SPOKANE VALLEY, Wash., Feb. 06, 2024 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 30, 2023.

For the second quarter of fiscal year 2024, Key Tronic reported total revenue of $145.4 million, up 18% from $123.7 million in the same period of fiscal year 2023. Revenue growth for the second quarter of fiscal year 2024 was driven by increased production at the Company’s US-based and Vietnam-based facilities, as well as by the sale of approximately $8.1 million of inventory from a discontinued program. For the first six months of fiscal year 2024, total revenue was $293.2 million, up 12% from $261.0 million in the same period of fiscal year 2023.

For the second quarter of fiscal year 2024, the Company’s gross margin was 8.1% and operating margin was 2.7%, compared to a gross margin of 7.2% and an operating margin of 2.9% in the same period of fiscal year 2023. The increase in gross margin in the second quarter of fiscal year 2024 reflects a favorable product mix for the quarter and improved operating efficiencies.

For the second quarter of fiscal year 2024, net income was $1.1 million or $0.10 per share, compared to $1.0 million or $0.09 per share for the same period of fiscal year 2023. For the first six months of fiscal year 2024, net income was $1.4 million or $0.13 per share, compared to $2.1 million or $0.20 per share for the same period of fiscal year 2023. The Company’s profitability in fiscal year 2024 continued to be negatively impacted by increased labor costs, unfavorable foreign currency exchange rates in Mexico and higher interest rates on its line of credit.  

“We’re pleased with the successful ramp of new programs in the second quarter of fiscal 2024, driven by increased utilization of our US and Vietnam facilities,” said Craig Gates, President and Chief Executive Officer. “During the quarter, we continued to expand our customer base, winning new programs involving security products, medical devices and military aerospace. We also continued to make gradual improvements in our gross margins and continued to make significant reductions to inventory, as well as reducing our accounts payable, debt and other liabilities.”

“While we continue to see the favorable trend of contract manufacturing returning to North America, the strength of the Mexican peso and continued wage increases in Mexican wages, particularly along the US-Mexico border, have created a shift in the way we allocate our production across our US and Juarez locations. In order to remain competitive, our Juarez site will be restructured to focus on higher-volume manufacturing, while lower-volume products with higher service level requirements will migrate to our other sites.

Accordingly, we are currently reducing our workforce in Mexico and will incur $1.0 million to $2.5 million of severance in the third quarter. We currently expect the payback period for these severance costs to be less than six months and our US and Vietnam facilities to contribute a growing portion of our revenue in coming periods.”

The financial data presented for the second quarter of fiscal year 2024 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.

Business Outlook
For the third quarter of fiscal 2024, Key Tronic expects to report revenue in the range of $135 million to $145 million. The Company also expects to incur a severance expense in the range of $1.0 million to $2.5 million from headcount reductions in its Mexico-based operations, resulting in a net income in the range of $0.00 to $0.15 per diluted share. These expected results assume an effective tax rate of 20% in the coming quarter.

Conference Call
Keytronic 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 877-400-0505 or +1-323-701-0225 (Access Code: 5587222). 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 with 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, demand for certain products and the effectiveness of some of its programs, business from customers and programs, and impacts from 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; 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; 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)
(Unaudited)
 
 Three Months EndedSix Months Ended
 December 30,
2023		 December 31,
2022		December 30,
2023		 December 31,
2022
Net sales$145,417  $123,708 $293,180  $260,971 
Cost of sales 133,654   114,788  270,555   241,672 
Gross profit 11,763   8,920  22,625   19,299 
Research, development and engineering expenses 1,758   2,287  3,999   4,583 
Selling, general and administrative expenses 6,057   5,735  11,841   11,391 
Gain on insurance proceeds, net of losses —   (2,710) (431)  (3,644)
Total operating expenses 7,815   5,312  15,409   12,330 
Operating income 3,948   3,608  7,216   6,969 
Interest expense, net 2,961   2,507  5,972   4,394 
Income before income taxes 987   1,101  1,244   2,575 
Income tax (benefit) provision (97)  134  (175)  456 
Net income$1,084  $967 $1,419  $2,119 
Net income per share — Basic$0.10  $0.09 $0.13  $0.20 
Weighted average shares outstanding — Basic 10,762   10,762  10,762   10,762 
Net income per share — Diluted$0.10  $0.09 $0.13  $0.20 
Weighted average shares outstanding — Diluted 10,889   10,832  10,889   10,832 


 
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  December 30, 2023
 July 1, 2023
ASSETS     
Current assets:     
Cash and cash equivalents 2,953  3,603 
Trade receivables, net of allowance for doubtful accounts of $72 and $23 134,892  150,600 
Contract assets 27,770  29,925 
Inventories, net 124,054  137,911 
Other 22,612  27,510 
Total current assets 312,281  349,549 
Property, plant and equipment, net 28,935  28,870 
Operating lease right-of-use assets, net 18,104  16,202 
Other assets:     
Deferred income tax asset 13,161  12,254 
Other 6,243  11,397 
Total other assets 19,404  23,651 
Total assets 378,724  418,272 
LIABILITIES AND SHAREHOLDERS’ EQUITY     
Current liabilities:     
Accounts payable 91,358  115,899 
Accrued compensation and vacation 5,677  13,351 
Current portion of debt, net 5,610  7,849 
Other 15,721  14,867 
Total current liabilities 118,366  151,966 
Long-term liabilities:     
Term loans 6,465  6,726 
Revolving loan 108,429  114,805 
Operating lease liabilities 12,380  10,317 
Deferred income tax liability 22  274 
Other long-term obligations 627  3,567 
Total long-term liabilities 127,923  135,689 
Total liabilities 246,289  287,655 
Shareholders’ equity:     
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively 47,839  47,728 
Retained earnings 84,405  82,986 
Accumulated other comprehensive income (loss) 191  (97)
Total shareholders’ equity 132,435  130,617 
Total liabilities and shareholders’ equity 378,724  418,272 


 


     
CONTACTS: Brett Larsen Michael Newman
  Chief Financial Officer Investor Relations
  Key Tronic Corporation StreetConnect
  (509) 927-5500 (206) 729-3625

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Source: Key Tronic Corporation

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