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. | ||
8-20 | ||
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. | ||
March 30, 2019 | June 30, 2018 | December 28, 2019 | June 29, 2019 | |||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 165 | $ | 343 | $ | 499 | $ | 601 | ||||||
Trade receivables, net of allowance for doubtful accounts of $58 and $0 | 55,903 | 70,262 | ||||||||||||
Trade receivables, net of allowance for doubtful accounts of $58 and $58 | 70,225 | 58,429 | ||||||||||||
Contract assets | 20,138 | — | 17,071 | 22,161 | ||||||||||
Inventories, net | 95,396 | 110,315 | 110,144 | 100,431 | ||||||||||
Other | 16,590 | 13,600 | 20,254 | 16,477 | ||||||||||
Total current assets | 188,192 | 194,520 | 218,193 | 198,099 | ||||||||||
Property, plant and equipment, net | 28,533 | 27,548 | 30,825 | 29,413 | ||||||||||
Operating lease right-of-use assets, net | 14,876 | — | ||||||||||||
Other assets: | ||||||||||||||
Deferred income tax asset | 7,826 | 7,882 | 8,207 | 7,840 | ||||||||||
Goodwill | — | 9,957 | ||||||||||||
Other intangible assets, net | 733 | 3,726 | — | 657 | ||||||||||
Other | 2,868 | 2,895 | 1,869 | 2,301 | ||||||||||
Total other assets | 11,427 | 24,460 | 10,076 | 10,798 | ||||||||||
Total assets | $ | 228,152 | $ | 246,528 | $ | 273,970 | $ | 238,310 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 68,759 | $ | 76,198 | $ | 80,448 | $ | 73,571 | ||||||
Accrued compensation and vacation | 6,336 | 8,105 | 6,954 | 6,759 | ||||||||||
Current portion of debt, net | 5,841 | 5,841 | 7,508 | 5,841 | ||||||||||
Other | 6,879 | 8,769 | 13,350 | 7,233 | ||||||||||
Total current liabilities | 87,815 | 98,913 | 108,260 | 93,404 | ||||||||||
Long-term liabilities: | ||||||||||||||
Term loans | 8,551 | 12,932 | 7,087 | 7,091 | ||||||||||
Revolving loan | 18,126 | 16,222 | 32,018 | 23,356 | ||||||||||
Operating lease liabilities | 9,780 | — | ||||||||||||
Other long-term obligations | 476 | 380 | 18 | — | ||||||||||
Total long-term liabilities | 27,153 | 29,534 | 48,903 | 30,447 | ||||||||||
Total liabilities | 114,968 | 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 | 46,598 | 46,244 | 46,821 | 46,680 | ||||||||||
Retained earnings | 64,536 | 72,806 | 67,729 | 65,353 | ||||||||||
Accumulated other comprehensive gain (loss) | 2,050 | (969 | ) | |||||||||||
Accumulated other comprehensive gain | 2,257 | 2,426 | ||||||||||||
Total shareholders’ equity | 113,184 | 118,081 | 116,807 | 114,459 | ||||||||||
Total liabilities and shareholders’ equity | $ | 228,152 | $ | 246,528 | $ | 273,970 | $ | 238,310 |
Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
March 30, 2019 | March 31, 2018 | March 30, 2019 | March 31, 2018 | December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||||||||||||
Net sales | $ | 107,954 | $ | 108,352 | $ | 358,463 | $ | 329,294 | $ | 116,722 | $ | 123,037 | $ | 222,007 | $ | 250,509 | ||||||||||||||
Cost of sales | 101,147 | 100,197 | 332,243 | 304,494 | 108,600 | 113,157 | 204,612 | 231,096 | ||||||||||||||||||||||
Gross profit | 6,807 | 8,155 | 26,220 | 24,800 | 8,122 | 9,880 | 17,395 | 19,413 | ||||||||||||||||||||||
Research, development and engineering expenses | 1,398 | 1,560 | 4,955 | 4,565 | 1,720 | 1,857 | 3,380 | 3,557 | ||||||||||||||||||||||
Selling, general and administrative expenses | 5,497 | 5,816 | 16,184 | 16,641 | 4,904 | 5,399 | 9,978 | 10,687 | ||||||||||||||||||||||
Impairment of goodwill and intangibles | 12,448 | — | 12,448 | — | ||||||||||||||||||||||||||
Total operating expenses | 19,343 | 7,376 | 33,587 | 21,206 | 6,624 | 7,256 | 13,358 | 14,244 | ||||||||||||||||||||||
Operating income (loss) | (12,536 | ) | 779 | (7,367 | ) | 3,594 | ||||||||||||||||||||||||
Operating income | 1,498 | 2,624 | 4,037 | 5,169 | ||||||||||||||||||||||||||
Interest expense, net | 720 | 656 | 2,105 | 1,866 | 524 | 708 | 1,234 | 1,385 | ||||||||||||||||||||||
Income (loss) before income taxes | (13,256 | ) | 123 | (9,472 | ) | 1,728 | ||||||||||||||||||||||||
Income tax provision (benefit) | (1,275 | ) | (521 | ) | (673 | ) | 876 | |||||||||||||||||||||||
Net income (loss) | $ | (11,981 | ) | $ | 644 | $ | (8,799 | ) | $ | 852 | ||||||||||||||||||||
Net income (loss) per share — Basic | $ | (1.11 | ) | $ | 0.06 | $ | (0.82 | ) | $ | 0.08 | ||||||||||||||||||||
Income before income taxes | 974 | 1,916 | 2,803 | 3,784 | ||||||||||||||||||||||||||
Income tax provision | 150 | 327 | 427 | 602 | ||||||||||||||||||||||||||
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 | $ | (1.11 | ) | $ | 0.06 | $ | (0.82 | ) | $ | 0.08 | ||||||||||||||||||||
Net income per share — Diluted | $ | 0.08 | $ | 0.15 | $ | 0.22 | $ | 0.29 | ||||||||||||||||||||||
Weighted average shares outstanding — Diluted | 10,760 | 10,760 | 10,760 | 10,760 | 10,877 | 10,881 | 10,811 | 10,986 |
Three Months Ended | Nine Months Ended | ||||||||||||||
March 30, 2019 | March 31, 2018 | March 30, 2019 | March 31, 2018 | ||||||||||||
Comprehensive income (loss): | |||||||||||||||
Net income (loss) | $ | (11,981 | ) | $ | 644 | $ | (8,799 | ) | $ | 852 | |||||
Other comprehensive income (loss): | |||||||||||||||
Unrealized gain on hedging instruments, net of tax | 859 | 4,340 | 3,019 | 4,127 | |||||||||||
Comprehensive income (loss) | $ | (11,122 | ) | $ | 4,984 | $ | (5,780 | ) | $ | 4,979 |
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 |
Nine Months Ended | Six Months Ended | |||||||||||||
March 30, 2019 | March 31, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||
Operating activities: | ||||||||||||||
Net income (loss) | $ | (8,799 | ) | $ | 852 | |||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||
Goodwill and intangible assets impairment | 12,448 | — | ||||||||||||
Net income | $ | 2,376 | $ | 3,182 | ||||||||||
Adjustments to reconcile net income to cash used in operating activities: | ||||||||||||||
Depreciation and amortization | 5,520 | 5,838 | 3,143 | 3,767 | ||||||||||
Amortization of deferred loan costs | 22 | 22 | 15 | 15 | ||||||||||
Provision for obsolete inventory | 70 | 28 | 41 | 58 | ||||||||||
Provision for warranty | 67 | 39 | 89 | 16 | ||||||||||
Recovery of doubtful accounts | 58 | (84 | ) | |||||||||||
Loss on disposal of assets | — | 8 | 206 | — | ||||||||||
Share-based compensation expense | 354 | 307 | 141 | 274 | ||||||||||
Deferred income taxes | (936 | ) | (1,396 | ) | (318 | ) | (131 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||||||||
Trade receivables | 5,534 | 2,199 | (13,514 | ) | (10,787 | ) | ||||||||
Contract assets | (8,232 | ) | — | 5,090 | (7,212 | ) | ||||||||
Cash received from arbitration settlement | 6,684 | — | — | 6,684 | ||||||||||
Inventories | 3,639 | (13,400 | ) | (9,754 | ) | 7,432 | ||||||||
Other assets | (3,648 | ) | (5,768 | ) | (3,689 | ) | (4,963 | ) | ||||||
Accounts payable | (7,439 | ) | 16,148 | 6,877 | (3,104 | ) | ||||||||
Accrued compensation and vacation | (1,769 | ) | (3,389 | ) | 195 | (350 | ) | |||||||
Other liabilities | (185 | ) | 2,616 | 664 | 23 | |||||||||
Cash provided by operating activities | 3,388 | 4,020 | ||||||||||||
Cash used in operating activities | (8,438 | ) | (5,096 | ) | ||||||||||
Investing activities: | ||||||||||||||
Purchase of property and equipment | (5,841 | ) | (3,176 | ) | (5,360 | ) | (3,586 | ) | ||||||
Proceeds from sale of fixed assets | 17 | 985 | 696 | 17 | ||||||||||
Cash receipts from deferred purchase price of factored receivables | 4,768 | 5,851 | 2,695 | 3,302 | ||||||||||
Cash provided by (used in) investing activities | (1,056 | ) | 3,660 | |||||||||||
Cash used in investing activities | (1,969 | ) | (267 | ) | ||||||||||
Financing activities: | ||||||||||||||
Payment of financing costs | (11 | ) | (17 | ) | (5 | ) | (8 | ) | ||||||
Proceeds from issuance of long term debt | 5,000 | — | ||||||||||||
Repayments of long term debt | (4,403 | ) | (4,403 | ) | (3,352 | ) | (2,936 | ) | ||||||
Borrowings under revolving credit agreement | 140,047 | 135,876 | 91,216 | 94,468 | ||||||||||
Repayments of revolving credit agreement | (138,143 | ) | (139,211 | ) | (82,554 | ) | (86,312 | ) | ||||||
Cash used in financing activities | (2,510 | ) | (7,755 | ) | ||||||||||
Cash provided by financing activities | 10,305 | 5,212 | ||||||||||||
Net decrease in cash and cash equivalents | (178 | ) | (75 | ) | (102 | ) | (151 | ) | ||||||
Cash and cash equivalents, beginning of period | 343 | 373 | 601 | 343 | ||||||||||
Cash and cash equivalents, end of period | $ | 165 | $ | 298 | $ | 499 | $ | 192 | ||||||
Non-cash investing activities: | ||||||||||||||
Beneficial interest in transferred receivables | (2,083 | ) | (2,389 | ) | (1,718 | ) | (2,117 | ) | ||||||
Supplemental cash flow information: | ||||||||||||||
Interest payments | $ | 2,108 | $ | 1,819 | $ | 1,235 | $ | 1,332 | ||||||
Income tax payments (refunds), net of refunds | $ | (384 | ) | $ | 233 | $ | 426 | $ | (50 | ) |
Three Months Ended | Nine Months Ended | Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
March 30, 2019 | March 31, 2018 | March 30, 2019 | March 31, 2018 | December 28, 2019 | December 29, 2018 | December 28, 2019 | December 29, 2018 | |||||||||||||||||||||||||
Total shareholders’ equity, beginning balances | 124,226 | 116,813 | 118,081 | 116,567 | $ | 115,139 | $ | 123,421 | $ | 114,459 | $ | 118,081 | ||||||||||||||||||||
Common stock (shares): | ||||||||||||||||||||||||||||||||
Beginning balances | 10,760 | 10,760 | 10,760 | 10,760 | $ | 10,760 | $ | 10,760 | $ | 10,760 | $ | 10,760 | ||||||||||||||||||||
Exercise of stock appreciation rights | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Ending balances | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | 10,760 | ||||||||||||||||||||||||
Common stock: | ||||||||||||||||||||||||||||||||
Beginning balances | 46,518 | 46,048 | 46,244 | 45,797 | $ | 46,754 | $ | 46,412 | $ | 46,680 | $ | 46,244 | ||||||||||||||||||||
Share-based compensation | 80 | 56 | 354 | 307 | 67 | 106 | 141 | 274 | ||||||||||||||||||||||||
Ending balances | $ | 46,598 | $ | 46,104 | $ | 46,598 | $ | 46,104 | 46,821 | 46,518 | 46,821 | 46,518 | ||||||||||||||||||||
Retained Earnings: | ||||||||||||||||||||||||||||||||
Beginning balances | 76,517 | 73,753 | 72,806 | 73,545 | $ | 66,905 | $ | 74,928 | $ | 65,353 | $ | 72,806 | ||||||||||||||||||||
Net income (loss) | (11,981 | ) | 644 | (8,799 | ) | 852 | ||||||||||||||||||||||||||
Net income | 824 | 1,589 | 2,376 | 3,182 | ||||||||||||||||||||||||||||
ASC 606 opening balance sheet adjustment | — | — | 529 | — | — | — | — | 529 | ||||||||||||||||||||||||
Tax rate effect reclassification | — | 586 | — | 586 | ||||||||||||||||||||||||||||
Ending balances | 64,536 | 74,983 | 64,536 | 74,983 | 67,729 | 76,517 | 67,729 | 76,517 | ||||||||||||||||||||||||
Accumulated other comprehensive income (loss): | ||||||||||||||||||||||||||||||||
Accumulated other comprehensive income: | ||||||||||||||||||||||||||||||||
Beginning balances | 1,191 | (2,988 | ) | (969 | ) | (2,775 | ) | $ | 1,479 | $ | 2,080 | $ | 2,426 | $ | (969 | ) | ||||||||||||||||
Unrealized gain on hedging instruments, net | 859 | 4,340 | 3,019 | 4,127 | ||||||||||||||||||||||||||||
Tax rate effect reclassification | — | (586 | ) | — | (586 | ) | ||||||||||||||||||||||||||
Unrealized gain (loss) on hedging instruments, net | 778 | (889 | ) | (169 | ) | 2,160 | ||||||||||||||||||||||||||
Ending balances | 2,050 | 766 | 2,050 | 766 | 2,257 | 1,191 | 2,257 | 1,191 | ||||||||||||||||||||||||
Total shareholder’s equity, ending balances | $ | 113,184 | $ | 121,853 | $ | 113,184 | $ | 121,853 | $ | 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 March 30, 2019 | |||||||
Impact of Adopting ASC 606 | |||||||
(Unaudited, in thousands) | As Reported | 606 Adjustment | Balance without 606 Adoption | ||||
ASSETS | |||||||
Contract assets | 20,138 | (20,138 | ) | — | |||
Inventories | 95,396 | 18,343 | 113,739 | ||||
Deferred income tax asset | 7,826 | 167 | 7,993 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Retained earnings | 64,536 | 1,628 | 66,164 |
Consolidated Statement of Income | ||||||||||||||||||||||||
Impact of Adopting ASC 606 | ||||||||||||||||||||||||
(Unaudited, in thousands) | Three Months Ended March 30, 2019 | Nine Months Ended March 30, 2019 | ||||||||||||||||||||||
As Reported | 606 Adjustment | Balance without 606 Adoption | As Reported | 606 Adjustment | Balance without 606 Adoption | |||||||||||||||||||
Net sales | $ | 107,954 | $ | 1,019 | $ | 106,935 | $ | 358,463 | $ | 8,231 | $ | 350,232 | ||||||||||||
Cost of sales | 101,147 | 419 | 100,728 | 332,243 | 7,133 | 325,110 | ||||||||||||||||||
Gross profit | 6,807 | 600 | 6,207 | 26,220 | 1,098 | 25,122 | ||||||||||||||||||
Net income | $ | (11,981 | ) | $ | 600 | $ | (12,581 | ) | $ | (8,799 | ) | $ | 1,098 | $ | (9,897 | ) |
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 |
March 30, 2019 | June 30, 2018 | ||||||
Finished goods | $ | 10,129 | $ | 14,927 | |||
Work-in-process | 12,017 | 22,254 | |||||
Raw materials and supplies | 73,250 | 73,134 | |||||
$ | 95,396 | $ | 110,315 |
4. | Long-Term Debt |
Fiscal Years Ending | Amount | Amount | ||||
2019 (1) | $ | 1,468 | ||||
2020 | 5,871 | |||||
2020 (1) | $ | 3,769 | ||||
2021 | 5,871 | 7,537 | ||||
2022 | 1,250 | 2,917 | ||||
2023 | — | 417 | ||||
Thereafter | 18,125 | |||||
2024 | 32,018 | |||||
Total debt | $ | 32,585 | $ | 46,658 | ||
Unamortized debt issuance costs | (67 | ) | (45 | ) | ||
Long-term debt, net of debt issuance costs | $ | 32,518 | $ | 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) | |||||||
March 30, 2019 | March 31, 2018 | ||||||
Net income (loss) | $ | (11,981 | ) | $ | 644 | ||
Weighted average shares outstanding—basic | 10,760 | 10,760 | |||||
Effect of dilutive common stock awards | — | — | |||||
Weighted average shares outstanding—diluted | 10,760 | 10,760 | |||||
Net income (loss) per share—basic | $ | (1.11 | ) | $ | 0.06 | ||
Net income (loss) per share—diluted | $ | (1.11 | ) | $ | 0.06 | ||
Antidilutive SARs not included in diluted earnings per share | 1,005 | 1,075 |
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 |
Nine Months Ended | |||||||
(in thousands, except per share information) | |||||||
March 30, 2019 | March 31, 2018 | ||||||
Net income (loss) | $ | (8,799 | ) | $ | 852 | ||
Weighted average shares outstanding—basic | 10,760 | 10,760 | |||||
Effect of dilutive common stock awards | — | — | |||||
Weighted average shares outstanding—diluted | 10,760 | 10,760 | |||||
Net income (loss) per share—basic | $ | (0.82 | ) | $ | 0.08 | ||
Net income (loss) per share—diluted | $ | (0.82 | ) | $ | 0.08 | ||
Antidilutive SARs not included in diluted earnings per share | 1,005 | 1,075 |
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 in MXN | Notional Contracts in USD | Estimated Fair Value | |||||||||
June 29, 2019 | $ | 142,947 | $ | 6,828 | $ | 483 | ||||||
September 28, 2019 | $ | 148,468 | $ | 6,740 | $ | 741 | ||||||
December 28, 2019 | $ | 152,613 | $ | 7,187 | $ | 399 | ||||||
March 28, 2020 | $ | 146,613 | $ | 6,553 | $ | 631 | ||||||
June 27, 2020 | $ | 138,213 | $ | 6,257 | $ | 430 |
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 | ) | $ | — |
March 30, 2019 | June 30, 2018 | ||||||||
Derivatives Designated as Hedging Instruments | Balance Sheet Location | Fair Value | Fair Value | ||||||
Foreign currency forward contracts & swaps | Other current assets | $ | 2,254 | $ | 23 | ||||
Foreign currency forward contracts & swaps | Other long-term assets | $ | 430 | $ | 477 | ||||
Foreign currency forward contracts & swaps | Other current liabilities | $ | — | $ | (1,618 | ) | |||
Foreign currency forward contracts & swaps | Other long-term liabilities | $ | — | $ | (58 | ) | |||
Interest rate swap | Other current assets | $ | 8 | $ | 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 December 29, 2018 | Effective Portion Recorded In AOCI | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of March 30, 2019 | ||||||||||||
Forward contracts & swaps | Cost of sales | $ | 1,178 | $ | 1,059 | $ | (194 | ) | $ | 2,043 | |||||||
Interest rate swap | Interest expense | 13 | 1 | (7 | ) | 7 | |||||||||||
Total | $ | 1,191 | $ | 1,060 | $ | (201 | ) | $ | 2,050 | ||||||||
Derivatives Designated as Hedging Instruments | Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | AOCI Balance as of December 30, 2017 | Effective Portion Recorded In AOCI (1) | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of March 31, 2018 | ||||||||||||
Forward contracts & swaps | Cost of sales | $ | (2,972 | ) | $ | 2,830 | $ | 897 | $ | 755 | |||||||
Interest rate swap | Interest expense | (16 | ) | 13 | 14 | 11 | |||||||||||
Total | $ | (2,988 | ) | $ | 2,843 | $ | 911 | $ | 766 |
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 | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of March 30, 2019 | 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 | ) | $ | 2,308 | $ | 723 | $ | 2,043 | Cost of sales | $ | 2,424 | $ | 1,492 | $ | (1,587 | ) | $ | 2,329 | ||||||||||||||
Interest rate swap | Interest expense | 19 | 2 | (14 | ) | 7 | Interest expense | 2 | (71 | ) | (3 | ) | (72 | ) | ||||||||||||||||||||
Total | $ | (969 | ) | $ | 2,310 | $ | 709 | $ | 2,050 | $ | 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 (1) | Effective Portion Reclassified From AOCI Into Income | AOCI Balance as of March 31, 2018 | 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 | ) | $ | 39 | $ | 3,423 | $ | 755 | Cost of sales | $ | (988 | ) | $ | 1,249 | $ | 917 | $ | 1,178 | ||||||||||||||
Interest rate swap | Interest expense | (68 | ) | 12 | 67 | 11 | Interest expense | 19 | 1 | (7 | ) | 13 | ||||||||||||||||||||||
Total | $ | (2,775 | ) | $ | 51 | $ | 3,490 | $ | 766 | $ | (969 | ) | $ | 1,250 | $ | 910 | $ | 1,191 |
11. | Fair Value Measurements |
March 30, 2019 | 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 | $ | — | $ | 8 | $ | — | $ | 8 | $ | — | $ | 6 | $ | — | $ | 6 | ||||||||||||||
Foreign currency forward contracts | $ | — | $ | 2,684 | $ | — | $ | 2,684 | $ | — | $ | 3,110 | $ | — | $ | 3,110 | ||||||||||||||
Financial Liabilities: | ||||||||||||||||||||||||||||||
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 |
March 30, 2019 | December 28, 2019 | |||||||||||||||||||||||||||||||||||||
Amortization Period in Years | Gross Carrying Amount | Accumulated Amortization | Impairment Recognized | 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 | (2,208 | ) | — | 733 | 4 - 7 | 2,941 | (2,284 | ) | — | (657 | ) | — | ||||||||||||||||||||||||
Total | $ | 7,744 | $ | (4,519 | ) | $ | (2,492 | ) | $ | 733 | $ | 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) | 76 | |||
2020 | 303 | |||
2021 | 303 | |||
2022 | 51 | |||
Total amortization expense | $ | 733 |
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 | 347,146 | ||
Amounts collected or invoiced | (338,914 | ) | |
Ending balance, March 30, 2019 | $ | 20,138 |
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 |
EMS Revenue | ||||||||
Recognition | Three Months Ended | Nine Months Ended | ||||||
Over-Time | $ | 105,840 | $ | 347,146 | ||||
Point-in-Time | 2,114 | 11,317 | ||||||
Total | $ | 107,954 | $ | 358,463 |
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 |
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 | |||||||||||||||||||||||||||||||||||||||
March 30, 2019 | % of net sales | March 31, 2018 | % of net sales | $ change | % point change | December 28, 2019 | % of net sales | December 29, 2018 | % of net sales | $ change | % point change | |||||||||||||||||||||||||||||
Net sales | $ | 107,954 | 100.0 | % | $ | 108,352 | 100.0 | % | $ | (398 | ) | — | % | $ | 116,722 | 100.0 | % | $ | 123,037 | 100.0 | % | $ | (6,315 | ) | — | % | ||||||||||||||
Cost of sales | 101,147 | 93.7 | % | 100,197 | 92.5 | % | 950 | 1.2 | % | 108,600 | 93.0 | % | 113,157 | 92.0 | % | (4,557 | ) | 1.0 | % | |||||||||||||||||||||
Gross profit | 6,807 | 6.3 | % | 8,155 | 7.5 | % | (1,348 | ) | (1.2 | )% | 8,122 | 7.0 | % | 9,880 | 8.0 | % | (1,758 | ) | (1.0 | )% | ||||||||||||||||||||
Research, development and engineering | 1,398 | 1.3 | % | 1,560 | 1.4 | % | (162 | ) | (0.1 | )% | 1,720 | 1.5 | % | 1,857 | 1.5 | % | (137 | ) | — | % | ||||||||||||||||||||
Selling, general and administrative | 5,497 | 5.1 | % | 5,816 | 5.4 | % | (319 | ) | (0.3 | )% | 4,904 | 4.2 | % | 5,399 | 4.4 | % | (495 | ) | (0.2 | )% | ||||||||||||||||||||
Impairment of goodwill and intangibles | 12,448 | 11.5 | % | — | — | % | 12,448 | 11.5 | % | |||||||||||||||||||||||||||||||
Total operating expenses | 19,343 | 17.9 | % | 7,376 | 6.8 | % | 11,967 | 11.1 | % | 6,624 | 5.7 | % | 7,256 | 5.9 | % | (632 | ) | (0.2 | )% | |||||||||||||||||||||
Operating income | (12,536 | ) | (11.6 | )% | 779 | 0.7 | % | (13,315 | ) | (12.3 | )% | 1,498 | 1.3 | % | 2,624 | 2.1 | % | (1,126 | ) | (0.8 | )% | |||||||||||||||||||
Interest expense, net | 720 | 0.7 | % | 656 | 0.6 | % | 64 | 0.1 | % | 524 | 0.4 | % | 708 | 0.6 | % | (184 | ) | (0.2 | )% | |||||||||||||||||||||
Income before income taxes | (13,256 | ) | (12.3 | )% | 123 | 0.1 | % | (13,379 | ) | (12.4 | )% | 974 | 0.8 | % | 1,916 | 1.6 | % | (942 | ) | (0.8 | )% | |||||||||||||||||||
Income tax provision | (1,275 | ) | (1.2 | )% | (521 | ) | (0.5 | )% | (754 | ) | (0.7 | )% | 150 | 0.1 | % | 327 | 0.3 | % | (177 | ) | (0.2 | )% | ||||||||||||||||||
Net (loss) income | $ | (11,981 | ) | (11.1 | )% | $ | 644 | 0.6 | % | $ | (12,625 | ) | (11.7 | )% | ||||||||||||||||||||||||||
Net income | $ | 824 | 0.7 | % | $ | 1,589 | 1.3 | % | $ | (765 | ) | (0.6 | )% | |||||||||||||||||||||||||||
Effective income tax rate | 9.6 | % | (423.6 | )% | 15.4 | % | 17.1 | % |
Nine Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
March 30, 2019 | % of net sales | March 31, 2018 | % of net sales | $ change | % point change | December 28, 2019 | % of net sales | December 29, 2018 | % of net sales | $ change | % point change | |||||||||||||||||||||||||||||
Net sales | $ | 358,463 | 100.0 | % | $ | 329,294 | 100.0 | % | $ | 29,169 | — | % | $ | 222,007 | 100.0 | % | $ | 250,509 | 100.0 | % | $ | (28,502 | ) | — | % | |||||||||||||||
Cost of sales | 332,243 | 92.7 | % | 304,494 | 92.5 | % | 27,749 | 0.2 | % | 204,612 | 92.2 | % | 231,096 | 92.3 | % | (26,484 | ) | (0.1 | )% | |||||||||||||||||||||
Gross profit | 26,220 | 7.3 | % | 24,800 | 7.5 | % | 1,420 | (0.2 | )% | 17,395 | 7.8 | % | 19,413 | 7.7 | % | (2,018 | ) | 0.1 | % | |||||||||||||||||||||
Research, development and engineering | 4,955 | 1.4 | % | 4,565 | 1.4 | % | 390 | — | % | 3,380 | 1.5 | % | 3,557 | 1.4 | % | (177 | ) | 0.1 | % | |||||||||||||||||||||
Selling, general and administrative | 16,184 | 4.5 | % | 16,641 | 5.1 | % | (457 | ) | (0.6 | )% | 9,978 | 4.5 | % | 10,687 | 4.3 | % | (709 | ) | 0.2 | % | ||||||||||||||||||||
Impairment of goodwill and intangibles | 12,448 | 3.5 | % | — | — | % | 12,448 | 3.5 | % | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||
Total operating expenses | 33,587 | 9.4 | % | 21,206 | 6.5 | % | 12,381 | 2.9 | % | 13,358 | 6.0 | % | 14,244 | 5.7 | % | (886 | ) | 0.3 | % | |||||||||||||||||||||
Operating income | (7,367 | ) | (2.1 | )% | 3,594 | 1.1 | % | (10,961 | ) | (3.2 | )% | 4,037 | 1.8 | % | 5,169 | 2.1 | % | (1,132 | ) | (0.3 | )% | |||||||||||||||||||
Interest expense, net | 2,105 | 0.6 | % | 1,866 | 0.6 | % | 239 | — | % | 1,234 | 0.6 | % | 1,385 | 0.6 | % | (151 | ) | — | % | |||||||||||||||||||||
Income before income taxes | (9,472 | ) | (2.6 | )% | 1,728 | 0.5 | % | (11,200 | ) | (3.1 | )% | 2,803 | 1.3 | % | 3,784 | 1.5 | % | (981 | ) | (0.2 | )% | |||||||||||||||||||
Income tax provision | (673 | ) | (0.2 | )% | 876 | 0.3 | % | (1,549 | ) | (0.5 | )% | 427 | 0.2 | % | 602 | 0.2 | % | (175 | ) | — | % | |||||||||||||||||||
Net income | $ | (8,799 | ) | (2.5 | )% | $ | 852 | 0.3 | % | $ | (9,651 | ) | (2.8 | )% | $ | 2,376 | 1.1 | % | $ | 3,182 | 1.3 | % | $ | (806 | ) | (0.2 | )% | |||||||||||||
Effective income tax rate | 7.1 | % | 50.7 | % | 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: | ||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
/s/ Brett R. Larsen | |||
Brett R. Larsen | Date: | ||
Executive Vice President of Administration, Chief Financial Officer and Treasurer | |||
(Principal Financial Officer) |