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) May 7, 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 May 7, 2024, Key Tronic Corporation issued a press release announcing its financial results for the quarter ended March 30, 2024. 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: May 7, 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 THIRD QUARTER OF FISCAL YEAR 2024

New Program Wins Driven by Continued On-Shoring and Dual Sourcing of Manufacturing
Spokane Valley, WA— May 7, 2024 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended March 30, 2024.
For the third quarter of fiscal year 2024, Key Tronic reported total revenue of $140.5 million, compared to $164.6 million in the same period of fiscal year 2023. As previously announced, revenue for the third quarter of fiscal year 2024 was constrained by approximately $5 million due to severe winter weather events that took Key Tronic’s facilities in Mississippi and Arkansas offline for approximately two weeks. In addition, the Company saw softening demand for a number of different programs produced in Mexico. For the first nine months of fiscal year 2024, total revenue was $433.7 million, compared to $425.5 million in the same period of fiscal year 2023.

For the third quarter of fiscal year 2024, the Company’s margins and profitability were significantly impacted by severance costs of approximately $3.7 million, or $0.27 per diluted share, as Key Tronic reduced its workforce by over 450 employees in Mexico. The severance costs were incurred late in the third quarter, which limited the previously planned payroll expense reductions anticipated in the third quarter.
The Company also continued to be adversely impacted by high labor costs and interest expense, and the continued strengthening of the Mexican Peso by approximately 5%, increasing expenses by approximately $1.5 million or $0.11 per diluted share. The temporary facilities closures in the US due to severe winter weather discussed above, also resulted in a loss of contribution margin of approximately $1 million or $0.07 per diluted share.
As a result of the combination of factors described above, the Company’s gross margin was 5.8% and operating margin was a loss of (0.4)% for the third quarter of fiscal year 2024, compared to a gross margin of 8.7% and an operating margin of 3.1% in the same period of fiscal year 2023.
Net loss was $(2.2) million or $(0.21) per share for the third quarter of fiscal year 2024, compared to net income of $2.0 million or $0.18 per share for the same period of fiscal year 2023. For the first nine months of fiscal year 2024, net loss was $(0.8) million or $(0.07) per share, compared to $4.1 million or $0.38 per share for the same period of fiscal year 2023.

Additionally, as of the end of the quarter, the Company cured a breach of the fixed charge coverage ratio covenant in its asset-based revolving credit facility by executing a fourth amendment to the agreement on May 7, 2024. This amendment will provide relief on the financial covenant for twelve months, increase the interest rate by 100 basis points and advance the maturity date of the agreement to September 2025.

“During the third quarter, we took the necessary steps to reduce our workforce in Mexico due to softening demand for a number of different programs with high labor content, which is expected to save us more than $10 million annually,” said Craig Gates, President and Chief Executive Officer. “We expect sales from Mexico-based production to recover in coming quarters due to recently won programs and we do not anticipate needing to increase our net headcount in coming periods, which would reflect significant improvements to our operating efficiencies. At the same time, our Juarez site is being restructured to focus on higher-volume manufacturing, while lower-volume products with higher service level requirements will migrate to our other sites.”

“We’re pleased with the continued ramp of new programs in the third quarter of fiscal 2024 and by increased utilization of our US and Vietnam facilities. During the quarter, we continued to expand our customer base, winning new programs involving


energy management, telecommunications, consumer audio and industrial manufacturing. The strong pipeline of new business underscores the continued trend towards on-shoring and dual sourcing of contract manufacturing. We also continued to make significant reductions to our inventory, down by approximately $39 million from a year ago, as well as reducing our accounts payable and other liabilities.”
The financial data presented for the third 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 fourth quarter of fiscal 2024, Key Tronic expects to report revenue in the range of $135 million to $145 million and earnings in the range $0.03 to $0.10 per diluted share. These expected results assume an effective tax rate of 20% in the coming quarter.

Conference Call

Key Tronic 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 866-400-0049 or +1-313-209-4906 (Access Code: 8579827). A replay will be available at www.keytronic.com under “Investor Relations”.

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, 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 Key Tronic 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, will, or would, 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, cost savings from workforce reduction, demand for certain products and the effectiveness of some of its programs, business from customers and programs, impacts from operational streamlining, efficiencies, and the amendment to the Loan Agreement. 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 EndedNine Months Ended
 March 30, 2024April 1, 2023March 30, 2024April 1, 2023
Net sales$140,527 $164,553 $433,707 $425,524 
Cost of sales132,446 150,277 403,001 391,950 
Gross profit8,081 14,276 30,706 33,574 
Research, development and engineering expenses2,234 2,580 6,233 7,162 
Selling, general and administrative expenses6,422 6,961 18,263 18,353 
Gain on insurance proceeds, net of losses— (396)(431)(4,040)
Total operating expenses8,656 9,145 24,065 21,475 
Operating income(575)5,131 6,641 12,099 
Interest expense, net2,800 2,688 8,772 7,081 
Income before income taxes(3,375)2,443 (2,131)5,018 
Income tax (benefit) provision(1,154)467 (1,329)924 
Net income$(2,221)$1,976 $(802)$4,094 
Net income per share — Basic$(0.21)$0.18 $(0.07)$0.38 
Weighted average shares outstanding — Basic10,762 10,762 10,762 10,762 
Net income per share — Diluted$(0.21)$0.18 $(0.07)$0.38 
Weighted average shares outstanding — Diluted10,762 10,865 10,762 10,892 
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KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
March 30, 2024July 1, 2023
ASSETS
Current assets:
Cash and cash equivalents$5,255 $3,603 
Trade receivables, net of allowance for doubtful accounts of $85 and $23135,642 150,600 
Contract assets28,619 29,925 
Inventories, net115,115 137,911 
Other22,224 27,510 
Total current assets306,855 349,549 
Property, plant and equipment, net29,046 28,870 
Operating lease right-of-use assets, net
16,790 16,202 
Other assets:
Deferred income tax asset14,577 12,254 
Other6,109 11,397 
Total other assets20,686 23,651 
Total assets$373,377 $418,272 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$82,198 $115,899 
Accrued compensation and vacation7,071 13,351 
Current portion of debt, net5,928 7,849 
Other14,206 14,867 
Total current liabilities109,403 151,966 
Long-term liabilities:
Term loans5,681 6,726 
Revolving loan116,512 114,805 
Operating lease liabilities11,351 10,317 
Deferred income tax liability19 274 
Other long-term obligations336 3,567 
Total long-term liabilities133,899 135,689 
Total liabilities243,302 287,655 
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively47,891 47,728 
Retained earnings82,184 82,986 
Accumulated other comprehensive income (loss)— (97)
Total shareholders’ equity130,075 130,617 
Total liabilities and shareholders’ equity$373,377 $418,272 
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v3.24.1.u1
Cover Page
Feb. 06, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date May 07, 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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