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) August 13, 2024

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 August 13, 2024, Key Tronic Corporation issued a press release announcing its financial results for the quarter ended June 29, 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						Press Release Dated August 13, 2024

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: August 13, 2024

By:

/s/ Anthony G. Voorhees

Anthony G. Voorhees, Executive Vice President
of Administration, CFO and Treasurer

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACTS:

Tony Voorhees

Michael Newman

Chief Financial Officer

Investor Relations

Key Tronic Corporation

StreetConnect

(509)-927-5345

(206) 729-3625

KEY TRONIC CORPORATION ANNOUNCES RESULTS

FOR THE FOURTH QUARTER OF FISCAL YEAR 2024

New Program Wins and Improving Gross Margins

Spokane Valley, WA— August 13, 2024 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter and fiscal year ended June 29, 2024.

For the fourth quarter of fiscal year 2024, Key Tronic reported total revenue of $125.7 million, compared to $162.6 million in the same period of fiscal year 2023. For the full year of fiscal 2024, total revenue was $559.4 million, compared to $588.1 million for fiscal year 2023.

As previously disclosed, a cybersecurity incident caused disruptions and limited access to portions of the Company’s business applications supporting operations and corporate functions at its Mexico and U.S. sites during the fourth quarter of fiscal 2024. During the disruption of business, Key Tronic continued to pay wages in accordance with statutory requirements. The Company also deployed new IT-related infrastructure and engaged cyber security experts to remediate the incident. As a result, the Company incurred additional expenses of approximately $2.3 million and was unable to fulfill approximately $15 million of revenue during the fourth quarter of fiscal year 2024. Most of these orders are recoverable and are expected to be fulfilled in fiscal year 2025.

Partially offsetting these additional cybersecurity-related expenses was a favorable weakening of the Mexican Peso that began in the latter half of the fourth quarter, decreasing expenses by approximately $0.6 million during the fourth quarter for fiscal year 2024, as well as an insurance gain in the amount of approximately $0.7 million, related to losses incurred from storm damage to the Company’s Arkansas facility in 2022.

Despite the business disruption event, Key Tronic improved its gross margin during Q4, primarily reflecting its workforce reductions in Mexico during the third quarter and the weakening of the Mexican Peso. The Company’s gross margin was 9.0% and operating margin was 2.2% for the fourth quarter of fiscal year 2024, compared to a gross margin of 8.5% and an operating margin of 2.6% on higher revenue in the same period of fiscal year 2023.

Net income was $0.0 million or $0.00 per share for the fourth quarter of fiscal year 2024, compared to net income of $1.1 million or $0.10 per share for the same period of fiscal year 2023. For the full year of fiscal 2024, net loss was $(0.8) million or $(0.07) per share, compared to net income of $5.2 million or $0.48 per share for fiscal year 2023.

Adjusted net income was $1.1 million or $0.10 per share for the fourth quarter of fiscal year 2024, compared to $1.0 million or $0.09 per share for the same period of fiscal year 2023. For the full year of fiscal 2024, adjusted net income was $3.4 million or $0.31 per share, compared to $2.2 million or $0.20 per share for fiscal year 2023. See “Non-GAAP Financial Measures,” below for additional information about adjusted net income and adjusted net income per share.

“Despite the significant business disruption from the cyberattack in the fourth quarter, we have taken the necessary steps to get back to full production and increase our defenses against future attacks. We’re seeing improving operating efficiencies from our recent workforce reductions in Mexico, which we expect will continue to save us more than $10 million annually,” said Brett Larsen, President and Chief Executive Officer. “During the fourth quarter, we continued to expand our customer base, winning new programs involving industrial moving equipment, industrial storage, medical devices and consumer air filtration products.”

“As we move into fiscal 2025, we’re seeing a gradual rebound in our Mexico-based production for higher-volume manufacturing and increased utilization of our US and Vietnam facilities for lower-volume products with higher service level

requirements. The strong pipeline of new business underscores the continued trend towards on-shoring and dual sourcing of contract manufacturing. We’re well-positioned for growth and improved profitability in coming periods.”

The financial data presented for the fourth quarter and full year of fiscal 2024 should be considered preliminary and could be subject to change, as the Company’s independent auditor has not completed their audit procedures.

Business Outlook

For the first quarter of fiscal 2025, Key Tronic expects to report revenue in the range of $140 million to $150 million and earnings in the range $0.10 to $0.20 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 888-394-8218 or +1-313-209-4906 (Access Code: 2512974). The Company will also reference accompanying slides that can be viewed with the webcast at www.keytronic.com under “Investor Relations”. 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, including as a result of the impact of the cybersecurity incident, cost savings from workforce reduction, demand for certain products and the effectiveness of some of its programs, business from customers and programs, and impacts from operational streamlining, and efficiencies. 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 completion of the Company’s investigation regarding the cybersecurity incident, including the possibility that containment and remediation may not be successful; the improper use of exfiltrated information from the cybersecurity incident and related regulatory proceedings or litigation; 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.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States (GAAP), we use certain non-GAAP financial measures, adjusted net income and adjusted net income per share. We provide these non-GAAP financial measures because we believe they provide greater transparency related to our core operations and represent supplemental information used by management in its financial and operational decision making. We exclude (or include) certain items in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe this facilitates operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain income and expense items that would not

otherwise be apparent on a GAAP basis. Non-GAAP performance measures should be considered in addition to, and not as a substitute for, results prepared in accordance with GAAP. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Our non-GAAP financial measures may be different from those reported by other companies. See the table below entitled “Reconciliation of GAAP to non-GAAP measures” for reconciliations of adjusted net income and adjusted net income per share to the most directly comparable GAAP measures, which are GAAP net income and GAAP net income per share.

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Twelve Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net sales	$	125,689	$	162,610	$	559,396	$	588,135
Cost of sales	114,363		148,712		517,364		540,663
Gross profit	11,326		13,898		42,032		47,472
Research, development and engineering expenses	2,135		2,573		8,368		9,735
Selling, general and administrative expenses	7,203		7,363		25,465		25,715

Gain on insurance proceeds, net of losses	(715)		(261)		(1,146)		(4,301)
Total operating expenses	8,623		9,675		32,687		31,149
Operating income	2,703		4,223		9,345		16,323
Interest expense, net	3,173		2,941		11,945		10,023
Income (loss) before income taxes	(470)		1,282		(2,600)		6,300
Income tax (benefit) provision	(507)		220		(1,836)		1,143
Net income (loss)	$	37	$	1,062	$	(764)	$	5,157
Net income (loss) per share — Basic	$	0.00	$	0.10	$	(0.07)	$	0.48
Weighted average shares outstanding — Basic	10,762		10,762		10,762		10,762
Net income (loss) per share — Diluted	$	0.00	$	0.10	$	(0.07)	$	0.47
Weighted average shares outstanding — Diluted	10,762		10,996		10,762		10,938

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	June 29, 2024		July 1, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	4,752	$	3,603
Trade receivables, net of allowance for doubtful accounts of $411 and $23	135,065		150,600
Contract assets	21,272		29,925
Inventories, net	108,997		137,911
Other	25,672		27,510
Total current assets	295,758		349,549
Property, plant and equipment, net	28,806		28,870
Operating lease right-of-use assets, net	15,416		16,202
Other assets:
Deferred income tax asset	16,069		12,254


Other	5,346		11,397
Total other assets	21,415		23,651
Total assets	$	361,395	$	418,272
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	79,394	$	115,899
Accrued compensation and vacation	6,510		13,351
Current portion of long-term debt	3,123		3,138
Other	15,348		19,578
Total current liabilities	104,375		151,966
Long-term liabilities:
Long-term debt, net	116,382		121,531
Operating lease liabilities	10,312		10,317
Deferred income tax liability	263		274
Other long-term obligations	219		3,567
Total long-term liabilities	127,176		135,689
Total liabilities	231,551		287,655
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,762 and 10,762 shares, respectively	47,837		47,728
Retained earnings	82,222		82,986
Accumulated other comprehensive income (loss)	(215)		(97)
Total shareholders’ equity	129,844		130,617
Total liabilities and shareholders’ equity	$	361,395	$	418,272

KEY TRONIC CORPORATION AND SUBSIDIARIES

Reconciliation of GAAP to non-GAAP measures

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Twelve Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
GAAP net income (loss)	37		$	1,062	$	(764)	$	5,157
Cybersecurity expenses	2,340		—		2,340		—
Severance expenses (benefit)	(223)		73		3,846		354
Gain on insurance proceeds (net of losses)	(715)		(261)		(1,146)		(4,301)
Stock-based compensation expense	(54)		76		109		254
Income tax effect of non-GAAP adjustments (1)	(270)		22		(1,030)		739
Adjusted net income:	$	1,115	$	972	$	3,355	$	2,203


Adjusted net income (loss) per share — non-GAAP Diluted	$	0.10	$	0.09	$	0.31	$	0.20
Weighted average shares outstanding — Diluted	10,762		10,996		10,854		10,938

(1) Income tax effects are calculated using an effective tax rate of 20%, which approximates the effective GAAP tax rate for the presented periods.

Cover Page	Aug. 13, 2024
Cover [Abstract]
Document Type	8-K
Document Period End Date	Aug. 13, 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