News Column

Key Tronic Corporation Announces Results for the Second Quarter of Fiscal Year 2014

January 28, 2014

SPOKANE VALLEY, Wash. , Jan. 28, 2014 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the three months ended December 28 , 2013.The Company's actual results were in line with its previous guidance. For the second quarter of fiscal year 2014, Key Tronic reported total revenue of $78.3 million , compared to $94.6 million in the same period of fiscal year 2013. For the first six months of fiscal year 2014, total revenue was $156.2 million , compared to $192.1 million in the same period of fiscal year 2013. Net income for the second quarter of fiscal year 2014 was $3.1 million or $0.28 per diluted share, compared to $3.6 million or $0.33 per diluted share for the same period of fiscal year 2013. Results for the second quarter of fiscal year 2014 include a one-time tax benefit of approximately $1.5 million or $0.13 per diluted share due to changes in Mexico's tax laws enacted in December of 2013. For the first six months of fiscal year 2014, net income was $4.8 million or $0.44 per diluted share, compared to $7.3 million or $0.67 per diluted share for the same period of fiscal year 2013. For the second quarter of fiscal year 2014, gross margin was 9% and operating margin was 3%, compared to 10% and 6%, respectively, in the same period of fiscal year 2013. "During the second quarter and moving into the third quarter of fiscal year 2014, many new programs continue to ramp up, despite greater than anticipated reductions in orders from some of our large, longstanding customers," said Craig Gates , President and Chief Executive Officer. "We currently expect to see sequential growth either during the fourth quarter of fiscal year 2014 or the first quarter of fiscal year 2015, as growing revenue from several new customers should offset and then exceed the revenue reductions in recent periods by certain large customers." "At the end of the second quarter of fiscal year 2014, we were generating revenue from 190 separate programs and had 57 distinct customers, up from 169 programs and 52 customers a year ago. Furthermore, we continued to diversify our future revenue base during the second quarter by winning two new programs from new customers involving consumer dental hygiene products and consumer home products. The pipeline of potential new business remains very robust and we're investing in the expansion of our new sheet metal fabrication business to capitalize on a growing number of opportunities related to this capability." Business Outlook For the third quarter of fiscal year 2014, the Company expects to report revenue in the range of $73 million to $78 million , and earnings in the range of $0.13 to $0.18 per diluted share. The expected earnings range assumes an effective tax rate of 32%. 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 877-941-0844 or +1-480-629-9835. A 48-hour replay will be available by calling 800-406-7325 or +1 303 590 3030 (Access Code: 4660975). 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 2014. 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 28, 2013 December 29, 2012 December 28, 2013 December 29, 2012 Net sales $ 78,250 $ 94,567 $ 156,224 $ 192,075 Cost of sales 71,300 85,071 142,652 173,104 Gross profit 6,950 9,496 13,572 18,971 Research, development and engineering expenses 1,421 1,225 2,767 2,475 Selling, general and administrative expenses 3,163 2,939 5,979 5,468 Total operating expenses 4,584 4,164 8,746 7,943 Operating income 2,366 5,332 4,826 11,028 Interest expense, net 16 92 38 208 Income before income taxes 2,350 5,240 4,788 10,820 Income tax (benefit) provision (764) 1,661 (31) 3,497 Net income $ 3,114 $ 3,579 $ 4,819 $ 7,323 Net income per share — Basic $ 0.30 $ 0.34 $ 0.46 $ 0.70 Weighted average shares outstanding — Basic 10,530 10,489 10,519 10,487 Net income per share — Diluted $ 0.28 $ 0.33 $ 0.44 $ 0.67 Weighted average shares outstanding — Diluted 10,932 10,899 10,925 10,864 KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December 28, 2013 June 29, 2013 ASSETS Current assets: Cash and cash equivalents $ 1,433 $ 10,819 Trade receivables, net 51,435 47,009 Inventories 47,065 44,664 Deferred income tax asset 1,602 1,767 Other 7,798 7,508 Total current assets 109,333 111,767 Property, plant and equipment—net 20,182 17,911 Other assets: Deferred income tax asset 3,267 3,179 Other 2,150 2,273 Goodwill 1,639 — Other intangibles 2,207 — Total other assets 9,263 5,452 Total assets $ 138,778 $ 135,130 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 27,779 $ 26,400 Accrued compensation and vacation 5,913 7,413 Current portion of other long-term obligations 196 576 Other 4,358 3,551 Total current liabilities 38,246 37,940 Long-term liabilities: Deferred income tax liability — 1,585 Other long-term obligations 722 1,445 Total long-term liabilities 722 3,030 Total liabilities 38,968 40,970 Shareholders' equity: Common stock, no par value—shares authorized 25,000; issued and outstanding 10,533 and 10,502 shares, respectively 43,888 43,369 Retained earnings 54,297 49,478 Accumulated other comprehensive income 1,625 1,313 Total shareholders' equity 99,810 94,160 Total liabilities and shareholders' equity $ 138,778 $ 135,130 CONTACT: Ron Klawitter Chief Financial Officer Key Tronic Corporation (509) 927-5295 Michael Newman Investor Relations StreetConnect (206) 729-3625 Source: Key Tronic


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