KTCC KeyTronic Corporation

New Customer Wins;Investing for Growth in Coming Quarters

 Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 31, 2016.

For the second quarter of fiscal year 2017, Key Tronic reported total revenue of $118.5 million, up 2% from $116.4 million in the same period of fiscal year 2016. For the first six months of fiscal year 2017, total revenue was $235.7 million, compared to $242.6 million in the same period of fiscal year 2016.

Net income for the second quarter of fiscal year 2017 was $1.5 million or $0.14 per share, compared to $1.8 million or $0.16 per share for the second quarter of fiscal year 2016. For the first six months of fiscal year 2017, net income was $3.3 million or $0.30 per share, up 27% from $2.6 million or $0.23 per share for the same period of fiscal year 2016.

For the second quarter of fiscal year 2017, gross margin was 8.1% and operating margin was 2.1%, compared to 7.8% and 2.1%, respectively, in the same period of fiscal 2016.

“During the second quarter of fiscal 2017, our new programs continued to ramp, more than offsetting a modest slowdown in demand from a few longstanding customers, which is consistent with EMS industry-wide experience,” said Craig Gates, President and Chief Executive Officer. “At the same time, we captured significant new business from other EMS competitors, including established programs that will begin generating revenue before the end of fiscal 2017.”

“We recently won new programs involving inventory automation systems and commercial lighting. Moving into the third quarter, we continue to see a robust pipeline of potential new business and our new programs continue to ramp, effectively offsetting softening sales demand in some current programs. In preparation for future growth, we continue to invest in expanding our SMT, sheet metal and plastic molding capabilities.”

Business Outlook

For the third quarter of fiscal year 2017, the Company expects to report revenue in the range of $115 million to $120 million, and earnings in the range of $0.11 to $0.16 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 888-224-1075 or +1-913-312-0977 (Access Code: 7228474).  A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 7228474).

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 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								Six Months Ended
	December 31, 2016				December 26, 2015				December 31, 2016				December 26, 2015
Net sales	$	118,517			$	116,403			$	235,652			$	242,612
Cost of sales	108,905				107,293				216,331				224,583
Gross profit	9,612				9,110				19,321				18,029
Research, development and engineering expenses	1,603				1,506				3,187				3,062
Selling, general and administrative expenses	5,462				5,201				10,797				10,784
Total operating expenses	7,065				6,707				13,984				13,846
Operating income	2,547				2,403				5,337				4,183
Interest expense, net	552				521				1,141				1,054
Income before income taxes	1,995				1,882				4,196				3,129
Income tax provision	467				95				876				525
Net income	$	1,528			$	1,787			$	3,320			$	2,604
Net income per share — Basic	$	0.14			$	0.17			$	0.31			$	0.24
Weighted average shares outstanding — Basic	10,758				10,710				10,753				10,708
Net income per share — Diluted	$	0.14			$	0.16			$	0.30			$	0.23
Weighted average shares outstanding — Diluted	10,968				11,418				10,919				11,279

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		December 31, 2016				July 2, 2016
ASSETS
Current assets:
Cash and cash equivalents		$	1,280			$	1,018
Trade receivables, net of allowance for doubtful accounts of $134 and $135		66,444				61,678
Inventories		98,106				107,006
Other		10,892				11,757
Total current assets		176,722				181,459
Property, plant and equipment, net		29,938				27,925
Other assets:
Deferred income tax asset		11,050				8,982
Goodwill		9,957				9,957
Other intangible assets		5,364				5,928
Other		1,471				1,673
Total other assets		27,842				26,540
Total assets		$	234,502			$	235,924
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	51,178			$	58,967
Accrued compensation and vacation		7,695				9,571
Current portion of debt		5,841				5,000
Other		14,292				10,572
Total current liabilities		79,006				84,110
Long-term liabilities:
Term loan - long term		21,693				21,250
Revolving loan		18,930				18,073
Other long-term obligations		7,998				6,909
Total long-term liabilities		48,621				46,232
Total liabilities		127,627				130,342
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,758 and 10,725 shares, respectively		45,466				45,227
Retained earnings		71,248				67,928
Accumulated other comprehensive loss		(9,839		)		(7,573		)
Total shareholders’ equity		106,875				105,582
Total liabilities and shareholders’ equity		$	234,502			$	235,924

 

CONTACTS:

Brett Larsen
Chief Financial Officer
Key Tronic Corporation
(509) 927-5500

Michael Newman
Investor Relations
StreetConnect
(206) 729-3625