EX-99.1 2 q22022exhibit991.htm EX-99.1 Document

Exhibit 99.1
FOR IMMEDIATE RELEASE
 
CONTACTS: Brett LarsenMichael Newman
 Chief Financial OfficerInvestor Relations
 Key Tronic CorporationStreetConnect
 (509) 927-5500(206) 729-3625

KEY TRONIC CORPORATION ANNOUNCES RESULTS
FOR THE SECOND QUARTER OF FISCAL YEAR 2022

Strong Customer Demand for US Production and New Program Wins
Spokane Valley, WA— February 1, 2022 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended January 1, 2022.
For the second quarter of fiscal year 2022, Keytronic reported total revenue of $134.5 million, up 5% from $128.3 million in the same period of fiscal year 2021. Revenue for the second quarter of fiscal year 2022 related to customer one-time reimbursements for tooling, equipment and other expenses increased approximately $10 million when compared to the previous year. For the first six months of fiscal year 2022, total revenue was $267.2 million, compared to $251.5 million in the same period of fiscal year 2021.
During second quarter of fiscal year 2022, the global supply chain, pandemic and transportation issues continued to disrupt production, including intermittent parts supply, factory downtime and overtime expenses. In addition, the Company had a seasonal closure for two weeks at the end of December, and revenue attributed to customer reimbursements did not contribute to its gross margin. Legal costs related specifically to the SEC’s review of last year’s whistleblower complaint totaled approximately $0.7 million during the quarter. For the second quarter of fiscal year 2022, the Company’s gross margin was 7.3% and operating margin was 1.2%, compared to a gross margin of 8.3% and an operating margin of 2.1% in the same period of fiscal year 2021.
For the second quarter of fiscal year 2022, net income was $0.6 million or $0.05 per share, compared to $1.6 million or $0.14 per share for the same period of fiscal year 2021. For the first six months of fiscal year 2022, net income was $1.4 million or $0.13 per share, compared to $3.3 million or $0.30 per share for the same period of fiscal year 2021.
“We’re pleased with the successful ramp of new programs and our expanding customer base in the second quarter of fiscal 2022, despite the continued headwinds from the global supply chain and COVID-19 challenges,” said Craig Gates, President and Chief Executive Officer. “During the second quarter of fiscal 2022, we continued to see the favorable trend of contract manufacturing returning to North America, with a significant increase in production across our US-based facilities.”
“During the second quarter of fiscal year 2022, we won new programs involving industrial robots, lighting control, disinfection, food production and energy management systems. We also announced a significant new program win with one of the world’s leading power equipment companies, for which we expect to begin manufacturing in the first quarter of fiscal year 2023 and, once fully ramped, could contribute approximately $80 million in annual revenue.”
“While we expect one of our largest customers to reduce demand in coming periods, those reductions will be more than offset by ramps from new customers. Nevertheless, the global supply chain and COVID-19 crises continue to present uncertainty and multiple business challenges, including industry-wide electronic component shortages, workforce disruptions and higher labor costs, which will adversely impact results.”


Business Outlook
For the third quarter of fiscal year 2022, Keytronic expects to report revenue in the range of $130 million to $140 million, and earnings in the range of $0.05 to $0.10 per diluted share. These expected results assume an effective tax rate of 25% in the coming quarter. Despite growing customer demand and backlog, we expect that the ongoing disruptions from the global supply chain and COVID-19 issues will continue to significantly limit production and adversely impact operating efficiencies.
Conference Call
Keytronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) today. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 888-394-8218 or +1-323-794-2588 (Access Code: 5130422). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 5130422).
About Key Tronic
Keytronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China and Vietnam. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world’s leading original equipment manufacturers. For more information about Keytronic visit: www.keytronic.com.
Forward-Looking Statements
Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to those including such words as aims, anticipates, believes, continues, could, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this press release include, without limitation, the Company’s statements regarding its expectations with respect to financial conditions and results, including revenue, earnings, legal and internal review expenses and further costs during fiscal 2022; expenses related to, and estimated recovery from, the COVID-19 health pandemic; demand from new and existing customers; and key components supply and other supply chain and transportation and logistics issues. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to: risks relating to the internal investigation by the Audit Committee, including legal and internal review costs, the risk of legal proceedings or government investigations relating to the subject of the internal investigation and related or unrelated matters; the future of the global economic environment and its impact on our customers and suppliers, particularly during the COVID-19 health crisis; the availability of components from the supply chain; the availability of a healthy workforce; the accuracy of suppliers’ and customers’ forecasts; development and success of customers’ programs and products; timing and effectiveness of ramping of new programs; success of new-product introductions; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of new governmental legislation and regulation, including tax reform, tariffs and related activities, such trade negotiations and other risks including those related to COVID-19 response; and other factors, risks, and uncertainties detailed from time to time in the Company’s SEC filings.
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KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months EndedSix Months Ended
 January 1, 2022December 26, 2020January 1, 2022December 26, 2020
Net sales$134,456 $128,262 $267,218 $251,469 
Cost of sales124,648 117,640 247,272 230,832 
Gross profit9,808 10,622 19,946 20,637 
Research, development and engineering expenses2,498 2,392 4,947 4,637 
Selling, general and administrative expenses5,659 5,510 11,254 10,484 
Total operating expenses8,157 7,902 16,201 15,121 
Operating income1,651 2,720 3,745 5,516 
Interest expense, net1,095 848 2,087 1,529 
Income before income taxes556 1,872 1,658 3,987 
Income tax provision (benefit)(31)292 256 688 
Net income$587 $1,580 $1,402 $3,299 
Net income per share — Basic$0.05 $0.15 $0.13 $0.31 
Weighted average shares outstanding — Basic10,762 10,760 10,762 10,760 
Net income per share — Diluted$0.05 $0.14 $0.13 $0.30 
Weighted average shares outstanding — Diluted11,057 11,385 11,055 11,040 
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KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
January 1, 2022July 3, 2021
ASSETS
Current assets:
Cash and cash equivalents$1,046 $3,473 
Trade receivables, net of allowance for doubtful accounts of $330 and $275123,413 110,324 
Contract assets25,968 24,781 
Inventories, net157,750 137,329 
Other35,374 23,345 
Total current assets343,551 299,252 
Property, plant and equipment, net29,004 35,735 
Operating lease right-of-use assets, net19,068 15,745 
Other assets:
Deferred income tax asset10,637 9,656 
Other8,247 1,458 
Total other assets18,884 11,114 
Total assets$410,507 $361,846 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$131,842 $92,823 
Accrued compensation and vacation7,357 11,471 
Current portion of debt, net4,991 2,143 
Other22,938 20,268 
Total current liabilities167,128 126,705 
Long-term liabilities:
Term loans6,817 7,906 
Revolving loan96,435 90,362 
Operating lease liabilities13,649 11,428 
Other long-term obligations3,843 1,740 
Total long-term liabilities120,744 111,436 
Total liabilities287,872 238,141 
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively47,324 47,181 
Retained earnings75,854 74,452 
Accumulated other comprehensive income(543)2,072 
Total shareholders’ equity122,635 123,705 
Total liabilities and shareholders’ equity$410,507 $361,846 
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