Key Tronic Posts Growth in Revenue and Earnings for Q1 FY 2019

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For the first quarter of fiscal year 2019, Key Tronic reported total revenue of $127.5 million, up from $117.0 million in the prior quarter and from $109.2 million in the same period of fiscal year 2018.

For the first quarter of fiscal year 2019, the Company had net income of $1.6 million or $0.15 per share, compared to net income of $0.4 million or $0.04 per share for the same period of fiscal year 2018. For the first quarter of fiscal year 2019, gross margin was 7.5% and operating margin was 2.0%, compared to 7.2% and 1.1%, respectively, in the same period of fiscal 2018. During the first quarter of fiscal year 2019, margins were adversely impacted by rising utility costs in Mexico.

“For the first quarter of fiscal 2019, our new programs continued to ramp, including a strong contribution from Skybell Technologies, despite the continued industry-wide supply chain issues for key components that hampered our growth.  During the first quarter, results were adversely impacted by rising utility costs in Mexico and increasing labor costs.” said Craig Gates, President and Chief Executive Officer. “However, we also continued to win new business from EMS competitors, including new programs involving industrial motion control products, power metering, and fire protection systems.

"Moving into the second quarter of fiscal year 2019, although we continue to face industry-wide supply chain issues and increased production costs, we are making significant investments in new equipment and processes to be more productive in both our Mexico and U.S. facilities in anticipation of future growth.  Although the details of the tariff situation remain unclear, it seems highly probable that the final outcome will be favorable for our U.S. and Mexican operations.  Additionally, customers utilizing our facility in China, who are considering repatriating their business back to North America, are finding our centralized systems and controls to be highly advantageous.  For these customers, a move back to our facilities in Mexico or the U.S. can be easily implemented.”

During the quarter the Company adopted the new revenue recognition standard, ASU 2014-09 Revenue from Contracts with Customers (Topic 606), beginning July 1, 2018. The impact of the adoption resulted in the recognition of $4.9 million in accelerated revenue as the standard requires.  This new standard is not expected to materially affect future quarters.

Business Outlook

For the second quarter of fiscal year 2019, the Company expects to report revenue in the range of $120 million to $125 million, and earnings in the range of $0.13 to $0.18 per diluted share. These expected results assume an effective tax rate of 20% in the quarter.

About Key Tronic

Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico and China. 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 Key Tronic, click here.