SPOKANE VALLEY, WA – Key Tronic Corp. posted fiscal second quarter revenue of $116.7 million, down 5.1% year-over-year.

Net income for the quarter ended Dec. 28 was $800,000, compared to net income of $1.6 million for the same period of fiscal year 2019.

For the first six months of fiscal year 2020, revenue was $222 million, a decrease of 11.4% year-over-year. Net income was $2.4 million, down 25% compared to fiscal 2019.

The lower than anticipated earnings for the fiscal second quarter were primarily a result of increased factory spending in the company’s Juarez metal fabrication departments. This spending was necessitated by both new and existing customers exiting their manufacturing arrangements in China and ramping their production in Juarez. While the financial effect on Key Tronic was significant, the long-term relationship with these customers was strengthened by the performance of the Juarez facility under extreme pressure, the firm says. Additionally, the company incurred unfavorable foreign currency losses related to its unhedged portion of Mexican labor expenses due to a strengthening peso over the quarter.

“Moving into the third quarter of fiscal 2020, the need for increased factory spending has diminished, and we see potential revenue and earnings growth in coming periods,” said Craig Gates, president and CEO. “Furthermore, uncertainty over tariffs and trade tension between the US and China continues to drive a number of existing and new customers to accelerate their plans to transition from China facilities to our expanding facilities in Mexico and Vietnam. While this transition caused delays in production during the first half of fiscal 2020, we see it as a very positive trend over the longer term, as customers see the increasing advantages of our North American and Vietnam-based production.

“During the second quarter of fiscal 2020, we continued to win significant new business from EMS competitors and from existing customers, including new programs involving consumer medical devices, Wi-Fi-enabled signage and temperature control devices. To prepare for growth in coming quarters, we have invested in the capacity of our Mexico, US and new Vietnam facilities, including a significant increase in our sheet metal capacity to address demand. We remain optimistic about our opportunities for growth in the second half of fiscal 2020 and beyond.”

For the fiscal third quarter, Key Tronic expects revenue in the range of $117 million to $121 million.