Do part D of the financial analysis project. You'll need information from the income statement on page 33 of the Key Tronic 10-K (page 39 of the PDF). The Management Discussion and Analysis starting on page 23 of the PDF compares 2019 results with 2018 (page 24). The balance sheet is on page 28 of the PDF and the statement of cash flows is on page 39. D. Basic Financial Analysis (10 points) Using the financial statements in the annual report, indicate the following: Income Statement: Locate and review the company's Income Statement. Create a table showing the company's Revenue or Sales, Cost of Goods Sold, Operating Expenses, Net Earnings (Net Income) and Earnings Per Share for the last two years. Include the change and the percentage change for each of the five items in the table. Read Management's Discussion and Analysis of Financial Conditions and Results of Operations. 2019 2018 Change % Change Revenue Cost of Goods Sold Operating Expenses Net Earnings Earnings Per Share Compare the company's net income and income per share in 2019 and 2018. What led to the company's change in sales and net income? (Hint: Use the Company Management's Discussion and Analysis to help explain the changes.) Balance Sheet: Locate and review the Company Balance Sheet and Statement of Cash Flow. By viewing these statements, how did the company's cash position change in total (not each year) over the period 2017-2019? In total, during the period 2017-2019, did how much cash from operating activities did the company generate? Over the 3 years, did the company use its Net Cash Flow to increase its cash balance, or was the cash used in the business? (If so, how did the company use its cash?) Using Yahoo and the instructions below, look at a chart of the company's stock price over the last 3 years. What is the price of the company's stock currently (at the time you are looking it up)? What was the lowest stock price the company had in the last 3 years (approximate value is okay if you are using the stock chart). Has the price fluctuated by much during that time period? How to find the company stock symbol, industry and current stock price Go to Yahoo finance (finance.yahoo.com) Find your company's stock market symbol by clicking on "Symbol Lookup". Enter the name of your company and find the stock symbol. For example: Enter Key Tronic Corporation. It also indicates in what industry the company operates. To get the stock price click on the symbol which was provided in the query. Note the current stock price is the one indicated by the last trade. To find the chart of the stocks price for the last 3 years, go to yahoo finance (finance.yahoo.com). Click on "Finance Enter Key Tronic Corporation's stock symbol. Click on "Basic chart". For the range of the chart click on 3Y (3 years). KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per share amounts) Fiscal Year Ended June 29, 2019 June 30, 2018 July 1, 2017 Net sales 464,044 S 446,322 $ 467,797 Cost of sales 429,443 412,153 429,497 Gross profit 34,601 34,169 38,300 Research, development and engineering expenses 6,555 6,186 6,393 Selling, general and administrative expenses 21,556 22,334 22,363 Impairment of goodwill and intangibles 12,448 Loss on settlement of arbitration 4,535 Total operating expenses 40,559 33,055 28,756 Operating income (loss) (5.958) 1,114 9,544 Interest expense, net 2,782 2,556 2.288 Income (loss) before income taxes (8,740) (1,442) 7,256 Income tax provision (benefit) (758) (117) 1.639 Net income (loss) (7,982) (1,325) S Net income (loss) per share - Basic (0.74) S (0.12) S 0.52 Weighted average shares outstanding - Basic 10,760 10,760 10,756 Net income (loss) per share - Diluted (0.74) S (0.12) S 0.51 Weighted average shares outstanding - Diluted 10,760 10,760 10,917 See accompanying notes to consolidated financial statements. 5,617 Item 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview KeyTronicEMS is a leader in electronic manufacturing services and solutions to original equipment manufacturers of a broad range of products. We provide engineering services, worldwide procurement and distribution, materials management, world-class manufacturing and assembly services, in-house testing, and unparalleled customer service. Our international production capability provides our customers with benefits of improved supply-chain management, reduced inventories, lower transportation costs, and reduced product fulfillment time. We continue to make investments in all of our operating facilities to give us the production capacity, capabilities and logistical advantages to continue to win new business. The following information should be read in conjunction with the consolidated financial statements included herein and with Item 1A, Risk Factors included as part of this filing. Our mission is to provide our customers with superior manufacturing and engineering services at the lowest total cost for the highest quality products, and create long-term mutually beneficial business relationships by employing our "Trust, Commitment, Results" philosophy. Executive Summary During the fourth quarter of fiscal year 2019, we continued to win significant new business from EMS competitors and from existing customers, including new programs involving smart security, architectural LED lighting, power meters and smart grid, and wireless power solutions. We also continue to invest in new equipment and processes to be more productive in our Mexico and Vietnam facilities, and we're expanding and enhancing our US facilities. We're optimistic about our opportunities for growth in fiscal 2020 and beyond. Net sales of $464.0 million for fiscal year 2019 increased by 4.0 percent as compared to net sales of $446.3 million in fiscal year 2018. The increase in net sales was primarily driven by an increase in net sales from new program wins, an increase in revenue recognized related to the adoption of Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606), as well as an increase in demand from current customers. Despite the many unexpected challenges during the second half of fiscal year 2019, we managed to grow our business for the year and ramp up most of our new programs. In the fourth quarter of fiscal year 2019, we saw a disruption in deliveries of a critical component from a supplier in China; delays in the ramp of a new program due to customer-driven design changes, and temporary reductions in customer demand due to concerns over tariffs and trade tension between the US and Mexico. Moving into the first quarter of fiscal 2020, these issues have been largely resolved and we expect revenue to increase significantly For the first quarter of fiscal year 2020, the Company expects to report revenue in the range of SIIS million to S120 million. Future results will depend on actual levels of customers' orders, the timing of the start-up of production of new product programs, impact of the new revenue recognition accounting policy and the potential impact of the geopolitical uncertainty. We believe that we are ustry to continue expansion of our customer base and continue long-term growth. We continue to diversify our customer base by adding additional programs and customers. Our current customer relationships involve a variety of products, including consumer electronics, electronic storage devices, plastics, household products, gaming devices, specialty printers, telecommunications, industrial equipment, military supplies, computer accessories, medical, educational, irrigation, automotive, transportation management, robotics, RFID, power supply, off-road vehicle equipment, fitness equipment, HVAC controls, consumer products, home building products, material handling systems, lighting equipment, consumer security products, smart security, architectural LED lighting, power meters and smart grid, and wireless power solutions, Gross profit as a percent of net sales was 7.5 percent in fiscal year 2019 compared to 7.7 percent for the prior fiscal year. The decrease in gross profit as a percentage of net sales was primarily related to an increase in certain overhead costs and by an increase in material related costs. The level of gross margin is impacted by product mix, timing of the startup of new programs, facility utilization, and pricing within the electronics industry and material costs, which can fluctuate significantly from quarter to quarter and year to year. Operating loss as a percentage of net sales for fiscal year 2019 was (1.3) percent compared to operating income of 0.2 percent for fiscal year 2018. The decrease in operating income as a percentage of net sales was primarily driven by the one-time impairment of goodwill and intangible assets during fiscal year 2019. 1/9/2020. 1:1 https://www.sec.gov/Archives/edgar/data/719733/0000719733190000 ment Net loss for fiscal year 2019 was S(8.0) million or S(0.74) per share, as compared to net loss of S(1.3) million or S(0.12) per share for fiscal year 2018. The decrease in net loss for fiscal year 2019 as compared to fiscal year 2018 was primarily driven by the one- time impairment of approximately $12.4 million related to the impairment of goodwill and intangible assets and SII million in severance expense due to improvements in operating efficiencies during fiscal year 2019 We maintain a strong balance sheet with a current ratio of 2.1 and a debt to equity ratio of 0.32. Total cash provided by operating activities as defined on our cash flow statement was $0.9 million during fiscal year 2019. We maintain sufficient liquidity for our expected future operations. As of June 29, 2019, we had $23.4 million outstanding on our revolving line of credit with Wells Fargo Bank, N.A. As a result, S21.3 million remained available to borrow as of June 29, 2019. We believe cash flow from operations, our borrowing capacity, our accounts receivable sale program, and equipment financing should provide adequate capital for planned growth over the long term. RESULTS OF OPERATIONS Comparison of the Fiscal Year Ended June 29, 2019 with the Fiscal Year Ended June 30, 2018 The following table sets forth for the periods indicated certain items of the consolidated statements of income expressed as a percentage of net sales. The financial information and discussion below should be read in conjunction with the consolidated financial statements and notes contained in this Annual Report. Fiscal Year Faded % o podat change June 29, 2019 464,044 429,443 34,601 June 30, 2018 446,322 412,153 34,169 100.0% 92.3 7.7 Schinge 17,722 17,290 0.2 (0.2) 6,555 6,186 22,334 (0.4) 21,556 12,448 Net sales Cost of sales Gross profit Operating expenses: Research, development and engineering Selling, general and administrative Impairment of goodwill and intangibles Loss on settlement of arbitration Total operating expenses Operating income (loss) Interest expense, net Income (loss) before income taxes Income tax benefit Net loss Effective income tax rate 4,535 33.055 1.114 2,556 (1.442) 40,559 (5,958) 2,782 (8,740) (758) (7.982) 369 (778) 12,448 (4,535) 7,504 (7,072) 226 (7.298) (641) (6.657) (1.5) (0.3) (1.6) (0.2) (1.4) S (1.7)% S (0.3)% S (1.325) 819 Net Sales The increase in net sales of $17.7 million from prior year period was primarily driven by an increase in net sales from new program wins, an increase in revenue recognized related to the adoption of Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606), as well as an increase in demand from current customers June 29 2019 June 2013 $ 343 70,262 601 58,429 22,161 100,431 16,477 198,099 29,413 110,315 13,600 194,520 27,548 7,840 657 2,301 10,798 238,310 7,882 9,957 3,726 2,895 24,460 246,528 S $ ASSETS Current assets: Cash and cash equivalents Trade receivables, net of allowance for doubtful accounts of $58 and $0 Contract assets Inventories, net Other Total current assets Property, plant and equipment, net Other assets: Deferred income tax asset Goodwill Other intangible assets, net Other Total other assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable Accrued compensation and vacation Current portion of debt, net Other Total current liabilities Long-term liabilities: Term loans Revolving loan Other long-term obligations Total long-term liabilities Total liabilities Commitments and contingencies (Note 4 and 9) Shareholders' equity: Common stock, no par value shares authorized 25.000, issued and outstanding 10,760 and 10,760 shares, respectively Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity S. 76,198 8,105 73,571 6,759 5,841 7.233 93.404 5,841 8,769 98,913 7.091 23,356 12,932 16.222 380 29,534 128.447 30.447 123.851 46.680 65.353 2,426 114.459 238,310 46.244 72.806 (969) 118,081 246,528 $ S Capital Resources and Liquidity Operating Cash Flow Net cash provided by operating activities for fiscal year 2019 was $0.9 million compared to net cash provided by operating activities of $3.1 million and $2.3 million in fiscal years 2018 and 2017, respectively. The decrease in cash provided by operating activities is a result of the net loss and the impairment of the goodwill and intangible assets. Upon adoption of ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, the Company recorded $6.5 million of cash receipts on the deferred purchase price from receivables factored by the Company during fiscal year 2019, in cash flows from investing activities that under the previous guidance would have been classified as cash flows from operating activities. Further, the Company reclassified $8.3 million and $7.1 million of similar cash receipts related to fiscal year 2018 and 2017, respectively, from cash flows from operating activities to cash flows from investing activities. The $0.9 million of net cash provided by operating activities during fiscal year 2019 is primarily related to $8.0 million of net loss adjusted for $12.4 million impairment of goodwill and intangibles, $7.3 million of depreciation and amortization, $6.7 million of cash received from arbitration settlement, $3.3 million decrease in accounts receivable, partially offset by a $10.3 million increase in contract assets, a $4.5 million increase in other assets and a $2.6 million decrease in accounts payable and a $1.4 million increase in inventory The $3.1 million of net cash provided by operating activities during fiscal year 2018 was primarily related to $1.3 million of net loss, $7.8 million of depreciation and amortization, a $23.3 million increase in accounts payable, a S12.6 million decrease in accounts receivable, a $0.6 million decrease in inventory, partially offset by a $4.5 million loss on arbitration. The $2.3 million of net cash provided by operating activities during fiscal year 2017 was primarily due to $5.6 million of net income, $7.2 million of depreciation and amortization and a $4.9 million decrease in inventory partially offset by a S5.1 million increase in accounts receivable and a $5.9 million decrease in accounts payable. Accounts receivable fluctuates based on the timing of shipments, terms offered and collections. In addition, accounts receivable will fluctuate based upon the amount of accounts receivable sold under our Trade Accounts Receivable Purchase Program. During actored receivables of $81.0 million, S104.7 million and $86.5 million, respectively, from accounts receivable sold to financial institutions, which are not included on our Consolidated Balance Sheets. We purchase inventory based on customer forecasts and orders, and when those forecasts and orders change, the amount of inventory may also fluctuate. Accounts payable fluctuates with changes in inventory levels, volume of inventory purchases, negotiated supplier terms, and taking advantage of early pay discounts. Investing Cash Flow Cash flows used in investing activities were $1.9 million for fiscal year 2019. Cash flows provided by investing activities were $4.9 million for fiscal year 2018 and cash flows used in investing activities were $1.3 million in fiscal year 2017. Our primary use of cash in investing activities during fiscal years 2019, 2018 and 2017, was purchasing equipment to support increased production levels for new programs, and our primary source of cash provided by investing activities came from receipts of the deferred purchase price on factored receivables. Operating and capital leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership. Capital expenditures and periodic lease payments are expected to be financed with internally generated funds and available borrowing capacities. During fiscal year 2019, we did not receive any cash resulting from the sale and leaseback of equipment under operating leases. During fiscal years 2018 and 2017, we received SL.0 million and S0.6 million of cash resulting from the sale and leaseback of equipment under operating leases, respectively. Financing Cash Flow Cash flows provided by financing activities were $1.2 million in fiscal year 2019, cash flows used in financing activities were $8.0 million in fiscal year 2018 and $1.6 million in fiscal year 2017. Our primary financing activities during fiscal year 2019, were repayments on our term loans of $5.9 million as well as borrowings and repayments under our revolving line of credit facility. Our primary financing activities during fiscal year 2018 was repayments on our term loans of $5.9 million as well as borrowings and repayments under our revolving line of credit facility. Our primary financing activities during fiscal year 2017 was the funding of a $3.9 million equipment term loan, repayments on our term loans of $5.4 million as well as borrowings and repayments under our revolving line of credit facility. As of June 29, 2019, the Company had an outstanding balance on the line of credit of $23.4 million. We had availability to borrow an additional $21.3 million under the Wells Fargo line of credit and we were in compliance with our loan covenants. Our cash requirements are affected by the level of current operations and new EMS programs. We believe that projected cash from operations, funds available under the revolving credit facility and fixed asset financing will be sufficient to meet our working and fixed capital requirements for the foreseeable future. Do part D of the financial analysis project. You'll need information from the income statement on page 33 of the Key Tronic 10-K (page 39 of the PDF). The Management Discussion and Analysis starting on page 23 of the PDF compares 2019 results with 2018 (page 24). The balance sheet is on page 28 of the PDF and the statement of cash flows is on page 39. D. Basic Financial Analysis (10 points) Using the financial statements in the annual report, indicate the following: Income Statement: Locate and review the company's Income Statement. Create a table showing the company's Revenue or Sales, Cost of Goods Sold, Operating Expenses, Net Earnings (Net Income) and Earnings Per Share for the last two years. Include the change and the percentage change for each of the five items in the table. Read Management's Discussion and Analysis of Financial Conditions and Results of Operations. 2019 2018 Change % Change Revenue Cost of Goods Sold Operating Expenses Net Earnings Earnings Per Share Compare the company's net income and income per share in 2019 and 2018. What led to the company's change in sales and net income? (Hint: Use the Company Management's Discussion and Analysis to help explain the changes.) Balance Sheet: Locate and review the Company Balance Sheet and Statement of Cash Flow. By viewing these statements, how did the company's cash position change in total (not each year) over the period 2017-2019? In total, during the period 2017-2019, did how much cash from operating activities did the company generate? Over the 3 years, did the company use its Net Cash Flow to increase its cash balance, or was the cash used in the business? (If so, how did the company use its cash?) Using Yahoo and the instructions below, look at a chart of the company's stock price over the last 3 years. What is the price of the company's stock currently (at the time you are looking it up)? What was the lowest stock price the company had in the last 3 years (approximate value is okay if you are using the stock chart). Has the price fluctuated by much during that time period? How to find the company stock symbol, industry and current stock price Go to Yahoo finance (finance.yahoo.com) Find your company's stock market symbol by clicking on "Symbol Lookup". Enter the name of your company and find the stock symbol. For example: Enter Key Tronic Corporation. It also indicates in what industry the company operates. To get the stock price click on the symbol which was provided in the query. Note the current stock price is the one indicated by the last trade. To find the chart of the stocks price for the last 3 years, go to yahoo finance (finance.yahoo.com). Click on "Finance Enter Key Tronic Corporation's stock symbol. Click on "Basic chart". For the range of the chart click on 3Y (3 years). KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands, except per share amounts) Fiscal Year Ended June 29, 2019 June 30, 2018 July 1, 2017 Net sales 464,044 S 446,322 $ 467,797 Cost of sales 429,443 412,153 429,497 Gross profit 34,601 34,169 38,300 Research, development and engineering expenses 6,555 6,186 6,393 Selling, general and administrative expenses 21,556 22,334 22,363 Impairment of goodwill and intangibles 12,448 Loss on settlement of arbitration 4,535 Total operating expenses 40,559 33,055 28,756 Operating income (loss) (5.958) 1,114 9,544 Interest expense, net 2,782 2,556 2.288 Income (loss) before income taxes (8,740) (1,442) 7,256 Income tax provision (benefit) (758) (117) 1.639 Net income (loss) (7,982) (1,325) S Net income (loss) per share - Basic (0.74) S (0.12) S 0.52 Weighted average shares outstanding - Basic 10,760 10,760 10,756 Net income (loss) per share - Diluted (0.74) S (0.12) S 0.51 Weighted average shares outstanding - Diluted 10,760 10,760 10,917 See accompanying notes to consolidated financial statements. 5,617 Item 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview KeyTronicEMS is a leader in electronic manufacturing services and solutions to original equipment manufacturers of a broad range of products. We provide engineering services, worldwide procurement and distribution, materials management, world-class manufacturing and assembly services, in-house testing, and unparalleled customer service. Our international production capability provides our customers with benefits of improved supply-chain management, reduced inventories, lower transportation costs, and reduced product fulfillment time. We continue to make investments in all of our operating facilities to give us the production capacity, capabilities and logistical advantages to continue to win new business. The following information should be read in conjunction with the consolidated financial statements included herein and with Item 1A, Risk Factors included as part of this filing. Our mission is to provide our customers with superior manufacturing and engineering services at the lowest total cost for the highest quality products, and create long-term mutually beneficial business relationships by employing our "Trust, Commitment, Results" philosophy. Executive Summary During the fourth quarter of fiscal year 2019, we continued to win significant new business from EMS competitors and from existing customers, including new programs involving smart security, architectural LED lighting, power meters and smart grid, and wireless power solutions. We also continue to invest in new equipment and processes to be more productive in our Mexico and Vietnam facilities, and we're expanding and enhancing our US facilities. We're optimistic about our opportunities for growth in fiscal 2020 and beyond. Net sales of $464.0 million for fiscal year 2019 increased by 4.0 percent as compared to net sales of $446.3 million in fiscal year 2018. The increase in net sales was primarily driven by an increase in net sales from new program wins, an increase in revenue recognized related to the adoption of Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606), as well as an increase in demand from current customers. Despite the many unexpected challenges during the second half of fiscal year 2019, we managed to grow our business for the year and ramp up most of our new programs. In the fourth quarter of fiscal year 2019, we saw a disruption in deliveries of a critical component from a supplier in China; delays in the ramp of a new program due to customer-driven design changes, and temporary reductions in customer demand due to concerns over tariffs and trade tension between the US and Mexico. Moving into the first quarter of fiscal 2020, these issues have been largely resolved and we expect revenue to increase significantly For the first quarter of fiscal year 2020, the Company expects to report revenue in the range of SIIS million to S120 million. Future results will depend on actual levels of customers' orders, the timing of the start-up of production of new product programs, impact of the new revenue recognition accounting policy and the potential impact of the geopolitical uncertainty. We believe that we are ustry to continue expansion of our customer base and continue long-term growth. We continue to diversify our customer base by adding additional programs and customers. Our current customer relationships involve a variety of products, including consumer electronics, electronic storage devices, plastics, household products, gaming devices, specialty printers, telecommunications, industrial equipment, military supplies, computer accessories, medical, educational, irrigation, automotive, transportation management, robotics, RFID, power supply, off-road vehicle equipment, fitness equipment, HVAC controls, consumer products, home building products, material handling systems, lighting equipment, consumer security products, smart security, architectural LED lighting, power meters and smart grid, and wireless power solutions, Gross profit as a percent of net sales was 7.5 percent in fiscal year 2019 compared to 7.7 percent for the prior fiscal year. The decrease in gross profit as a percentage of net sales was primarily related to an increase in certain overhead costs and by an increase in material related costs. The level of gross margin is impacted by product mix, timing of the startup of new programs, facility utilization, and pricing within the electronics industry and material costs, which can fluctuate significantly from quarter to quarter and year to year. Operating loss as a percentage of net sales for fiscal year 2019 was (1.3) percent compared to operating income of 0.2 percent for fiscal year 2018. The decrease in operating income as a percentage of net sales was primarily driven by the one-time impairment of goodwill and intangible assets during fiscal year 2019. 1/9/2020. 1:1 https://www.sec.gov/Archives/edgar/data/719733/0000719733190000 ment Net loss for fiscal year 2019 was S(8.0) million or S(0.74) per share, as compared to net loss of S(1.3) million or S(0.12) per share for fiscal year 2018. The decrease in net loss for fiscal year 2019 as compared to fiscal year 2018 was primarily driven by the one- time impairment of approximately $12.4 million related to the impairment of goodwill and intangible assets and SII million in severance expense due to improvements in operating efficiencies during fiscal year 2019 We maintain a strong balance sheet with a current ratio of 2.1 and a debt to equity ratio of 0.32. Total cash provided by operating activities as defined on our cash flow statement was $0.9 million during fiscal year 2019. We maintain sufficient liquidity for our expected future operations. As of June 29, 2019, we had $23.4 million outstanding on our revolving line of credit with Wells Fargo Bank, N.A. As a result, S21.3 million remained available to borrow as of June 29, 2019. We believe cash flow from operations, our borrowing capacity, our accounts receivable sale program, and equipment financing should provide adequate capital for planned growth over the long term. RESULTS OF OPERATIONS Comparison of the Fiscal Year Ended June 29, 2019 with the Fiscal Year Ended June 30, 2018 The following table sets forth for the periods indicated certain items of the consolidated statements of income expressed as a percentage of net sales. The financial information and discussion below should be read in conjunction with the consolidated financial statements and notes contained in this Annual Report. Fiscal Year Faded % o podat change June 29, 2019 464,044 429,443 34,601 June 30, 2018 446,322 412,153 34,169 100.0% 92.3 7.7 Schinge 17,722 17,290 0.2 (0.2) 6,555 6,186 22,334 (0.4) 21,556 12,448 Net sales Cost of sales Gross profit Operating expenses: Research, development and engineering Selling, general and administrative Impairment of goodwill and intangibles Loss on settlement of arbitration Total operating expenses Operating income (loss) Interest expense, net Income (loss) before income taxes Income tax benefit Net loss Effective income tax rate 4,535 33.055 1.114 2,556 (1.442) 40,559 (5,958) 2,782 (8,740) (758) (7.982) 369 (778) 12,448 (4,535) 7,504 (7,072) 226 (7.298) (641) (6.657) (1.5) (0.3) (1.6) (0.2) (1.4) S (1.7)% S (0.3)% S (1.325) 819 Net Sales The increase in net sales of $17.7 million from prior year period was primarily driven by an increase in net sales from new program wins, an increase in revenue recognized related to the adoption of Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606), as well as an increase in demand from current customers June 29 2019 June 2013 $ 343 70,262 601 58,429 22,161 100,431 16,477 198,099 29,413 110,315 13,600 194,520 27,548 7,840 657 2,301 10,798 238,310 7,882 9,957 3,726 2,895 24,460 246,528 S $ ASSETS Current assets: Cash and cash equivalents Trade receivables, net of allowance for doubtful accounts of $58 and $0 Contract assets Inventories, net Other Total current assets Property, plant and equipment, net Other assets: Deferred income tax asset Goodwill Other intangible assets, net Other Total other assets Total assets LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable Accrued compensation and vacation Current portion of debt, net Other Total current liabilities Long-term liabilities: Term loans Revolving loan Other long-term obligations Total long-term liabilities Total liabilities Commitments and contingencies (Note 4 and 9) Shareholders' equity: Common stock, no par value shares authorized 25.000, issued and outstanding 10,760 and 10,760 shares, respectively Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity S. 76,198 8,105 73,571 6,759 5,841 7.233 93.404 5,841 8,769 98,913 7.091 23,356 12,932 16.222 380 29,534 128.447 30.447 123.851 46.680 65.353 2,426 114.459 238,310 46.244 72.806 (969) 118,081 246,528 $ S Capital Resources and Liquidity Operating Cash Flow Net cash provided by operating activities for fiscal year 2019 was $0.9 million compared to net cash provided by operating activities of $3.1 million and $2.3 million in fiscal years 2018 and 2017, respectively. The decrease in cash provided by operating activities is a result of the net loss and the impairment of the goodwill and intangible assets. Upon adoption of ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, the Company recorded $6.5 million of cash receipts on the deferred purchase price from receivables factored by the Company during fiscal year 2019, in cash flows from investing activities that under the previous guidance would have been classified as cash flows from operating activities. Further, the Company reclassified $8.3 million and $7.1 million of similar cash receipts related to fiscal year 2018 and 2017, respectively, from cash flows from operating activities to cash flows from investing activities. The $0.9 million of net cash provided by operating activities during fiscal year 2019 is primarily related to $8.0 million of net loss adjusted for $12.4 million impairment of goodwill and intangibles, $7.3 million of depreciation and amortization, $6.7 million of cash received from arbitration settlement, $3.3 million decrease in accounts receivable, partially offset by a $10.3 million increase in contract assets, a $4.5 million increase in other assets and a $2.6 million decrease in accounts payable and a $1.4 million increase in inventory The $3.1 million of net cash provided by operating activities during fiscal year 2018 was primarily related to $1.3 million of net loss, $7.8 million of depreciation and amortization, a $23.3 million increase in accounts payable, a S12.6 million decrease in accounts receivable, a $0.6 million decrease in inventory, partially offset by a $4.5 million loss on arbitration. The $2.3 million of net cash provided by operating activities during fiscal year 2017 was primarily due to $5.6 million of net income, $7.2 million of depreciation and amortization and a $4.9 million decrease in inventory partially offset by a S5.1 million increase in accounts receivable and a $5.9 million decrease in accounts payable. Accounts receivable fluctuates based on the timing of shipments, terms offered and collections. In addition, accounts receivable will fluctuate based upon the amount of accounts receivable sold under our Trade Accounts Receivable Purchase Program. During actored receivables of $81.0 million, S104.7 million and $86.5 million, respectively, from accounts receivable sold to financial institutions, which are not included on our Consolidated Balance Sheets. We purchase inventory based on customer forecasts and orders, and when those forecasts and orders change, the amount of inventory may also fluctuate. Accounts payable fluctuates with changes in inventory levels, volume of inventory purchases, negotiated supplier terms, and taking advantage of early pay discounts. Investing Cash Flow Cash flows used in investing activities were $1.9 million for fiscal year 2019. Cash flows provided by investing activities were $4.9 million for fiscal year 2018 and cash flows used in investing activities were $1.3 million in fiscal year 2017. Our primary use of cash in investing activities during fiscal years 2019, 2018 and 2017, was purchasing equipment to support increased production levels for new programs, and our primary source of cash provided by investing activities came from receipts of the deferred purchase price on factored receivables. Operating and capital leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership. Capital expenditures and periodic lease payments are expected to be financed with internally generated funds and available borrowing capacities. During fiscal year 2019, we did not receive any cash resulting from the sale and leaseback of equipment under operating leases. During fiscal years 2018 and 2017, we received SL.0 million and S0.6 million of cash resulting from the sale and leaseback of equipment under operating leases, respectively. Financing Cash Flow Cash flows provided by financing activities were $1.2 million in fiscal year 2019, cash flows used in financing activities were $8.0 million in fiscal year 2018 and $1.6 million in fiscal year 2017. Our primary financing activities during fiscal year 2019, were repayments on our term loans of $5.9 million as well as borrowings and repayments under our revolving line of credit facility. Our primary financing activities during fiscal year 2018 was repayments on our term loans of $5.9 million as well as borrowings and repayments under our revolving line of credit facility. Our primary financing activities during fiscal year 2017 was the funding of a $3.9 million equipment term loan, repayments on our term loans of $5.4 million as well as borrowings and repayments under our revolving line of credit facility. As of June 29, 2019, the Company had an outstanding balance on the line of credit of $23.4 million. We had availability to borrow an additional $21.3 million under the Wells Fargo line of credit and we were in compliance with our loan covenants. Our cash requirements are affected by the level of current operations and new EMS programs. We believe that projected cash from operations, funds available under the revolving credit facility and fixed asset financing will be sufficient to meet our working and fixed capital requirements for the foreseeable future