8-K

EFFECTIVE AUGUST 4, 2020

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 4, 2020

Key Tronic Corporation

(Exact name of registrant as specified in its charter)

Washington		0-11559	91-0849125
(State or other jurisdiction<br>of incorporation)		(Commission<br>File Number)	(IRS Employer<br>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 August 4, 2020, Key Tronic Corporation issued a press release announcing its financial results for the quarter ended June 27, 2020. 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 4, 2020

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.

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<br><br>(Registrant)
Date: August 4, 2020
	By:	/s/ Brett R. Larsen
		Brett R. Larsen, Executive Vice President<br>of Administration, CFO and Treasurer

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Document

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 FOURTH QUARTER AND YEAR END OF FISCAL 2020

Continued New Program Wins; Expecting Continued Revenue Growth in the First Quarter

Spokane Valley, WA— August 4, 2020 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter and the year ended June 27, 2020.

For the fourth quarter of fiscal year 2020, Keytronic reported total revenue of $116.0 million, up 10% from $105.6 million in the same period of fiscal year 2019. During the fourth quarter of fiscal year 2020, the Company’s revenue was significantly constrained by the temporary shutdown of its facilities in Juarez by the Mexican government due to the COVID-19 pandemic and associated delays in production. For the full year of fiscal 2020, total revenue was $449.5 million, compared to $464.0 million in the same period of fiscal year 2019.

During the fourth quarter of fiscal year 2020, the Company incurred a variety of additional costs caused by the COVID-19 crisis totaling approximately $2.2 million or $0.16 per share. These expenses are related to the temporary shutdown and restart of the Company’s Juarez facility, as well as preventative measures and equipment for employees at all of its facilities in the US, Mexico, China and Vietnam.

The pandemic’s adverse impact on revenue and expenses reduced the Company’s margins. For the fourth quarter of fiscal year 2020, gross margin was 7.4% and operating margin was 0.9%, compared to gross margin of 7.9% and an operating margin of 1.3%, in the same period of fiscal 2019.

For the fourth quarter of fiscal year 2020, net income was $1.5 million or $0.14 per share, compared to $0.8 million or $0.08 per share for the same period of fiscal year 2019. Earnings for the fourth quarter of fiscal year 2020 included a tax benefit from releasing a portion of the Company’s allowance on research and development credits taken in previous years of $1.3 million or $0.12 per share. For the full year of fiscal year 2020, net income was $4.8 million or $0.44 per share, compared to a net loss of $8.0 million or $(0.74) per share for fiscal year 2019. Excluding the goodwill and intangibles write down in fiscal 2019, the Company would have reported net income of $4.5 million or $0.42 per for fiscal year 2019.

“During the past fiscal year, we overcame a number of powerful global headwinds, including component shortages, trade disputes and the COVID-19 crisis, but we see the favorable trend of contract manufacturing returning to North America accelerating,” said Craig Gates, President and Chief Executive Officer. “On balance, the effect of the pandemic on our customer’s demand was a net positive during the second half of fiscal 2020. While some of our customers, particularly in the gaming industry, have seen large decreases in their demand, others have significantly increased their demand, including programs for healthcare and home-oriented consumer products and exercise equipment.

“During the fourth quarter of fiscal year 2020, we won new programs involving sanitizer dispensing, automotive controllers, oil and gas drilling, wireless security and personal healthcare protective equipment. A large program that we announced in the third quarter, which when fully ramped is anticipated to contribute $100 million in annual revenue, got underway in the fourth quarter and is expected to contribute to revenue in fiscal 2021.

“As we enter fiscal 2021, uncertainty remains around the continuing impact of COVID-19 and potential future disruptions to our production facilities and we continue to focus on protecting the health of all of our employees by adhering to current health guidelines. Nevertheless, thanks to the dedication and sacrifices of our employees, we enter the year with increasingly positive momentum. We continue to invest in new capacity and remain optimistic about our long-term opportunities for growth.”

Business Outlook

For the first quarter of fiscal year 2021, Keytronic expects to report revenue in the range of $118 million to $125 million, and earnings in the range of $0.18 to $0.25 per diluted share. These expected results assume an effective tax rate of 20% in the quarter. Keytronic is working closely with its customers, key suppliers and employees to minimize effects of delays attributable to the continued global pandemic. While the Company’s facilities in the US, Mexico, China and Vietnam currently operating and rigorously following current health guidelines, uncertainty as to the possibility of future temporary closures, customer demand and costs, and future supply chain disruptions during the rapidly changing COVID-19 environment could significantly impact operations in coming periods. Due to the heightened risks associated with the above, we may issue updated guidance during the upcoming quarter.

Conference Call

Keytronic will host a conference call to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern) on August 4, 2020. A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 800-353-6461 or +1-334-323-0501 (Access Code: 9895228). A replay will be available by calling 888-203-1112 or +1-719-457-0820 (Access Code: 9895228).

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.

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 word as aims, anticipates, believes, 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 during periods of fiscal year 2021, risks of manufacturing supply chain and operational disruptions and relating to the health of employees due to COVID-19 health pandemic, demand for certain products and the effectiveness of some of our programs, effects of recent tax reform and tariff measures and trade tensions, business from new customers and programs, improvement of supply chain delivery 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, particularly during the COVID-19 health crisis; 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; 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 including those related to COVID-19 response; 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						Twelve Months Ended
	June 27, 2020		June 29, 2019		June 27, 2020		June 29, 2019
Net sales	$	116,018	$	105,581	$	449,480	$	464,044
Cost of sales	107,412		97,200		414,231		429,443
Gross profit	8,606		8,381		35,249		34,601
Research, development and engineering expenses	2,262		1,600		7,391		6,555
Selling, general and administrative expenses	5,317		5,372		21,030		21,556
Impairment of goodwill and intangibles	—		—		—		12,448
Total operating expenses	7,579		6,972		28,421		40,559
Operating income (loss)	1,027		1,409		6,828		(5,958)
Interest expense, net	521		677		2,509		2,782
Income (loss) before income taxes	506		732		4,319		(8,740)
Income tax benefit	(966)		(85)		(439)		(758)
Net income (loss)	$	1,472	$	817	$	4,758	$	(7,982)
Net income (loss) per share — Basic	$	0.14	$	0.08	$	0.44	$	(0.74)
Weighted average shares outstanding — Basic	10,760		10,760		10,760		10,760
Net income (loss) per share — Diluted	$	0.14	$	0.08	$	0.44	$	(0.74)
Weighted average shares outstanding — Diluted	10,832		10,760		10,816		10,760

KEYTRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 27, 2020		June 29, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	553	$	601
Trade receivables, net of allowance for doubtful accounts of $609 and $58	86,123		58,429
Contract assets	23,753		22,161
Inventories, net	115,020		100,431
Other	17,315		16,477
Total current assets	242,764		198,099
Property, plant and equipment, net	31,764		29,413
Operating lease right-of-use assets, net	14,441		—
Other assets:
Deferred income tax asset	10,178		7,840
Other intangible assets, net	—		657
Other	2,587		2,301
Total other assets	12,765		10,798
Total assets	$	301,734	$	238,310
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	80,204	$	73,571
Accrued compensation and vacation	10,428		6,759
Current portion of debt, net	7,508		5,841
Other	14,079		7,233
Total current liabilities	112,219		93,404
Long-term liabilities:
Term loans	3,258		7,091
Revolving loan	60,094		23,356
Operating lease liabilities	9,497		—
Deferred income tax liability	234		—
Other long-term obligations	875		—
Total long-term liabilities	73,958		30,447
Total liabilities	186,177		123,851
Shareholders’ equity:
Common stock, no par value—shares authorized 25,000; issued and outstanding 10,760 and 10,760 shares, respectively	46,946		46,680
Retained earnings	70,111		65,353
Accumulated other comprehensive income (loss)	(1,500)		2,426
Total shareholders’ equity	115,557		114,459
Total liabilities and shareholders’ equity	$	301,734	$	238,310

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