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Operator
Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Key Tronic fourth quarter and year end fiscal 2009 conference call.
During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today Tuesday, August 18, 2009. At this time, I would like to turn the conference over to our host, Mr. Craig Gates. Please go ahead sir.
Craig Gates - President and CEO
Good afternoon everyone. I'm Craig Gates, President and Chief Executive Officer of Key Tronic. I would like to thank everyone for joining us today for our investor conference call.
Ron Klawitter, our Chief Financial Officer, is here with me in our headquarters in Spokane Valley, Washington. Today we released the results for the fourth quarter and full year of fiscal 2009. We successfully confronted the challenging global economic environment in the second half of fiscal 2009 by reducing our costs while ramping our new customer programs which allowed us to maintain our profitability and strengthen our balance sheet.
Despite the current economic uncertainty, our strong financial position and the string of 22 consecutive profitable quarters have helped us to win additional new programs and further diversify our customer portfolio across a wide range of industries. Now I would like to turn the call over to Ron to review our financial performance. And I will come back to discuss our progress and our strategy going forward. Ron?
Ron Klawitter - CFO
Okay; thanks, Craig. As always, I would like to remind you that during the course of this call, we might make projections or other forward-looking statements regarding future events or the Company's future financial performance. Please remember that such statements are only predictions.
Actual events or results may differ materially. For more information, you may review the risk factors outlined in the documents the Company has filed with the SEC; specifically our latest 10-K, quarterly 10-Qs and 8-Ks.
Please note that on this call, we will discusses historical financial and other statistical information regarding our business and operations. Some of this information is included in today's press release and a recorded version of this call will be available on our website.
As we mentioned, today we released the results for the quarter end and year ended June 27, 2009. For the fourth quarter of fiscal 2009, we reported total revenue of $45.5 million compared to $57.3 million in the same period in fiscal 2008. For the full year of fiscal 2009, total revenue was $184.9 million, down 9% from $204.1 million for fiscal 2008.
In the second half of fiscal 2009, the global economic recession clearly impacted our business. Yet the impact was partially offset by growth among our new programs which now represent over 40% of our revenue. As the economy recovers, we expect to see increased orders from existing customers which will be additive to the new customer revenue.
For the fourth quarter of fiscal 2009, our gross margin was 6%. This is down from 10.5% in the same period last year.
For the full year of fiscal 2009, our gross margin was 7%. This is down from 8% in fiscal 2008. The decline in gross margin reflects the substantially lower sales volumes than the previous fiscal year and approximately $1.5 million for severance charges related to cost reduction achievements during the year.
In the face of a slowing demand from many of our customers, our flexible operating model allows us to take the necessary steps to reduce our variable operating expenses and trim fixed overhead. Our headcount at the end of June 2009 was approximately 2000 people, down from about 2500 a year ago. In coming periods, we expect our gross margins to be around 7% until the economy recovers and we begin growing our total production volumes again.
We continue to focus on controlling our operating expenses without hurting our long-term competitiveness. Our research, development and engineering costs for the fourth quarter were $515,000. This is down from $679,000 in the fourth quarter of fiscal 2008. Selling, general and administrative expense was $1.8 million for the quarter and this is down from $2.4 million in the fourth quarter of fiscal 2008.
Going forward, we expect to [hold] our total operating expenses to around $2.5 million in coming quarters. Despite the overall decline in our revenue and the challenges and costs of bringing on new customers, we have maintained profitability for 22 consecutive quarters.
Net income for the fourth quarter of fiscal 2009 was $300,000 or $0.03 per diluted share compared to $2.6 million or $0.25 per share for the same period of fiscal 2008. For the full year of fiscal 2009, net income was $1.1 million or $0.11 per diluted share compared to $5.6 million or $0.54 per share for fiscal 2008.
Turning to the balance sheet, our trade receivables were $24.9 million at the end of fiscal 2009. This is down from $36 million at the end of last fiscal year, reflecting the slower sales activity and an increased focus on cash management. Given the challenging economic environment and credit environment, we're very pleased to see our average day sales outstanding improve to 46 days.
Inventory was $32.3 million at the end of fiscal 2009. This is down from $37.9 million at the end of fiscal 2008.
In general, we are pleased with our efforts to keep our inventory in line with our revenue levels even as we dealt with sharp reductions in orders from existing customers and brought a number of new customers into production. Our cash management and our cost reduction programs allowed us to pay down our debt by nearly $10 million during fiscal 2009.
At year end, we had $2.4 million borrowed against our credit line which is the lowest balance we've had in the last 17 years. We recently received a commitment letter from a bank for a new line of credit which we expect to sign before August 22, 2009. That's when our existing credit agreement expires.
Finally, our total capital spending was $1.2 million for the fourth quarter of fiscal 2009 and 1.8 for the full year with most of the spending related to bringing on new customer programs. In summary, we saw a significant slowdown in revenue from existing programs in the second half of the year. This is partially offset by revenue from new customers.
Moving into fiscal 2010, we expect to see gradual growth in the revenue contribution from our new customer programs though the overall economic environment continues to create uncertainty. In response, we continue to control our costs while making the necessary investments to support our long-term competitiveness and maintaining our strong balance sheet.
Taking all these factors into consideration, we expect revenue in the range of 41 to $44 million with earnings in the range of $0.01 to $0.03 per share in the first quarter of fiscal 2010. Over the longer term, we believe that we are well positioned to profitably expand our business as the overall economy rebounds. That's it for me, Craig.
Craig Gates - President and CEO
Okay; thanks, Ron. While the global economic situation significantly impacted our business in the second half of fiscal 2009, we are pleased that our conservative fiscal administration, intense focus on cost control, quick response to inventory pressures and diversified and growing customer base has combined to allow us to remain on track and profitable.
As the saying goes, in a recession, cash is king. Key Tronic's at the end of Q4 is the best it has been, the lowest it has been, in 17 years. The ramp-up for our new programs was slowed by recession but these new programs continue to represent a growing portion of our revenue and a promising foundation for our future.
In keeping with our long-term strategic objectives, we have been successfully building a more diversified customer portfolio and a less concentrated revenue base, spanning a wider range of industries. During fiscal 2009, we won new customer programs involving military electronics, computer networking, telecommunications, gaming technology, consumer medical devices, and HVAC control systems.
We expect these recent wins to begin moving into production during fiscal 2010. When they reach full production, each program represents a potential revenue contribution of between 5 to $30 million annually.
Even in the current economic environment, the pipeline of potential business remains relatively robust and the long-term trend towards outsourcing continues to look encouraging. While the recession may have initially put some potential customers outsourcing plans on hold, many of these companies are now recognizing the growing need to move forward with their outsourcing strategies to improve their long-term efficiencies and operating flexibility.
In the face of this severe economic recession, we believe Key Tronic has actually strengthened its position. We continue to see our perspective and current customers place an increasing value on the policies and initiatives that have been at the core of our strategic efforts. Our focus on creating and growing world-class manufacturing sites in three geographic areas allows customers to choose from a menu of attributes and create the best possible supply chain for their unique businesses.
They increasingly recognize our strong centralized management approach to inventory, IP, production control, engineering which has been honed and refined over decades of operating offshore facilities. As OEMs have struggled with IP control, [insurance of supply] issues and product launch delays with stand-alone and independent foreign sites, our approach has become a clear competitive advantage in many of our recent program wins. In many cases, we are providing design services in Spokane, building prototypes in Spokane, ramping production in both China and Mexico; cross supplying parts for that production from China, Spokane and Mexico; and controlling the production, planning and delivery from Spokane.
This type of seamless blending of the advantages of each locale is not readily available from our Tier 3 competitors. And the value of this blend is becoming more of a competitive weapon as the marketplace gains experience in outsourcing.
Our conservative approach to financial and business risk has been validated during the recession. We've won several customers based solely upon our stability and performance and continue to see increasing emphasis placed on long-term viability by both prospective and current customers.
Our consistent focus on customer and market diversification has also been validated during the recession. While we are not happy with our reduction in revenue, we are pleased with the manageable decrease we have experienced compared with the overall performance of the EMS marketplace.
As we move into fiscal 2010, we're not sitting still and are improving our operations. We're taking steps to further strengthen our competitive position by enhancing the efficiency of our supply chain and our new product introduction processes. In the marketplace, we are seeing more potential customers moving forward with outsourcing and we're more strongly positioned than ever before to win new business.
We expect to continue to work to control our costs and maintain our operational efficiency and excellence even as we continue to broaden and diversify our customer base. As the economy recovers, we are increasingly confident in our ability to grow our revenue and profits over the long term.
This concludes the formal portion of our presentation. Ron and I will now be pleased to answer any of your questions.
Operator
(Operator Instructions) Bill Dezellem, Tieton Capital Management.
Bill Dezellem - Analyst
Thank you. A couple questions here. First of all, are we thinking about your fiscal 2009 results correctly in that if we exclude the restructuring costs of the last couple quarters, the small goodwill writedown and the small bad debt writeoff during the year that you made approximately 31 pennies of earnings during fiscal '09? Is that roughly correct?
Ron Klawitter - CFO
So we have a goodwill of $765,000 writeoff and that was about $0.07. Bad debt reserve was a little over $0.5 million (inaudible) $0.05 and severance costs were about $1.5 million, actually about $1.2 million. I think that's around $0.12. So you've got the $0.12, the $0.07, and the $0.05 which is $0.24 added to the 11 I think it's what you're coming up with, Bill; somewhere around $0.30 to $0.35.
Bill Dezellem - Analyst
Okay, thank you. So it's actually even a little bit higher than what I was thinking.
Did we read the press release correctly that you had four customer new wins in the fourth quarter or did you actually have more than that? A couple of the categories noted in the release you had more than one win.
Craig Gates - President and CEO
We had four in the fourth quarter and in those categories over the year, we had more than one in some of them.
Bill Dezellem - Analyst
The size range that you mentioned on the conference call or on the opening remarks of this call, that 5 to $30 million, does that apply to these four customers that you won in the fourth quarter?
Craig Gates - President and CEO
Yes.
Bill Dezellem - Analyst
And then in the release -- actually while we're talking about new customers, how many new customers did you begin the ramping process in the fiscal '09 year?
Craig Gates - President and CEO
I don't keep track of them. It's kind of hard to keep score when they actually start because the day when you sign the PO is typically probably after you start putting it into the factory. So we could look it up and give you a call with the official scorecard. But it was about about 10 customers that actually generated revenue for the first time in fiscal 2009.
Bill Dezellem - Analyst
Great, thank you. And we are curious, have you either won business or is there business that is up for grabs from some of your Tier 3 competitors that have gone out of business?
Craig Gates - President and CEO
Well not so much gone out of business but have become distressed financially.
Bill Dezellem - Analyst
And do you see a prognosis where there may actually be at risk of going out of business when the economy turns and they require additional working capital but with credit conditions the way they are, they're not able to raise the funds?
Craig Gates - President and CEO
Hard for us to really to assess that because there's only a few Tier 3 companies that are public companies. So we only see the ones that are public.
But I think we have mentioned in previous calls that I think I read there's something like 6500 different EMS companies in the US and these are -- could be anywhere from a couple million dollars of annual revenue up to a couple hundred million dollars like we are in the small category. So, I guess it would just be speculation. So we don't really know exactly what the impact on the financial environment is on some of those competitors but I'm sure it would be stressed. If you have any amount of debt at all, there has to be some stress.
I can give you the specific example, I can't give you any names. But in one that's a perfect match to your question, this competitor had gotten to the point where they needed to sell themselves to a venture capitalist. And our customer, although that customer felt reasonably confident that the short term was secure, our customer was very concerned about what would happen one to two to three years out when things got better and the VC decided to sell our competitor.
So this has taken all different little permutations. The general theme is that if you're not in pretty good shape financially, this testing economy has scared of a lot of your customers away.
Bill Dezellem - Analyst
Thank you. And then finally in the release, you made a comment that you were increasing the efficiency of the supply chain and a new product introduction process. Would you please expand on those comments?
Craig Gates - President and CEO
Sure. We had originally convinced ourselves -- I'll talk about the new product introduction first. We had originally convinced ourselves that we could run NPIs through our Juarez, Mexico plant because technically you can.
What we found that even though you can force the customer and the project through the Juarez plant, you have to do battle every day with logistics in terms of getting parts across the border, back out again, getting information in and out and getting it translated quickly. So what we have ended up doing was creating an NPI center here in Spokane that has twins of the machines both in Juarez and in China.
So this means that our customers can communicate with us in English pretty much on their time zone. We can move parts around within the confines of the United States a lot more quickly than we could get them across the border into Mexico. And yet once we have successfully built the product, we are pretty confident that we when we move it to Juarez or to China that since the machines are the same, the processes are the same, the documentation is the same, the production control and planning is the same, that it will be a very smooth and successful transition.
So we have just put that in and started to work with it this year. Actually having that in place played a major role in a couple of key program wins for us. So it's kind of I guess a nice surprise in that it brought some new customers to us that I don't think we would have won otherwise and it's also dramatically eased the NPI process for current customers.
That's the first question. Then the other one was talking about the supply chain. We are still in the transition from a keyboard manufacturer to an EMS provider and that we have added to the size of our purchasing department over the years. But we haven't really done a great job but we're going to do a better job, I should say, of using all of the computer tools that we have to help plan our buying and to link up well with our customers.
As our customers get better at EMI, we are finding that we can take better advantage of money they have invested in their MRP systems and linking our MRP with their and in being quicker at using the computers to answer a lot of the questions on what if we increase, what if we decrease our volume, how fast can we go. The kinds of answers that used to take a lot of thought and a lot of spreadsheet analysis, we can now do quickly.
And then the other step to that is that we can do a lot more efficient looking for parts at a lower cost and looking for parts that we need to bring in because of an upside if we can do a better job of linking our computer systems with our people and with our customers' computer systems.
Bill Dezellem - Analyst
Great, thank you both and when you have occasion to visit with Jack next time, please wish him our best.
Operator
(Operator Instructions) I'm showing there's no further questions in the queue. I'd like to turn it back over to management for any closing comments.
Craig Gates - President and CEO
Okay, well thank you again for participating in today's conference call. Ron and I look forward to speaking with you again. Thanks and have a good day.
Operator
Thank you. Ladies and gentlemen, that does conclude today's Key Tronic fourth quarter and year end for fiscal 2009 conference call. If you'd like to listen to a replay of today's call, please dial 303-590-3030 or 1-800-406-7325, enter the passcode 409-9852. Thank you for your participation. You may now disconnect.