Form 8-K - Current report

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) October 31, 2023

Key Tronic Corporation

(Exact name of registrant as specified in its charter)



Washington		0-11559	91-0849125
(State or other jurisdiction of incorporation)		(Commission File Number)	(IRS Employer Identification No.)

4424 North Sullivan Road	Spokane Valley,	Washington	99216
(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 October 31, 2023, Key Tronic Corporation issued a press release announcing its financial results for the quarter ended September 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						Press Release Dated October 31, 2023

104						Cover 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.

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: October 31, 2023

By:

/s/ Brett R. Larsen

Brett R. Larsen, Executive Vice President
of Administration, CFO and Treasurer

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACTS:

Brett Larsen

Michael Newman

Chief Financial Officer

Investor Relations

Key Tronic Corporation

StreetConnect

(509) 927-5500

(206) 729-3625

KEY TRONIC CORPORATION ANNOUNCES RESULTS

FOR THE FIRST QUARTER OF FISCAL YEAR 2024

Year-over-Year Revenue Up 8%; New Program Wins

Spokane Valley, WA— October 31, 2023 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended September 30, 2023. These results are in line with the preliminary results announced on October 24, 2023.

For the first quarter of fiscal year 2024, Keytronic reported total revenue of $147.8 million, up 8% from $137.3 million in the same period of fiscal year 2023. The Company’s gross margin for the first quarter of 2024 was 7.4% and operating margin was 2.2%, compared to a gross margin of 7.6% and an operating margin of 2.4% in the same period of fiscal 2023. For the first quarter of fiscal 2024, net income was $0.3 million or $0.03 per share, compared to $1.2 million or $0.11 per share for the same period of fiscal 2023.

The year-over-year decline in earnings was primarily a result of unanticipated severance costs of $0.6 million, or approximately $0.04 to $0.05 per diluted share, as the Company reduced its workforce by over 100 employees in Mexico and the US. The workforce reduction reflects softening demand for a number of different programs and is expected to reduce operating expenses by more than $5 million annually. Keytronic also continued to be adversely impacted by high interest expense and the strength of the Mexican Peso, although the Mexican Peso has weakened during the second quarter.

“During first quarter of fiscal year 2024, we continued to ramp many new programs produced in our US facilities and remained profitable, despite a softening of customer demand for our Mexico-based programs,” said Craig Gates, President and Chief Executive Officer. “As previously announced, the large program with a leading power equipment company is now expected to resume materially in fiscal 2025 rather than 2024, with a redesigned product.”

“At the same time, we continued to expand our customer base during the first quarter and won new programs involving security equipment, sporting goods, environmental solutions, and industrial control systems. We’re also seeing some gradual improvement in our gross margins and have continued to reduce our inventories to be more in line with current revenue levels, as well as reducing our accounts payable, leasing obligations and overall debt in the quarter.”

“In the second half of fiscal year 2024, we expect increased demand for many of our Mexico-based programs. Overall, we continue to see the favorable trend of contract manufacturing returning to North America, as well as a growing number of potential customers evaluating a migration of their China-based manufacturing to our facility in Vietnam.”

The financial data presented for first 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 second quarter of fiscal 2024, Keytronic expects to report revenue in the range of $135 million to $145 million and earnings in the range of $0.05 to $0.10 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 888-254-3590 or +1-323-794-2551 (Access Code: 5128668). A replay will be available at www.keytronic.com under “Investor Relations”.

About Keytronic

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 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 our 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.

KEYTRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended
	September 30, 2023		October 1, 2022
Net sales	$	147,763	$	137,263
Cost of sales	136,901		126,884
Gross profit	10,862		10,379
Research, development and engineering expenses	2,241		2,296
Selling, general and administrative expenses	5,784		5,656

Gain on insurance proceeds, net of losses	(431)		(934)
Total operating expenses	7,594		7,018
Operating income	3,268		3,361
Interest expense, net	3,011		1,887
Income before income taxes	257		1,474
Income tax (benefit) provision	(78)		322
Net income	$	335	$	1,152
Net income per share — Basic	$	0.03	$	0.11
Weighted average shares outstanding — Basic	10,762		10,762
Net income per share — Diluted	$	0.03	$	0.11
Weighted average shares outstanding — Diluted	11,003		10,832

KEYTRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	September 30, 2023	July 1, 2023
ASSETS
Current assets:
Cash and cash equivalents	3,574	3,603
Trade receivables, net of allowance for doubtful accounts of $23 and $23	141,442	150,600
Contract assets	32,903	29,925
Inventories, net	126,778	137,911
Other	22,930	27,510
Total current assets	327,627	349,549
Property, plant and equipment, net	28,085	28,870
Operating lease right-of-use assets, net	15,928	16,202
Other assets:
Deferred income tax asset	13,205	12,254


Other	7,500	11,397
Total other assets	20,705	23,651
Total assets	392,345	418,272
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	101,638	115,899
Accrued compensation and vacation	11,860	13,351
Current portion of debt, net	6,196	7,849
Other	13,330	14,867
Total current liabilities	133,024	151,966
Long-term liabilities:
Term loans	6,272	6,726
Revolving loan	109,517	114,805
Operating lease liabilities	10,939	10,317
Deferred income tax liability	324	274
Other long-term obligations	1,201	3,567
Total long-term liabilities	128,253	135,689
Total liabilities	261,277	287,655
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively	47,786	47,728
Retained earnings	83,321	82,986
Accumulated other comprehensive income (loss)	(39)	(97)
Total shareholders’ equity	131,068	130,617
Total liabilities and shareholders’ equity	392,345	418,272

Cover Page	Oct. 31, 2023
Cover [Abstract]
Document Type	8-K
Document Period End Date	Oct. 31, 2023
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