SPOKANE VALLEY, WA -- Key Tronic today said revenue fell 6.6% to $109.2 million for its fiscal first quarter ended Sept. 30 due to weather conditions and parts shortages.
Net income was $400,000, down from $1.8 million a year ago. Gross margin was 7.2% and operating margin was 1.1%, compared to 8.3% and 2.4%, respectively, last year.
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, Key Tronic said. In addition, the company incurred approximately $300,00 in statutory severance expense during the quarter at its 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. “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.”
Key Tronic guided for fiscal second quarter revenue of $110 million to $115 million.
“Moving into the second quarter, we continue to see a strong pipeline of potential new business and our new programs continue to ramp," Gates said. "We expect to see renewed revenue growth in coming quarters even as we deal with continued widespread supply constraints in the integrated circuit marketplace. While carefully managing our expenses, we continue to invest in expanding our SMT, sheet metal and plastic molding capabilities in preparation for future growth.”