Key Tronic Corporation Announces Results For The Fourth Quarter And Fiscal Year End 2016

Annual Revenue Up 12% and Net Income Up 52%; Continued New Customer Wins and Improving Operating Efficiencies

SPOKANE VALLEY, Wash., July 26, 2016 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the three months and full year ended July 2, 2016.

For the fourth quarter of fiscal year 2016, Key Tronic reported total revenue of $123.9 million, up 5% from $118.4 million in the previous quarter and up 3% from $120.4 million in the same period of fiscal year 2015. For the full fiscal year 2016, total revenue was $485.0 million, up 12% from $434.0 million for fiscal year 2015.

As expected, the Company continued to see sequential improvement in operating efficiencies. For the fiscal year 2016, gross margin was by quarter 7.1%, 7.8%, 8.4% and most recently 8.7% during the fourth quarter. Similarly, operating margin improved by quarter from 1.4%, 2.1%, 2.3% and 2.8% throughout the fiscal year 2016.

Net income for the fourth quarter of fiscal year 2016 was $2.1 million or $0.20 per share, compared to $2.3 million or $0.21 per share for the fourth quarter of fiscal year 2015. For the full fiscal year 2016, net income was $6.5 million or $0.58 per share, up 52% from $4.3 million or $0.38 per share for fiscal year 2015.

"We're pleased with how our business rebounded from several unusual challenges in the first two quarters and finished with strong revenue and earnings growth for fiscal year 2016," said Craig Gates, President and Chief Executive Officer. "The continued ramp of new programs and our investment in improving our operations to accommodate a more diversified customer base drove the overall improvement in fiscal 2016. At the same time, we won a number of new significant programs throughout the year, including new programs involving home automation and industrial metering in the fourth quarter."

"In the first quarter, we expect to see a slight decline in revenue due to the closure of our Kentucky facility and our decision to disengage completely from the longstanding customer that adversely impacted our business throughout the year. While impacting our top line revenue, we anticipate improvements in margins in the first quarter as the remaining Kentucky programs are transferred to other facilities and cost savings begin to be realized. We expect our many new programs will continue to ramp up, the continued onboarding of several new customers and see a robust pipeline of potential new business. Moving into fiscal 2017, we feel encouraged by our growth opportunities, the improvements in our operating efficiencies and our competitive strengths."

Business Outlook

For the first quarter of fiscal year 2017, 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 888-438-5491 or +1-719-325-2420 (Access Code: 9822492).  A replay will be available by calling 888-203-1112 or +1 719-457-0820 (Access Code: 9822492). 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 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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share amounts)(Unaudited)
       
  Three Months Ended   Twelve Months Ended
  July 2, 2016   June 27, 2015   July 2, 2016   June 27, 2015
Net sales $ 123,905     $ 120,429     $ 484,965     $ 433,997  
Cost of sales 113,064     110,037     446,140     400,692  
Gross profit 10,841     10,392     38,825     33,305  
Research, development and engineering expenses 1,701     1,641     6,397     5,784  
Selling, general and administrative expenses 5,664     5,461     22,012     20,868  
Total operating expenses 7,365     7,102     28,409     26,652  
Operating income 3,476     3,290     10,416     6,653  
Interest expense, net 591     443     2,265     1,353  
Income before income taxes 2,885     2,847     8,151     5,300  
Income tax provision 739     507     1,618     996  
Net income $ 2,146     $ 2,340     $ 6,533     $ 4,304  
Net income per share — Basic $ 0.20     $ 0.22     $ 0.61     $ 0.41  
Weighted average shares outstanding — Basic 10,714     10,636     10,710     10,572  
Net income per share — Diluted $ 0.20     $ 0.21     $ 0.58     $ 0.38  
Weighted average shares outstanding — Diluted 10,966     11,414     11,278     11,286  

 
KEY TRONIC CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)
    July 2, 2016   June 27, 2015
ASSETS        
Current assets:        
Cash and cash equivalents   $ 1,018     $ 372  
Trade receivables, net of allowance for doubtful accounts of $135 and $97   61,678     72,852  
Inventories   107,006     91,594  
Other   16,041     13,646  
Total current assets   185,743     178,464  
Property, plant and equipment, net   27,925     26,974  
Other assets:        
Deferred income tax asset   8,982     6,723  
Goodwill   9,957     9,957  
Other intangible assets   5,928     7,055  
Other   1,673     1,621  
Total other assets   26,540     25,356  
Total assets   $ 240,208     $ 230,794  
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 58,967     $ 61,528  
Accrued compensation and vacation   9,571     9,467  
Current portion of debt   5,000     5,000  
Other   14,856     10,794  
Total current liabilities   88,394     86,789  
Long-term liabilities:        
Term loan - long term   21,250     26,250  
Revolving loan   18,073     11,631  
Deferred income tax liability       501  
Other long-term obligations   6,909     4,855  
Total long-term liabilities   46,232     43,237  
Total liabilities   134,626     130,026  
Shareholders' equity:        
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,725 and 10,706 shares, respectively   45,227     44,136  
Retained earnings   67,928     61,395  
Accumulated other comprehensive loss   (7,573 )   (4,763 )
Total shareholders' equity   105,582     100,768  
Total liabilities and shareholders' equity   $ 240,208     $ 230,794  

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

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