Key Tronic Corporation Announces Results For the First Quarter of Fiscal Year 2023
SPOKANE VALLEY, Wash., Nov. 01, 2022 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended October 1, 2022.
For the first quarter of fiscal year 2023, Key Tronic reported total revenue of $137.3 million, up 9% from the previous quarter and up 3% from $132.8 million in the same period of fiscal year 2022. During the first quarter of fiscal year 2023, the Company ramped up new programs from both longstanding and new customers. While constraints in the global supply chain continued to limit production, the Company saw some gradual improvements with respect to lead times of certain key components.
During the first quarter of fiscal year 2023, the results were impacted by storm damage to the Company’s facilities in Arkansas, which reduced revenue and gross profit. Key Tronic has received initial insurance proceeds to repair the plant and replace equipment, which should be completed by the second half of fiscal year 2023, and these initial coverage amounts, net of equipment book value loss, are included in reported gain on insurance claims during the quarter.
For the first quarter of fiscal year 2023, the Company’s gross margin was 7.6% and operating margin was 2.4%, compared to a gross margin of 7.6% and an operating margin of 1.6% in the same period of fiscal year 2022. The gross margin in the first quarter of fiscal year 2023 was adversely impacted by the storm damage to the Arkansas facility, preparations for expected sales growth in the second quarter and increased labor costs in both the US and Mexico. While profitability is expected to improve in coming quarters with increasing expected revenue, higher interest rates on our line of credit and increasing wages will limit a portion of that expected improvement.
For the first quarter of fiscal year 2023, net income was $1.2 million or $0.11 per share, up 41% from $0.8 million or $0.07 per share for the same period of fiscal year 2022.
“We’re pleased with our growing revenue and earnings during the first quarter, driven by the successful ramp of new programs and our expanding customer base,” said Craig Gates, President and Chief Executive Officer. “During the first quarter of fiscal year 2023, we won new programs involving audio, automation, electric vehicle and power distribution equipment. We’re also preparing for a significant ramp in production in our Mexico facility for the previously announced program with a leading outdoor power equipment company during the second quarter.”
“Moving further into fiscal 2023, the headwinds from the global supply chain continue to present uncertainty and multiple business challenges but do show some signs of gradually abating, particularly with respect to the recent price reductions for commodity components. At the same time, these price reductions are offset by increasing wages at our North American facilities.”
“Global logistics problems, China-US political tensions and heightened assurance of supply concerns continue to drive the favorable trend of contract manufacturing returning to North America, as well as to expanding our Vietnam facilities. We see the potential for significant growth in fiscal 2023 and beyond.”
The financial data presented for the first quarter of fiscal year 2023, should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their audit.
Business Outlook
For the second quarter of fiscal year 2023, Keytronic expects to report revenue in the range of $140 million to $150 million, and earnings in the range of $0.13 to $0.18 per diluted share. These expected results assume an effective tax rate of 25% in the coming quarter.
Conference Call
Key Tronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) on November 1, 2022. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 877-502-9276 or +1-323-994-2093 (Access Code: 4459625). A replay will be available at www.keytronic.com under “Investor Relations”.
About Key Tronic
Keytronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China and Vietnam. 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 Keytronic visit: www.keytronic.com.
Forward-Looking Statements
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, but are not limited to those including such words as aims, anticipates, believes, continues, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions 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 financial conditions and results, including revenue and earnings during periods of fiscal year 2023, risks of manufacturing supply chain and operational disruptions and relating to the health of employees due to COVID-19 health pandemic, demand for certain products and the effectiveness of some of our programs, effects of recent tax reform and tariff measures and trade tensions, business from new customers and programs, improvement of supply chain delivery and impacts from legal proceedings and operational streamlining. 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, particularly during the COVID-19 health crisis; the availability of components from the supply chain; the availability of a healthy workforce; the accuracy of suppliers’ and customers’ forecasts; development and success of customers’ programs and products; timing and effectiveness of ramping of new programs; success of new-product introductions; the risk of legal proceedings or governmental investigations relating to the subject of the internal investigation by the Company’s Audit Committee and related or other unrelated matters; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of new governmental legislation and regulation, including tax reform, tariffs and related activities, such trade negotiations and other risks including those related to COVID-19 response; and other factors, risks, and uncertainties detailed from time to time in the Company’s SEC filings.
| CONTACTS: | Brett Larsen | Michael Newman | ||
| Chief Financial Officer | Investor Relations | |||
| Key Tronic Corporation | StreetConnect | |||
| (509) 927-5500 | (206) 729-3625 |
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||||
| October 1, 2022 | October 2, 2021 | |||||
| Net sales | $ | 137,263 | $ | 132,762 | ||
| Cost of sales | 126,884 | 122,624 | ||||
| Gross profit | 10,379 | 10,138 | ||||
| Research, development and engineering expenses | 2,296 | 2,449 | ||||
| Selling, general and administrative expenses | 5,656 | 5,595 | ||||
| Gain on insurance proceeds, net of losses | (934 | ) | — | |||
| Total operating expenses | 7,018 | 8,044 | ||||
| Operating income | 3,361 | 2,094 | ||||
| Interest expense, net | 1,887 | 992 | ||||
| Income before income taxes | 1,474 | 1,102 | ||||
| Income tax provision | 322 | 287 | ||||
| Net income | $ | 1,152 | $ | 815 | ||
| Net income per share — Basic | $ | 0.11 | $ | 0.08 | ||
| Weighted average shares outstanding — Basic | 10,762 | 10,762 | ||||
| Net income per share — Diluted | $ | 0.11 | $ | 0.07 | ||
| Weighted average shares outstanding — Diluted | 10,832 | 11,052 | ||||
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| October 1, 2022 | July 2, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,133 | $ | 1,707 | ||||
| Trade receivables, net of allowance for doubtful accounts of $14 and $12 | 139,010 | 135,876 | ||||||
| Contract assets | 26,358 | 21,974 | ||||||
| Inventories, net | 169,285 | 155,741 | ||||||
| Other | 22,803 | 24,710 | ||||||
| Total current assets | 359,589 | 340,008 | ||||||
| Property, plant and equipment, net | 26,977 | 26,012 | ||||||
| Operating lease right-of-use assets, net | 19,497 | 16,731 | ||||||
| Other assets: | ||||||||
| Deferred income tax asset | 10,770 | 10,055 | ||||||
| Other | 13,131 | 14,117 | ||||||
| Total other assets | 23,901 | 24,172 | ||||||
| Total assets | $ | 429,964 | $ | 406,923 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 134,126 | $ | 121,393 | ||||
| Accrued compensation and vacation | 9,065 | 11,836 | ||||||
| Current portion of debt, net | 6,642 | 7,402 | ||||||
| Other | 23,950 | 23,036 | ||||||
| Total current liabilities | 173,783 | 163,667 | ||||||
| Long-term liabilities: | ||||||||
| Term loans | 5,173 | 5,716 | ||||||
| Revolving loan | 104,968 | 94,577 | ||||||
| Operating lease liabilities | 14,128 | 12,023 | ||||||
| Deferred income tax liability | 21 | 64 | ||||||
| Other long-term obligations | 5,668 | 5,998 | ||||||
| Total long-term liabilities | 129,958 | 118,378 | ||||||
| Total liabilities | 303,741 | 282,045 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively | 47,514 | 47,474 | ||||||
| Retained earnings | 78,981 | 77,829 | ||||||
| Accumulated other comprehensive income (loss) | (272 | ) | (425 | ) | ||||
| Total shareholders’ equity | 126,223 | 124,878 | ||||||
| Total liabilities and shareholders’ equity | $ | 429,964 | $ | 406,923 | ||||
