New Customer Wins; Investing for Growth in Coming Quarters

SPOKANE VALLEY, Wash., Jan. 31, 2017 (GLOBE NEWSWIRE) --  Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 31, 2016.

For the second quarter of fiscal year 2017, Key Tronic reported total revenue of $118.5 million, up 2% from $116.4 million in the same period of fiscal year 2016. For the first six months of fiscal year 2017, total revenue was $235.7 million, compared to $242.6 million in the same period of fiscal year 2016.

Net income for the second quarter of fiscal year 2017 was $1.5 million or $0.14 per share, compared to $1.8 million or $0.16 per share for the second quarter of fiscal year 2016. For the first six months of fiscal year 2017, net income was $3.3 million or $0.30 per share, up 27% from $2.6 million or $0.23 per share for the same period of fiscal year 2016.

For the second quarter of fiscal year 2017, gross margin was 8.1% and operating margin was 2.1%, compared to 7.8% and 2.1%, respectively, in the same period of fiscal 2016.

"During the second quarter of fiscal 2017, our new programs continued to ramp, more than offsetting a modest slowdown in demand from a few longstanding customers, which is consistent with EMS industry-wide experience," said Craig Gates, President and Chief Executive Officer. "At the same time, we captured significant new business from other EMS competitors, including established programs that will begin generating revenue before the end of fiscal 2017."

"We recently won new programs involving inventory automation systems and commercial lighting. Moving into the third quarter, we continue to see a robust pipeline of potential new business and our new programs continue to ramp, effectively offsetting softening sales demand in some current programs. In preparation for future growth, we continue to invest in expanding our SMT, sheet metal and plastic molding capabilities."

Business Outlook

For the third quarter of fiscal year 2017, the Company expects to report revenue in the range of $115 million to $120 million, and earnings in the range of $0.11 to $0.16 per diluted share. These expected results assume an effective tax rate of 20% in the quarter.

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 888-224-1075 or +1-913-312-0977 (Access Code: 7228474).  A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 7228474).

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 SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
       
  Three Months Ended   Six Months Ended
  December 31, 2016   December 26, 2015   December 31, 2016   December 26, 2015
Net sales $ 118,517     $ 116,403     $ 235,652     $ 242,612  
Cost of sales 108,905     107,293     216,331     224,583  
Gross profit 9,612     9,110     19,321     18,029  
Research, development and engineering expenses 1,603     1,506     3,187     3,062  
Selling, general and administrative expenses 5,462     5,201     10,797     10,784  
Total operating expenses 7,065     6,707     13,984     13,846  
Operating income 2,547     2,403     5,337     4,183  
Interest expense, net 552     521     1,141     1,054  
Income before income taxes 1,995     1,882     4,196     3,129  
Income tax provision 467     95     876     525  
Net income $ 1,528     $ 1,787     $ 3,320     $ 2,604  
Net income per share — Basic $ 0.14     $ 0.17     $ 0.31     $ 0.24  
Weighted average shares outstanding — Basic 10,758     10,710     10,753     10,708  
Net income per share — Diluted $ 0.14     $ 0.16     $ 0.30     $ 0.23  
Weighted average shares outstanding — Diluted 10,968     11,418     10,919     11,279  
                       

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
         
    December 31, 2016   July 2, 2016
ASSETS        
Current assets:        
Cash and cash equivalents   $ 1,280     $ 1,018  
Trade receivables, net of allowance for doubtful accounts of $134 and $135   66,444     61,678  
Inventories   98,106     107,006  
Other   10,892     11,757  
Total current assets   176,722     181,459  
Property, plant and equipment, net   29,938     27,925  
Other assets:        
Deferred income tax asset   11,050     8,982  
Goodwill   9,957     9,957  
Other intangible assets   5,364     5,928  
Other   1,471     1,673  
Total other assets   27,842     26,540  
Total assets   $ 234,502     $ 235,924  
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 51,178     $ 58,967  
Accrued compensation and vacation   7,695     9,571  
Current portion of debt   5,841     5,000  
Other   14,292     10,572  
Total current liabilities   79,006     84,110  
Long-term liabilities:        
Term loan - long term   21,693     21,250  
Revolving loan   18,930     18,073  
Other long-term obligations   7,998     6,909  
Total long-term liabilities   48,621     46,232  
Total liabilities   127,627     130,342  
Shareholders' equity:        
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,758 and 10,725 shares, respectively   45,466     45,227  
Retained earnings   71,248     67,928  
Accumulated other comprehensive loss   (9,839 )   (7,573 )
Total shareholders' equity   106,875     105,582  
Total liabilities and shareholders' equity   $ 234,502     $ 235,924  
                 

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

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