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Key Tronic Corporation Announces Results for the Fourth Quarter and Year End of Fiscal 2022

·8 min read
Key Tronic Corporation
Key Tronic Corporation

Strong Customer Demand for North American Production and New Program Wins

SPOKANE VALLEY, Wash., Aug. 09, 2022 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter and the year ended July 2, 2022.

For the fourth quarter of fiscal year 2022, Keytronic reported total revenue of $126.2 million, compared to $132.6 million in the same period of fiscal year 2021. For the full year of fiscal 2022, total revenue was $531.8 million, up 3% from $518.7 million for fiscal year 2021. During fiscal year 2022, the Company added significant new programs and its backlog for orders reached historic highs. At the same time, constraints in the global supply chain and transportation issues continued to limit production throughout the year.

During the fourth quarter of fiscal year 2022, the results were impacted by intermittent parts supply and factory downtime. The Company’s facilities in Shanghai, China were closed for most of the fourth quarter due to a government mandated COVID shutdown. While the reopening of the Company’s China facility took longer than anticipated, operations have since resumed. Legal costs related specifically to the SEC’s review of last year’s whistleblower complaint totaled approximately $0.08 per diluted share during the quarter, though we estimate legal costs to decrease in coming periods.

For the fourth quarter of fiscal year 2022, the Company’s gross margin was 9.3% and operating margin was 1.8%, compared to a gross margin of 7.8% and an operating margin of 1.1% in the same period of fiscal year 2021. The increased margins primarily reflect an increase in sales pricing to recoup higher materials and labor costs incurred by the Company throughout the fiscal year. While the fourth quarter was a significant improvement of gross margin, margins are expected to return to historical levels in coming quarters.

For the fourth quarter of fiscal year 2022, net income was $1.0 million or $0.09 per share, up from $0.2 million or $0.02 per share for the same period of fiscal year 2021. For the full year of fiscal year 2022, net income was $3.4 million or $0.31 per share, compared to $4.3 million or $0.39 per share for fiscal year 2021.

“Despite the continued headwinds from the global supply chain challenges during fiscal 2022, we still managed to grow our business, driven by the successful ramp of new programs and our expanding customer base,” said Craig Gates, President and Chief Executive Officer. “During the fourth quarter of fiscal year 2022, we won new programs involving audio products, GPS devices, utility meters, personal safety devices, and innovative internet solutions.”

“Moving into fiscal 2023, the global supply chain and COVID-19 crises continue to present uncertainty and multiple business challenges. 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.”

“In fiscal 2023, we expect to ramp a number of new programs, including the previously announced program with a leading power equipment company in our Mexico facility during the second quarter. We believe we are well positioned to benefit from the growing demand for North American onshoring and see the potential for significant growth in fiscal 2023 and beyond.”

The financial data presented for the fourth quarter and year end of fiscal year 2022 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 first quarter of fiscal year 2023, Keytronic expects to report revenue in the range of $125 million to $135 million, and earnings in the range of $0.05 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 25% 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 888-394-8218 or +1-323-794-2588 (Access Code: 6758956). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 6758956).

About Keytronic

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.

KEYTRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

 

Three Months Ended

 

Twelve Months Ended

 

July 2, 2022

 

July 3, 2021

 

July 2, 2022

 

July 3, 2021

Net sales

$

126,206

 

 

$

132,629

 

 

$

531,815

 

 

$

518,698

 

Cost of sales

 

114,446

 

 

 

122,323

 

 

 

488,601

 

 

 

476,659

 

Gross profit

 

11,760

 

 

 

10,306

 

 

 

43,214

 

 

 

42,039

 

Research, development and engineering expenses

 

2,348

 

 

 

2,498

 

 

 

9,821

 

 

 

9,790

 

Selling, general and administrative expenses

 

7,151

 

 

 

6,374

 

 

 

24,598

 

 

 

22,723

 

Total operating expenses

 

9,499

 

 

 

8,872

 

 

 

34,419

 

 

 

32,513

 

Operating income

 

2,261

 

 

 

1,434

 

 

 

8,795

 

 

 

9,526

 

Interest expense, net

 

1,466

 

 

 

1,064

 

 

 

5,104

 

 

 

3,613

 

Income before income taxes

 

795

 

 

 

370

 

 

 

3,691

 

 

 

5,913

 

Income tax (benefit) provision

 

(173

)

 

 

195

 

 

 

314

 

 

 

1,572

 

Net income

$

968

 

 

$

175

 

 

$

3,377

 

 

$

4,341

 

Net income per share — Basic

$

0.09

 

 

$

0.02

 

 

$

0.31

 

 

$

0.40

 

Weighted average shares outstanding — Basic

 

10,762

 

 

 

10,762

 

 

 

10,762

 

 

 

10,760

 

Net income per share — Diluted

$

0.09

 

 

$

0.02

 

 

$

0.31

 

 

$

0.39

 

Weighted average shares outstanding — Diluted

 

11,071

 

 

 

11,169

 

 

 

11,063

 

 

 

11,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KEYTRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

 

 

July 2, 2022

 

July 3, 2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,707

 

 

$

3,473

 

Trade receivables, net of allowance for doubtful accounts of $12 and $275

 

 

135,876

 

 

 

110,324

 

Contract assets

 

 

21,974

 

 

 

24,781

 

Inventories, net

 

 

155,741

 

 

 

137,329

 

Other

 

 

24,710

 

 

 

23,345

 

Total current assets

 

 

340,008

 

 

 

299,252

 

Property, plant and equipment, net

 

 

26,012

 

 

 

35,735

 

Operating lease right-of-use assets, net

 

 

16,731

 

 

 

15,745

 

Other assets:

 

 

 

 

Deferred income tax asset

 

 

10,055

 

 

 

9,656

 

Other

 

 

14,117

 

 

 

1,458

 

Total other assets

 

 

24,172

 

 

 

11,114

 

Total assets

 

$

406,923

 

 

$

361,846

 

LIABILITIES AND SHAREHOLDERS EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

121,393

 

 

$

92,823

 

Accrued compensation and vacation

 

 

11,836

 

 

 

11,471

 

Current portion of debt, net

 

 

7,402

 

 

 

2,143

 

Other

 

 

23,036

 

 

 

20,268

 

Total current liabilities

 

 

163,667

 

 

 

126,705

 

Long-term liabilities:

 

 

 

 

Term loans

 

 

5,716

 

 

 

7,906

 

Revolving loan

 

 

94,577

 

 

 

90,362

 

Operating lease liabilities

 

 

12,023

 

 

 

11,428

 

Deferred income tax liability

 

 

64

 

 

 

 

Other long-term obligations

 

 

5,998

 

 

 

1,740

 

Total long-term liabilities

 

 

118,378

 

 

 

111,436

 

Total liabilities

 

 

282,045

 

 

 

238,141

 

Shareholders’ equity:

 

 

 

 

Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively

 

 

47,474

 

 

 

47,181

 

Retained earnings

 

 

77,829

 

 

 

74,452

 

Accumulated other comprehensive income (loss)

 

 

(425

)

 

 

2,072

 

Total shareholders’ equity

 

 

124,878

 

 

 

123,705

 

Total liabilities and shareholders’ equity

 

$

406,923

 

 

$

361,846

 

 

 

 

 

 

 

 

 

 


CONTACTS:

  

Brett Larsen
Chief Financial Officer
Key Tronic Corporation
(509) 927-5500

                               

Michael Newman
Investor Relations
StreetConnect
(206) 729-3625