Washington | 91-0849125 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Page No. | ||
PART I. | ||
Item 1. | ||
8-19 | ||
Item 2. | 20-32 | |
Item 3. | ||
Item 4. | ||
PART II. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds* | |
Item 3. | Defaults upon Senior Securities* | |
Item 4. | Mine Safety Disclosures* | |
Item 5. | Other Information* | |
Item 6. | ||
April 2, 2016 | June 27, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 275 | $ | 372 | |||
Trade receivables, net of allowance for doubtful accounts of $112 and $97 | 55,600 | 72,852 | |||||
Inventories | 107,239 | 91,594 | |||||
Other | 16,211 | 13,646 | |||||
Total current assets | 179,325 | 178,464 | |||||
Property, plant and equipment, net | 27,346 | 26,974 | |||||
Other assets: | |||||||
Deferred income tax asset | 9,678 | 6,723 | |||||
Goodwill | 9,957 | 9,957 | |||||
Other intangible assets, net | 6,210 | 7,055 | |||||
Other | 1,816 | 1,621 | |||||
Total other assets | 27,661 | 25,356 | |||||
Total assets | $ | 234,332 | $ | 230,794 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 56,212 | $ | 61,528 | |||
Accrued compensation and vacation | 7,937 | 9,467 | |||||
Current portion of debt | 5,000 | 5,000 | |||||
Other | 13,902 | 10,794 | |||||
Total current liabilities | 83,051 | 86,789 | |||||
Long-term liabilities: | |||||||
Term loan | 22,500 | 26,250 | |||||
Revolving loan | 18,543 | 11,631 | |||||
Deferred income tax liability | — | 501 | |||||
Other long-term obligations | 5,687 | 4,855 | |||||
Total long-term liabilities | 46,730 | 43,237 | |||||
Total liabilities | 129,781 | 130,026 | |||||
Commitments and contingencies (Note 9) | |||||||
Shareholders’ equity: | |||||||
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,711 and 10,706 shares, respectively | 45,148 | 44,136 | |||||
Retained earnings | 65,782 | 61,395 | |||||
Accumulated other comprehensive loss | (6,379 | ) | (4,763 | ) | |||
Total shareholders’ equity | 104,551 | 100,768 | |||||
Total liabilities and shareholders’ equity | $ | 234,332 | $ | 230,794 |
Three Months Ended | Nine Months Ended | ||||||||||||||
April 2, 2016 | March 28, 2015 | April 2, 2016 | March 28, 2015 | ||||||||||||
Net sales | $ | 118,448 | $ | 112,915 | $ | 361,060 | $ | 313,568 | |||||||
Cost of sales | 108,493 | 103,479 | 333,076 | 290,655 | |||||||||||
Gross profit | 9,955 | 9,436 | 27,984 | 22,913 | |||||||||||
Research, development and engineering expenses | 1,634 | 1,510 | 4,696 | 4,143 | |||||||||||
Selling, general and administrative expenses | 5,564 | 5,375 | 16,348 | 15,407 | |||||||||||
Total operating expenses | 7,198 | 6,885 | 21,044 | 19,550 | |||||||||||
Operating income | 2,757 | 2,551 | 6,940 | 3,363 | |||||||||||
Interest expense, net | 620 | 317 | 1,674 | 910 | |||||||||||
Income before income taxes | 2,137 | 2,234 | 5,266 | 2,453 | |||||||||||
Income tax provision | 354 | 373 | 879 | 489 | |||||||||||
Net income | $ | 1,783 | $ | 1,861 | $ | 4,387 | $ | 1,964 | |||||||
Net income per share — Basic | $ | 0.17 | $ | 0.18 | $ | 0.41 | $ | 0.19 | |||||||
Weighted average shares outstanding — Basic | 10,711 | 10,552 | 10,709 | 10,551 | |||||||||||
Net income per share — Diluted | $ | 0.16 | $ | 0.16 | $ | 0.39 | $ | 0.17 | |||||||
Weighted average shares outstanding — Diluted | 11,068 | 11,556 | 11,298 | 11,457 |
Three Months Ended | Nine Months Ended | ||||||||||||||
April 2, 2016 | March 28, 2015 | April 2, 2016 | March 28, 2015 | ||||||||||||
Comprehensive income (loss): | |||||||||||||||
Net income | $ | 1,783 | $ | 1,861 | $ | 4,387 | $ | 1,964 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Unrealized gain (loss) on hedging instruments, net of tax | 677 | (1,438 | ) | (1,616 | ) | (6,788 | ) | ||||||||
Comprehensive income (loss) | $ | 2,460 | $ | 423 | $ | 2,771 | $ | (4,824 | ) |
Nine Months Ended | |||||||
April 2, 2016 | March 28, 2015 | ||||||
Operating activities: | |||||||
Net income | $ | 4,387 | $ | 1,964 | |||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Depreciation and amortization | 4,556 | 4,376 | |||||
Excess tax benefit from share-based compensation | (402 | ) | (50 | ) | |||
Provision for obsolete inventory | 754 | 254 | |||||
Provision for warranty | 86 | 48 | |||||
Provision for doubtful accounts | 2 | 111 | |||||
Gain on disposal of assets | — | (4 | ) | ||||
Share-based compensation expense | 630 | 540 | |||||
Deferred income taxes | (2,624 | ) | (904 | ) | |||
Changes in operating assets and liabilities, net of acquisition: | |||||||
Trade receivables | 17,250 | 1,068 | |||||
Inventories | (16,399 | ) | (808 | ) | |||
Other assets | (2,712 | ) | (5,591 | ) | |||
Accounts payable | (5,316 | ) | 6,748 | ||||
Accrued compensation and vacation | (1,530 | ) | (2,093 | ) | |||
Other liabilities | 1,550 | 1,338 | |||||
Cash provided by operating activities | 232 | 6,997 | |||||
Investing activities: | |||||||
Payment for acquisition, net of cash acquired | — | (47,964 | ) | ||||
Purchase of property and equipment | (10,020 | ) | (7,147 | ) | |||
Proceeds from sale of fixed assets | 6,183 | 6,469 | |||||
Cash used in investing activities | (3,837 | ) | (48,642 | ) | |||
Financing activities: | |||||||
Payment of financing costs | (56 | ) | (44 | ) | |||
Proceeds from issuance of long term debt | — | 35,000 | |||||
Repayments of long term debt | (3,750 | ) | (2,500 | ) | |||
Borrowings under revolving credit agreement | 153,835 | 99,379 | |||||
Repayments of revolving credit agreement | (146,923 | ) | (87,893 | ) | |||
Proceeds from accounts receivable purchase agreement | — | 1,147 | |||||
Payments towards accounts receivable purchase agreement | — | (8,969 | ) | ||||
Excess tax benefit from share-based compensation | 402 | 50 | |||||
Proceeds from exercise of stock options | — | 17 | |||||
Cash provided by financing activities | 3,508 | 36,187 | |||||
Net decrease in cash and cash equivalents | (97 | ) | (5,458 | ) | |||
Cash and cash equivalents, beginning of period | 372 | 5,803 | |||||
Cash and cash equivalents, end of period | $ | 275 | $ | 345 | |||
Supplemental cash flow information: | |||||||
Interest payments | $ | 1,713 | $ | 934 | |||
Income tax payments, net of refunds | $ | 1,278 | $ | 3,084 |
Shares | Common Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||
Balances, June 27, 2015 | 10,706 | $ | 44,136 | $ | 61,395 | $ | (4,763 | ) | $ | 100,768 | ||||||||
Net income | — | — | 4,387 | — | 4,387 | |||||||||||||
Unrealized loss on hedging instruments, net | — | — | — | (1,616 | ) | (1,616 | ) | |||||||||||
Exercise of stock appreciation rights | 13 | — | — | — | — | |||||||||||||
Shares withheld for taxes | (8 | ) | (20 | ) | — | — | (20 | ) | ||||||||||
Share-based compensation | — | 630 | — | — | 630 | |||||||||||||
Excess tax benefit from share-based compensation | — | 402 | — | — | 402 | |||||||||||||
Balances, April 2, 2016 | 10,711 | $ | 45,148 | $ | 65,782 | $ | (6,379 | ) | $ | 104,551 |
1. | Basis of Presentation |
2. | Significant Accounting Policies |
June 27, 2015 | |||||||||||
As Filed | Reclass | As Adjusted | |||||||||
Current deferred income tax assets | $ | 6,643 | $ | (6,643 | ) | $ | — | ||||
Long-term deferred income tax assets | 80 | 6,643 | 6,723 | ||||||||
Long-term deferred income tax liabilities | (501 | ) | — | (501 | ) | ||||||
Net deferred tax assets | $ | 6,222 | $ | — | $ | 6,222 |
3. | Inventories |
April 2, 2016 | June 27, 2015 | ||||||
Finished goods | $ | 13,450 | $ | 8,019 | |||
Work-in-process | 18,391 | 15,220 | |||||
Raw materials and supplies | 75,398 | 68,355 | |||||
$ | 107,239 | $ | 91,594 |
4. | Long-Term Debt |
5. | Trade Accounts Receivable Purchase Programs |
6. | Income Taxes |
7. | Earnings Per Share |
Three Months Ended | |||||||
(in thousands, except per share information) | |||||||
April 2, 2016 | March 28, 2015 | ||||||
Net income | $ | 1,783 | $ | 1,861 | |||
Weighted average shares outstanding—basic | 10,711 | 10,552 | |||||
Effect of dilutive common stock awards | 357 | 1,004 | |||||
Weighted average shares outstanding—diluted | 11,068 | 11,556 | |||||
Net income per share—basic | $ | 0.17 | $ | 0.18 | |||
Net income per share—diluted | $ | 0.16 | $ | 0.16 | |||
Antidilutive SARs not included in diluted earnings per share | 869 | 208 |
Nine Months Ended | |||||||
(in thousands, except per share information) | |||||||
April 2, 2016 | March 28, 2015 | ||||||
Net income | $ | 4,387 | $ | 1,964 | |||
Weighted average shares outstanding—basic | 10,709 | 10,551 | |||||
Effect of dilutive common stock awards | 589 | 906 | |||||
Weighted average shares outstanding—diluted | 11,298 | 11,457 | |||||
Earnings per share—basic | $ | 0.41 | $ | 0.19 | |||
Earnings per share—diluted | $ | 0.39 | $ | 0.17 | |||
Antidilutive SARs not included in diluted earnings per share | 456 | 208 |
July 29, 2015 | October 31, 2014 | ||||||
SARs Granted | 248,166 | 213,166 | |||||
Strike Price | $ | 10.26 | $ | 8.22 | |||
Fair Value | $ | 3.65 | $ | 3.04 |
9. | Commitments and Contingencies |
10. | Fair Value Measurements |
April 2, 2016 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||
Financial Assets: | |||||||||||||||
Foreign currency forward contracts | $ | — | $ | 263 | $ | — | $ | 263 | |||||||
Financial Liabilities: | |||||||||||||||
Interest rate swaps | $ | — | $ | (506 | ) | $ | — | $ | (506 | ) | |||||
Foreign currency forward contracts | $ | — | $ | (9,422 | ) | $ | — | $ | (9,422 | ) |
June 27, 2015 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||
Financial Assets: | |||||||||||||||
Interest rate swaps | $ | — | $ | 25 | $ | — | $ | 25 | |||||||
Financial Liabilities: | |||||||||||||||
Interest rate swaps | $ | — | $ | (443 | ) | $ | — | $ | (443 | ) | |||||
Foreign currency forward contracts | $ | — | $ | (6,799 | ) | $ | — | $ | (6,799 | ) |
11. | Derivative Financial Instruments |
April 2, 2016 | June 27, 2015 | ||||||||
Derivatives Designated as Hedging Instruments | Balance Sheet Location | Fair Value | Fair Value | ||||||
Foreign currency forward contracts | Other long-term assets | $ | 263 | $ | — | ||||
Foreign currency forward contracts | Other current liabilities | $ | (3,968 | ) | $ | (2,517 | ) | ||
Foreign currency forward contracts | Other long-term liabilities | $ | (5,454 | ) | $ | (4,282 | ) | ||
Interest rate swap | Other long-term assets | $ | — | $ | 25 | ||||
Interest rate swap | Other current liabilities | $ | (273 | ) | $ | (271 | ) | ||
Interest rate swap | Other long-term liabilities | $ | (233 | ) | $ | (172 | ) |
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of December 26, 2015 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of April 2, 2016 | ||||||||||||
Forward contracts | Cost of sales | $ | (6,769 | ) | $ | (589 | ) | $ | 1,313 | $ | (6,045 | ) | |||||
Interest rate swap | Interest expense | (287 | ) | (142 | ) | 95 | (334 | ) | |||||||||
Total | $ | (7,056 | ) | $ | (731 | ) | $ | 1,408 | $ | (6,379 | ) | ||||||
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of December 27, 2014 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of March 28, 2015 | ||||||||||||
Forward contracts | Cost of sales | $ | (2,806 | ) | $ | (1,320 | ) | $ | 25 | $ | (4,101 | ) | |||||
Interest rate swap | Interest expense | (141 | ) | (143 | ) | — | (284 | ) | |||||||||
Total | $ | (2,947 | ) | $ | (1,463 | ) | $ | 25 | $ | (4,385 | ) |
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of June 27, 2015 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of April 2, 2016 | ||||||||||||
Forward contracts | Cost of sales | $ | (4,487 | ) | $ | (4,479 | ) | $ | 2,921 | $ | (6,045 | ) | |||||
Interest rate swap | Interest expense | (276 | ) | (268 | ) | 210 | (334 | ) | |||||||||
Total | $ | (4,763 | ) | $ | (4,747 | ) | $ | 3,131 | $ | (6,379 | ) | ||||||
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of June 28, 2014 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of March 28, 2015 | ||||||||||||
Forward contracts | Cost of sales | $ | 2,403 | $ | (5,739 | ) | $ | (765 | ) | $ | (4,101 | ) | |||||
Interest rate swap | Interest expense | — | (284 | ) | — | (284 | ) | ||||||||||
Total | $ | 2,403 | $ | (6,023 | ) | $ | (765 | ) | $ | (4,385 | ) |
12. | Acquisition |
Estimated Fair Values | |||
At September 3, 2014 | |||
Purchase price paid | $ | 48,010 | |
Cash acquired | (46 | ) | |
Purchase price, net of cash received | $ | 47,964 | |
Cash | $ | 46 | |
Accounts Receivable | 21,211 | ||
Inventories | 21,772 | ||
Other Current Assets | 1,013 | ||
Fixed Assets | 7,823 | ||
Favorable Leases | 2,941 | ||
Customer Relationships | 2,833 | ||
Non-Compete Agreements | 196 | ||
Goodwill | 8,217 | ||
Other Assets | 42 | ||
Accounts Payable | (11,070 | ) | |
Accrued Salaries and Wages | (2,188 | ) | |
Other Current Liabilities | (2,408 | ) | |
Deferred Tax Liability | (2,418 | ) | |
Fair Value of Assets Acquired | $ | 48,010 |
Nine Months Ended | ||||||||
(unaudited) | ||||||||
April 2, 2016 | March 28, 2015 | |||||||
Net sales | $ | 361,060 | $ | 337,046 | ||||
Net income | $ | 4,387 | $ | 2,582 |
13. | Goodwill and Other Intangible Assets |
April 2, 2016 | |||||||||||||
Amortization Period in Years | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Intangible assets: | |||||||||||||
Non-Compete Agreements | 3 - 5 | $ | 568 | $ | (308 | ) | $ | 260 | |||||
Customer Relationships | 10 | 4,803 | (990 | ) | 3,813 | ||||||||
Favorable Lease Agreements | 4 - 7 | 2,941 | (804 | ) | 2,137 | ||||||||
Total | $ | 8,312 | $ | (2,102 | ) | $ | 6,210 |
June 27, 2015 | |||||||||||||
Amortization Period in Years | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Intangible assets: | |||||||||||||
Non-Compete Agreements | 3 - 5 | $ | 568 | $ | (204 | ) | $ | 364 | |||||
Customer Relationships | 10 | 4,803 | (630 | ) | 4,173 | ||||||||
Favorable Lease Agreements | 4 - 7 | 2,941 | (423 | ) | 2,518 | ||||||||
Total | $ | 8,312 | $ | (1,257 | ) | $ | 7,055 |
Fiscal Years Ending | Amount | |||
2016 (1) | $ | 283 | ||
2017 | 1,128 | |||
2018 | 1,073 | |||
2019 | 818 | |||
2020 | 783 | |||
Thereafter | 2,125 | |||
Total amortization expense | $ | 6,210 |
14. | Subsequent Event |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Inactive, Obsolete, and Surplus Inventory Reserve |
• | Revenue Recognition |
• | Allowance for Doubtful Accounts |
• | Accrued Warranty |
• | Income Taxes |
• | Share-Based Compensation |
• | Impairment of Long-Lived Assets |
• | Derivatives and Hedging Activity |
• | Long-Term Incentive Compensation Accrual |
• | Impairment of Goodwill |
• | Business Combinations |
Three Months Ended | ||||||||||||||||||||
April 2, 2016 | % of net sales | March 28, 2015 | % of net sales | $ change | % point change | |||||||||||||||
Net sales | $ | 118,448 | 100.0 | % | $ | 112,915 | 100.0 | % | $ | 5,533 | — | % | ||||||||
Cost of sales | 108,493 | 91.6 | % | 103,479 | 91.6 | % | 5,014 | — | % | |||||||||||
Gross profit | 9,955 | 8.4 | % | 9,436 | 8.4 | % | 519 | — | % | |||||||||||
Research, development and engineering | 1,634 | 1.4 | % | 1,510 | 1.3 | % | 124 | 0.1 | % | |||||||||||
Selling, general and administrative | 5,564 | 4.7 | % | 5,375 | 4.8 | % | 189 | (0.1 | )% | |||||||||||
Total operating expenses | 7,198 | 6.1 | % | 6,885 | 6.1 | % | 313 | — | % | |||||||||||
Operating income | 2,757 | 2.3 | % | 2,551 | 2.3 | % | 206 | — | % | |||||||||||
Interest expense, net | 620 | 0.5 | % | 317 | 0.3 | % | 303 | 0.2 | % | |||||||||||
Income before income taxes | 2,137 | 1.8 | % | 2,234 | 2.0 | % | (97 | ) | (0.2 | )% | ||||||||||
Income tax provision | 354 | 0.3 | % | 373 | 0.3 | % | (19 | ) | — | % | ||||||||||
Net income | $ | 1,783 | 1.5 | % | $ | 1,861 | 1.6 | % | $ | (78 | ) | (0.1 | )% | |||||||
Effective income tax rate | 16.6 | % | 16.7 | % |
Nine Months Ended | ||||||||||||||||||||
April 2, 2016 | % of net sales | March 28, 2015 | % of net sales | $ change | % point change | |||||||||||||||
Net sales | $ | 361,060 | 100.0 | % | $ | 313,568 | 100.0 | % | $ | 47,492 | — | % | ||||||||
Cost of sales | 333,076 | 92.2 | % | 290,655 | 92.7 | % | 42,421 | (0.5 | )% | |||||||||||
Gross profit | 27,984 | 7.8 | % | 22,913 | 7.3 | % | 5,071 | 0.5 | % | |||||||||||
Research, development and engineering | 4,696 | 1.3 | % | 4,143 | 1.3 | % | 553 | — | % | |||||||||||
Selling, general and administrative | 16,348 | 4.5 | % | 15,407 | 4.9 | % | 941 | (0.4 | )% | |||||||||||
Total operating expenses | 21,044 | 5.8 | % | 19,550 | 6.2 | % | 1,494 | (0.4 | )% | |||||||||||
Operating income | 6,940 | 1.9 | % | 3,363 | 1.1 | % | 3,577 | 0.8 | % | |||||||||||
Interest expense, net | 1,674 | 0.5 | % | 910 | 0.3 | % | 764 | 0.2 | % | |||||||||||
Income before income taxes | 5,266 | 1.5 | % | 2,453 | 0.8 | % | 2,813 | 0.7 | % | |||||||||||
Income tax provision | 879 | 0.2 | % | 489 | 0.2 | % | 390 | — | % | |||||||||||
Net income | $ | 4,387 | 1.2 | % | $ | 1,964 | 0.6 | % | $ | 2,423 | 0.6 | % | ||||||||
Effective income tax rate | 16.7 | % | 19.9 | % |
• | difficulties in staffing and managing onshore and offshore operations; |
• | political and economic instability (including acts of terrorism, pandemics, civil unrest, forms of violence and outbreaks of war), which could impact our ability to ship, manufacture, and/or receive product; |
• | unexpected changes in regulatory requirements and laws; |
• | longer customer payment cycles and difficulty collecting accounts receivable; |
• | export duties, import controls and trade barriers (including quotas); |
• | governmental restrictions on the transfer of funds; |
• | burdens of complying with a wide variety of foreign laws and labor practices; |
• | our locations may be impacted by hurricanes, tornadoes, earthquakes, water shortages, tsunamis, floods, typhoons, fires, extreme weather conditions and other natural or man-made disasters. |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 6. | Exhibits | |||
31.1 | Certification of Chief Executive Officer (Exchange Act Rules 13(a)-14 and 15(d)-14) | |||
31.2 | Certification of Chief Financial Officer (Exchange Act Rules 13(a)-14 and 15(d)-14) | |||
32.1 | Certification of Chief Executive Officer (18 U.S.C. 1350) | |||
32.2 | Certification of Chief Financial Officer (18 U.S.C. 1350) | |||
101.INS | XBRL Instance Document * | |||
101.SCH | XBRL Taxonomy Extension Schema Document * | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document * | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document * | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document * | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document * |
KEY TRONIC CORPORATION | |||
/s/ CRAIG D. GATES | |||
Craig D. Gates | Date: | May 10, 2016 | |
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
/s/ Brett R. Larsen | |||
Brett R. Larsen | Date: | May 10, 2016 | |
Executive Vice President of Administration, Chief Financial Officer and Treasurer | |||
(Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Key Tronic Corporation; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) | Designed such control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons fulfilling the equivalent functions); |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting |
Dated: | May 10, 2016 | |
/s/ Craig D. Gates | ||
Craig D. Gates | ||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Key Tronic Corporation; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b) | Designed such control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons fulfilling the equivalent functions); |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting |
Dated: | May 10, 2016 | |
/s/ Brett R. Larsen | ||
Brett R. Larsen | ||
Executive Vice President of Administration, Chief Financial Officer and Treasurer |
1. | The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
2. | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | May 10, 2016 | |
/s/ Craig D. Gates | ||
Craig D. Gates | ||
President and Chief Executive Officer |
1. | The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
2. | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | May 10, 2016 | |
/s/ Brett R. Larsen | ||
Brett R. Larsen | ||
Executive Vice President of Administration, Chief Financial Officer and Treasurer |
Document and Entity Information - shares |
9 Months Ended | |
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Apr. 02, 2016 |
Apr. 29, 2016 |
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Document Documentand Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Apr. 02, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | ktcc | |
Entity Registrant Name | KEY TRONIC CORP | |
Entity Central Index Key | 0000719733 | |
Current Fiscal Year End Date | --07-02 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 10,710,606 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Apr. 02, 2016 |
Jun. 27, 2015 |
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Statement of Financial Position [Abstract] | ||
Trade receivables, allowance for doubtful accounts | $ 112 | $ 97 |
Common stock - par value | $ 0 | $ 0 |
Common stock - shares authorized | 25,000 | 25,000 |
Common stock - shares issued | 10,711 | 10,706 |
Common stock - shares outstanding | 10,711 | 10,706 |
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Apr. 02, 2016 |
Mar. 28, 2015 |
Apr. 02, 2016 |
Mar. 28, 2015 |
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Income Statement [Abstract] | ||||
Net sales | $ 118,448 | $ 112,915 | $ 361,060 | $ 313,568 |
Cost of sales | 108,493 | 103,479 | 333,076 | 290,655 |
Gross profit | 9,955 | 9,436 | 27,984 | 22,913 |
Operating expenses | ||||
Research, development and engineering expenses | 1,634 | 1,510 | 4,696 | 4,143 |
Selling, general and administrative expenses | 5,564 | 5,375 | 16,348 | 15,407 |
Total operating expenses | 7,198 | 6,885 | 21,044 | 19,550 |
Operating income | 2,757 | 2,551 | 6,940 | 3,363 |
Interest expense, net | 620 | 317 | 1,674 | 910 |
Income before income taxes | 2,137 | 2,234 | 5,266 | 2,453 |
Income tax provision | 354 | 373 | 879 | 489 |
Net income | $ 1,783 | $ 1,861 | $ 4,387 | $ 1,964 |
Earnings per share: | ||||
Net income per share — Basic | $ 0.17 | $ 0.18 | $ 0.41 | $ 0.19 |
Weighted average shares outstanding — Basic | 10,711 | 10,552 | 10,709 | 10,551 |
Net income per share — Diluted | $ 0.16 | $ 0.16 | $ 0.39 | $ 0.17 |
Weighted average shares outstanding — Diluted | 11,068 | 11,556 | 11,298 | 11,457 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Apr. 02, 2016 |
Mar. 28, 2015 |
Apr. 02, 2016 |
Mar. 28, 2015 |
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Comprehensive income (loss): | ||||
Net income | $ 1,783 | $ 1,861 | $ 4,387 | $ 1,964 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on hedging instruments, net of tax | 677 | (1,438) | (1,616) | (6,788) |
Comprehensive income (loss) | $ 2,460 | $ 423 | $ 2,771 | $ (4,824) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Apr. 02, 2016 |
Mar. 28, 2015 |
Apr. 02, 2016 |
Mar. 28, 2015 |
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Statement of Comprehensive Income [Abstract] | ||||
Unrealized gain (loss) on foreign exchange contracts, tax | $ 0.3 | $ (0.7) | $ (0.8) | $ (3.5) |
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY - 9 months ended Apr. 02, 2016 - USD ($) shares in Thousands, $ in Thousands |
Total |
Common Stock |
Retained Earnings |
Accumulated Other Comprehensive (Loss) Income |
---|---|---|---|---|
Balances (Shares) at Jun. 27, 2015 | 10,706 | |||
Balances, Period Start at Jun. 27, 2015 | $ 100,768 | $ 44,136 | $ 61,395 | $ (4,763) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 4,387 | |||
Unrealized loss on hedging instruments, net | $ (1,616) | (1,616) | ||
Exercise of stock appreciation rights (Shares) | 13 | |||
Shares withheld for taxes, (Shares) | (8) | |||
Shares withheld for taxes | $ 20 | |||
Share-based compensation expense | 630 | $ 630 | ||
Excess tax benefit from share-based compensation | 402 | $ 402 | ||
Balances (Shares) at Apr. 02, 2016 | 10,711 | |||
Balances, Period End at Apr. 02, 2016 | $ 104,551 | $ 45,148 | $ 65,782 | $ (6,379) |
BASIS OF PRESENTATION |
9 Months Ended |
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Apr. 02, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | Basis of Presentation The consolidated financial statements included herein have been prepared by Key Tronic Corporation and subsidiaries (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet information was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The financial statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2015. |
FISCAL YEAR | The Company’s reporting period is a 52/53 week fiscal year ending on the Saturday closest to June 30. The quarter ended April 2, 2016 was a 14 week period, whereas the quarter ended March 28, 2015 was a 13 week period. Fiscal year 2016 will end on July 2, 2016, which is a 53 week year. Fiscal year 2015 which ended on June 27, 2015, was a 52 week year. |
SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | Significant Accounting Policies Reclassifications Certain prior period reclassifications were made to conform with the current period presentation. These reclassifications had no effect on reported income, comprehensive income, cash flows, total assets, or shareholders’ equity as previously reported. Earnings Per Common Share Basic earnings per common share (EPS) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the combination of other potentially dilutive weighted average common shares and the weighted average number of common shares outstanding during the period using the treasury stock method. The computation assumes the proceeds from the exercise of equity awards were used to repurchase common shares at the average market price during the period. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance of common stock equivalent shares that would have an anti-dilutive effect on EPS. Derivative Instruments and Hedging Activities The Company has entered into foreign currency forward contracts and an interest rate swap which are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging. The effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (AOCI) and is reclassified into earnings in the same period in which the underlying hedged transaction affects earnings. The derivative’s effectiveness represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. The Company uses derivatives to manage the variability of foreign currency fluctuations of expenses in our Mexico facilities and interest rate risk associated with certain borrowings under the Company’s debt arrangement. The foreign currency forward contracts and interest rate swaps have terms that are matched to the underlying transactions being hedged. As a result, these transactions fully offset the hedged risk and no ineffectiveness has been recorded. The Company’s foreign currency forward contracts and interest rate swaps potentially expose the Company to credit risk to the extent the counterparties may be unable to meet the terms of the agreement. The Company minimizes such risk by seeking high quality counterparties. The Company’s counterparties to the foreign currency forward contracts and interest rate swaps are major banking institutions. These institutions do not require collateral for the contracts, and the Company believes that the risk of the counterparties failing to meet their contractual obligations is remote. The Company does not enter into derivative instruments for trading or speculative purposes. Income Taxes We compute our interim income tax provision through the use of an estimated annual effective tax rate (ETR) applied to year-to-date operating results and specific events that are discretely recognized as they occur. In determining the estimated annual ETR, we analyze various factors, including projections of our annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates, and certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments, are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than included in the estimated annual ETR. Refer to Note 6 for further discussions. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments based on new assessments and changes in estimates and which may not accurately forecast actual outcomes. Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. The tax years 1998 through the present remain open to examination by the major U.S. taxing jurisdictions to which we are subject. Impairment of Goodwill and Other Intangible Assets The Company records intangible assets that are acquired individually or with a group of other assets in the financial statements at acquisition. In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are required to be reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value. The Company’s acquired intangible assets are subject to amortization over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. This may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued an amendment to defer the effective date of ASU 2014-09 for all entities by one year. This Update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016. Companies have the option of using either a full or modified retrospective approach in applying this standard. The Company is in the process of assessing the impact of ASU 2014-09 on its consolidated financial statements. In August 2014, the FASB issued Accounting Standards Update 2014-15 (ASU 2014-15), Presentation of Financial Statements - Going Concern. The guidance in this Update applies to all entities. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The amendments of ASU 2014-15 did not have a significant impact on the Company’s consolidated financial statements. In April 2015, the FASB issued Accounting Standards Update 2015-03 (ASU 2015-03), Simplifying the Presentation of Debt Issuance Costs. The guidance in this Update changes the presentation of debt issuance costs in financial statements. Under the new guidance, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This guidance is effective for the Company beginning in the first quarter of fiscal year 2017 and early adoption is permitted in an interim period with any adjustments reflected as of the beginning of the fiscal year that includes that interim period. The amendments of ASU 2015-03 did not have a significant impact to the Company’s consolidated financial statements. In July 2015, the FASB issued final guidance that simplifies the subsequent measurement of inventory for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method. For inventory within the scope of the new guidance, entities will be required to compare the cost of inventory to only one measure, its net realizable value, and not the three measures required by the existing guidance. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The new guidance should not change how entities initially measure the cost of inventory. The guidance will be effective for the Company in the fiscal year beginning July 3, 2017. Early adoption is permitted. We have not yet determined the impact this new guidance may have on our financial statements. In September 2015, the FASB issued Accounting Standards Update 2015-16 (ASU 2015-16), Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this Update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements. In November 2015, the FASB issued Accounting Standards Update 2015-17, Income Taxes. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The guidance will be effective for the Company beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities. The Company retrospectively adopted this ASU during the second quarter of fiscal year 2016. The following table summarizes the adjustments made to conform prior period classifications with the new guidance (in thousands):
In February 2016, the FASB issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases which supersedes ASC 840 Leases and creates a new topic, ASC 842 Leases. This update requires lessees to recognize a lease asset and a lease liability for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier adoption permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect of this update on its consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update 2016-09 (ASU 2016-09), Improvements to Employee Share-Based Payment Accounting. This update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with earlier adoption permitted. The amendments of ASU 2016-09, when adopted, are not expected to have a material impact on the Company’s consolidated financial statements. |
INVENTORIES |
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INVENTORIES | Inventories The components of inventories consist of the following (in thousands):
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LONG-TERM DEBT |
9 Months Ended |
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Apr. 02, 2016 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | Long-Term Debt On September 3, 2014, the Company added a five-year term loan in the amount of $35.0 million used to acquire all of the outstanding shares of CDR Manufacturing, Inc. (dba Ayrshire Electronics). For further information on the acquisition of Ayrshire, see footnote 12 of the “Notes to Consolidated Financial Statements.” On August 6, 2015, the Company entered into a First Amendment to the amended and restated credit agreement extending the limit on our line of credit facility to $45.0 million as evidenced by the Second Replacement Revolving Note. The agreement specifies that the proceeds of the revolving line of credit be used primarily for working capital and general corporate purposes of the Company and its subsidiaries. Borrowings under the revolving line of credit bear interest at either a “Base Rate” or a “Fixed Rate,” as elected by the Company. The base rate is the higher of the Wells Fargo Bank prime rate, daily one month London Interbank Offered Rate (LIBOR) plus 1.5%, or the Federal Funds rate plus 1.5%. The fixed rate is LIBOR plus 1.75%, LIBOR plus 2.00%, or LIBOR plus 2.25% depending on the level of the Company’s trailing four quarters Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). The revolving line of credit is secured by substantially all of the assets of the Company. As of April 2, 2016, the Company had an outstanding balance under the credit facility of $18.5 million, $0.4 million in outstanding letters of credit and $26.1 million available for future borrowings. The interest rate on the outstanding line of credit balance was in the range of 2.44% - 3.50%. As of June 27, 2015, the Company had an outstanding balance under the credit facility of $11.6 million, $0.3 million in outstanding letters of credit and $18.0 million available for future borrowings. The interest rate on the outstanding line of credit balance was in the range of 2.28% - 3.25%. The outstanding principal balance of the term loan bears interest at a fixed rate per annum of the daily one month LIBOR plus 1.75%, 2.00% or 2.25% depending on the ratio of the Company’s funded debt to EBITDA, except that the term loan bore interest at LIBOR plus 2.00% from September 3, 2014 through December 14, 2014 regardless of the Company’s cash flow leverage ratio. Principal on the term loan is payable in equal quarterly installments of $1.25 million which commenced on December 15, 2014 and will continue through June 15, 2019, with a final installment of all remaining unpaid principal due on August 31, 2019. The Company had an outstanding balance of $27.5 million under the term loan as of April 2, 2016. As of June 27, 2015, the Company had an outstanding balance of $31.3 million under the term loan. The Company must comply with certain financial covenants, including a cash flow leverage ratio, an asset coverage ratio, and a fixed charge coverage ratio. The credit agreement requires the Company to maintain a minimum profit threshold, limits the maximum capital lease expenditures and restricts the Company from declaring or paying dividends in cash or stock without prior bank approval. The Company is in compliance with all financial covenants for all periods presented. |
TRADE ACCOUNTS RECEIVABLE PURCHASE PROGRAMS |
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Apr. 02, 2016 | |
Receivables [Abstract] | |
TRADE ACCOUNTS RECEIVABLE PURCHASE PROGRAMS | Trade Accounts Receivable Purchase Programs Sale Programs On June 25, 2014, the Company entered into an Account Purchase Agreement with Wells Fargo Bank, N.A. (“WFB”) which provides that the Company may sell and assign to WFB and WFB may purchase from the Company the accounts receivable of certain Company customers in a maximum aggregate amount outstanding of $50.0 million. The initial term of the agreement is 36 months with successive 12 month renewal terms. On December 18, 2014, the Company modified the original Account Purchase Agreement with WFB to allow the Company to account for the factored receivables as a true-sale. On July 16, 2015, the Company modified the Account Purchase Agreement with WFB to decrease the maximum aggregate amount of receivables available to factor from $50.0 million to $20.0 million. The decrease in the aggregate amount available was due to a change in customer mix and to reduce fees related to the program. The Company also has an Account Purchase Agreement with Orbian Financial Services (“Orbian”) which allows the Company to account for factored receivables as a true-sale. Total accounts receivables sold during the nine months ended April 2, 2016 and March 28, 2015 was approximately $58.2 million and $5.0 million, respectively. Accounts receivables sold and not yet collected was $2.0 million and $0.9 million as of April 2, 2016 and June 27, 2015, respectively. The receivables that were sold were removed from the condensed consolidated balance sheets and the cash received is reflected as cash provided by operating activities in the condensed consolidated statements of cash flows. |
INCOME TAXES |
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Apr. 02, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Income Taxes The Company expects to repatriate a portion of its foreign earnings based on increased net sales growth driving additional capital requirements domestically, cash requirements for potential acquisitions and to implement certain tax strategies. The Company currently expects to repatriate approximately $11.7 million of foreign earnings in the future. As such, these earnings would be recognized in the United States, and the Company would be subject to U.S. federal income taxes and potential withholding taxes in foreign jurisdictions. Both the domestic tax and estimated withholding tax of expected repatriation of foreign earnings have been recorded as part of deferred taxes as of April 2, 2016. All other unremitted foreign earnings are expected to remain permanently reinvested for planned fixed assets purchases and improvements in foreign locations. The Company has available approximately $6.9 million of gross federal research and development tax credits as of April 2, 2016. ASC 740 requires the Company to recognize in its financial statements uncertainties in tax positions taken that may not be sustained upon examination by the taxing authorities. Accordingly, as of April 2, 2016, the Company has recorded $3.7 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $3.2 million. |
EARNINGS PER SHARE |
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EARNINGS PER SHARE | Earnings Per Share The following tables present a reconciliation of the denominator in the basic and diluted EPS calculation and the number of antidilutive common share awards that were not included in the diluted earnings per share calculation. These antidilutive securities occur when equity awards outstanding have an option price greater than the average market price for the period.
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SHARE-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
SHARE BASED COMPENSATION | Share-based Compensation The Company’s incentive plan provides for equity and liability awards to employees and non-employee directors in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock-based or cash-based awards. Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sold, research, development and engineering, and selling, general and administrative expenses. Share-based compensation is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on historical experience and future expectations. In addition to service conditions, these SARs contain a performance condition. The additional performance condition is based upon the achievement of Return on Invested Capital (ROIC) goals relative to a peer group. All awards with performance conditions are evaluated quarterly to determine the likelihood that performance metrics will be achieved during the performance period. These awards are charged to compensation expense over the requisite service period based on the number of shares expected to vest. The SARs cliff vest after a three-year period from date of grant and expire five years from date of grant. The grant date fair value for the awards granted below were estimated using the Black Scholes option valuation method:
Total share-based compensation expense recognized during the three months ended April 2, 2016 and March 28, 2015 was approximately $204,000 and $196,000, respectively. Total share-based compensation recognized during the nine months ended April 2, 2016 and March 28, 2015 was approximately $630,000 and $540,000, respectively. As of April 2, 2016, total unrecognized compensation expense related to unvested share-based compensation arrangements was approximately $1.1 million. This expense is expected to be recognized over a weighted average period of 1.91 years. No options to purchase shares of common stock or SARs were exercised during the three months ended April 2, 2016 or March 28, 2015. During the nine months ended April 2, 2016, 13,333 SARs were exercised, with an immaterial amount of intrinsic value. During the nine months ended March 28, 2015, 4,930 options to purchase shares of common stock were exercised, with an immaterial amount of intrinsic value. |
COMMITMENTS AND CONTINGENCIES |
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Apr. 02, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Commitments and Contingencies Litigation and Other Matters The Company is party to certain lawsuits or claims in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the financial position, results of operations or cash flow of the Company. Warranties The Company provides warranties on certain product sales. Allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty. If actual return rates and/or repair and replacement costs differ significantly from management’s estimates, adjustments to recognize additional cost of sales may be required in future periods. The Company’s warranty reserve was approximately $48,000 and $115,000 as of April 2, 2016 and June 27, 2015, respectively. |
FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | Fair Value Measurements The Company has adopted ASC 820, Fair Value Measurements, which defines fair value, establishes a framework for assets and liabilities being measured and reported at fair value and expands disclosures about fair value measurements. There are three levels of fair value hierarchy inputs used to value assets and liabilities which include: Level 1 – inputs are quoted market prices for identical assets or liabilities; Level 2 – inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 – inputs are unobservable inputs for the asset or liability. The following table summarizes the fair value of assets (liabilities) of the Company’s derivatives that are required to be measured on a recurring basis as of April 2, 2016 and June 27, 2015 (in thousands):
The Company currently has forward contracts to hedge known future cash outflows for expenses denominated in the Mexican peso and interest rate swaps to mitigate risk associated with certain borrowings under the Company’s debt arrangement. These contracts are measured on a recurring basis based on the foreign currency spot rates and forward rates quoted by banks or foreign currency dealers. These contracts are marked to market using level 2 input criteria every period with the unrealized gain or loss, net of tax, reported as a component of shareholders’ equity in accumulated other comprehensive loss, as they qualify for hedge accounting. The carrying values of cash and cash equivalents, accounts receivable and current liabilities reflected on the balance sheets at April 2, 2016 and June 27, 2015, reasonably approximate their fair value. The Company’s long-term debt primarily consists of a revolving line of credit and a term loan. Borrowings under the revolving line of credit bear interest at either a “Base Rate” or a “Fixed Rate,” as elected by the Company. Each of these rates is a variable floating rate dependent upon current market conditions and the Company’s current credit risk as discussed in footnote 4. As a result of the determinable market rate for our revolving credit and term loan debt, they are classified within Level 2 of the fair value hierarchy. The discounted cash flow of the revolving line of credit is estimated to be $18.5 million and $11.6 million as of April 2, 2016 and June 27, 2015, respectively, with a carrying value that reasonably approximates the fair value. The discounted cash flow of the term loan is estimated to be $27.5 million as of April 2, 2016 and $31.3 million as of June 27, 2015, respectively, with a carrying value that reasonably approximates the fair value. |
DERIVATIVE FINANCIAL INSTRUMENTS |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | Derivative Financial Instruments As of April 2, 2016, the Company had outstanding foreign currency forward contracts with a total notional amount of $67.8 million. The maturity dates for these contracts extend through March 2019. For the three months ended April 2, 2016, the Company entered into $7.0 million of foreign currency forward contracts and settled $5.7 million of such contracts. During the same period of the previous year, the Company entered into $5.8 million of foreign currency forward contracts and settled $5.0 million of such contracts. For the nine months ended April 2, 2016, the Company entered into foreign currency forward contracts of $19.0 million and settled $16.3 million of such contracts. During the same period of the previous year, the Company entered into foreign currency forward contracts of $23.1 million and settled $15.3 million of such contracts. On October 1, 2014, the Company entered into an interest rate swap contract with an effective date of September 1, 2015 and a termination date of September 3, 2019, with a notional amount of $25.0 million related to the borrowings outstanding under the term loan and line of credit. This interest rate swap pays the Company variable interest at the one month LIBOR rate, and the Company pays the counter party a fixed interest rate. The fixed interest rate for the contract is 1.97% that replaces the one month LIBOR rate component of our contractual interest to be paid to WFB as part of our debt facilities. Based on the terms of the interest rate swap contract and the underlying borrowings outstanding under the term loan, the interest rate contract was determined to be effective, and thus qualifies as a cash flow hedge. The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheet as of April 2, 2016 and June 27, 2015 (in thousands):
The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended April 2, 2016 and March 28, 2015, respectively (in thousands):
The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the nine months ended April 2, 2016 and March 28, 2015, respectively (in thousands):
The Company does not enter into derivative instruments for trading or speculative purposes. The Company’s counterparties to the foreign currency forward contracts and interest rate swaps are major financial institutions. These institutions do not require collateral for the contracts and the Company believes that the risk of the counterparties failing to meet their contractual obligations is remote. As of April 2, 2016, the net amount of unrealized loss expected to be reclassified into earnings within the next 12 months is approximately $2.8 million. As of April 2, 2016, the Company does not have any foreign exchange contracts with credit-risk-related contingent features. |
ACQUISITION |
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ACQUISITION | Acquisition On September 3, 2014, the Company acquired all of the outstanding stock of Ayrshire, resulting in Ayrshire becoming a wholly owned subsidiary of the Company. Ayrshire provides printed circuit board assembly and other electronic manufacturing services to a diversified customer base through manufacturing facilities operated by Ayrshire or its subsidiaries in Minnesota, Arkansas, Mississippi, and Kentucky and through a sheltered maquiladora facility in Reynosa, Mexico. The Reynosa, Mexico operations were moved to the Company’s existing facility in Juarez, Mexico. This acquisition expands our printed circuit board assembly capacity, total revenue, and adds to and diversifies our customer base with the addition of many new multi-national companies. The total cash payment of approximately $48.0 million was funded through borrowings on our term loan, revolving line of credit, and cash on hand. The Company incurred approximately $775,000 of costs related to due diligence and closing this acquisition. The following table summarizes the purchase price paid for Ayrshire and the fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands):
The Ayrshire acquisition was accounted for using the acquisition method of accounting whereby the total purchase price is allocated to tangible and intangible assets and liabilities based on their fair values on the date of acquisition. The Company determined the purchase price allocations on the acquisition based on estimates of the fair values of the assets acquired and liabilities assumed. The following summary pro forma condensed consolidated financial information reflects the Ayrshire acquisition as if it had occurred on June 30, 2014 for purposes of the statements of income. This summary pro forma information is not necessarily representative of what the Company’s results of operations would have been had this acquisition in fact occurred on June 30, 2014 and is not intended to project the Company’s results of operations for any future period. Pro forma condensed consolidated financial information for the nine months ended April 2, 2016 and March 28, 2015 (in thousands):
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GOODWILL AND OTHER INTANGIBLE ASSETS |
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GOODWILL AND OTHER INTANGIBLE ASSETS | Goodwill and Other Intangible Assets In accordance with ASC 350 Intangibles – Goodwill and Other Intangibles, goodwill is not amortized, but must be analyzed for impairment at least annually. The Company recorded goodwill in connection with the Ayrshire and Sabre acquisitions resulting primarily from the synergies that resulted from the Company’s acquisitions and the assembled workforce. The goodwill is not amortized for financial accounting purposes. The goodwill from the acquisitions is not deductible for tax purposes. The Company assesses goodwill and other intangibles for impairment on the first day of the fourth quarter, or more frequently if circumstances indicate that the carrying value of the assets may not be recoverable. During the nine months ended April 2, 2016 and March 28, 2015, no impairment was recognized. Goodwill was recorded at $10.0 million as of April 2, 2016 and June 27, 2015. The components of acquired intangible assets are as follows (in thousands):
Amortization expense was approximately $282,000 for both the three months ended April 2, 2016 and March 28, 2015. Amortization expense was approximately $845,000 and $704,000 for the nine months ended April 2, 2016 and March 28, 2015, respectively. Aggregate amortization expense relative to existing intangible assets by fiscal year is currently estimated to be as follows (in thousands):
(1) Represents estimated amortization for the remaining three-month period ending July 2, 2016. |
SUBSEQUENT EVENT |
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Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Event Subsequent to the end of the third quarter of 2016, management approved a plan for the closure of the Harrodsburg, Kentucky facility in order to reduce costs and further improve operating efficiencies. Customer programs from this location will be transferred to other manufacturing facilities primarily in the United States. The Company expects to incur approximately $250,000 in costs related to the closure of this facility as well as transferring customer programs to other locations. The Harrodsburg, Kentucky facility is expected to be shut down by the end of the first quarter of fiscal year 2017. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Reclassifications | Reclassifications Certain prior period reclassifications were made to conform with the current period presentation. These reclassifications had no effect on reported income, comprehensive income, cash flows, total assets, or shareholders’ equity as previously reported. |
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Earnings Per Common Share | Earnings Per Common Share Basic earnings per common share (EPS) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the combination of other potentially dilutive weighted average common shares and the weighted average number of common shares outstanding during the period using the treasury stock method. The computation assumes the proceeds from the exercise of equity awards were used to repurchase common shares at the average market price during the period. The computation of diluted EPS does not assume conversion, exercise, or contingent issuance of common stock equivalent shares that would have an anti-dilutive effect on EPS. |
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Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company has entered into foreign currency forward contracts and an interest rate swap which are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging. The effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (AOCI) and is reclassified into earnings in the same period in which the underlying hedged transaction affects earnings. The derivative’s effectiveness represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. The Company uses derivatives to manage the variability of foreign currency fluctuations of expenses in our Mexico facilities and interest rate risk associated with certain borrowings under the Company’s debt arrangement. The foreign currency forward contracts and interest rate swaps have terms that are matched to the underlying transactions being hedged. As a result, these transactions fully offset the hedged risk and no ineffectiveness has been recorded. The Company’s foreign currency forward contracts and interest rate swaps potentially expose the Company to credit risk to the extent the counterparties may be unable to meet the terms of the agreement. The Company minimizes such risk by seeking high quality counterparties. The Company’s counterparties to the foreign currency forward contracts and interest rate swaps are major banking institutions. These institutions do not require collateral for the contracts, and the Company believes that the risk of the counterparties failing to meet their contractual obligations is remote. The Company does not enter into derivative instruments for trading or speculative purposes. |
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Income Taxes | Income Taxes We compute our interim income tax provision through the use of an estimated annual effective tax rate (ETR) applied to year-to-date operating results and specific events that are discretely recognized as they occur. In determining the estimated annual ETR, we analyze various factors, including projections of our annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates, and certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments, are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than included in the estimated annual ETR. Refer to Note 6 for further discussions. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rates is recognized in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments based on new assessments and changes in estimates and which may not accurately forecast actual outcomes. Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. The tax years 1998 through the present remain open to examination by the major U.S. taxing jurisdictions to which we are subject. |
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Impairment of Goodwill | Impairment of Goodwill and Other Intangible Assets The Company records intangible assets that are acquired individually or with a group of other assets in the financial statements at acquisition. In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but are required to be reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value. The Company’s acquired intangible assets are subject to amortization over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. |
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Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09 (ASU 2014-09), Revenue from Contracts with Customers. The guidance in this Update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. This may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued an amendment to defer the effective date of ASU 2014-09 for all entities by one year. This Update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016. Companies have the option of using either a full or modified retrospective approach in applying this standard. The Company is in the process of assessing the impact of ASU 2014-09 on its consolidated financial statements. In August 2014, the FASB issued Accounting Standards Update 2014-15 (ASU 2014-15), Presentation of Financial Statements - Going Concern. The guidance in this Update applies to all entities. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The amendments of ASU 2014-15 did not have a significant impact on the Company’s consolidated financial statements. In April 2015, the FASB issued Accounting Standards Update 2015-03 (ASU 2015-03), Simplifying the Presentation of Debt Issuance Costs. The guidance in this Update changes the presentation of debt issuance costs in financial statements. Under the new guidance, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. This guidance is effective for the Company beginning in the first quarter of fiscal year 2017 and early adoption is permitted in an interim period with any adjustments reflected as of the beginning of the fiscal year that includes that interim period. The amendments of ASU 2015-03 did not have a significant impact to the Company’s consolidated financial statements. In July 2015, the FASB issued final guidance that simplifies the subsequent measurement of inventory for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method. For inventory within the scope of the new guidance, entities will be required to compare the cost of inventory to only one measure, its net realizable value, and not the three measures required by the existing guidance. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The new guidance should not change how entities initially measure the cost of inventory. The guidance will be effective for the Company in the fiscal year beginning July 3, 2017. Early adoption is permitted. We have not yet determined the impact this new guidance may have on our financial statements. In September 2015, the FASB issued Accounting Standards Update 2015-16 (ASU 2015-16), Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this Update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements. In November 2015, the FASB issued Accounting Standards Update 2015-17, Income Taxes. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The guidance will be effective for the Company beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities. The Company retrospectively adopted this ASU during the second quarter of fiscal year 2016. The following table summarizes the adjustments made to conform prior period classifications with the new guidance (in thousands):
In February 2016, the FASB issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases which supersedes ASC 840 Leases and creates a new topic, ASC 842 Leases. This update requires lessees to recognize a lease asset and a lease liability for all leases, including operating leases, with a term greater than 12 months on its balance sheet. The update also expands the required quantitative and qualitative disclosures surrounding leases. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with earlier adoption permitted. This update will be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect of this update on its consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update 2016-09 (ASU 2016-09), Improvements to Employee Share-Based Payment Accounting. This update simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with earlier adoption permitted. The amendments of ASU 2016-09, when adopted, are not expected to have a material impact on the Company’s consolidated financial statements. |
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Maximum Amount Of Income Tax Benefits Percentage Realized Upon Ultimate Settlement | 50.00% |
SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Accounting Pronouncement, Early Adoption | The following table summarizes the adjustments made to conform prior period classifications with the new guidance (in thousands):
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INVENTORIES (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Inventories | The components of inventories consist of the following (in thousands):
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Denominator and Number of Antidilutive Common Share Awards not Included in Diluted Earnings Per Share Calculation | These antidilutive securities occur when equity awards outstanding have an option price greater than the average market price for the period.
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SHARE-BASED COMPENSATION (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award | The grant date fair value for the awards granted below were estimated using the Black Scholes option valuation method:
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table summarizes the fair value of assets (liabilities) of the Company’s derivatives that are required to be measured on a recurring basis as of April 2, 2016 and June 27, 2015 (in thousands):
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DERIVATIVE FINANCIAL INSTRUMENTS (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summerized Fair Value of Derivative Instruments in Consolidated Balance Sheets | The following table summarizes the fair value of derivative instruments in the Consolidated Balance Sheet as of April 2, 2016 and June 27, 2015 (in thousands):
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Gain (Loss) of Derivative Instruments in Statement of Operations | The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the three months ended April 2, 2016 and March 28, 2015, respectively (in thousands):
The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the nine months ended April 2, 2016 and March 28, 2015, respectively (in thousands):
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ACQUISITION (Tables) |
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the purchase price paid for Ayrshire and the fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands):
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Business Acquisition, Pro Forma Information | Pro forma condensed consolidated financial information for the nine months ended April 2, 2016 and March 28, 2015 (in thousands):
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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | The components of acquired intangible assets are as follows (in thousands):
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Aggregate amortization expense relative to existing intangible assets by fiscal year is currently estimated to be as follows (in thousands):
(1) Represents estimated amortization for the remaining three-month period ending July 2, 2016. |
Significant Accounting Policies (Detail) - USD ($) |
Apr. 02, 2016 |
Jun. 27, 2015 |
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Current deferred income tax assets | $ 0 | |
Long-term deferred income tax assets | 6,723,000 | |
Long-term deferred income tax liabilities | $ 0 | (501,000) |
Net deferred tax assets | 6,222,000 | |
Scenario, Adjustment | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Current deferred income tax assets | 6,643,000 | |
Long-term deferred income tax assets | 6,643,000 | |
Long-term deferred income tax liabilities | 0 | |
Net deferred tax assets | 0 | |
Scenario, Previously Reported | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Current deferred income tax assets | 6,643,000 | |
Long-term deferred income tax assets | 80,000 | |
Long-term deferred income tax liabilities | (501,000) | |
Net deferred tax assets | $ 6,222,000 |
Inventories (Components Of Inventories) (Detail) - USD ($) $ in Thousands |
Apr. 02, 2016 |
Jun. 27, 2015 |
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Inventory Disclosure [Abstract] | ||
Finished goods | $ 13,450 | $ 8,019 |
Work-in-process | 18,391 | 15,220 |
Raw materials and supplies | 75,398 | 68,355 |
Inventories | $ 107,239 | $ 91,594 |
Trade Accounts Receivable Purchase Programs (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
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Apr. 02, 2016 |
Mar. 28, 2015 |
Jul. 16, 2015 |
Jun. 27, 2015 |
Jun. 25, 2014 |
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Receivables [Abstract] | |||||
Account Purchase Agreement Maximum Aggregate Amount | $ 20.0 | $ 50.0 | |||
Trade Accounts Receivable Sold To Third Party | $ 58.2 | $ 5.0 | |||
Accounts Receivable Factored To Banking Institutions | $ 2.0 | $ 0.9 |
Income Taxes (Detail) $ in Millions |
9 Months Ended |
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Apr. 02, 2016
USD ($)
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Income Tax Disclosure [Abstract] | |
Foreign tax credits related to future repatriations of earnings | $ 11.7 |
Gross potential research and development (R&D) tax credit | 6.9 |
Unrecognized tax benefits associated with federal tax credits | 3.7 |
Deferred Income Tax Expense (Benefit) | $ 3.2 |
Earnings Per Share (Reconciliation Of Denominator And Number Of Antidilutive Common Share Awards Not Included In Diluted Earnings Per Share Calculation) (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Apr. 02, 2016 |
Mar. 28, 2015 |
Apr. 02, 2016 |
Mar. 28, 2015 |
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Earnings Per Share [Abstract] | ||||
Net income | $ 1,783 | $ 1,861 | $ 4,387 | $ 1,964 |
Weighted average shares outstanding - basic | 10,711 | 10,552 | 10,709 | 10,551 |
Effect of dilutive common stock options (Shares) | 357 | 1,004 | 589 | 906 |
Weighted average shares outstanding - Diluted | 11,068 | 11,556 | 11,298 | 11,457 |
Net income per share—diluted | $ 0.17 | $ 0.18 | $ 0.41 | $ 0.19 |
Net income per share—diluted | $ 0.16 | $ 0.16 | $ 0.39 | $ 0.17 |
Antidilutive options not included in diluted earnings per share (Shares) | 869 | 208 | 456 | 208 |
Commitments And Contingencies (Detail) - USD ($) |
Apr. 02, 2016 |
Jun. 27, 2015 |
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Purchase Commitment, Excluding Long-term Commitment [Line Items] | ||
Warranty reserve | $ 48,000 | $ 115,000 |
Derivative Financial Instruments (Detail) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |
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Apr. 02, 2016 |
Mar. 28, 2015 |
Apr. 02, 2016 |
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Derivative [Line Items] | |||
Outstanding foreign currency forward contracts | $ 67.8 | $ 67.8 | |
Contract maturity date | Mar. 27, 2019 | ||
Foreign currency forward contracts entered | $ 5.8 | ||
Foreign currency forward contracts settled | $ 5.7 | $ 5.0 | |
Derivative, Fixed Interest Rate | 1.97% | 1.97% | |
Net amount of existing losses expected to be reclassified into earnings within the next 12 months | $ 2.8 | $ 2.8 | |
Interest Rate Swap | |||
Derivative [Line Items] | |||
Outstanding foreign currency forward contracts | $ 25.0 | $ 25.0 |
Acquisition (Detail) - USD ($) |
9 Months Ended | |||
---|---|---|---|---|
Apr. 02, 2016 |
Mar. 28, 2015 |
Jun. 27, 2015 |
Sep. 03, 2014 |
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Business Acquisition [Line Items] | ||||
Payments to Acquire Businesses, Net of Cash Acquired | $ 0 | $ 47,964,000 | ||
Goodwill | 9,957,000 | $ 9,957,000 | ||
Ayrshire | ||||
Business Acquisition [Line Items] | ||||
Business Combination, Consideration Transferred | 48,000,000 | |||
Business Combination, Acquisition Related Costs | $ 775,000 | |||
Payments to Acquire Businesses, Gross | 48,010,000 | |||
Cash Acquired from Acquisition | (46,000) | |||
Payments to Acquire Businesses, Net of Cash Acquired | $ 47,964,000 | |||
Cash | $ 46,000 | |||
Accounts Receivable | 21,211,000 | |||
Inventories | 21,772,000 | |||
Other Current Assets | 1,013,000 | |||
Fixed Assets | 7,823,000 | |||
Favorable Leases | 2,941,000 | |||
Customer Relationships | 2,833,000 | |||
Non-Compete Agreements | 196,000 | |||
Goodwill | 8,217,000 | |||
Other Assets | 42,000 | |||
Accounts Payable | 11,070,000 | |||
Accrued Salaries and Wages | 2,188,000 | |||
Other Current Liabilities | 2,408,000 | |||
Deferred Tax Liability | 2,418,000 | |||
Fair Value of Assets Acquired | $ 48,010,000 |
Business Acquisition Pro Forma Information (Detail) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Apr. 02, 2016 |
Mar. 28, 2015 |
|
Business Combinations [Abstract] | ||
Net sales | $ 361,060 | $ 337,046 |
Net income | $ 4,387 | $ 2,582 |
Goodwill and Intangible Assets (Aggregate Amortization Expense by Fiscal Year) (Detail) - USD ($) $ in Thousands |
Apr. 02, 2016 |
Jun. 27, 2015 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2016 | $ 283 | |
2017 | 1,128 | |
2018 | 1,073 | |
2019 | 818 | |
2020 | 783 | |
Thereafter | 2,125 | |
Net Carrying Amount | $ 6,210 | $ 7,055 |
Subsequent Event (Detail) |
9 Months Ended |
---|---|
Apr. 02, 2016
USD ($)
| |
Subsequent Events [Abstract] | |
Restructuring Charges | $ 250,000 |
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