false000071973300007197332024-02-062024-02-06


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) February 6, 2024
 
Key Tronic Corporation
(Exact name of registrant as specified in its charter)
 
Washington 0-1155991-0849125
(State or other jurisdiction
of incorporation)		 (Commission
File Number)		(IRS Employer
Identification No.)
4424 North Sullivan RoadSpokane Valley,Washington99216
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (509) 928-8000
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provision (see General Instruction A.2. below):
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, no par value
KTCC
NASDAQ Global Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐


ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 6, 2024, Key Tronic Corporation issued a press release announcing its financial results for the quarter ended December 30, 2023. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Form 8-K including the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section and shall not be deemed incorporated by reference into any filing of Key Tronic Corporation under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as set forth by specific reference in such a filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d)Exhibits
Exhibit Number  Description
99.1  
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document
SAFE HARBOR STATEMENT. Statements contained in the Exhibit to this report that state Key Tronic Corporation's or its management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. Key Tronic Corporation's actual results could differ materially from those projected in such forward-looking statements. Factors that could affect those results include those mentioned in the Exhibit to this report and the documents that Key Tronic Corporation has filed with the Securities and Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
  
KEY TRONIC CORPORATION
(Registrant)
Date: February 6, 2024   
  By: /s/ Brett R. Larsen
   Brett R. Larsen, Executive Vice President
of Administration, CFO and Treasurer
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Exhibit 99.1
FOR IMMEDIATE RELEASE
 
CONTACTS: Brett LarsenMichael Newman
 Chief Financial OfficerInvestor Relations
 Key Tronic CorporationStreetConnect
 (509) 927-5500(206) 729-3625
KEY TRONIC CORPORATION ANNOUNCES RESULTS
FOR THE SECOND QUARTER OF FISCAL YEAR 2024

Continued Growth in US-based Production; Improved Gross Margins; New Program Wins
Spokane Valley, WA— February 6, 2024 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 30, 2023.
For the second quarter of fiscal year 2024, Key Tronic reported total revenue of $145.4 million, up 18% from $123.7 million in the same period of fiscal year 2023. Revenue growth for the second quarter of fiscal year 2024 was driven by increased production at the Company’s US-based and Vietnam-based facilities, as well as by the sale of approximately $8.1 million of inventory from a discontinued program. For the first six months of fiscal year 2024, total revenue was $293.2 million, up 12% from $261.0 million in the same period of fiscal year 2023.
For the second quarter of fiscal year 2024, the Company’s gross margin was 8.1% and operating margin was 2.7%, compared to a gross margin of 7.2% and an operating margin of 2.9% in the same period of fiscal year 2023. The increase in gross margin in the second quarter of fiscal year 2024 reflects a favorable product mix for the quarter and improved operating efficiencies.
For the second quarter of fiscal year 2024, net income was $1.1 million or $0.10 per share, compared to $1.0 million or $0.09 per share for the same period of fiscal year 2023. For the first six months of fiscal year 2024, net income was $1.4 million or $0.13 per share, compared to $2.1 million or $0.20 per share for the same period of fiscal year 2023. The Company’s profitability in fiscal year 2024 continued to be negatively impacted by increased labor costs, unfavorable foreign currency exchange rates in Mexico and higher interest rates on its line of credit.
“We’re pleased with the successful ramp of new programs in the second quarter of fiscal 2024, driven by increased utilization of our US and Vietnam facilities,” said Craig Gates, President and Chief Executive Officer. “During the quarter, we continued to expand our customer base, winning new programs involving security products, medical devices and military aerospace. We also continued to make gradual improvements in our gross margins and continued to make significant reductions to inventory, as well as reducing our accounts payable, debt and other liabilities.”
“While we continue to see the favorable trend of contract manufacturing returning to North America, the strength of the Mexican peso and continued wage increases in Mexican wages, particularly along the US-Mexico border, have created a shift in the way we allocate our production across our US and Juarez locations. In order to remain competitive, our Juarez site will be restructured to focus on higher-volume manufacturing, while lower-volume products with higher service level requirements will migrate to our other sites.
Accordingly, we are currently reducing our workforce in Mexico and will incur $1.0 million to $2.5 million of severance in the third quarter. We currently expect the payback period for these severance costs to be less than six months and our US and Vietnam facilities to contribute a growing portion of our revenue in coming periods.”
The financial data presented for the second quarter of fiscal year 2024 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their review procedures.
Business Outlook
For the third quarter of fiscal 2024, Key Tronic expects to report revenue in the range of $135 million to $145 million. The Company also expects to incur a severance expense in the range of $1.0 million to $2.5 million from headcount reductions in its Mexico-based operations, resulting in a net income in the range of $0.00 to $0.15 per diluted share. These expected results assume an effective tax rate of 20% in the coming quarter.

Conference Call


Keytronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) today. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 877-400-0505 or +1-323-701-0225 (Access Code: 5587222). A replay will be available at www.keytronic.com under “Investor Relations”.

About Key Tronic
Keytronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China and Vietnam. The Company provides its customers with 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 Keytronic visit: www.keytronic.com

Forward-Looking Statements
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, but are not limited to those including such words as aims, anticipates, believes, continues, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions 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 financial conditions and results, including revenue and earnings, demand for certain products and the effectiveness of some of its programs, business from customers and programs, and impacts from operational streamlining. 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 components from the supply chain; the availability of a healthy workforce; the accuracy of suppliers’ and customers’ forecasts; development and success of customers’ programs and products; timing and effectiveness of ramping of new programs; success of new-product introductions; the risk of legal proceedings or governmental investigations relating to the subject of the internal investigation by the Company’s Audit Committee and related or other unrelated matters; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; impact of new governmental legislation and regulation, including tax reform, tariffs and related activities, such trade negotiations and other risks; and other factors, risks, and uncertainties detailed from time to time in the Company’s SEC filings.
2

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months EndedSix Months Ended
 December 30, 2023December 31, 2022December 30, 2023December 31, 2022
Net sales$145,417 $123,708 $293,180 $260,971 
Cost of sales133,654 114,788 270,555 241,672 
Gross profit11,763 8,920 22,625 19,299 
Research, development and engineering expenses1,758 2,287 3,999 4,583 
Selling, general and administrative expenses6,057 5,735 11,841 11,391 
Gain on insurance proceeds, net of losses— (2,710)(431)(3,644)
Total operating expenses7,815 5,312 15,409 12,330 
Operating income3,948 3,608 7,216 6,969 
Interest expense, net2,961 2,507 5,972 4,394 
Income before income taxes987 1,101 1,244 2,575 
Income tax (benefit) provision(97)134 (175)456 
Net income$1,084 $967 $1,419 $2,119 
Net income per share — Basic$0.10 $0.09 $0.13 $0.20 
Weighted average shares outstanding — Basic10,762 10,762 10,762 10,762 
Net income per share — Diluted$0.10 $0.09 $0.13 $0.20 
Weighted average shares outstanding — Diluted10,889 10,832 10,889 10,832 
3

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
December 30, 2023July 1, 2023
ASSETS
Current assets:
Cash and cash equivalents2,953 3,603 
Trade receivables, net of allowance for doubtful accounts of $72 and $23134,892 150,600 
Contract assets27,770 29,925 
Inventories, net124,054 137,911 
Other22,612 27,510 
Total current assets312,281 349,549 
Property, plant and equipment, net28,935 28,870 
Operating lease right-of-use assets, net
18,104 16,202 
Other assets:
Deferred income tax asset13,161 12,254 
Other6,243 11,397 
Total other assets19,404 23,651 
Total assets378,724 418,272 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable91,358 115,899 
Accrued compensation and vacation5,677 13,351 
Current portion of debt, net5,610 7,849 
Other15,721 14,867 
Total current liabilities118,366 151,966 
Long-term liabilities:
Term loans6,465 6,726 
Revolving loan108,429 114,805 
Operating lease liabilities12,380 10,317 
Deferred income tax liability22 274 
Other long-term obligations627 3,567 
Total long-term liabilities127,923 135,689 
Total liabilities246,289 287,655 
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively47,839 47,728 
Retained earnings84,405 82,986 
Accumulated other comprehensive income (loss)191 (97)
Total shareholders’ equity132,435 130,617 
Total liabilities and shareholders’ equity378,724 418,272 
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v3.24.0.1
Cover Page
Feb. 06, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Feb. 06, 2024
Entity Registrant Name Key Tronic Corp
Entity Incorporation, State or Country Code WA
Entity File Number 0-11559
Entity Tax Identification Number 91-0849125
Entity Address, Address Line One 4424 North Sullivan Road
Entity Address, City or Town Spokane Valley,
Entity Address, State or Province WA
Entity Address, Postal Zip Code 99216
City Area Code 509
Local Phone Number 928-8000
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Amendment Flag false
Entity Central Index Key 0000719733
Title of 12(b) Security Common Stock, no par value
Trading Symbol KTCC
Security Exchange Name NASDAQ
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