Key Tronic Releases Preliminary Results for Q3 FY2019


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Key Tronic Corp., a provider of electronic manufacturing services (EMS), has released its preliminary results for the three months ended March 31, 2019. For the third quarter of fiscal 2019, Key Tronic expects to report revenue of approximately $108 million, which is below previous guidance. The lower revenue is primarily a result of reduced orders from two large, longstanding customers. One of these customers needed to lower its inventory in the third quarter, but expects a rebound in demand in the fourth quarter; the other large customer is managing inventory as it is transitioning its production from Key Tronic's China facilities to Key Tronic's Mexico facilities. In addition, there were unanticipated delays in the launch of production for two new customers in the third quarter. Key Tronic expects both of these new programs to contribute significant revenue in the fourth quarter.

Due to its strategic investments in increased operational efficiencies in recent periods, the company was able to reduce its workforce by approximately 10%, resulting in a severance charge of $1 million or $0.07 per share in the third quarter of 2019. The resultant cost reduction is expected to reduce annual manufacturing and operating expenses by approximately $3 million annually. Due to accounting requirements, the company will write down its goodwill and intangibles by approximately $12.5 million in the third quarter of 2019. 

As a result of the revenue shortfall, severance costs and the goodwill write down, Key Tronic expects to report a loss for the third quarter of fiscal 2019 in the range of ($1.10) to ($1.20) per share. Excluding the goodwill write down and severance costs, the company would have expected a profit for the third quarter of fiscal 2019 in the range of $0.01 to $0.03 per share, despite the significant shortfall in revenue in the third quarter.

The company plans to report its complete results for the third quarter of fiscal 2019 on April 30, 2019.

For the fourth quarter of fiscal 2019, Key Tronic expects to report revenue in the range of $115 million to $120 million, earnings per share of in the range of $0.10 to $0.20 and expects to report 10% growth in revenue for fiscal year 2019 when compared to fiscal year 2018.

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