Washington | 91-0849125 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
Large accelerated filer | Accelerated filer | |||||
Non-accelerated filer | Smaller reporting company | |||||
Emerging growth company |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, no par value | KTCC | NASDAQ Global Market |
Page No. | ||
PART I. | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds* | |
Item 3. | Defaults upon Senior Securities* | |
Item 4. | Mine Safety Disclosures* | |
Item 5. | Other Information* | |
Item 6. | ||
December 29, 2018 | June 30, 2018 | December 28, 2019 | June 29, 2019 | |||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 192 | $ | 343 | $ | 499 | $ | 601 | ||||||
Trade receivables | 72,248 | 70,262 | ||||||||||||
Trade receivables, net of allowance for doubtful accounts of $58 and $58 | 70,225 | 58,429 | ||||||||||||
Contract assets | 19,118 | — | 17,071 | 22,161 | ||||||||||
Inventories, net | 91,615 | 110,315 | 110,144 | 100,431 | ||||||||||
Other | 18,264 | 13,600 | 20,254 | 16,477 | ||||||||||
Total current assets | 201,437 | 194,520 | 218,193 | 198,099 | ||||||||||
Property, plant and equipment, net | 27,903 | 27,548 | 30,825 | 29,413 | ||||||||||
Operating lease right-of-use assets, net | 14,876 | — | ||||||||||||
Other assets: | ||||||||||||||
Deferred income tax asset | 7,256 | 7,882 | 8,207 | 7,840 | ||||||||||
Goodwill | 9,957 | 9,957 | ||||||||||||
Other intangible assets, net | 3,300 | 3,726 | — | 657 | ||||||||||
Other | 2,976 | 2,895 | 1,869 | 2,301 | ||||||||||
Total other assets | 23,489 | 24,460 | 10,076 | 10,798 | ||||||||||
Total assets | $ | 252,829 | $ | 246,528 | $ | 273,970 | $ | 238,310 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 73,094 | $ | 76,198 | $ | 80,448 | $ | 73,571 | ||||||
Accrued compensation and vacation | 7,755 | 8,105 | 6,954 | 6,759 | ||||||||||
Current portion of debt, net | 5,841 | 5,841 | 7,508 | 5,841 | ||||||||||
Other | 7,048 | 8,769 | 13,350 | 7,233 | ||||||||||
Total current liabilities | 93,738 | 98,913 | 108,260 | 93,404 | ||||||||||
Long-term liabilities: | ||||||||||||||
Term loans | 10,011 | 12,932 | 7,087 | 7,091 | ||||||||||
Revolving loan | 24,378 | 16,222 | 32,018 | 23,356 | ||||||||||
Operating lease liabilities | 9,780 | — | ||||||||||||
Other long-term obligations | 476 | 380 | 18 | — | ||||||||||
Total long-term liabilities | 34,865 | 29,534 | 48,903 | 30,447 | ||||||||||
Total liabilities | 128,603 | 128,447 | 157,163 | 123,851 | ||||||||||
Commitments and contingencies (Note 9) | ||||||||||||||
Shareholders’ equity: | ||||||||||||||
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,760 and 10,760 shares, respectively | 46,518 | 46,244 | 46,821 | 46,680 | ||||||||||
Retained earnings | 76,517 | 72,806 | 67,729 | 65,353 | ||||||||||
Accumulated other comprehensive gain (loss) | 1,191 | (969 | ) | |||||||||||
Accumulated other comprehensive gain | 2,257 | 2,426 | ||||||||||||
Total shareholders’ equity | 124,226 | 118,081 | 116,807 | 114,459 | ||||||||||
Total liabilities and shareholders’ equity | $ | 252,829 | $ | 246,528 | $ | 273,970 | $ | 238,310 |
Three Months Ended | Six Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
December 29, 2018 | December 30, 2017 | December 29, 2018 | December 30, 2017 | December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||||||||||||
Net sales | $ | 123,037 | $ | 111,725 | $ | 250,509 | $ | 220,942 | $ | 116,722 | $ | 123,037 | $ | 222,007 | $ | 250,509 | ||||||||||||||
Cost of sales | 113,157 | 102,925 | 231,096 | 204,297 | 108,600 | 113,157 | 204,612 | 231,096 | ||||||||||||||||||||||
Gross profit | 9,880 | 8,800 | 19,413 | 16,645 | 8,122 | 9,880 | 17,395 | 19,413 | ||||||||||||||||||||||
Research, development and engineering expenses | 1,857 | 1,495 | 3,557 | 3,005 | 1,720 | 1,857 | 3,380 | 3,557 | ||||||||||||||||||||||
Selling, general and administrative expenses | 5,399 | 5,654 | 10,687 | 10,825 | 4,904 | 5,399 | 9,978 | 10,687 | ||||||||||||||||||||||
Total operating expenses | 7,256 | 7,149 | 14,244 | 13,830 | 6,624 | 7,256 | 13,358 | 14,244 | ||||||||||||||||||||||
Operating income | 2,624 | 1,651 | 5,169 | 2,815 | 1,498 | 2,624 | 4,037 | 5,169 | ||||||||||||||||||||||
Interest expense, net | 708 | 616 | 1,385 | 1,210 | 524 | 708 | 1,234 | 1,385 | ||||||||||||||||||||||
Income before income taxes | 1,916 | 1,035 | 3,784 | 1,605 | 974 | 1,916 | 2,803 | 3,784 | ||||||||||||||||||||||
Income tax provision | 327 | 1,259 | 602 | �� | 1,397 | 150 | 327 | 427 | 602 | |||||||||||||||||||||
Net income (loss) | $ | 1,589 | $ | (224 | ) | $ | 3,182 | $ | 208 | |||||||||||||||||||||
Net income (loss) per share — Basic | $ | 0.15 | $ | (0.02 | ) | $ | 0.30 | $ | 0.02 | |||||||||||||||||||||
Net income | $ | 824 | $ | 1,589 | $ | 2,376 | $ | 3,182 | ||||||||||||||||||||||
Net income per share — Basic | $ | 0.08 | $ | 0.15 | $ | 0.22 | $ | 0.30 | ||||||||||||||||||||||
Weighted average shares outstanding — Basic | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | ||||||||||||||||||||||
Net income (loss) per share — Diluted | $ | 0.15 | $ | (0.02 | ) | $ | 0.29 | $ | 0.02 | |||||||||||||||||||||
Net income per share — Diluted | $ | 0.08 | $ | 0.15 | $ | 0.22 | $ | 0.29 | ||||||||||||||||||||||
Weighted average shares outstanding — Diluted | 10,881 | 10,760 | 10,986 | 10,760 | 10,877 | 10,881 | 10,811 | 10,986 |
Three Months Ended | Six Months Ended | ||||||||||||||
December 29, 2018 | December 30, 2017 | December 29, 2018 | December 30, 2017 | ||||||||||||
Comprehensive income (loss): | |||||||||||||||
Net income (loss) | $ | 1,589 | $ | (224 | ) | $ | 3,182 | $ | 208 | ||||||
Other comprehensive income (loss): | |||||||||||||||
Unrealized gain (loss) on hedging instruments, net of tax | (889 | ) | (1,225 | ) | 2,160 | (213 | ) | ||||||||
Comprehensive income (loss) | $ | 700 | $ | (1,449 | ) | $ | 5,342 | $ | (5 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | ||||||||||||
Comprehensive income: | |||||||||||||||
Net income | $ | 824 | $ | 1,589 | $ | 2,376 | $ | 3,182 | |||||||
Other comprehensive income: | |||||||||||||||
Unrealized gain (loss) on hedging instruments, net of tax | 778 | (889 | ) | (169 | ) | 2,160 | |||||||||
Comprehensive income | $ | 1,602 | $ | 700 | $ | 2,207 | $ | 5,342 |
Six Months Ended | Six Months Ended | |||||||||||||
December 29, 2018 | December 30, 2017 | December 28, 2019 | December 29, 2018 | |||||||||||
Operating activities: | ||||||||||||||
Net income | $ | 3,182 | $ | 208 | $ | 2,376 | $ | 3,182 | ||||||
Adjustments to reconcile net income to cash provided by (used in) operating activities: | ||||||||||||||
Adjustments to reconcile net income to cash used in operating activities: | ||||||||||||||
Depreciation and amortization | 3,767 | 3,889 | 3,143 | 3,767 | ||||||||||
Amortization of deferred loan costs | 15 | 15 | 15 | 15 | ||||||||||
Provision for obsolete inventory | 58 | 26 | 41 | 58 | ||||||||||
Provision for warranty | 16 | 21 | 89 | 16 | ||||||||||
Recovery of doubtful accounts | — | (84 | ) | |||||||||||
Loss on disposal of assets | — | 11 | 206 | — | ||||||||||
Share-based compensation expense | 274 | 251 | 141 | 274 | ||||||||||
Deferred income taxes | (131 | ) | (372 | ) | (318 | ) | (131 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||||||||
Trade receivables | (10,787 | ) | 5,515 | (13,514 | ) | (10,787 | ) | |||||||
Contract assets | (7,212 | ) | — | 5,090 | (7,212 | ) | ||||||||
Cash received from arbitration settlement | 6,684 | — | — | 6,684 | ||||||||||
Inventories | 7,432 | (7,309 | ) | (9,754 | ) | 7,432 | ||||||||
Other assets | (4,963 | ) | (4,803 | ) | (3,689 | ) | (4,963 | ) | ||||||
Accounts payable | (3,104 | ) | 8,459 | 6,877 | (3,104 | ) | ||||||||
Accrued compensation and vacation | (350 | ) | (3,523 | ) | 195 | (350 | ) | |||||||
Other liabilities | 23 | 990 | 664 | 23 | ||||||||||
Cash (used in) provided by operating activities | (5,096 | ) | 3,294 | |||||||||||
Cash used in operating activities | (8,438 | ) | (5,096 | ) | ||||||||||
Investing activities: | ||||||||||||||
Purchase of property and equipment | (3,586 | ) | (2,155 | ) | (5,360 | ) | (3,586 | ) | ||||||
Proceeds from sale of fixed assets | 17 | 982 | 696 | 17 | ||||||||||
Cash receipts from deferred purchase price of factored receivables | 3,302 | 3,606 | 2,695 | 3,302 | ||||||||||
Cash (used in) provided by investing activities | (267 | ) | 2,433 | |||||||||||
Cash used in investing activities | (1,969 | ) | (267 | ) | ||||||||||
Financing activities: | ||||||||||||||
Payment of financing costs | (8 | ) | (12 | ) | (5 | ) | (8 | ) | ||||||
Proceeds from issuance of long term debt | 5,000 | — | ||||||||||||
Repayments of long term debt | (2,936 | ) | (2,936 | ) | (3,352 | ) | (2,936 | ) | ||||||
Borrowings under revolving credit agreement | 94,468 | 91,707 | 91,216 | 94,468 | ||||||||||
Repayments of revolving credit agreement | (86,312 | ) | (94,409 | ) | (82,554 | ) | (86,312 | ) | ||||||
Cash provided by (used in) financing activities | 5,212 | (5,650 | ) | |||||||||||
Net (decrease) increase in cash and cash equivalents | (151 | ) | 77 | |||||||||||
Cash provided by financing activities | 10,305 | 5,212 | ||||||||||||
Net decrease in cash and cash equivalents | (102 | ) | (151 | ) | ||||||||||
Cash and cash equivalents, beginning of period | 343 | 373 | 601 | 343 | ||||||||||
Cash and cash equivalents, end of period | $ | 192 | $ | 450 | $ | 499 | $ | 192 | ||||||
Non-cash investing activities: | ||||||||||||||
Beneficial interest in transferred receivables | (2,117 | ) | (2,325 | ) | (1,718 | ) | (2,117 | ) | ||||||
Supplemental cash flow information: | ||||||||||||||
Interest payments | $ | 1,332 | $ | 1,202 | $ | 1,235 | $ | 1,332 | ||||||
Income tax payments (refunds), net of refunds | $ | (50 | ) | $ | 516 | $ | 426 | $ | (50 | ) |
Shares | Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | ||||||||||||||
Balances, June 30, 2018 | 10,760 | $ | 46,244 | $ | 72,806 | $ | (969 | ) | $ | 118,081 | ||||||||
Net income | — | — | 3,182 | — | 3,182 | |||||||||||||
ASC 606 Opening Balance Sheet Adjustment | — | — | 529 | — | 529 | |||||||||||||
Unrealized gain on hedging instruments, net | — | — | — | 2,160 | 2,160 | |||||||||||||
Share-based compensation | — | 274 | — | — | 274 | |||||||||||||
Balances, December 29, 2018 | 10,760 | $ | 46,518 | $ | 76,517 | $ | 1,191 | $ | 124,226 |
Three Months Ended | Six Months Ended | |||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||
Total shareholders’ equity, beginning balances | $ | 115,139 | $ | 123,421 | $ | 114,459 | $ | 118,081 | ||||||||
Common stock (shares): | ||||||||||||||||
Beginning balances | $ | 10,760 | $ | 10,760 | $ | 10,760 | $ | 10,760 | ||||||||
Exercise of stock appreciation rights | — | — | — | — | ||||||||||||
Ending balances | 10,760 | 10,760 | 10,760 | 10,760 | ||||||||||||
Common stock: | ||||||||||||||||
Beginning balances | $ | 46,754 | $ | 46,412 | $ | 46,680 | $ | 46,244 | ||||||||
Share-based compensation | 67 | 106 | 141 | 274 | ||||||||||||
Ending balances | 46,821 | 46,518 | 46,821 | 46,518 | ||||||||||||
Retained Earnings: | ||||||||||||||||
Beginning balances | $ | 66,905 | $ | 74,928 | $ | 65,353 | $ | 72,806 | ||||||||
Net income | 824 | 1,589 | 2,376 | 3,182 | ||||||||||||
ASC 606 opening balance sheet adjustment | — | — | — | 529 | ||||||||||||
Ending balances | 67,729 | 76,517 | 67,729 | 76,517 | ||||||||||||
Accumulated other comprehensive income: | ||||||||||||||||
Beginning balances | $ | 1,479 | $ | 2,080 | $ | 2,426 | $ | (969 | ) | |||||||
Unrealized gain (loss) on hedging instruments, net | 778 | (889 | ) | (169 | ) | 2,160 | ||||||||||
Ending balances | 2,257 | 1,191 | 2,257 | 1,191 | ||||||||||||
Total shareholder’s equity, ending balances | $ | 116,807 | $ | 124,226 | $ | 116,807 | $ | 124,226 |
1. | Basis of Presentation |
2. | Significant Accounting Policies |
Consolidated Balance Sheet | |||||||
Impact of Adopting ASC 606 | |||||||
(Unaudited, in thousands) | Balance at June 30, 2018 | Adjustments | Balance at July 1, 2018 | ||||
ASSETS | |||||||
Contract assets | — | 11,906 | 11,906 | ||||
Inventories | 110,315 | (11,210 | ) | 99,105 | |||
Deferred income tax asset | 7,882 | (167 | ) | 7,715 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Retained earnings | 72,806 | 529 | 73,335 |
Consolidated Balance Sheet | |||||||
As of December 29, 2018 | |||||||
Impact of Adopting ASC 606 | |||||||
(Unaudited, in thousands) | As Reported | 606 Adjustment | Balance without 606 Adoption | ||||
ASSETS | |||||||
Contract assets | 19,118 | (19,118 | ) | — | |||
Inventories | 91,615 | 17,924 | 109,539 | ||||
Deferred income tax asset | 7,256 | 167 | 7,423 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Retained earnings | 76,517 | 1,027 | 77,544 |
Consolidated Statement of Income | ||||||||||||||||||||||||
Impact of Adopting ASC 606 | ||||||||||||||||||||||||
(Unaudited, in thousands) | Three Months Ended December 29, 2018 | Six Months Ended December 29, 2018 | ||||||||||||||||||||||
As Reported | 606 Adjustment | Balance without 606 Adoption | As Reported | 606 Adjustment | Balance without 606 Adoption | |||||||||||||||||||
Net sales | $ | 123,037 | $ | 2,347 | $ | 120,690 | $ | 250,509 | $ | 7,212 | $ | 243,297 | ||||||||||||
Cost of sales | 113,157 | 1,770 | 111,387 | 231,096 | 6,714 | 224,382 | ||||||||||||||||||
Gross profit | 9,880 | 577 | 9,303 | 19,413 | 498 | 18,915 | ||||||||||||||||||
Net income | $ | 1,589 | $ | 577 | $ | 1,012 | $ | 3,182 | $ | 498 | $ | 2,684 |
3. | Inventories |
December 28, 2019 | June 29, 2019 | ||||||
Finished goods | $ | 14,320 | $ | 11,969 | |||
Work-in-process | 20,638 | 11,705 | |||||
Raw materials and supplies | 75,186 | 76,757 | |||||
$ | 110,144 | $ | 100,431 |
December 29, 2018 | June 30, 2018 | ||||||
Finished goods | $ | 8,945 | $ | 14,927 | |||
Work-in-process | 11,918 | 22,254 | |||||
Raw materials and supplies | 70,752 | 73,134 | |||||
$ | 91,615 | $ | 110,315 |
4. | Long-Term Debt |
Fiscal Years Ending | Amount | Amount | ||||
2019 (1) | $ | 2,935 | ||||
2020 | 5,871 | |||||
2020 (1) | $ | 3,769 | ||||
2021 | 5,871 | 7,537 | ||||
2022 | 1,250 | 2,917 | ||||
2023 | — | 417 | ||||
Thereafter | 24,378 | |||||
2024 | 32,018 | |||||
Total debt | $ | 40,305 | $ | 46,658 | ||
Unamortized debt issuance costs | (75 | ) | (45 | ) | ||
Long-term debt, net of debt issuance costs | $ | 40,230 | $ | 46,613 |
5. | Trade Accounts Receivable Purchase Programs |
6. | Income Taxes |
7. | Earnings Per Share |
Three Months Ended | |||||||
(in thousands, except share and per share information) | |||||||
December 28, 2019 | December 29, 2018 | ||||||
Net income | $ | 824 | $ | 1,589 | |||
Weighted average shares outstanding—basic | 10,760 | 10,760 | |||||
Effect of dilutive common stock awards | 117 | 121 | |||||
Weighted average shares outstanding—diluted | 10,877 | 10,881 | |||||
Net income per share—basic | $ | 0.08 | $ | 0.15 | |||
Net income per share—diluted | $ | 0.08 | $ | 0.15 | |||
Antidilutive SARs not included in diluted earnings per share | 725 | 1,035 |
Three Months Ended | |||||||
(in thousands, except per share information) | |||||||
December 29, 2018 | December 30, 2017 | ||||||
Net income (loss) | $ | 1,589 | $ | (224 | ) | ||
Weighted average shares outstanding—basic | 10,760 | 10,760 | |||||
Effect of dilutive common stock awards | 121 | — | |||||
Weighted average shares outstanding—diluted | 10,881 | 10,760 | |||||
Net income (loss) per share—basic | $ | 0.15 | $ | (0.02 | ) | ||
Net income (loss) per share—diluted | $ | 0.15 | $ | (0.02 | ) | ||
Antidilutive SARs not included in diluted earnings per share | 1,035 | 1,105 |
Six Months Ended | |||||||
(in thousands, except share and per share information) | |||||||
December 28, 2019 | December 29, 2018 | ||||||
Net income | $ | 2,376 | $ | 3,182 | |||
Weighted average shares outstanding—basic | 10,760 | 10,760 | |||||
Effect of dilutive common stock awards | 51 | 226 | |||||
Weighted average shares outstanding—diluted | 10,811 | 10,986 | |||||
Net income per share—basic | $ | 0.22 | $ | 0.30 | |||
Net income per share—diluted | $ | 0.22 | $ | 0.29 | |||
Antidilutive SARs not included in diluted earnings per share | 725 | 793 |
Six Months Ended | |||||||
(in thousands, except per share information) | |||||||
December 29, 2018 | December 30, 2017 | ||||||
Net income | $ | 3,182 | $ | 208 | |||
Weighted average shares outstanding—basic | 10,760 | 10,760 | |||||
Effect of dilutive common stock awards | 226 | — | |||||
Weighted average shares outstanding—diluted | 10,986 | 10,760 | |||||
Net income per share—basic | $ | 0.30 | $ | 0.02 | |||
Net income per share—diluted | $ | 0.29 | $ | 0.02 | |||
Antidilutive SARs not included in diluted earnings per share | 793 | 1,105 |
July 26, 2019 | July 27, 2018 | ||||||
SARs Granted | 170,000 | 161,250 | |||||
Strike Price | $ | 4.93 | $ | 8.17 | |||
Fair Value | $ | 1.23 | $ | 2.27 |
July 27, 2018 | July 28, 2017 | ||||||
SARs Granted | 161,250 | 272,500 | |||||
Strike Price | $ | 8.17 | $ | 7.26 | |||
Fair Value | $ | 2.27 | $ | 1.89 |
9. | Commitments and Contingencies |
10. | Derivative Financial Instruments |
Quarter Ending | Notional Contracts in MXN | Notional Contracts in USD | Estimated Fair Value | |||||||||
March 28, 2020 | $ | 146,613 | $ | 6,553 | $ | 1,177 | ||||||
June 27, 2020 | $ | 138,213 | $ | 6,257 | $ | 929 | ||||||
September 26, 2020 | $ | 141,173 | $ | 6,729 | $ | 516 | ||||||
December 26, 2020 | $ | 132,773 | $ | 6,241 | $ | 488 |
Quarter Ending | Notional Contracts and Swaps in MXN | Notional Contracts and Swaps in USD | Estimated Fair Value | |||||||||
March 30, 2019 | $ | 137,944 | $ | 6,979 | $ | 1 | ||||||
June 29, 2019 | $ | 142,947 | $ | 6,828 | $ | 278 | ||||||
September 28, 2019 | $ | 148,468 | $ | 6,740 | $ | 521 | ||||||
December 28, 2019 | $ | 152,613 | $ | 7,187 | $ | 170 | ||||||
March 28, 2020 | $ | 146,613 | $ | 6,553 | $ | 404 | ||||||
June 27, 2020 | $ | 138,213 | $ | 6,257 | $ | 209 |
December 28, 2019 | June 29, 2019 | ||||||||
Derivatives Designated as Hedging Instruments | Balance Sheet Location | Fair Value | Fair Value | ||||||
Foreign currency forward contracts & swaps | Other current assets | $ | 3,110 | $ | 2,912 | ||||
Foreign currency forward contracts & swaps | Other long-term assets | $ | — | $ | 320 | ||||
Interest rate swap | Other current assets | $ | 6 | $ | 2 | ||||
Interest rate swap | Other current liabilities | $ | (83 | ) | $ | — | |||
Interest rate swap | Other long-term liabilities | $ | (17 | ) | $ | — |
December 29, 2018 | June 30, 2018 | ||||||||
Derivatives Designated as Hedging Instruments | Balance Sheet Location | Fair Value | Fair Value | ||||||
Foreign currency forward contracts & swaps | Other current assets | $ | 981 | $ | 23 | ||||
Foreign currency forward contracts & swaps | Other long-term assets | $ | 613 | $ | 477 | ||||
Foreign currency forward contracts & swaps | Other current liabilities | $ | (11 | ) | $ | (1,618 | ) | ||
Foreign currency forward contracts & swaps | Other long-term liabilities | $ | — | $ | (58 | ) | |||
Interest rate swap | Other current assets | $ | 16 | $ | 20 | ||||
Interest rate swap | Other long-term assets | $ | — | $ | 4 |
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of September 28, 2019 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 28, 2019 | ||||||||||||
Forward contracts & swaps | Cost of sales | $ | 1,479 | $ | 1,533 | $ | (683 | ) | $ | 2,329 | |||||||
Interest rate swap | Interest expense | — | (71 | ) | (1 | ) | (72 | ) | |||||||||
Total | $ | 1,479 | $ | 1,462 | $ | (684 | ) | $ | 2,257 | ||||||||
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of September 29, 2018 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 29, 2018 | ||||||||||||
Forward contracts & swaps | Cost of sales | $ | 2,061 | $ | (1,266 | ) | $ | 383 | $ | 1,178 | |||||||
Interest rate swap | Interest expense | 19 | (1 | ) | (5 | ) | 13 | ||||||||||
Total | $ | 2,080 | $ | (1,267 | ) | $ | 378 | $ | 1,191 |
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of September 29, 2018 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 29, 2018 | ||||||||||||
Forward contracts & swaps | Cost of sales | $ | 2,061 | $ | (1,266 | ) | $ | 383 | $ | 1,178 | |||||||
Interest rate swap | Interest expense | 19 | (1 | ) | (5 | ) | 13 | ||||||||||
Total | $ | 2,080 | $ | (1,267 | ) | $ | 378 | $ | 1,191 | ||||||||
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of September 30, 2017 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 30, 2017 | ||||||||||||
Forward contracts & swaps | Cost of sales | $ | (1,715 | ) | $ | (2,669 | ) | $ | 1,412 | $ | (2,972 | ) | |||||
Interest rate swap | Interest expense | (48 | ) | 8 | 24 | (16 | ) | ||||||||||
Total | $ | (1,763 | ) | $ | (2,661 | ) | $ | 1,436 | $ | (2,988 | ) |
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of June 30, 2018 | Effective Portion Recorded In AOCI (1) | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 29, 2018 | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of June 29, 2019 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 28, 2019 | ||||||||||||||||||||||||
Forward contracts & swaps | Cost of sales | $ | (988 | ) | $ | 1,249 | $ | 917 | $ | 1,178 | Cost of sales | $ | 2,424 | $ | 1,492 | $ | (1,587 | ) | $ | 2,329 | ||||||||||||||
Interest rate swap | Interest expense | 19 | 1 | (7 | ) | 13 | Interest expense | 2 | (71 | ) | (3 | ) | (72 | ) | ||||||||||||||||||||
Total | $ | (969 | ) | $ | 1,250 | $ | 910 | $ | 1,191 | $ | 2,426 | $ | 1,421 | $ | (1,590 | ) | $ | 2,257 | ||||||||||||||||
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of July 1, 2017 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 30, 2017 | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of June 30, 2018 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of December 29, 2018 | ||||||||||||||||||||||||
Forward contracts & swaps | Cost of sales | $ | (2,707 | ) | $ | (2,791 | ) | $ | 2,526 | $ | (2,972 | ) | Cost of sales | $ | (988 | ) | $ | 1,249 | $ | 917 | $ | 1,178 | ||||||||||||
Interest rate swap | Interest expense | (68 | ) | (1 | ) | 53 | (16 | ) | Interest expense | 19 | 1 | (7 | ) | 13 | ||||||||||||||||||||
Total | $ | (2,775 | ) | $ | (2,792 | ) | $ | 2,579 | $ | (2,988 | ) | $ | (969 | ) | $ | 1,250 | $ | 910 | $ | 1,191 |
11. | Fair Value Measurements |
December 29, 2018 | December 28, 2019 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair Value | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | 16 | $ | — | $ | 16 | $ | — | $ | 6 | $ | — | $ | 6 | ||||||||||||||
Foreign currency forward contracts & swaps | $ | — | $ | 1,594 | $ | — | $ | 1,594 | ||||||||||||||||||||||
Foreign currency forward contracts | $ | — | $ | 3,110 | $ | — | $ | 3,110 | ||||||||||||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||||||||
Foreign currency forward contracts & swaps | $ | — | $ | (11 | ) | $ | — | $ | (11 | ) | ||||||||||||||||||||
Interest rate swap | $ | — | $ | (100 | ) | $ | — | $ | (100 | ) |
June 29, 2019 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||
Financial Assets: | |||||||||||||||
Interest rate swaps | $ | — | $ | 2 | $ | — | $ | 2 | |||||||
Foreign currency forward contracts & swaps | $ | — | $ | 3,232 | $ | — | $ | 3,232 |
June 30, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||
Financial Assets: | |||||||||||||||
Interest rate swaps | $ | — | $ | 24 | $ | — | $ | 24 | |||||||
Foreign currency forward contracts & swaps | $ | — | $ | 500 | $ | — | $ | 500 | |||||||
Financial Liabilities: | |||||||||||||||
Foreign currency forward contracts & swaps | $ | — | $ | (1,676 | ) | $ | — | $ | (1,676 | ) |
12. | Goodwill and Other Intangible Assets |
December 29, 2018 | December 28, 2019 | |||||||||||||||||||||||||||||||||
Amortization Period in Years | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Amortization Period in Years | Gross Carrying Amount | Accumulated Amortization | Impairment Recognized | Derecognition Favorable Lease per ASC 842 | Net Carrying Amount | |||||||||||||||||||||||||
Intangible assets: | ||||||||||||||||||||||||||||||||||
Customer Relationships | 10 | 4,803 | (2,311 | ) | 2,492 | |||||||||||||||||||||||||||||
Favorable Lease Agreements | 4 - 7 | 2,941 | (2,133 | ) | 808 | 4 - 7 | 2,941 | (2,284 | ) | — | (657 | ) | — | |||||||||||||||||||||
Total | $ | 7,744 | $ | (4,444 | ) | $ | 3,300 | $ | 2,941 | $ | (2,284 | ) | $ | — | $ | (657 | ) | $ | — |
June 29, 2019 | |||||||||||||||||
Amortization Period in Years | Gross Carrying Amount | Accumulated Amortization | Impairment Recognized | Net Carrying Amount | |||||||||||||
Intangible assets: | |||||||||||||||||
Non-Compete Agreements | 3 - 5 | $ | 568 | $ | (568 | ) | $ | — | $ | — | |||||||
Customer Relationships | 10 | 4,803 | (2,311 | ) | (2,492 | ) | — | ||||||||||
Favorable Lease Agreements | 4 - 7 | 2,941 | (2,284 | ) | — | 657 | |||||||||||
Total | $ | 8,312 | $ | (5,163 | ) | $ | (2,492 | ) | $ | 657 |
June 30, 2018 | |||||||||||||
Amortization Period in Years | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Intangible assets: | |||||||||||||
Non-Compete Agreements | 3 - 5 | $ | 568 | $ | (568 | ) | $ | — | |||||
Customer Relationships | 10 | 4,803 | (2,071 | ) | 2,732 | ||||||||
Favorable Lease Agreements | 4 - 7 | 2,941 | (1,947 | ) | 994 | ||||||||
Total | $ | 8,312 | $ | (4,586 | ) | $ | 3,726 |
Fiscal Years Ending | Amount | |||
2019 (1) | 392 | |||
2020 | 783 | |||
2021 | 784 | |||
2022 | 531 | |||
2023 | 480 | |||
Thereafter | 330 | |||
Total amortization expense | $ | 3,300 |
13. | Revenue |
Contract Assets | |||
Beginning balance, June 29, 2019 | $ | 22,161 | |
Revenue recognized | 219,144 | ||
Amounts collected or invoiced | (224,234 | ) | |
Ending balance, September 28, 2019 | $ | 17,071 |
Contract Assets | |||
Beginning balance, June 30, 2018 | $ | — | |
Cumulative effect adjustment at July 1, 2018 | 11,906 | ||
Revenue recognized | 241,306 | ||
Amounts collected or invoiced | (234,094 | ) | |
Ending balance, December 29, 2018 | $ | 19,118 |
EMS Revenue | ||||||||||||||||
Recognition | Three Months Ended | Six Months Ended | ||||||||||||||
December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||
Over-Time | $ | 115,118 | $ | 122,137 | $ | 219,144 | $ | 248,518 | ||||||||
Point-in-Time | 1,604 | 900 | 2,863 | 1,991 | ||||||||||||
Total | $ | 116,722 | $ | 123,037 | $ | 222,007 | $ | 250,509 |
14. | Leases |
Lease cost | Classification | Three-Month Period Ended | Six-Month Period Ended | |||||
Operating lease cost | Cost of sales | $ | 1,161 | $ | 2,319 | |||
Operating lease cost | Selling, general and administrative expenses | 331 | 598 | |||||
Total lease cost | $ | 1,492 | $ | 2,917 |
December 28, 2019 | ||||
Operating Leases: | ||||
Operating lease right of use assets | $ | 14,876 | ||
Operating lease liabilities (1) | 14,329 | |||
Weighted-average remaining lease term (in years) | ||||
Operating leases | 6.29 | |||
Weighted-average discount rate | ||||
Operating leases | 4.1 | % |
Three-Month Period Ended | Six-Month Period Ended | |||||||
December 28, 2019 | ||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows from operating leases | $ | 1,180 | $ | 2,301 |
EMS Revenue | ||||||||
Recognition | Three Months Ended | Six Months Ended | ||||||
Over-Time | $ | 119,790 | $ | 241,306 | ||||
Point-in-Time | 3,247 | 9,203 | ||||||
Total | $ | 123,037 | $ | 250,509 |
Fiscal Years Ending | Operating Leases | |||
2020 (1) | $ | 2,241 | ||
2021 | 3,970 | |||
2022 | 3,371 | |||
2023 | 2,597 | |||
2024 | 1,595 | |||
Thereafter | 6,337 | |||
Total undiscounted lease payments | 20,111 | |||
Less: present value discount | 5,782 | |||
Total lease liabilities | $ | 14,329 |
Fiscal Years Ending | Operating Leases | |||
2020 | $ | 4,777 | ||
2021 | 3,563 | |||
2022 | 2,641 | |||
2023 | 1,866 | |||
2024 | 1,271 | |||
Thereafter | 4,121 | |||
Total minimum lease payments | $ | 18,239 |
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||||
December 29, 2018 | % of net sales | December 30, 2017 | % of net sales | $ change | % point change | December 28, 2019 | % of net sales | December 29, 2018 | % of net sales | $ change | % point change | |||||||||||||||||||||||||||||
Net sales | $ | 123,037 | 100.0 | % | $ | 111,725 | 100.0 | % | $ | 11,312 | — | % | $ | 116,722 | 100.0 | % | $ | 123,037 | 100.0 | % | $ | (6,315 | ) | — | % | |||||||||||||||
Cost of sales | 113,157 | 92.0 | % | 102,925 | 92.1 | % | 10,232 | (0.1 | )% | 108,600 | 93.0 | % | 113,157 | 92.0 | % | (4,557 | ) | 1.0 | % | |||||||||||||||||||||
Gross profit | 9,880 | 8.0 | % | 8,800 | 7.9 | % | 1,080 | 0.1 | % | 8,122 | 7.0 | % | 9,880 | 8.0 | % | (1,758 | ) | (1.0 | )% | |||||||||||||||||||||
Research, development and engineering | 1,857 | 1.5 | % | 1,495 | 1.3 | % | 362 | 0.2 | % | 1,720 | 1.5 | % | 1,857 | 1.5 | % | (137 | ) | — | % | |||||||||||||||||||||
Selling, general and administrative | 5,399 | 4.4 | % | 5,654 | 5.1 | % | (255 | ) | (0.7 | )% | 4,904 | 4.2 | % | 5,399 | 4.4 | % | (495 | ) | (0.2 | )% | ||||||||||||||||||||
Total operating expenses | 7,256 | 5.9 | % | 7,149 | 6.4 | % | 107 | (0.5 | )% | 6,624 | 5.7 | % | 7,256 | 5.9 | % | (632 | ) | (0.2 | )% | |||||||||||||||||||||
Operating income | 2,624 | 2.1 | % | 1,651 | 1.5 | % | 973 | 0.6 | % | 1,498 | 1.3 | % | 2,624 | 2.1 | % | (1,126 | ) | (0.8 | )% | |||||||||||||||||||||
Interest expense, net | 708 | 0.6 | % | 616 | 0.6 | % | 92 | — | % | 524 | 0.4 | % | 708 | 0.6 | % | (184 | ) | (0.2 | )% | |||||||||||||||||||||
Income before income taxes | 1,916 | 1.6 | % | 1,035 | 0.9 | % | 881 | 0.7 | % | 974 | 0.8 | % | 1,916 | 1.6 | % | (942 | ) | (0.8 | )% | |||||||||||||||||||||
Income tax provision | 327 | 0.3 | % | 1,259 | 1.1 | % | (932 | ) | (0.8 | )% | 150 | 0.1 | % | 327 | 0.3 | % | (177 | ) | (0.2 | )% | ||||||||||||||||||||
Net income (loss) | $ | 1,589 | 1.3 | % | $ | (224 | ) | (0.2 | )% | $ | 1,813 | 1.5 | % | |||||||||||||||||||||||||||
Net income | $ | 824 | 0.7 | % | $ | 1,589 | 1.3 | % | $ | (765 | ) | (0.6 | )% | |||||||||||||||||||||||||||
Effective income tax rate | 17.1 | % | 121.6 | % | 15.4 | % | 17.1 | % |
Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
December 29, 2018 | % of net sales | December 30, 2017 | % of net sales | $ change | % point change | December 28, 2019 | % of net sales | December 29, 2018 | % of net sales | $ change | % point change | |||||||||||||||||||||||||||||
Net sales | $ | 250,509 | 100.0 | % | $ | 220,942 | 100.0 | % | $ | 29,567 | — | % | $ | 222,007 | 100.0 | % | $ | 250,509 | 100.0 | % | $ | (28,502 | ) | — | % | |||||||||||||||
Cost of sales | 231,096 | 92.3 | % | 204,297 | 92.5 | % | 26,799 | (0.2 | )% | 204,612 | 92.2 | % | 231,096 | 92.3 | % | (26,484 | ) | (0.1 | )% | |||||||||||||||||||||
Gross profit | 19,413 | 7.7 | % | 16,645 | 7.5 | % | 2,768 | 0.2 | % | 17,395 | 7.8 | % | 19,413 | 7.7 | % | (2,018 | ) | 0.1 | % | |||||||||||||||||||||
Research, development and engineering | 3,557 | 1.4 | % | 3,005 | 1.4 | % | 552 | — | % | 3,380 | 1.5 | % | 3,557 | 1.4 | % | (177 | ) | 0.1 | % | |||||||||||||||||||||
Selling, general and administrative | 10,687 | 4.3 | % | 10,825 | 4.9 | % | (138 | ) | (0.6 | )% | 9,978 | 4.5 | % | 10,687 | 4.3 | % | (709 | ) | 0.2 | % | ||||||||||||||||||||
Impairment of goodwill and intangibles | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||||
Total operating expenses | 14,244 | 5.7 | % | 13,830 | 6.3 | % | 414 | (0.6 | )% | 13,358 | 6.0 | % | 14,244 | 5.7 | % | (886 | ) | 0.3 | % | |||||||||||||||||||||
Operating income | 5,169 | 2.1 | % | 2,815 | 1.3 | % | 2,354 | 0.8 | % | 4,037 | 1.8 | % | 5,169 | 2.1 | % | (1,132 | ) | (0.3 | )% | |||||||||||||||||||||
Interest expense, net | 1,385 | 0.6 | % | 1,210 | 0.5 | % | 175 | 0.1 | % | 1,234 | 0.6 | % | 1,385 | 0.6 | % | (151 | ) | — | % | |||||||||||||||||||||
Income before income taxes | 3,784 | 1.5 | % | 1,605 | 0.7 | % | 2,179 | 0.8 | % | 2,803 | 1.3 | % | 3,784 | 1.5 | % | (981 | ) | (0.2 | )% | |||||||||||||||||||||
Income tax provision | 602 | 0.2 | % | 1,397 | 0.6 | % | (795 | ) | (0.4 | )% | 427 | 0.2 | % | 602 | 0.2 | % | (175 | ) | — | % | ||||||||||||||||||||
Net income | $ | 3,182 | 1.3 | % | $ | 208 | 0.1 | % | $ | 2,974 | 1.2 | % | $ | 2,376 | 1.1 | % | $ | 3,182 | 1.3 | % | $ | (806 | ) | (0.2 | )% | |||||||||||||||
Effective income tax rate | 15.9 | % | 87.0 | % | 15.2 | % | 15.9 | % |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 6. | Exhibits | |||
31.1 | ||||
31.2 | ||||
32.1 | ||||
32.2 | ||||
101.INS | XBRL Instance Document | |||
101.SCH | XBRL Taxonomy Extension Schema Document * | |||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document * | |||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document * | |||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document * | |||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document * | |||
104 | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extention information contained in Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB and 101.PRE) |
KEY TRONIC CORPORATION | |||
/s/ CRAIG D. GATES | |||
Craig D. Gates | Date: | February | |
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
/s/ Brett R. Larsen | |||
Brett R. Larsen | Date: | February | |
Executive Vice President of Administration, Chief Financial Officer and Treasurer | |||
(Principal Financial Officer) |