KEY TRONIC CORPORATION ANNOUNCES RESULTS
FOR THE FIRST QUARTER OF FISCAL YEAR END 2018
Winning Established Programs from Competitors; Investing for Growth in Coming Quarters
Spokane Valley, WA– October 31,2017 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended September 30, 2017.
For the first quarter of fiscal year 2018, Key Tronic reported total revenue of $109.2 million, compared to $117.1 million in the same period of fiscal year 2017. Net income for the first quarter of fiscal year 2018 was $0.4 million or $0.04 per share, compared to $1.8 million or $0.16 per share for the first quarter of fiscal year 2017. For the first quarter of fiscal year 2018, gross margin was 7.2% and operating margin was 1.1%, compared to 8.3% and 2.4%, respectively, in the same period of fiscal 2017.
During the first quarter of fiscal 2018, revenue was unexpectedly impacted by approximately $4 million along with a corresponding unfavorable impact on income as a result of delays in shipments due to massive flooding in Houston and unrelated industry-wide shortages of key electronic components affecting a few larger programs. In addition, the Company incurred approximately $0.3 million in statutory severance expense during the quarter in our Juarez facility.
“While the unanticipated revenue shortfall adversely impacted our margins and bottom line more rapidly than we could fully adjust our variable production expenses, we remained profitable in the first quarter,” said Craig Gates, President and Chief Executive Officer. “At the same time, we continued to win significant new business from other EMS competitors. We recently won two new programs involving HVAC controllers and exercise equipment monitors.”
“Additionally, we recently signed a manufacturing agreement and began customer funded tooling related to a consumer security product. This product is already in production at a small regional manufacturer, but demand has far surpassed that supplier’s capacity. We would normally announce this win next quarter as some details of the deal are yet to be finalized. However, if the project proceeds as planned, it is expected to have a positive material impact on our results for the remainder of the second quarter and beyond. If the deal is finalized within the second quarter, we will release further details of the program and update guidance as appropriate.”
“Moving into the second quarter, we continue to see a strong pipeline of potential new business and our new programs continue to ramp. We expect to see renewed revenue growth in coming quarters even as we deal with continued widespread supply constraints in the integrated circuit market place. While carefully managing our expenses, we continue to invest in expanding our SMT, sheet metal and plastic molding capabilities in preparation for future growth.”
For the second quarter of fiscal year 2018, the Company expects to report revenue in the range of $110 million to $115 million, and earnings in the range of $0.07 to $0.14 per diluted share. These expected results assume an effective tax rate of 25% in the quarter. (This guidance does not include the potential material impact to our second quarter if the new program relating to the consumer security product proceeds as currently anticipated)
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 800-274-0251 or +1-323-794-2551 (Access Code: 6482518). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 6482518).
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 2018. 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.