Kent Electronics Reports Third Quarter and Nine Month Results
HOUSTON--(BUSINESS WIRE)--Jan. 12, 1999--Kent Electronics Corporation (NYSE:KNT - news) today reported financial results for the third fiscal quarter and nine months ended December 26, 1998.
Net sales for the third quarter were $155.4 million, a 5% sequential increase over the $147.5 million reported for the second fiscal quarter this year, but below the $177.4 million reported in the comparable quarter last year. The Company's net loss narrowed to $0.9 million, or $0.03 per diluted share, for the third fiscal quarter, from the net loss of $3.5 million, or $0.13 per diluted share, incurred in the second quarter of fiscal 1999. In the third quarter of fiscal 1998, the Company reported net earnings of $10.1 million, or $0.36 per diluted share.
As previously reported, the Company expected the fiscal third quarter to show a level of sequential revenue improvement that would enable it to report approximate break-even results for the period. This increase resulted primarily from higher volume at K*TEC, Kent's contract manufacturing subsidiary. The Company's distribution operations, which represented 70% of net sales for the quarter, contributed modestly to the sequential increase in revenues, reflecting the strength of the Kent Datacomm division.
Gross profit for the December quarter was $23.7 million, or 15.3% of net revenues, up from 13.1% of net revenues in the second fiscal quarter, as a result of increased plant and equipment utilization and improved operating efficiencies at K*TEC.
Morrie K. Abramson, Chairman and Chief Executive Officer, commented, ''We made substantial progress in the third quarter, posting an 18% sequential increase in contract manufacturing revenues over the second fiscal quarter. New services beyond our traditional cable assembly business increased 36% on a sequential basis and represented 60% of total manufacturing revenues for the period. Importantly, we have succeeded in diversifying our contract manufacturing revenue base, thereby strengthening K*TEC's ability to withstand the cyclicality of the personal computer and semiconductor capital equipment industries. On a combined basis, these industries accounted for approximately 23% of fiscal 1999 third quarter manufacturing revenues, in contrast to approximately 62% in last year's third quarter. The production ramp-up for new customers continues to be a slow and, therefore, costly process which is penalizing gross margin.''
Mr. Abramson also noted, ''We were able to post modestly higher distribution revenues on a sequential basis as a result of our Datacomm business which supplies value-added networking products. Therefore, while we continue to experience pricing pressure in the electronics components part of our distribution business, we are moving forward to further develop our Datacomm services niche.''
Looking ahead, Mr. Abramson said, ''Our visibility continues to be limited. Based on currently available information, however, we expect the progress of our current operations to enable Kent to return to modest profitability in the fourth quarter of fiscal 1999. At the same time, we are pursuing several related opportunities that could increase profitability through additional volume as well as provide the Company with higher margin services to offer to a growing customer base.''
Net sales for the first nine months of fiscal 1999 were $460.0 million with a net loss of $0.4 million, or $0.01 per diluted share. For the comparable period in fiscal 1998, the Company generated net sales of $497.0 million and net earnings $28.5 million, or $1.01 per diluted share.
The forward-looking statements in this press release involve risks and uncertainties which could cause actual results, performance or trends, including the above mentioned anticipated improvement in profitability, to differ materially from those expressed in the forward-looking statements. The Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that management's expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include, but are not limited to the risks relating to forward-looking statements discussed in the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 1998, including, but not limited to, the risks discussed under the captions ''Downward Pressure on Margins,'' ''Cycles in the Electronics Industry; General Economic Conditions,'' ''Dependence on K*TEC Customers; Uncertainty of Increasing Contract Manufacturing Sales'' and ''Risks Associated with Acquisitions.''
Kent Electronics is among the largest publicly traded specialty electronics distributors. Kent's contract manufacturing subsidiary, K*TEC Electronics, is among the leading contract manufacturers in the U.S. |
