8-K

EFFECTIVE APRIL 30, 2019

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) April 30, 2019

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))

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 April 30, 2019, Key Tronic Corporation issued a press release announcing its financial results for the quarter ended March 30, 2019. 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 April 30, 2019

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: April 30, 2019
	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 2019

Expecting Growth in Revenue for Fourth Quarter and Full Year

Spokane Valley, WA— April 30, 2019 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended March 30, 2019. The results were in line with the guidance provided in the Company’s announcement of preliminary results on April 10, 2019.

For the third quarter of fiscal year 2019, Key Tronic reported total revenue of $108.0 million, compared to $108.4 million in the same period of fiscal year 2018. For the first nine months of fiscal year 2019, total revenue was $358.5 million, up 9% from $329.3 million in the same period of fiscal year 2018.

As previously reported, the Company’s revenue in the third quarter of fiscal 2019 was adversely impacted by reduced orders from two large, longstanding customers. One of these customers needed to lower its inventory in the third quarter, but expects a rebound in demand in the fourth quarter; the other large customer is managing inventory as it is transitioning its production from Key Tronic’s China facilities to Key Tronic’s Mexico facilities. In addition, there were unanticipated delays in the launch of production for two new customers in the third quarter.

Due to its strategic investments in increased operational efficiencies in recent periods, the Company reduced its workforce by approximately 10%, resulting in a severance charge of $1.1 million in the third quarter of 2019. Due to accounting requirements, Key Tronic also wrote down its goodwill and intangibles by approximately $12.5 million in the third quarter of 2019.

For the third quarter of fiscal year 2019, the Company had a net loss of approximately $12.0 million or $(1.11) per share, compared to net income of $0.6 million or $0.06 per share for the same period of fiscal year 2018. For the first nine months of fiscal year 2019, the net loss was $8.8 million or $(0.82) per share, compared to net income of $0.9 million or $0.08 per share for the same period of fiscal year 2018.

Excluding charges for the write off of goodwill and intangibles and for severance, the results would have been approximately net income of $0.02 per share and $0.32 per share, respectively, for the third quarter and first nine months of fiscal year 2019.

“While we were significantly impacted by the unanticipated decline in demand from two large customers, we expect both of these new programs to rebound and contribute significant revenue in the fourth quarter,” said Craig Gates, President and Chief Executive Officer. “At the same time, our new programs continue to ramp and we continue to win significant new business from both EMS competitors and from existing customers, including four new programs involving consumer kitchen tools, emergency medical equipment, paper dispensing products, and outdoor LED lighting.

“We expect to report growth in revenue for the fourth quarter and for the year. Moreover, our investments in increased efficiencies in recent periods have allowed us to streamline our operations, lowering manufacturing and operating expenses by approximately $3 million annually.”

Business Outlook

For the fourth quarter of fiscal year 2019, the Company expects to report revenue in the range of $112 million to $117 million, and earnings in the range of $0.10 to $0.15 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 800-667-5617 or +1-334-323-0509 (Access Code: 8155106). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 8155106).

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 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 2019, 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 (LOSS)

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 30, 2019			March 31, 2018			March 30, 2019			March 31, 2018
Net sales	$	107,954		$	108,352		$	358,463		$	329,294
Cost of sales	101,147			100,197			332,243			304,494
Gross profit	6,807			8,155			26,220			24,800
Research, development and engineering expenses	1,398			1,560			4,955			4,565
Selling, general and administrative expenses	5,497			5,816			16,184			16,641
Impairment of goodwill and intangibles	12,448			—			12,448			—
Total operating expenses	19,343			13,192			33,587			21,206
Operating income (loss)	(12,536		)	779			(7,367		)	3,594
Interest expense, net	720			656			2,105			1,866
Income (loss) before income taxes	(13,256		)	123			(9,472		)	1,728
Income tax provision (benefit)	(1,275		)	(521		)	(673		)	876
Net income (loss)	$	(11,981	)	$	644		$	(8,799	)	$	852
Net income (loss) per share — Basic	$	(1.11	)	$	0.06		$	(0.82	)	$	0.08
Weighted average shares outstanding — Basic	10,760			10,760			10,760			10,760
Net income (loss) per share — Diluted	$	(1.11	)	$	0.06		$	(0.82	)	$	0.08
Weighted average shares outstanding — Diluted	10,760			10,760			10,760			10,760

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KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	March 30, 2019		June 30, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	165	$	343
Trade receivables, net of allowance for doubtful accounts of $58 and $0	55,903		70,262
Contract assets	20,138		—
Inventories, net	95,396		110,315
Other	16,590		13,600
Total current assets	188,192		194,520
Property, plant and equipment, net	28,533		27,548
Other assets:
Deferred income tax asset	7,826		7,882
Goodwill	—		9,957
Other intangible assets, net	733		3,726
Other	2,868		2,895
Total other assets	11,427		24,460
Total assets	$	228,152	$	246,528
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	68,759	$	76,198
Accrued compensation and vacation	6,336		8,105
Current portion of debt, net	5,841		5,841
Other	6,879		8,769
Total current liabilities	87,815		98,913
Long-term liabilities:
Term loans	8,551		12,932
Revolving loan	18,126		16,222
Other long-term obligations	476		380
Total long-term liabilities	27,153		29,534
Total liabilities	114,968		128,447
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,760 and 10,760 shares, respectively	46,598		46,244
Retained earnings	64,536		72,806
Accumulated other comprehensive gain (loss)	2,050		(969		)
Total shareholders’ equity	113,184		118,081
Total liabilities and shareholders’ equity	$	228,152	$	246,528

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