EXHIBIT 99.1
FOR IMMEDIATE RELEASE
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| CONTACTS: | | Ron Klawitter | | Michael Newman |
| | | Chief Financial Officer | | Investor Relations |
| | | Key Tronic Corporation | | StreetConnect |
| | | (509) 927-5295 | | (206) 729-3625 |
KEY TRONIC CORPORATION ANNOUNCES
SECOND QUARTER RESULTS
Operating Efficiency Drives Continued Earnings Improvement
Spokane, WA— January 31, 2006 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended December 31, 2005.
For the second quarter of fiscal 2006, Key Tronic reported total revenue of $45.4 million, compared to $44.3 million for the previous quarter and $51.2 million for the second quarter of fiscal 2005. For the first six months of fiscal 2006, total revenue was $89.6 million, compared to $100.0 million in the same period of fiscal 2005.
Net income for the second quarter of fiscal 2006 was $1.0 million or $0.10 per diluted share, up 45% from $702,000 or $0.07 per diluted share in the previous quarter and up 108% from $490,000 or $0.05 per share for the second quarter of fiscal 2005. For the first six months of fiscal 2006, net income was $1.7 million or $0.17 per diluted share, up 128% from $756,000 or $0.08 per share for the same period of fiscal 2005.
“We are very pleased with our improved production efficiencies in the second quarter, which resulted in increased operating income and earnings,” said Jack Oehlke, President and Chief Executive Officer. “Our sequential revenue growth in the quarter came primarily from one of our established customers, which had strong seasonal demand for its product. To help offset that seasonal slowdown, we expect a new program for a consumer product to get underway in the third quarter.
“In coming periods, we continue to pursue new programs and feel very positive about our position as a strong competitor for winning new EMS business across a variety of target markets. We are excited about the long-term opportunities and remain focused on improving operating efficiencies, controlling costs and maintaining profitability.”
In the third quarter of fiscal 2006, the Company expects revenue in the range of $42 million to $46 million and earnings between $0.07 and $0.11 per share.
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 800-218-0204 or +1 303-262-2140. A 48-hour replay will be available by calling 800-405-2236 or +1 303-590-3000 (Reservation No. 11050135). 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 2006. 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 accuracy of customers’ forecasts; success of customers’ programs; timing of new programs; success of new-product introductions; 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 EARNINGS
(In thousands, except per share amounts)
(Unaudited)
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| | | Second Quarters Ended
| | | Six Months Ended
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| | | December 31
2005
| | | January 1
2005
| | | December 31
2005
| | January 1
2005
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Net sales | | $ | 45,360 | | | $ | 51,226 | | | $ | 89,610 | | $ | 100,000 | |
Cost of sales | | | 41,260 | | | | 47,235 | | | $ | 81,658 | | | 92,461 | |
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Gross profit on sales | | | 4,100 | | | | 3,991 | | | | 7,952 | | | 7,539 | |
Operating expenses: | | | | | | | | | | | | | | | |
Research, development and engineering | | | 670 | | | | 708 | | | | 1,332 | | | 1,413 | |
Selling | | | 490 | | | | 528 | | | | 1,058 | | | 1,022 | |
General and administrative | | | 1,654 | | | | 1,848 | | | | 3,306 | | | 3,516 | |
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Total operating expenses | | | 2,814 | | | | 3,084 | | | | 5,696 | | | 5,951 | |
Operating income | | | 1,286 | | | | 907 | | | | 2,256 | | | 1,588 | |
Interest expense | | | 275 | | | | 308 | | | | 536 | | | 607 | |
Other (income) expense | | | — | | | | (11 | ) | | | — | | | (13 | ) |
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Income before income taxes | | | 1,011 | | | | 610 | | | | 1,720 | | | 994 | |
Income tax provision (benefit) | | | (7 | ) | | | 120 | | | | — | | | 238 | |
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Net income | | $ | 1,018 | | | $ | 490 | | | $ | 1,720 | | $ | 756 | |
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Earnings per share: | | | | | | | | | | | | | | | |
Earnings per common share - basic | | $ | 0.10 | | | $ | 0.05 | | | $ | 0.18 | | $ | 0.08 | |
Weighted average shares O/S - basic | | | 9,703 | | | | 9,681 | | | | 9,700 | | | 9,679 | |
Earnings per common share - diluted | | $ | 0.10 | | | $ | 0.05 | | | $ | 0.17 | | $ | 0.08 | |
Weighted average shares O/S - diluted | | | 10,022 | | | | 9,966 | | | | 10,086 | | | 9,942 | |
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
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| | | December 31
2005
| | | July 2
2005
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ASSETS | | | | | | | | |
Current Assets: | | | | | | | | |
Cash and cash equivalents | | $ | 2,120 | | | $ | 1,463 | |
Trade receivables - net | | | 19,878 | | | | 24,191 | |
Inventories | | | 28,849 | | | | 29,712 | |
Other | | | 2,993 | | | | 3,482 | |
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Total current assets | | | 53,840 | | | | 58,848 | |
Property, plant and equipment, net | | | 10,449 | | | | 10,011 | |
Other Assets: | | | | | | | | |
Restricted cash | | | 933 | | | | 1,158 | |
Real estate | | | 1,693 | | | | 1,693 | |
Other - net | | | 734 | | | | 426 | |
Goodwill | | | 765 | | | | 765 | |
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Total other assets | | | 4,125 | | | | 4,042 | |
Total Assets | | $ | 68,414 | | | $ | 72,901 | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
Current Liabilities: | | | | | | | | |
Current portion of long term obligations | | $ | 690 | | | $ | 735 | |
Accounts payable | | | 20,362 | | | | 25,475 | |
Accrued compensation and vacation | | | 3,483 | | | | 5,241 | |
Litigation settlement | | | — | | | | 812 | |
Other | | | 3,394 | | | | 3,579 | |
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Total current liabilities | | | 27,929 | | | | 35,842 | |
Long-Term Liabilities: | | | | | | | | |
Revolving loan | | | 9,210 | | | | 7,412 | |
Other | | | 1,865 | | | | 2,008 | |
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Total long-term liabilities | | | 11,075 | | | | 9,420 | |
Shareholders’ Equity: | | | | | | | | |
Common stock, no par value, authorized 25,000 shares; issued and outstanding 9,703 and 9,694 shares | | | 38,477 | | | | 38,426 | |
Retained deficit | | | (9,067 | ) | | | (10,787 | ) |
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Total shareholders’ equity | | | 29,410 | | | | 27,639 | |
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Total Liabilities and Shareholders’ Equity | | $ | 68,414 | | | $ | 72,901 | |
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