GlobeNewswire Inc | Aug 4, 2020 04:00PM EDT

August 04, 2020

SPOKANE VALLEY, Wash., Aug. 04, 2020 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter and the year ended June27, 2020.

For the fourth quarter of fiscal year 2020, Keytronic reported total revenue of $116.0 million, up 10% from $105.6 million in the same period of fiscal year 2019. During the fourth quarter of fiscal year 2020, the Companys revenue was significantly constrained by the temporary shutdown of its facilities in Juarez by the Mexican government due to the COVID-19 pandemic and associated delays in production. For the full year of fiscal 2020, total revenue was $449.5 million, compared to $464.0 million in the same period of fiscal year 2019.

During the fourth quarter of fiscal year 2020, the Company incurred a variety of additional costs caused by the COVID-19 crisis totaling approximately $2.2 million or $0.16 per share. These expenses are related to the temporary shutdown and restart of the Companys Juarez facility, as well as preventative measures and equipment for employees at all of its facilities in the US, Mexico, China and Vietnam.

The pandemics adverse impact on revenue and expenses reduced the Companys margins. For the fourth quarter of fiscal year 2020, gross margin was 7.4% and operating margin was 0.9%, compared to gross margin of 7.9% and an operating margin of 1.3%, in the same period of fiscal 2019.

For the fourth quarter of fiscal year 2020, net income was $1.5 million or $0.14 per share, compared to $0.8 million or $0.08 per share for the same period of fiscal year 2019. Earnings for the fourth quarter of fiscal year 2020 included a tax benefit from releasing a portion of the Companys allowance on research and development credits taken in previous years of $1.3 million or $0.12 per share. For the full year of fiscal year 2020, net income was $4.8 million or $0.44 per share, compared to a net loss of $8.0 million or $(0.74) per share for fiscal year 2019. Excluding the goodwill and intangibles write down in fiscal 2019, the Company would have reported net income of $4.5 million or $0.42 per for fiscal year 2019.

During the past fiscal year, we overcame a number of powerful global headwinds, including component shortages, trade disputes and the COVID-19 crisis, but we see the favorable trend of contract manufacturing returning to North America accelerating, said Craig Gates, President and Chief Executive Officer. On balance, the effect of the pandemic on our customers demand was a net positive during the second half of fiscal 2020. While some of our customers, particularly in the gaming industry, have seen large decreases in their demand, others have significantly increased their demand, including programs for healthcare and home-oriented consumer products and exercise equipment.

During the fourth quarter of fiscal year 2020, we won new programs involving sanitizer dispensing, automotive controllers, oil and gas drilling, wireless security and personal healthcare protective equipment. A large program that we announced in the third quarter, which when fully ramped is anticipated to contribute $100 million in annual revenue, got underway in the fourth quarter and is expected to contribute to revenue in fiscal 2021.

As we enter fiscal 2021, uncertainty remains around the continuing impact of COVID-19 and potential future disruptions to our production facilities and we continue to focus on protecting the health of all of our employees by adhering to current health guidelines. Nevertheless, thanks to the dedication and sacrifices of our employees, we enter the year with increasingly positive momentum. We continue to invest in new capacity and remain optimistic about our long-term opportunities for growth.

Business Outlook

For the first quarter of fiscal year 2021, Keytronic expects to report revenue in the range of $118 million to $125 million, and earnings in the range of $0.18 to $0.25 per diluted share. These expected results assume an effective tax rate of 20% in the quarter. Keytronic is working closely with its customers, key suppliers and employees to minimize effects of delays attributable to the continued global pandemic. While the Companys facilities in the US, Mexico, China and Vietnam currently operating and rigorously following current health guidelines, uncertainty as to the possibility of future temporary closures, customer demand and costs, and future supply chain disruptions during the rapidly changing COVID-19 environment could significantly impact operations in coming periods. Due to the heightened risks associated with the above, we may issue updated guidance during the upcoming quarter.

Conference Call

Keytronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) on August 4, 2020. A broadcast of the conference call will be available at www.keytronic.com under Investor Relations or by calling 800-353-6461 or +1-334-323-0501 (Access Code: 9895228). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 9895228).

About Keytronic

Keytronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China and Vietnam. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the worlds leading original equipment manufacturers. For more information about Keytronic visit: www.keytronic.com.

Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to those including such word as aims, anticipates, believes, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this release include, without limitation, the Companys statements regarding its expectations with respect to financial conditions and results, including revenue and earnings during periods of fiscal year 2021, risks of manufacturing supply chain and operational disruptions and relating to the health of employees due to COVID-19 health pandemic, demand for certain products and the effectiveness of some of our programs, effects of recent tax reform and tariff measures and trade tensions, business from new customers and programs, improvement of supply chain delivery and impacts from legal proceedings and operational streamlining. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to: the future of the global economic environment and its impact on our customers and suppliers, particularly during the COVID-19 health crisis; the availability of components from the supply chain; the availability of a healthy workforce; the accuracy of suppliers and customers forecasts; development and success of customers programs and products; timing and effectiveness of ramping of new programs; success of new-product introductions; 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 Companys SEC filings.

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

ThreeMonthsEnded Twelve Months Ended June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019Net sales $ 116,018 $ 105,581 $ 449,480 $ 464,044 Cost of sales 107,412 97,200 414,231 429,443 Gross profit 8,606 8,381 35,249 34,601 Research,development and 2,262 1,600 7,391 6,555 engineeringexpensesSelling, generaland 5,317 5,372 21,030 21,556 administrativeexpensesImpairment ofgoodwill and ? ? ? 12,448 intangiblesTotal operating 7,579 6,972 28,421 40,559 expensesOperating income 1,027 1,409 6,828 (5,958 ) (loss)Interest expense, 521 677 2,509 2,782 netIncome (loss)before income 506 732 4,319 (8,740 ) taxesIncome tax (966 ) (85 ) (439 ) (758 ) benefitNet income (loss) $ 1,472 $ 817 $ 4,758 $ (7,982 ) Net income (loss) $ 0.14 $ 0.08 $ 0.44 $ (0.74 ) per share ? BasicWeighted averageshares 10,760 10,760 10,760 10,760 outstanding ?BasicNet income (loss)per share ? $ 0.14 $ 0.08 $ 0.44 $ (0.74 ) DilutedWeighted averageshares 10,832 10,760 10,816 10,760 outstanding ?Diluted

KEYTRONIC CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands)(Unaudited)

June 27, 2020 June 29, 2019ASSETS Current assets: Cash and cash equivalents $ 553 $ 601 Trade receivables, net of allowance for doubtful 86,123 58,429 accounts of $609 and $58Contract assets 23,753 22,161 Inventories, net 115,020 100,431 Other 17,315 16,477 Total current assets 242,764 198,099 Property, plant and equipment, net 31,764 29,413 Operating lease right-of-use assets, net 14,441 ? Other assets: Deferred income tax asset 10,178 7,840 Other intangible assets, net ? 657 Other 2,587 2,301 Total other assets 12,765 10,798 Total assets $ 301,734 $ 238,310 LIABILITIES AND SHAREHOLDERS? EQUITY Current liabilities: Accounts payable $ 80,204 $ 73,571 Accrued compensation and vacation 10,428 6,759 Current portion of debt, net 7,508 5,841 Other 14,079 7,233 Total current liabilities 112,219 93,404 Long-term liabilities: Term loans 3,258 7,091 Revolving loan 60,094 23,356 Operating lease liabilities 9,497 ? Deferred income tax liability 234 ? Other long-term obligations 875 ? Total long-term liabilities 73,958 30,447 Total liabilities 186,177 123,851 Shareholders? equity: Common stock, no par value?shares authorized25,000; issued and outstanding 10,760 and 10,760 46,946 46,680 shares, respectivelyRetained earnings 70,111 65,353 Accumulated other comprehensive income (loss) (1,500 ) 2,426 Total shareholders? equity 115,557 114,459 Total liabilities and shareholders? equity $ 301,734 $ 238,310

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