8-K

EFFECTIVE MAY 1, 2018

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 1, 2018

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))

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On May 1, 2018, Key Tronic Corporation issued a press release announcing its financial results for the quarter ended March 31, 2018. 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 May 1, 2018

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 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 1, 2018
	By:	/s/ Brett R. Larsen
		Brett R. Larsen, Executive Vice President of Administration, CFO and Treasurer

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EX-99.1

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 THIRD QUARTER OF FISCAL YEAR 2018

Expecting Sequential Revenue and Earnings Growth in the Fourth Quarter

Spokane Valley, WA— May 1, 2018 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended March 31, 2018.

For the third quarter of fiscal year 2018, Key Tronic reported total revenue of $108.4 million, compared to $113.6 million in the same period of fiscal year 2017. For the first nine months of fiscal year 2018, total revenue was $329.3 million, compared to $349.3 million in the same period of fiscal year 2017.

For the third quarter of fiscal year 2018, the Company had net income of approximately $0.6 million or $0.06 per share, compared to net income of $1.0 million or $0.09 per share for the third quarter of fiscal year 2017. As expected, the results for the third quarter of fiscal year 2018 include expenses in connection with a binding arbitration hearing and severance expenses related to streamlining the company’s facilities in Mexico, totaling $0.10 per diluted share. For the first nine months of fiscal year 2018, net income was $0.9 million or $0.08 per share, compared to net income of $4.3 million or $0.39 per share for the same period of fiscal year 2017.

For the third quarter of fiscal year 2018, gross margin was 7.5% and operating margin was 0.7%, compared to 8.0% and 1.6%, respectively, in the same period of fiscal 2017.

“Most of our new programs continued to ramp steadily during the third quarter of fiscal 2018, though our productivity was adversely impacted by industry wide shortages in key components and an unexpected delay from one large new customer,” said Craig Gates, President and Chief Executive Officer. “At the same time, we have continued to win significant new business from both EMS competitors and from existing customers, including 5 new programs involving gaming equipment, medical devices and a consumer security product.

Moving into the fourth quarter, although we continue to see significant supply chain issues, we expect significant growth in revenue and earnings. A large longstanding customer is significantly increasing its demand, our new programs continue to ramp and we have a strong pipeline of potential new business. In preparation for future growth, we continue to invest in new equipment and processes to be more productive with less labor content in our Mexico facilities, and we’re expanding and enhancing our highly profitable US facilities.”

Business Outlook

For the fourth quarter of fiscal year 2018, the Company expects to report revenue in the range of $112 million to $117 million, and earnings in the range of $0.11 to $0.16 per diluted share. These expected results assume an effective tax rate of 20% in the quarter.

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 800-239-9838 or +1-323-794-2551 (Access Code: 9010653). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 9010653).

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, targets, or will, similar verbs, 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 periods of fiscal year 2018, effects of recent tax reform measures, business from new customers and programs, and impacts from legal proceedings and 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 parts from the supply chain, the accuracy of customers’ forecasts; success of customers’ programs; timing and effectiveness of ramping 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; impact of tax reform and related activities and the other risks and uncertainties detailed from time to time in the Company’s SEC filings.

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KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended					Nine Months Ended
	March 31, 2018			April 1, 2017		March 31, 2018		April 1, 2017
Net sales	$	108,352		$	113,601	$	329,294	$	349,253
Cost of sales	100,197			104,462		304,494		320,793
Gross profit	8,155			9,139		24,800		28,460
Research, development and engineering expenses	1,560			1,569		4,565		4,756
Selling, general and administrative expenses	5,816			5,721		16,641		16,518
Total operating expenses	7,376			7,290		21,206		21,274
Operating income	779			1,849		3,594		7,186
Interest expense, net	656			566		1,866		1,707
Income before income taxes	123			1,283		1,728		5,479
Income tax provision (benefit)	(521		)	322		876		1,198
Net income	$	644		$	961	$	852	$	4,281
Net income per share — Basic	$	0.06		$	0.09	$	0.08	$	0.40
Weighted average shares outstanding — Basic	10,760			10,759		10,760		10,755
Net income per share — Diluted	$	0.06		$	0.09	$	0.08	$	0.39
Weighted average shares outstanding — Diluted	10,760			10,957		10,760		10,916

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KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	March 31, 2018		July 1, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	298	$	373
Trade receivables, net of allowance for doubtful accounts of $0 and $84	60,689		65,193
Inventories, net	114,962		101,590
Other	12,941		11,037
Total current assets	188,890		178,193
Property, plant and equipment, net	27,872		30,496
Other assets:
Deferred income tax asset	7,254		6,981
Goodwill	9,957		9,957
Other intangible assets, net	3,992		4,800
Other	3,753		2,413
Total other assets	24,956		24,151
Total assets	$	241,718	$	232,840
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	69,226	$	53,078
Accrued compensation and vacation	6,616		10,005
Current portion of debt, net	5,841		5,841
Other	8,790		8,829
Total current liabilities	90,473		77,753
Long-term liabilities:
Term loans	14,392		18,773
Revolving loan	15,000		18,335
Other long-term obligations	—		1,412
Total long-term liabilities	29,392		38,520
Total liabilities	119,865		116,273
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,760 and 10,760 shares, respectively	46,104		45,797
Retained earnings	74,983		73,545
Accumulated other comprehensive gain (loss)	766		(2,775		)
Total shareholders’ equity	121,853		116,567
Total liabilities and shareholders’ equity	$	241,718	$	232,840

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