Second Quarter Overview
Net sales for the three months ended March 31, 2015 totaled $21.6 million, compared to $31.6 million recorded in the corresponding quarter last year. The Company reported a net loss for the quarter of $1.9 million, or $0.31 per diluted share, compared to a net loss of $0.7 million, or $0.11 per diluted share, in the same period a year ago.
The gross profit for the second quarter of fiscal 2015 was $5.7 million, compared to $10.3 million in the corresponding period last year. As a percentage of net sales, gross profit was 26.4% and 32.5% in the second quarter of fiscal 2015 and 2014, respectively. Operating expenses for the quarter ended March 31, 2015 were $8.6 million, or 39.8% of net sales, compared to $11.2 million, or 35.5% of net sales, in the same quarter last year.
Six Month Year-to-Date Overview
Net sales for the six months ended March 31, 2015 were $41.7 million, compared with $54.3 million for the comparable period in fiscal 2014. The Company reported a net loss for the fiscal 2015 six-month period ended March 31, 2015 of $3.8 million, or $0.60 per diluted share, compared to a net loss of $3.3 million, or $0.53 per diluted share, for the corresponding six-month period in fiscal 2014.
For the six-month period ended March 31, 2015, gross profit was $11.2 million, compared to $16.4 million for the same six-month period of fiscal 2014, or 26.8% and 30.3% of net sales, respectively. Operating expenses for the six-month period ended March 31, 2015 were $17.3 million, or 41.5% of net sales, compared to $21.3 million, or 39.2% of net sales, for the corresponding period of fiscal 2014.
Jack Ehren, President and CEO:
“The net loss in the second quarter and year-to-date was larger than originally expected due to workforce reduction-related costs, and customer delays resulting in lower orders and net sales. In the second quarter of fiscal 2015, we incurred approximately $420,000 in costs associated with a workforce reduction, of which approximately 60% was recorded in operating expenses. The payback on these costs through future savings is expected to occur during the third quarter of fiscal 2015. In view of significant customer order and related shipment delays, and the net loss in the first half of the fiscal year, the Company no longer expects to be profitable in fiscal 2015.”
“Our lower than historical gross margin percentage for the second quarter and year-to-date resulted primarily from facility under-utilization related to lower net sales and production levels, and less favorable product mix. We continue to manage our overall cost structure and, as a result, our total operating expenses have continued to decline significantly in all functional areas, compared to the prior fiscal year.”
Orders and Backlog
Key's backlog at the end of the second quarter of fiscal 2015 was $32.2 million, compared to $30.8 million one year ago. New orders received during the second quarter were $25.1 million, compared to $25.5 million in the corresponding period last year. New orders for the six months ended March 31, 2015 were $55.6 million, compared to $59.6 million for the corresponding period in fiscal 2014.
Jack Ehren:
“While total orders for fiscal 2015 second quarter and year-to-date did not reach expectations, European orders in euros approached record quarterly levels with several strategic wins, most notably in the potato market. The exchange rate, however, negatively affected the U.S. dollar equivalent of overall European orders due to the strengthening of the U.S. dollar throughout the quarter. In addition, there have been several significant opportunities, primarily in North America, that have been delayed by customers until later in fiscal 2015, and potentially into fiscal 2016. Subject to any further negative effects of exchange rate fluctuations and customer order delays, we continue to believe that it remains reasonable for Key to achieve year-over-year double-digit bookings growth in fiscal 2015.”Conclusion
Ehren concluded, “We remain confident in the foundation we are building, and in leveraging the investments we made in 2013 through 2015 to propel anticipated profitable growth and increased shareholder value in the future. We continue to receive supportive and encouraging feedback from our strategic partners who are field-testing our new developments, and we continue to expect to bring our new developments to the market in late fiscal 2015.”
