Key Tronic Corporation Announces Results For The Second Quarter Of Fiscal Year 2016

SPOKANE VALLEY, Wash., Jan. 26, 2016 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the three months ended December 26, 2015.

For the second quarter of fiscal year 2016, Key Tronic reported total revenue of $116.4 million, up 2% from $114.3 million in the same period of fiscal year 2015. For the first six months of fiscal year 2016, total revenue was $242.6 million, up 21% from $200.7 million in the same period of fiscal year 2015.

As expected, the Company saw sequential improvement in operating efficiencies. For the second quarter of fiscal year 2016, gross margin was 7.8% and operating margin was 2.1%, up from 7.1% and 1.4%, respectively, in the prior quarter.

Net income for the second quarter of fiscal year 2016 was $1.8 million or $0.16 per share, up from $1.6 million or $0.14 per share for the second quarter of fiscal year 2015. The results for the second quarter of fiscal year 2016 include $675,000 or $0.06 per share of tax credits related to recently approved research and development federal tax incentives. For the first six months of fiscal year 2016, net income was $2.6 million or $0.23 per share, up from $103,000 or $0.01 per share for the same period of fiscal year 2015.

"We're pleased to see sequential profit growth, as our new programs continue to ramp and more than offset the reduced demand from a certain customer that has significantly impacted our results in recent quarters," said Craig Gates, President and Chief Executive Officer. "We continue to see a robust pipeline of potential new business and recently won four new programs, involving industrial equipment, consumer products and lighting devices."

"In the second half of fiscal year 2016, we expect that the ramp of new programs will continue to outpace the previously discussed decline of a longstanding customer. Even as we onboard several new customers and programs, we anticipate that we will continue to see gradually improving operating efficiencies in coming periods."

Business Outlook

For the third quarter of fiscal year 2016, the Company expects to report revenue in the range of $117 million to $122 million, and earnings in the range of $0.12 to $0.17 per diluted share. These expected results assume an effective tax rate of 30%.

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 888-427-9419 or +1-719-325-2432 (Access Code: 431302).  A replay will be available by calling 888-203-1112 or +1 719-457-0820 (Access Code: 431302). 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   Six Months Ended
  December 26, 2015   December 27, 2014   December 26, 2015   December 27, 2014
Net sales $ 116,403     $ 114,311     $ 242,612     $ 200,653  
Cost of sales 107,293     105,072     224,583     187,176  
Gross profit 9,110     9,239     18,029     13,477  
Research, development and engineering expenses 1,506     1,297     3,062     2,633  
Selling, general and administrative expenses 5,201     5,425     10,784     10,032  
Total operating expenses 6,707     6,722     13,846     12,665  
Operating income 2,403     2,517     4,183     812  
Interest expense, net 521     404     1,054     593  
Income before income taxes 1,882     2,113     3,129     219  
Income tax provision 95     487     525     116  
Net income $ 1,787     $ 1,626     $ 2,604     $ 103  
Net income per share — Basic $ 0.17     $ 0.15     $ 0.24     $ 0.01  
Weighted average shares outstanding — Basic 10,710     10,552     10,708     10,550  
Net income per share — Diluted $ 0.16     $ 0.14     $ 0.23     $ 0.01  
Weighted average shares outstanding — Diluted 11,418     11,471     11,279     11,442  

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    December 26, 2015   June 27, 2015
ASSETS        
Current assets:        
Cash and cash equivalents   $ 1,193     $ 372  
Trade receivables, net of allowance for doubtful accounts of $210 and $97   60,840     72,852  
Inventories   97,909     91,594  
Other   14,226     13,646  
Total current assets   174,168     178,464  
Property, plant and equipment, net   26,032     26,974  
Other assets:        
Deferred income tax asset   9,631     6,723  
Goodwill   9,957     9,957  
Other intangible assets   6,492     7,055  
Other   1,660     1,621  
Total other assets   27,740     25,356  
Total assets   $ 227,940     $ 230,794  
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 56,839     $ 61,528  
Accrued compensation and vacation   7,382     9,467  
Current portion of debt   5,000     5,000  
Other   13,999     10,794  
Total current liabilities   83,220     86,789  
Long-term liabilities:        
Term loan - long term   23,750     26,250  
Revolving loan   12,660     11,631  
Deferred income tax liability       501  
Other long-term obligations   6,423     4,855  
Total long-term liabilities   42,833     43,237  
Total liabilities   126,053     130,026  
Shareholders' equity:        
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,711 and 10,706 shares, respectively   44,944     44,136  
Retained earnings   63,999     61,395  
Accumulated other comprehensive loss   (7,056 )   (4,763 )
Total shareholders' equity   101,887     100,768  
Total liabilities and shareholders' equity   $ 227,940     $ 230,794  

CONTACTS:Brett LarsenChief Financial OfficerKey Tronic Corporation(509) 927-5500Michael NewmanInvestor RelationsStreetConnect(206) 729-3625