)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 26, 2015 September 27, 2014
Net sales$126,209 $86,342
Cost of sales117,290 82,104
Gross profit8,919 4,238
Research, development and engineering expenses1,556 1,336
Selling, general and administrative expenses5,583 4,607
Total operating expenses7,139 5,943
Operating income (loss)1,780 (1,705)
Interest expense, net533 189
Income (loss) before income taxes1,247 (1,894)
Income tax provision (benefit)430 (371)
Net income (loss)$817 $(1,523)
Net income (loss) per share — Basic$0.08 $(0.14)
Weighted average shares outstanding — Basic10,706 10,548
Net income (loss) per share — Diluted$0.07 $(0.14)
Weighted average shares outstanding — Diluted11,391 10,548


KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 26, 2015 June 27, 2015
ASSETS
Current assets:
Cash and cash equivalents $140 $372
Trade receivables, net of allowance for doubtful accounts of $229 and $97 73,761 72,852
Inventories 100,800 91,594
Deferred income tax asset 6,245 6,643
Other 15,515 13,646
Total current assets 196,461 185,107
Property, plant and equipment, net 26,898 26,974
Other assets:
Deferred income tax asset 2,637 80
Goodwill 9,957 9,957
Other intangible assets 6,774 7,055
Other 1,573 1,621
Total other assets 20,941 18,713
Total assets $244,300 $230,794
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable $74,957 $61,528
Accrued compensation and vacation 7,456 9,467
Current portion of debt 5,000 5,000
Other 13,239 10,794
Total current liabilities 100,652 86,789
Long-term liabilities:
Term loan - long term 25,000 26,250
Revolving loan 12,131 11,631
Deferred income tax liability 501
Other long-term obligations 7,401 4,855
Total long-term liabilities 44,532 43,237
Total liabilities 145,184 130,026
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,707 and 10,706 shares, respectively 44,647 44,136
Retained earnings 62,212 61,395
Accumulated other comprehensive loss (7,743) (4,763)
Total shareholders’ equity 99,116 100,768
Total liabilities and shareholders’ equity $244,300 $230,794




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

Source:Key Tronic Corporation