Key Tronic Corporation (Nasdaq:KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter and year ended July 3, 2010.

For the fourth quarter of fiscal 2010, Key Tronic reported record quarterly revenue of $61.9 million, up 20% from $51.7 million in the previous quarter and up 36% from $45.5 million in the same period of fiscal 2009. For the full year of fiscal 2010, total revenue was $199.6 million, up 8% from $184.9 million for fiscal 2009.

Net income for the fourth quarter of fiscal 2010 was $2.3 million or $0.22 per diluted share, up from $0.3 million or $0.03 per diluted share for the same period of fiscal 2009. For the full year of fiscal 2010, net income was $8.7 million or $0.85 per diluted share, up from $1.1 million or $0.11 per diluted share for fiscal 2009.

The Company continued to maintain strong operating efficiencies during the fourth quarter. For the fourth quarter of fiscal 2010, gross margin was 11% and operating margin was 5%, up from 6% and 1%, respectively, in the same period of fiscal 2009. For the full year of fiscal 2010, gross margin was 10% and operating margin was 4%, up from 7% and 1%, respectively, in fiscal 2009.

“We’re very pleased with our strong growth in revenue and earnings for fiscal 2010, driven by increased demand from both new and longstanding customers,” said Craig Gates, President and Chief Executive Officer, “We began the year in the depths of the global recession and ended with the highest quarterly revenue in Key Tronic’s history. We’ve remained profitable for 26 consecutive quarters and significantly increased our profitability in fiscal 2010 compared to recent years. As we grew our business and brought many new programs into production, we controlled our costs, maintained strong operating efficiencies and improved our new product introduction processes.

“During the fourth quarter of fiscal 2010, we continued to diversify our revenue base by winning a new program involving gaming technology and two new programs for industrial safety equipment. To accommodate new programs moving into production, we significantly expanded our world-class production capacity in Mexico and China during the fourth quarter. Similar to recent quarters, we also had approximately $4 million in order delays from a number of customers due to industry-wide shortages in the global supply chain, which we expect to persist in coming quarters.

“Moving into fiscal 2011, we have good business momentum, growing our business faster than many of our peers. Recent forecasts predict double-digit growth for the EMS market in coming years. With our unique combination of world-class engineering, global logistics and cost-effective production, we’re increasingly well positioned to continue to capture market share and capitalize on emerging opportunities in fiscal 2011 and beyond.”

Business Outlook

For the first quarter of fiscal 2011, the Company expects to report revenue in the range of $58 million to $61 million, and earnings in the range of $0.17 to $0.20 per share. The Company’s forecast for the first quarter of fiscal 2011 may be impacted by continuing supply chain issues that could result in variances in its results as the world’s electronic parts supply ramps up to meet demand.

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 877-941-2333 or +1 480-629-9723. A 48-hour replay will be available by calling 800-406-7325 or +1 303 590 3030 (Access Code: 4325641). A replay will also be available on the Company’s Web site.

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 or targets’ 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 fiscal 2011. 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; shortages in the global supply chain; the accuracy of customers’ forecasts; success of customers’ programs; timing 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; and the other risks and uncertainties detailed from time to time in the Company’s SEC filings.
 
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended   Twelve Months Ended
July 3   June 27 July 3   June 27
2010 2009 2010 2009
 
Net sales $ 61,864 $ 45,464 $ 199,620 $ 184,924
Cost of sales   55,241   42,819     180,370     171,744
Gross profit on sales 6,623 2,645 19,250 13,180
 
Operating expenses:
Research, development and engineering 720 515 2,783 2,266
Selling, general and administrative 2,854 1,833 9,079 8,366
Goodwill impairment   0   0     0     765
 
Total operating expenses 3,574 2,348 11,862 11,397
 
Operating income 3,049 297 7,388 1,783
 
Interest expense   25   97     102     590
 
Income before income taxes 3,024 200 7,286 1,193
 
(Benefit from) provision for income taxes   713   (87 )   (1404 )   130
 
Net income $ 2,311 $ 287   $ 8,690   $ 1,063
 
 
Earnings per share:
 
Earnings per common share - basic $ 0.23 $ 0.03 $ 0.86 $ 0.11
Weighted average shares outstanding - basic 10,219 10,066 10,124 10,059
 
Earnings per common share - diluted $ 0.22 $ 0.03 $ 0.85 $ 0.11
Weighted average shares outstanding - diluted 10,342 10,074 10,191 10,075
 

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  July 3   June 27
2010 2009
ASSETS
Current assets:
Cash and cash equivalents $ 770 $ 729
Trade receivables 34,617 24,867
Inventories 39,775 32,291
Other   5,588     3,168
Total current assets   80,750     61,055
 
Property, plant and equipment - net 13,898 11,199
 
Other assets:
Restricted cash - 124
Deferred income tax asset 4,815 4,611
Other   653     766
Total other assets   5,468     5,501
 
Total assets $ 100,116   $ 77,755
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,158 $ 18,703
Accrued compensation and vacation 5,097 3,198
Current portion of other long-term obligations 146 359
Other   2,670     1,351
Total current liabilities   37,071     23,611
 
Long-term liabilities:
Revolving loan 1,554 2,412
Other long-term obligations   2,074     618
Total long-term liabilities   3,628     3,030
 
Shareholders' equity:

Common stock, no par value - share authorized 25,000;

issued and outstanding 10,124 and 10,066 shares, respectively
40,126 39,359
Retained earnings 19,533 10,843
Accumulated other comprehensive (loss) income   (242 )   912
Total shareholders' equity   59,417     51,114
 
Total liabilities and shareholders' equity $ 100,116   $ 77,755

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