Key Tronic (KTCC) 8-K Strong Growth in Revenue Contribution from New Customer Programs

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

CONTACTS: Ron Klawitter Chief Financial Officer Key Tronic Corporation (509) 927-5295 Michael Newman Investor Relations StreetConnect (206) 729-3625

KEY TRONIC CORPORATION ANNOUNCES

THIRD QUARTER RESULTS

Strong Growth in Revenue Contribution from New Customer Programs

Spokane, WA — May 1, 2007 — Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services (EMS), today announced its results for the quarter ended March 31, 2007.

For the third quarter of fiscal 2007, Key Tronic reported total revenue of $47.2 million, up 4% from $45.6 million in the third quarter of fiscal 2006. For the first nine months of fiscal 2007, total revenue was $152.6 million, up 13% from $135.2 million in the same period of fiscal 2006.

Net income for the third quarter of fiscal 2007 was $0.7 million or $0.07 per diluted share, compared to $0.9 million or $0.09 per diluted share for the third quarter of fiscal 2006. For the first nine months of fiscal 2007, net income was $2.5 million or $0.24 per diluted share, compared to $2.6 million or $0.26 per diluted share in the same period of fiscal 2006.

“Two new customer programs, which went into initial production in the second quarter of 2007, continued to ramp up, adding $3 million to our revenue during the third quarter,” said Jack Oehlke, President and Chief Executive Officer. “In the fourth quarter, we expect to start production on four additional new programs.”

“We continue to actively pursue promising and larger opportunities with both existing and new customers. In preparation for future growth, our new SMT production facility at our Spokane Valley headquarters is now operational and will provide rapid response, new product introduction process, prototype production, low-volume and highly specialized PCB assembly for programs that require domestic sourcing. In addition, we currently expect to complete the pending sale of our facility in Las Cruces, New Mexico by the end of fourth quarter.”

Business Outlook

In the fourth quarter of fiscal 2007, the Company expects revenue in the range of $45 million to $49 million, with earnings in the range of $0.07 to $0.11 per share, excluding the anticipated gain from the sale of the Las Cruces facility. Assuming the transaction is completed, it is expected to contribute approximately $2.7 million of cash, net of related transaction expenses.

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 atwww.keytronic.com under “Investor Relations” or by calling 800-218-0204 or +1 303-262-2143. A 48-hour replay will be available by calling 800-405-2236 or +1 303-590-3000 (Reservation No. 11085619). 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 2007. 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; 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 EARNINGS

(In thousands, except per share amounts)

(Unaudited)

	Third Quarters Ended					Nine Months Ended
	March 31 2007			April 1 2006		March 31 2007		April 1 2006
Net sales	$	47,212		$	45,567	$	152,553	$	135,177
Cost of sales		43,492			41,590	$	139,338		123,248
Gross profit on sales		3,720			3,977		13,215		11,929
Operating expenses:
Research, development and engineering		709			698		2,467		2,030
Selling		356			529		1,339		1,587
General and administrative		1,581			1,559		5,771		4,865
Total operating expenses		2,646			2,786		9,577		8,482
Operating income		1,074			1,191		3,638		3,447
Interest expense		351			274		1,065		810
Other (income) expense		—			—		—		—
Income before income taxes		723			917		2,573		2,637
Income tax provision (benefit)		(19	)		—		67		—
Net income	$	742		$	917	$	2,506	$	2,637
Earnings per share:
Earnings per common share—basic	$	0.07		$	0.09	$	0.25	$	0.27
Weighted average shares O/S—basic		9,915			9,705		9,891		9,701
Earnings per common share—diluted	$	0.07		$	0.09	$	0.24	$	0.26
Weighted average shares O/S—diluted		10,272			10,064		10,364		9,922

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	March 31 2007		July 1 2006
ASSETS
Current Assets:
Cash and cash equivalents	$	1,157	$	2,428
Trade receivables—net		26,174		29,003
Inventories		35,300		36,338
Real estate held for sale		1,698		—
Other		4,783		3,416
Total current assets		69,112		71,185
Property, plant and equipment, net		11,110		9,807
Other Assets:
Restricted cash		1,571		874
Real estate		—		1,698
Deferred income tax asset—net		3,500		3,500
Other—net		786		866
Goodwill		765		765
Total other assets		6,622		7,703
Total Assets	$	86,844	$	88,695
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	22,016	$	31,228
Accrued compensation and vacation		2,562		4,477
Current portion of long term obligations		740		689
Other		2,145		3,088
Total current liabilities		27,463		39,482
Long-Term Liabilities:
Revolving loan		17,388		10,069
Other		1,489		1,596
Total long-term liabilities		18,877		11,665
Shareholders’ Equity:
Common stock, no par value, authorized 25,000 shares; issued and outstanding 9,915 and 9,750 shares		39,032		38,582
Retained earnings (deficit)		1,472		(1,034	)
Total shareholders’ equity		40,504		37,548
Total Liabilities and Shareholders’ Equity	$	86,844	$	88,695