EMS provider Key Tronic Corp. has reported total revenue of $109.2 million for the first quarter ended September 30, 2017, down from $117.1 million in the same period of fiscal year 2017. Net income for the first quarter of fiscal year 2018 was $0.4 million or $0.04 per share; gross margin was 7.2%; and operating margin was 1.1%.
During the quarter, revenue was unexpectedly impacted by approximately $4 million along with a corresponding unfavorable impact on income as a result of delays in shipments due to massive flooding in Houston and unrelated industry-wide shortages of key electronic components affecting a few larger programs. In addition, the company incurred approximately $0.3 million in statutory severance expense during the quarter in our Juarez facility.
"While the unanticipated revenue shortfall adversely impacted our margins and bottom line more rapidly than we could fully adjust our variable production expenses, we remained profitable in the first quarter," said Craig Gates, President and Chief Executive Officer. "At the same time, we continued to win significant new business from other EMS competitors. We recently won two new programs involving HVAC controllers and exercise equipment monitors."
"Additionally, we recently signed a manufacturing agreement and began customer funded tooling related to a consumer security product. This product is already in production at a small regional manufacturer, but demand has far surpassed that supplier’s capacity. We would normally announce this win next quarter as some details of the deal are yet to be finalized. However, if the project proceeds as planned, it is expected to have a positive material impact on our results for the remainder of the second quarter and beyond. If the deal is finalized within the second quarter, we will release further details of the program and update guidance as appropriate."
"Moving into the second quarter, we continue to see a strong pipeline of potential new business and our new programs continue to ramp. We expect to see renewed revenue growth in coming quarters even as we deal with continued widespread supply constraints in the integrated circuit market place. While carefully managing our expenses, we continue to invest in expanding our SMT, sheet metal and plastic molding capabilities in preparation for future growth.”
Business Outlook
For the second quarter of fiscal year 2018, the company expects to report revenue in the range of $110 million to $115 million, and earnings in the range of $0.07 to $0.14 per diluted share. These expected results assume an effective tax rate of 25% in the quarter.