Key Tronic Corporation (Nasdaq:
KTCC), a provider of electronic manufacturing services (EMS), today
announced its results for the quarter ended April 3, 2021.
Reporting the results for the third quarter of fiscal 2021 was
delayed until the Audit Committee of the Company’s Board of
Directors completed its previously announced internal
investigation.
For the third quarter of fiscal year 2021, Key Tronic reported
revenue of approximately $134.6 million, up 21% from $111.5 million
in the same period of fiscal year 2020. Customer demand has
remained strong and new and existing customers have increased their
backlog. In the third quarter, customer demand exceeded $150
million; the highest in the Company’s history. For the first nine
months of fiscal year 2021, total revenue was $386.1 million, up
16% from $333.5 million in the same period of fiscal year 2020.
At the same time, results for the third quarter of fiscal year
2021 were constrained by the following: a tightening worldwide
supply chain and transportation and logistics issues which delayed
the arrival of key components; causing both factory downtime and
overtime expenses; legal expenses related to the previously
disclosed internal investigation of approximately $0.7 million; a
four-day closure of our Mexico facilities during a late winter
storm that caused power disruptions in the region; and continued
but lessening expenses related to COVID-19.
For the third quarter of fiscal year 2021, net income was $0.9
million or $0.08 per share, comparable to the same period of fiscal
year 2020. The lower than anticipated earnings for the third
quarter of fiscal 2021 are primarily a result of a tax true up of
federal research and development credits of $0.4 million. For the
first nine months of fiscal year 2021, net income was $4.2 million
or $0.38 per share, up from $3.3 million or $0.30 per share for the
same period of fiscal year 2020.
During the third quarter, the Company was awarded a customer
program to build consumer products that could provide up to $30
million or more in annual revenue when it reaches full production.
This new program is expected to commence production in the latter
half of fiscal year 2022, and is another example of a customer
onshoring an existing program to manage logistic risk. The
production process is highly automated and involves a high level of
partnership with the customer to build out the production equipment
in the coming months. In support of the new program, Key Tronic
expanded its facility footprint at its Juarez, Mexico campus by
leasing an additional contiguous building of 145,000 square
feet.
“We’re pleased with the successful launch of new programs, and
our rebounding and increasing customer demand in fiscal 2021,” said
Craig Gates, President and Chief Executive Officer. “We are
currently ramping a number of new programs and, while production
has been hindered by limited supply of key components, we are
extremely encouraged by both new customer and new program
wins.”
“Moving into fiscal 2022, the COVID-19 crisis, component
shortages and logistic delays continue to present macroeconomic
along with multiple business challenges, but we continue to see the
favorable trend of contract manufacturing returning to North
America. We are excited to expand our Mexico operations with new
program awards, and also to see our domestic sites benefiting from
customers’ onshoring initiatives. We expect continued strong
revenue growth in the coming quarters and continue to invest in new
capacity to prepare for long-term growth.”
Business Outlook
For the fourth quarter of fiscal 2021, Key Tronic expects to
report revenue in the range of $120 million to $125 million, as
delays in the supply of key components for the Company’s business
continue to significantly limit production. As a result of
additional legal and internal review costs associated with the
internal investigation, we expect that earnings for the fourth
quarter of fiscal 2021 will be below the previous guidance range
provided on May 4, 2021, but updated guidance for earnings is not
available at this time. We expect to release final results for the
fourth quarter in the coming weeks.
Conference Call
As a result of the delay in reporting the results for the third
quarter of fiscal 2021, the Company expects to host a conference
call in August to discuss both its third quarter and fourth quarter
results for fiscal 2021.
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, China and Vietnam. 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.
Forward-Looking Statements
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, but are not
limited to those including such words as aims, anticipates,
believes, continues, could, estimates, expects, hopes, intends,
plans, predicts, projects, targets, or will, similar verbs, or
nouns corresponding to such verbs, which may be forward looking.
Forward-looking statements also include other passages that are
relevant to expected future events, performances, and actions or
that can only be fully evaluated by events that will occur in the
future. Forward-looking statements in this press release include,
without limitation, the Company’s statements regarding its
expectations with respect to financial conditions and results,
including revenue, earnings, legal and internal review expenses and
further costs during fourth quarter of fiscal 2021; expenses
related to, and estimated recovery from, the COVID-19 health
pandemic; demand from new and existing customers; and key
components supply and other supply chain and transportation and
logistics issues. 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: risks relating to the internal investigation by the
Audit Committee, including legal and internal review costs, the
risk of legal proceedings or government investigations relating to
the subject of the internal investigation or related matters; the
future of the global economic environment and its impact on our
customers and suppliers, particularly during the COVID-19 health
crisis; the availability of components from the supply chain; the
availability of a healthy workforce; the accuracy of suppliers’ and
customers’ forecasts; development and success of customers’
programs and products; 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 new governmental legislation and
regulation, including tax reform, tariffs and related activities,
such trade negotiations and other risks including those related to
COVID-19 response; and other factors, risks, and uncertainties
detailed from time to time in the Company’s SEC filings.
KEY TRONIC CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In
thousands, except per share amounts)(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
April 3, 2021 |
|
March 28, 2020 |
|
April 3, 2021 |
|
March 28, 2020 |
Net sales |
$ |
134,600 |
|
|
$ |
111,455 |
|
|
$ |
386,069 |
|
|
$ |
333,462 |
|
Cost of sales |
123,504 |
|
|
102,207 |
|
|
354,336 |
|
|
306,819 |
|
Gross profit |
11,096 |
|
|
9,248 |
|
|
31,733 |
|
|
26,643 |
|
Research, development and
engineering expenses |
2,655 |
|
|
1,749 |
|
|
7,292 |
|
|
5,129 |
|
Selling, general and
administrative expenses |
5,865 |
|
|
5,735 |
|
|
16,349 |
|
|
15,713 |
|
Total operating expenses |
8,520 |
|
|
7,484 |
|
|
23,641 |
|
|
20,842 |
|
Operating income |
2,576 |
|
|
1,764 |
|
|
8,092 |
|
|
5,801 |
|
Interest expense, net |
1,020 |
|
|
754 |
|
|
2,549 |
|
|
1,988 |
|
Income before income taxes |
1,556 |
|
|
1,010 |
|
|
5,543 |
|
|
3,813 |
|
Income tax provision |
689 |
|
|
100 |
|
|
1,377 |
|
|
527 |
|
Net income |
$ |
867 |
|
|
$ |
910 |
|
|
$ |
4,166 |
|
|
$ |
3,286 |
|
Net income per share — Basic |
$ |
0.08 |
|
|
$ |
0.08 |
|
|
$ |
0.39 |
|
|
$ |
0.31 |
|
Weighted average shares outstanding — Basic |
10,760 |
|
|
10,760 |
|
|
10,760 |
|
|
10,760 |
|
Net income per share — Diluted |
$ |
0.08 |
|
|
$ |
0.08 |
|
|
$ |
0.38 |
|
|
$ |
0.30 |
|
Weighted average shares outstanding — Diluted |
11,429 |
|
|
10,885 |
|
|
11,040 |
|
|
10,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
KEY TRONIC CORPORATION AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In
thousands)(Unaudited)
|
April 3, 2021 |
|
June 27, 2020 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
1,281 |
|
|
$ |
553 |
|
Trade receivables, net of allowance for doubtful accounts of $247
and $609 |
112,914 |
|
|
86,123 |
|
Contract assets |
19,435 |
|
|
23,753 |
|
Inventories, net |
130,396 |
|
|
115,020 |
|
Other |
19,750 |
|
|
17,315 |
|
Total current assets |
283,776 |
|
|
242,764 |
|
Property, plant and equipment,
net |
36,622 |
|
|
31,764 |
|
Operating lease right-of-use
assets, net |
16,869 |
|
|
17,568 |
|
Other assets: |
|
|
|
Deferred income tax asset |
8,258 |
|
|
10,178 |
|
Other |
1,415 |
|
|
2,587 |
|
Total other assets |
9,673 |
|
|
12,765 |
|
Total assets |
$ |
346,940 |
|
|
$ |
304,861 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
83,133 |
|
|
$ |
80,204 |
|
Accrued compensation and vacation |
9,361 |
|
|
10,428 |
|
Current portion of debt, net |
1,706 |
|
|
7,508 |
|
Other |
18,110 |
|
|
14,079 |
|
Total current liabilities |
112,310 |
|
|
112,219 |
|
Long-term liabilities: |
|
|
|
Term loans |
8,771 |
|
|
3,258 |
|
Revolving loan |
89,439 |
|
|
60,094 |
|
Operating lease liabilities |
11,761 |
|
|
12,624 |
|
Deferred income tax liability |
153 |
|
|
234 |
|
Other long-term obligations |
1,046 |
|
|
875 |
|
Total long-term liabilities |
111,170 |
|
|
77,085 |
|
Total liabilities |
223,480 |
|
|
189,304 |
|
Shareholders’ equity: |
|
|
|
Common stock, no par value—shares authorized 25,000; issued and
outstanding 10,761 and 10,760 shares, respectively |
47,121 |
|
|
46,946 |
|
Retained earnings |
74,277 |
|
|
70,111 |
|
Accumulated other comprehensive income (loss) |
2,062 |
|
|
(1,500 |
) |
Total shareholders’ equity |
123,460 |
|
|
115,557 |
|
Total liabilities and
shareholders’ equity |
$ |
346,940 |
|
|
$ |
304,861 |
|
|
|
|
|
|
|
|
|
CONTACTS: |
|
Brett LarsenChief Financial OfficerKey Tronic Corporation(509)
927-5500 |
|
Michael NewmanInvestor RelationsStreetConnect(206) 729-3625 |
|
|
|
|
|
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