Key Tronic Corporation Announces Results for the Second Quarter of Fiscal Year 2014

Key Tronic Corporation Announces Results for the Second Quarter of Fiscal Year
2014

Continued New Customer Wins and Revenue Diversification

SPOKANE VALLEY, Wash., Jan. 28, 2014 (GLOBE NEWSWIRE) -- Key Tronic
Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services
(EMS), today announced its results for the three months ended December 28,
2013.The Company's actual results were in line with its previous guidance.

For the second quarter of fiscal year 2014, Key Tronic reported total revenue
of $78.3 million, compared to $94.6 million in the same period of fiscal year
2013. For the first six months of fiscal year 2014, total revenue was $156.2
million, compared to $192.1 million in the same period of fiscal year 2013.

Net income for the second quarter of fiscal year 2014 was $3.1 million or
$0.28 per diluted share, compared to $3.6 million or $0.33 per diluted share
for the same period of fiscal year 2013. Results for the second quarter of
fiscal year 2014 include a one-time tax benefit of approximately $1.5 million
or $0.13 per diluted share due to changes in Mexico's tax laws enacted in
December of 2013. For the first six months of fiscal year 2014, net income was
$4.8 million or $0.44 per diluted share, compared to $7.3 million or $0.67 per
diluted share for the same period of fiscal year 2013.

For the second quarter of fiscal year 2014, gross margin was 9% and operating
margin was 3%, compared to 10% and 6%, respectively, in the same period of
fiscal year 2013.

"During the second quarter and moving into the third quarter of fiscal year
2014, many new programs continue to ramp up, despite greater than anticipated
reductions in orders from some of our large, longstanding customers," said
Craig Gates, President and Chief Executive Officer. "We currently expect to
see sequential growth either during the fourth quarter of fiscal year 2014 or
the first quarter of fiscal year 2015, as growing revenue from several new
customers should offset and then exceed the revenue reductions in recent
periods by certain large customers."

"At the end of the second quarter of fiscal year 2014, we were generating
revenue from 190 separate programs and had 57 distinct customers, up from 169
programs and 52 customers a year ago. Furthermore, we continued to diversify
our future revenue base during the second quarter by winning two new programs
from new customers involving consumer dental hygiene products and consumer
home products. The pipeline of potential new business remains very robust and
we're investing in the expansion of our new sheet metal fabrication business
to capitalize on a growing number of opportunities related to this
capability."

Business Outlook

For the third quarter of fiscal year 2014, the Company expects to report
revenue in the range of $73 million to $78 million, and earnings in the range
of $0.13 to $0.18 per diluted share. The expected earnings range assumes an
effective tax rate of 32%.

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 www.keytronic.com under "Investor Relations" or by calling
877-941-0844 or +1-480-629-9835. A 48-hour replay will be available by calling
800-406-7325 or +1 303 590 3030 (Access Code: 4660975). 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: www.keytronic.com.

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 2014. 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.

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
                                                              
                                                              
                          ThreeMonthsEnded        Six Months Ended
                          December 28, December 29, December 28, December 29,
                           2013         2012         2013         2012
Net sales                  $78,250    $94,567    $156,224   $192,075
Cost of sales              71,300       85,071       142,652      173,104
Gross profit               6,950        9,496        13,572       18,971
Research, development and  1,421        1,225        2,767        2,475
engineering expenses
Selling, general and       3,163        2,939        5,979        5,468
administrative expenses
Total operating expenses   4,584        4,164        8,746        7,943
Operating income           2,366        5,332        4,826        11,028
Interest expense, net      16           92           38           208
Income before income taxes 2,350        5,240        4,788        10,820
Income tax (benefit)       (764)        1,661        (31)         3,497
provision
Net income                 $3,114     $3,579     $4,819     $7,323
Net income per share —     $ 0.30       $ 0.34       $ 0.46       $ 0.70
Basic
Weighted average shares    10,530       10,489       10,519       10,487
outstanding — Basic
Net income per share —     $0.28      $0.33      $0.44      $0.67
Diluted
Weighted average shares    10,932       10,899       10,925       10,864
outstanding — Diluted


KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                               
                                                               
                                              December 28, 2013 June 29, 2013
ASSETS                                                          
Current assets:                                                 
Cash and cash equivalents                      $1,433          $10,819
Trade receivables, net                         51,435            47,009
Inventories                                    47,065            44,664
Deferred income tax asset                      1,602             1,767
Other                                          7,798             7,508
Total current assets                           109,333           111,767
Property, plant and equipment—net              20,182            17,911
Other assets:                                                   
Deferred income tax asset                      3,267             3,179
Other                                          2,150             2,273
Goodwill                                       1,639             —
Other intangibles                              2,207             —
Total other assets                             9,263             5,452
Total assets                                   $138,778        $135,130
LIABILITIES AND SHAREHOLDERS' EQUITY                            
Current liabilities:                                            
Accounts payable                               $27,779         $26,400
Accrued compensation and vacation              5,913             7,413
Current portion of other long-term obligations 196               576
Other                                          4,358             3,551
Total current liabilities                      38,246            37,940
Long-term liabilities:                                          
Deferred income tax liability                  —                 1,585
Other long-term obligations                    722               1,445
Total long-term liabilities                    722               3,030
Total liabilities                              38,968            40,970
Shareholders' equity:                                           
Common stock, no par value—shares authorized
25,000; issued and outstanding 10,533 and      43,888            43,369
10,502 shares, respectively
Retained earnings                              54,297            49,478
Accumulated other comprehensive income         1,625             1,313
Total shareholders' equity                     99,810            94,160
Total liabilities and shareholders' equity     $138,778        $135,130

CONTACT: Ron Klawitter
         Chief Financial Officer
         Key Tronic Corporation
         (509) 927-5295
        
         Michael Newman
         Investor Relations
         StreetConnect
         (206) 729-3625
 
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