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

Key Tronic Corporation Announces Results for the Third Quarter of Fiscal Year 2014  Continued New Customer Wins and Revenue Diversification; Expecting Sequential Growth in Fourth Quarter  SPOKANE VALLEY, Wash., April 29, 2014 (GLOBE NEWSWIRE) -- Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the three months ended March 29, 2014. The Company's actual results were in line with its previous guidance.  For the third quarter of fiscal year 2014, Key Tronic reported total revenue of $77.0 million, compared to $84.3 million in the same period of fiscal year 2013. For the first nine months of fiscal year 2014, total revenue was $233.3 million, compared to $276.4 million in the same period of fiscal year 2013.  Net income for the third quarter of fiscal year 2014 was $1.4 million or $0.13 per diluted share, compared to $2.9 million or $0.26 per diluted share for the same period of fiscal year 2013. For the first nine months of fiscal year 2014, net income was $6.2 million or $0.57 per diluted share, compared to $10.2 million or $0.94 per diluted share for the same period of fiscal year 2013.  For the third quarter of fiscal year 2014, gross margin was 9% and operating margin was 3%, compared to 9% and 4%, respectively, in the same period of fiscal year 2013.  "During the third quarter of fiscal year 2014, many of our new programs continued to ramp up," said Craig Gates, President and Chief Executive Officer. "We expect to see sequential growth during the fourth quarter of fiscal year 2014, as growing revenue from new customers and new programs should offset and then exceed the demand reductions in recent periods by our two largest customers."  "Overall, we continue to enjoy strong customer loyalty, with many of our customers rewarding us with nearly a decade or more of uninterrupted business. At the end of the third quarter of fiscal year 2014, we were generating revenue from 192 separate programs compared to 177 programs at the end of the third quarter of fiscal year 2013. At the same time, we continued to diversify our future revenue base during the third quarter by winning two new programs from new customers involving consumer products and fitness equipment."  "Our pipeline of potential new business is also increasingly robust, involving programs with greater long-term revenue potential and higher quality requirements. Our increased competitiveness in the EMS marketplace is being driven by the growing recognition of the advantages of Mexico-based production for North America consumption over China-based production, as well as by the growing number of opportunities where we can capitalize on the continued expansion of our new sheet metal fabrications capabilities in concert with our plastic molding, printed circuit, and product assembly capabilities."  Business Outlook  For the fourth quarter of fiscal year 2014, the Company expects to report revenue in the range of $78 million to $85 million, and earnings in the range of $0.17 to $0.23 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 800-762-8779 or +1-480-629-9645. A 48-hour replay will be available by calling 800-406-7325 or +1 303 590 3030 (Access Code: 4676348). 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 year 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  Nine Months Ended                                     March 29, March 30, March 29,  March 30,                                      2014      2013      2014       2013 Net sales                            $77,043 $84,343 $233,267 $276,418 Cost of sales                        70,436    76,483    213,088    249,587 Gross profit                         6,607     7,860     20,179     26,831 Research, development and            1,414     1,329     4,181      3,804 engineering expenses Selling, general and administrative  2,985     2,938     8,964      8,406 expenses Total operating expenses             4,399     4,267     13,145     12,210 Operating income                     2,208     3,593     7,034      14,621 Interest expense, net                12        38        50         246 Income before income taxes           2,196     3,555     6,984      14,375 Income tax provision                 782       692       751        4,189 Net income                           $1,414  $2,863  $6,233   $10,186 Net income per share — Basic         $0.13   $0.27   $0.59    $0.97 Weighted average shares outstanding  10,533    10,489    10,523     10,488 — Basic Net income per share — Diluted       $0.13   $0.26   $0.57    $0.94 Weighted average shares outstanding  10,926    10,931    10,920     10,888 — Diluted   KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)                                                                                                                  March 29, 2014 June 29, 2013 ASSETS                                                           Current assets:                                                  Cash and cash equivalents                         $2,241       $10,819 Trade receivables, net of allowances of $37 and   52,637         47,009 $40, respectively Inventories                                       46,086         44,664 Deferred income tax asset                         1,516          1,767 Other                                             9,464          7,508 Total current assets                              111,944        111,767 Property, plant and equipment—net                 21,188         17,911 Other assets:                                                    Deferred income tax asset                         3,052          3,179 Other                                             1,914          2,273 Goodwill                                          1,740          — Other intangibles                                 2,138          — Total other assets                                8,844          5,452 Total assets                                      $141,976     $135,130 LIABILITIES AND SHAREHOLDERS' EQUITY                             Current liabilities:                                             Accounts payable                                  $28,540      $26,400 Accrued compensation and vacation                 6,297          7,413 Current portion of other long-term obligations    —              576 Other                                             5,021          3,551 Total current liabilities                         39,858         37,940 Long-term liabilities:                                           Deferred income tax liability                     —              1,585 Other long-term obligations                       564            1,445 Total long-term liabilities                       564            3,030 Total liabilities                                 40,422         40,970 Shareholders' equity:                                            Common stock, no par value—shares authorized 25,000; issued and outstanding 10,533 and 10,502  44,015         43,369 shares, respectively Retained earnings                                 55,711         49,478 Accumulated other comprehensive income            1,828          1,313 Total shareholders' equity                        101,554        94,160 Total liabilities and shareholders' equity        $141,976     $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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