Strong Customer Demand for North American Production and New Program Wins
SPOKANE VALLEY, Wash., May 05, 2022 (GLOBE NEWSWIRE) — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended April 2, 2022.
For the third quarter of fiscal year 2022, Keytronic reported total revenue of $138.4 million, up 3% from $134.6 million in the same period of fiscal year 2021. For the first nine months of fiscal year 2022, total revenue was $405.6 million, up 5% from $386.1 million in the same period of fiscal year 2021. While year-over-year sales have increased, customer demand has been even higher but production continues to be constrained by global supply chain and transportation issues. In the coming quarters, the Company expects to ramp a number of new programs, including the previously announced program with a leading power equipment company in its Mexico facility during the first part of the next fiscal year.
During third quarter of fiscal year 2022, the results were again impacted by intermittent parts supply, factory downtime and overtime expenses. The Company’s facilities in Shanghai, China were closed for a portion of the third quarter by a mandated COVID shutdown, although we expect operations to resume shortly. Legal costs related specifically to the SEC’s review of last year’s whistleblower complaint totaled approximately $0.06 per diluted share during the quarter and we expect legal costs to potentially continue at a similar pace in coming periods.
Despite these headwinds, the Company slightly improved its margins when compared to the previous year. For the third quarter of fiscal year 2022, the Company’s gross margin was 8.3% and operating margin was 2.0%, compared to a gross margin of 8.2% and an operating margin of 1.9% in the same period of fiscal year 2021.
For the third quarter of fiscal year 2022, net income was $1.0 million or $0.09 per share, up 16% from $0.9 million or $0.08 per share for the same period of fiscal year 2021. For the first nine months of fiscal year 2022, net income was $2.4 million or $0.22 per share, compared to $4.2 million or $0.38 per share for the same period of fiscal year 2021.
“We’re pleased with the successful ramp of new programs and our expanding customer base in the third quarter of fiscal 2022, despite the continued headwinds from the global supply chain challenges,” said Craig Gates, President and Chief Executive Officer. “At the same time, global logistics problems and heightened assurance of supply concerns continue to drive the favorable trend of contract manufacturing returning to North America. We believe we are well positioned to benefit from this growing demand.”
“During the third quarter of fiscal year 2022, we won new programs involving outdoor recreation, RFID, industrial connectivity and electric mobility products. While the global supply chain and COVID-19 crises continue to present uncertainty and multiple business challenges in the fourth quarter, we see the potential for significant growth in fiscal 2023 and beyond.”
For the fourth quarter of fiscal year 2022, Keytronic expects to report revenue in the range of $125 million to $135 million, and earnings in the range of $0.04 to $0.10 per diluted share. Despite growing customer demand and backlog, the Company expects that the ongoing disruptions from the global supply chain and COVID-19 issues will continue to significantly limit production and adversely impact operating efficiencies, particularly for our China-based facilities. These expected results assume an effective tax rate of approximately 20% for the full fiscal year.
Key Tronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) today. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 888-220-8451 or +1-323-794-2588 (Access Code: 6479803). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 6479803).
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.
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, could, 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 press release include, without limitation, the Company’s statements regarding its expectations with respect to financial conditions and results, including revenue, earnings, legal and internal review expenses and further costs during fiscal 2022; expenses related to, and estimated recovery from, the COVID-19 health pandemic; demand from new and existing customers; and key components supply and other supply chain and transportation and logistics issues. 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: risks relating to the internal investigation by the Audit Committee, including legal and internal review costs, the risk of legal proceedings or government investigations relating to the subject of the internal investigation and related or unrelated matters; 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; 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.
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
|Three Months Ended||Nine Months Ended|
|April 2, 2022||April 3, 2021||April 2, 2022||April 3, 2021|
|Cost of sales||126,883||123,504||374,155||354,336|
|Research, development and engineering expenses||2,526||2,655||7,473||7,292|
|Selling, general and administrative expenses||6,193||5,865||17,447||16,349|
|Total operating expenses||8,719||8,520||24,920||23,641|
|Interest expense, net||1,551||1,020||3,638||2,549|
|Income before income taxes||1,238||1,556||2,896||5,543|
|Income tax provision||231||689||487||1,377|
|Net income per share — Basic||$||0.09||$||0.08||$||0.22||$||0.39|
|Weighted average shares outstanding — Basic||10,762||10,760||10,762||10,760|
|Net income per share — Diluted||$||0.09||$||0.08||$||0.22||$||0.38|
|Weighted average shares outstanding — Diluted||11,062||11,429||11,059||11,040|
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|April 2, 2022||July 3, 2021|
|Cash and cash equivalents||$||1,722||$||3,473|
|Trade receivables, net of allowance for doubtful accounts of $219 and $275||137,835||110,324|
|Total current assets||344,083||299,252|
|Property, plant and equipment, net||26,690||35,735|
|Operating lease right-of-use assets, net||17,838||15,745|
|Deferred income tax asset||11,485||9,656|
|Total other assets||22,815||11,114|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Accrued compensation and vacation||8,659||11,471|
|Current portion of debt, net||6,143||2,143|
|Total current liabilities||164,338||126,705|
|Operating lease liabilities||12,059||11,428|
|Deferred income tax liability||51||—|
|Other long-term obligations||5,486||1,740|
|Total long-term liabilities||123,062||111,436|
|Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively||47,399||47,181|
|Accumulated other comprehensive income (loss)||(234||)||2,072|
|Total shareholders’ equity||124,026||123,705|
|Total liabilities and shareholders’ equity||$||411,426||$||361,846|
|CONTACTS:||Brett Larsen||Michael Newman|
|Chief Financial Officer||Investor Relations|
|Key Tronic Corporation||StreetConnect|
|(509) 927-5500||(206) 729-3625|