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

Increasing Revenue and Continued New Customer Wins; Expecting Continued Growth and Improving Operating Efficiencies in the Fourth Quarter

SPOKANE VALLEY, Wash., May 10, 2016 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended April 2, 2016.

For the third quarter of fiscal year 2016, Key Tronic reported total revenue of $118.4 million, up 2% from $116.4 million in the previous quarter and up 5% from $112.9 million in the same period of fiscal year 2015. For the first nine months of fiscal year 2016, total revenue was $361.1 million, up 15% from $313.6 million in the same period of fiscal year 2015.

As expected, the Company saw sequential improvement in operating efficiencies. For the third quarter of fiscal year 2016, gross margin was 8.4% and operating margin was 2.3%, up from 7.8% and 2.1%, respectively, in the prior quarter.

Net income for the third quarter of fiscal year 2016 was $1.8 million or $0.16 per share, compared to $1.9 million or $0.16 per share for the third quarter of fiscal year 2015. The results for the third quarter of fiscal year 2016 reflect an extra week due to the Company's 53 week fiscal calendar this year. For the first nine months of fiscal year 2016, net income was $4.4 million or $0.39 per share, up 123% from $2.0 million or $0.17 per share for the same period of fiscal year 2015.

"We're pleased to see revenue growth and improvement in operating efficiencies, as our new programs continue to ramp and we continue to invest in improving our operations to accommodate a more diversified customer base," said Craig Gates, President and Chief Executive Officer. "At the same time, we continue to see a robust pipeline of potential new business and our third quarter wins include a new program involving industrial lighting."

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

Business Outlook

For the fourth 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 $0.16 to $0.21 per diluted share. These expected results assume an effective tax rate of 25%.

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 888-329-8862 or +1-719-325-2376 (Access Code: 4162151).  A replay will be available by calling 888-203-1112 or +1 719-457-0820 (Access Code: 4162151). 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
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended   Nine Months Ended
  April 2, 2016     March 28, 2015     April 2, 2016     March 28, 2015
Net sales $ 118,448     $ 112,915     $ 361,060     $ 313,568  
Cost of sales 108,493     103,479     333,076     290,655  
Gross profit 9,955     9,436     27,984     22,913  
Research, development and engineering expenses 1,634     1,510     4,696     4,143  
Selling, general and administrative expenses 5,564     5,375     16,348     15,407  
Total operating expenses 7,198     6,885     21,044     19,550  
Operating income 2,757     2,551     6,940     3,363  
Interest expense, net 620     317     1,674     910  
Income before income taxes 2,137     2,234     5,266     2,453  
Income tax provision 354     373     879     489  
Net income $ 1,783     $ 1,861     $ 4,387     $ 1,964  
Net income per share — Basic $ 0.17     $ 0.18     $ 0.41     $ 0.19  
Weighted average shares outstanding — Basic 10,711     10,552     10,709     10,551  
Net income per share — Diluted $ 0.16     $ 0.16     $ 0.39     $ 0.17  
Weighted average shares outstanding — Diluted 11,068     11,556     11,298     11,457  
                       

 
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
    April 2, 2016     June 27, 2015
ASSETS        
Current assets:        
Cash and cash equivalents   $ 275     $ 372  
Trade receivables, net of allowance for doubtful accounts of $112 and $97   55,600     72,852  
Inventories   107,239     91,594  
Other   16,211     13,646  
Total current assets   179,325     178,464  
Property, plant and equipment, net   27,346     26,974  
Other assets:        
Deferred income tax asset   9,678     6,723  
Goodwill   9,957     9,957  
Other intangible assets   6,210     7,055  
Other   1,816     1,621  
Total other assets   27,661     25,356  
Total assets   $ 234,332     $ 230,794  
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 56,212     $ 61,528  
Accrued compensation and vacation   7,937     9,467  
Current portion of debt   5,000     5,000  
Other   13,902     10,794  
Total current liabilities   83,051     86,789  
Long-term liabilities:        
Term loan - long term   22,500     26,250  
Revolving loan   18,543     11,631  
Deferred income tax liability       501  
Other long-term obligations   5,687     4,855  
Total long-term liabilities   46,730     43,237  
Total liabilities   129,781     130,026  
Shareholders' equity:        
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,711 and 10,706 shares, respectively   45,148     44,136  
Retained earnings   65,782     61,395  
Accumulated other comprehensive loss   (6,379 )   (4,763 )
Total shareholders' equity   104,551     100,768  
Total liabilities and shareholders' equity   $ 234,332     $ 230,794  
                 

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

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