Key Tronic Corporation Announces Results for the Second Quarter of Fiscal 2013

  Key Tronic Corporation Announces Results for the Second Quarter of Fiscal

 Quarterly Revenue Up 12% Year-over-Year and Net Income Up 13%; Continued New
                  Customer Wins and Revenue Diversification

Business Wire

SPOKANE VALLEY, Wash. -- January 29, 2013

Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing
services (EMS), today announced its results for the three and six months ended
December 29, 2012.

For the second quarter of fiscal year 2013, Key Tronic reported total revenue
of $94.6 million, up 12% from $84.5 million in the same period of fiscal year
2012. For the first six months of fiscal 2013, total revenue was $192.1
million, up 25% from $154.2 million in the same period of fiscal 2012.

Net income for the second quarter of fiscal year 2013 was $3.6 million or
$0.33 per diluted share, up 13% from $3.2 million or $0.30 per diluted share
for the same period of fiscal year 2012. For the first six months of fiscal
2013, net income was $7.3 million or $0.67 per diluted share, up 66% from $4.4
million or $0.42 per diluted share for the same period of fiscal 2012.

For the second quarter of fiscal year 2013, gross margin was 10% and operating
margin was 6%, compared to 8% and 3%, respectively, in the same period of
fiscal year 2012.

“We're pleased with our strong year-over-year growth in revenue and earnings
for the second quarter and first half of fiscal 2013,” said Craig Gates,
President and Chief Executive Officer. “While we maintained strong operating
efficiencies and further strengthened our balance sheet during the second
quarter of fiscal 2013, our sequential quarterly revenue was impacted by a
significant slowdown in demand from one customer, as well as by the decisions
of two other customers to change the mix of in-house versus outsourced
production for portions of certain programs. At the same time, our many new
customer programs continued to ramp up and we continued to diversify our
future revenue base by winning new customer programs involving RFID, exercise,
and security equipment. At the end of the second quarter of fiscal 2013, we
were generating revenue from 169 separate programs and had 52 distinct
customers, up from 149 programs and 40 customers a year ago.

“Moving into the third quarter, our revenue is being reduced by the continued
slowdown in demand from the same customer that began to reduce its production
levels in the second quarter. In coming periods, however, we expect to see the
continued ramp up of our new programs to more than offset this customer's
decrease in demand. We also have a very robust pipeline of potential new
business, including programs with larger revenue potential than most of our
current customer programs. We believe this trend towards larger quote
opportunities reflects increased recognition of the competitive advantages of
North American based manufacturing for products sold in the Americas. Over the
long term, we believe our unique combination of global logistics with
world-class engineering and production capabilities in North America and China
will continue to fuel our growth.”

Business Outlook

For the third quarter of fiscal year 2013, the Company expects to report
revenue in the range of $83 million to $90 million, and earnings in the range
of $0.24 to $0.30 per diluted share. The expected earnings range assumes an
effective tax rate of 25%, reflecting the US government's recent renewal of
research and development tax credits.

Conference Call

Key Tronic will host a conference call today to discuss its financial results
at 2:00 PM Pacific (5:00 PM Eastern). A broadcast of the conference call will
be available at under “Investor Relations” or by calling
866-225-8754 or +1-480-629-9645. A 48-hour replay will be available by calling
800-406-7325 or +1 303-590-3030 (Access Code: 4588514). A replay will also be
available on the Company's Web site.

About Key Tronic

Key Tronic is a leading contract manufacturer offering value-added design and
manufacturing services from its facilities in the United States, Mexico and
China. The Company provides its customers full engineering services, materials
management, worldwide manufacturing facilities, assembly services, in-house
testing, and worldwide distribution. Its customers include some of the world's
leading original equipment manufacturers. For more information about Key
Tronic visit:

Some of the statements in this press release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all passages containing verbs such as
'aims, anticipates, believes, estimates, expects, hopes, intends, plans,
predicts, projects or targets' or nouns corresponding to such verbs.
Forward-looking statements also include other passages that are primarily
relevant to expected future events or that can only be fully evaluated by
events that will occur in the future. Forward-looking statements in this
release include, without limitation, the Company's statements regarding its
expectations with respect to quarterly revenue and earnings during fiscal
2013. There are many factors, risks and uncertainties that could cause actual
results to differ materially from those predicted or projected in
forward-looking statements, including but not limited to the future of the
global economic environment and its impact on our customers and suppliers, the
availability of parts from the supply chain, the accuracy of customers'
forecasts; success of customers' programs; timing of new programs; success of
new-product introductions; acquisitions or divestitures of operations or
facilities; technology advances; changes in pricing policies by the Company,
its competitors, customers or suppliers; and the other risks and uncertainties
detailed from time to time in the Company's SEC filings.



(In thousands, except per share amounts)

                  Three Months Ended              Six Months Ended
                  December 29,   December 31,    December 29,    December
                  2012            2011            2012             31, 2011
Net sales         $  94,567       $  84,454       $  192,075       $ 154,215
Cost of sales     85,071         77,586         173,104         142,342   
Gross profit      9,496           6,868           18,971           11,873
development and   1,225           1,157           2,475            2,113
general and       2,939          2,916          5,468           5,350     
Total operating   4,164          4,073          7,943           7,463     
Operating         5,332           2,795           11,028           4,410
Interest          92             124            208             227       
expense, net
Income before     5,240           2,671           10,820           4,183
income taxes
Income tax
provision         1,661          (503       )    3,497           (238      )
Net income        $  3,579       $  3,174       $  7,323        $ 4,421   
Net income per    $  0.34         $  0.30         $  0.70          $ 0.42
share — Basic
average shares    10,489          10,447          10,487           10,432
outstanding —
Net income per    $  0.33         $  0.30         $  0.67          $ 0.42
share — Diluted
average shares    10,899          10,479          10,864           10,462
outstanding —



(In thousands)

                                             December 29, 2012   June 30, 2012
Current assets:
Cash and cash equivalents                    $   245             $  502
Trade receivables, net                       54,797              60,709
Inventories                                  49,145              58,439
Deferred income tax asset                    3,761               5,201
Other                                        6,422              4,639       
Total current assets                         114,370            129,490     
Property, plant and equipment—net            18,284              17,306
Other assets:
Deferred income tax asset                    2,015               2,703
Other                                        1,828              1,413       
Total other assets                           3,843              4,116       
Total assets                                 $   136,497        $  150,912  
Current liabilities:
Accounts payable                             $   31,669          $  43,025
Accrued compensation and vacation            5,327               6,337
Current portion of other long-term           749                 729
Other                                        3,989              3,163       
Total current liabilities                    41,734             53,254      
Long-term liabilities:
Revolving loan                               4,731               15,011
Deferred income tax liability                1,465               1,094
Other long-term obligations                  1,076              2,945       
Total long-term liabilities                  7,272              19,050      
Total liabilities                            49,006             72,304      
Shareholders' equity:
Common stock, no par value—shares
authorized 25,000; issued and outstanding    42,909              42,372
10,489 and 10,481 shares, respectively
Retained earnings                            44,218              36,895
Accumulated other comprehensive income       364                (659        )
Total shareholders' equity                   87,491             78,608      
Total liabilities and shareholders’ equity   $   136,497        $  150,912  


Key Tronic Corporation
Chief Financial Officer
Ron Klawitter, 509-927-5295
Investor Relations
Michael Newman, 206-729-3625
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