Key Tronic Corporation (NASDAQ:KTCC) Q2 2021 Earnings Conference Call January 26, 2021 5:00 PM ET Company Participants Brett Larsen - Chief Financial Officer Craig Gates - President & Chief Executive Officer Conference Call Participants Bill Dezellem - Tieton Capital George Melas - MKH Management Scott Bundy - Moors & Cabot Operator Good day and welcome to the Q2 Fiscal Year 2021 Key Tronic Corporation Conference Call. Today's conference is being recorded. At this time, IÂ'd like to turn the conference over ...

Part I: Financial Information [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q3 2020 financials show increased assets and liabilities, with net sales up 17% to $123.2 million and net income of $1.7 million [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 26, 2020, total assets increased to $317.8 million, total liabilities rose to $199.2 million, and shareholders' equity reached $118.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | September 26, 2020 | June 27, 2020 | | :--- | :--- | :--- | | **Total current assets** | $256,065 | $242,764 | | **Total assets** | $317,812 | $304,861 | | **Total current liabilities** | $101,650 | $112,219 | | **Revolving loan** | $80,414 | $60,094 | | **Total liabilities** | $199,205 | $189,304 | | **Total shareholders' equity** | $118,607 | $115,557 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net sales for Q1 FY2021 increased 17.0% to $123.2 million, resulting in a net income of $1.7 million or $0.16 per diluted share Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 26, 2020 | Three Months Ended Sep 28, 2019 | | :--- | :--- | :--- | | **Net sales** | $123,207 | $105,285 | | **Gross profit** | $10,015 | $9,273 | | **Operating income** | $2,796 | $2,539 | | **Net income** | $1,719 | $1,552 | | **Net income per share — Diluted** | $0.16 | $0.14 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY2021 saw $9.4 million cash used in operations, $3.2 million in investing, and $13.5 million provided by financing activities Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Sep 26, 2020 | Three Months Ended Sep 28, 2019 | | :--- | :--- | :--- | | **Cash used in operating activities** | $(9,439) | $(10,313) | | **Cash used in investing activities** | $(3,186) | $(1,271) | | **Cash provided by financing activities** | $13,543 | $11,487 | | **Net increase (decrease) in cash** | $918 | $(97) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail COVID-19 risks, a new $93 million Bank of America loan, 'over-time' revenue recognition, and foreign currency hedging - The company has identified significant risks and uncertainties related to the **COVID-19 pandemic**, which could materially impact operating results through shifts in customer demand, supply chain disruptions, and increased costs[25](index=25&type=chunk) - On August 14, 2020, the Company entered into a new five-year, **$93 million asset-based senior secured revolving credit facility with Bank of America**, with **$80.7 million outstanding** and **$12.3 million available** as of September 26, 2020[37](index=37&type=chunk) - The majority of the company's revenue is recognized **'over-time'** using a **cost-to-cost method**, due to products having no alternative use and enforceable payment rights[70](index=70&type=chunk) - The company uses **foreign currency forward contracts** to hedge Mexican peso fluctuations, with **$30.0 million notional outstanding** as of September 26, 2020, and terminated interest rate swaps in August 2020[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 FY2021 revenue growth of 17% to $123.2 million, gross margin decline due to COVID-19 costs, and increased backlog to $201.9 million [Executive Summary](index=18&type=section&id=Executive%20Summary) Q1 FY2021 revenue grew 17% to $123.2 million, but gross margin declined to 8.1% due to COVID-19 costs, with new program wins - Revenue for Q1 fiscal 2021 was **$123.2 million**, a **17% increase** from $105.3 million in the prior-year period[83](index=83&type=chunk) - Gross margin decreased to **8.1% from 8.8%** year-over-year, primarily due to additional costs from the **COVID-19 crisis**[86](index=86&type=chunk) - New program wins included products for **audio/video editing, indoor air quality, utility meters, warehouse management, and automation**[83](index=83&type=chunk)[89](index=89&type=chunk) [Results of Operations](index=20&type=section&id=RESULTS%20OF%20OPERATIONS) Q1 FY2021 net sales increased 17.0% to $123.2 million, but gross profit margin declined to 8.1% due to COVID-19 costs, and the effective tax rate rose to 18.7% Comparison of Operations (in thousands) | Metric | Q1 FY2021 | Q1 FY2020 | $ Change | % Point Change (of Net Sales) | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $123,207 | $105,285 | $17,922 | — | | **Gross profit** | $10,015 | $9,273 | $742 | (0.7)% | | **Operating income** | $2,796 | $2,539 | $257 | (0.1)% | | **Net income** | $1,719 | $1,552 | $167 | (0.1)% | - The **$17.9 million increase in net sales** was driven by higher demand for new and current programs, partially constrained by **COVID-19 related labor shortages in Juarez**[99](index=99&type=chunk) - The effective tax rate increased to **18.7% from 15.1%**, primarily due to reduced federal research and development tax credits[107](index=107&type=chunk) [Backlog](index=21&type=section&id=BACKLOG) Order backlog significantly increased to approximately $201.9 million as of September 26, 2020, driven by COVID-19 related demand Order Backlog Comparison | Date | Backlog Amount | | :--- | :--- | | September 26, 2020 | ~$201.9 million | | September 28, 2019 | ~$159.9 million | - The increase in backlog was related to the **COVID-19 pandemic's effect on customer demand**, particularly for home-consumer products, healthcare, and home exercise equipment[108](index=108&type=chunk) [Capital Resources and Liquidity](index=22&type=section&id=CAPITAL%20RESOURCES%20AND%20LIQUIDITY) Net cash used in operations was $9.4 million, driven by increased receivables and inventory, with $12.3 million available on the credit facility - Net cash used in operating activities was **$9.4 million**, compared to $10.3 million in the prior-year period[110](index=110&type=chunk) - The company did not factor any accounts receivable in Q1 2021, unlike **$17.8 million factored in Q1 2020**, contributing to the increased accounts receivable balance[111](index=111&type=chunk)[113](index=113&type=chunk) - As of September 26, 2020, the company had approximately **$12.3 million available** under its asset-based revolving credit facility[117](index=117&type=chunk) [Risks and Uncertainties](index=23&type=section&id=RISKS%20AND%20UNCERTAINTIES%20THAT%20MAY%20AFFECT%20FUTURE%20RESULTS) Key risks include COVID-19 impacts, foreign operations challenges, customer/supplier concentration, and demand volatility affecting quarterly results - The **COVID-19 pandemic** presents significant risks, including shifts in customer demand, facility closures, labor constraints, and supply chain disruptions[126](index=126&type=chunk)[128](index=128&type=chunk) - Operations in **Mexico, China, and Vietnam** are subject to risks like political/economic instability, regulatory changes, trade barriers, and natural disasters[121](index=121&type=chunk)[125](index=125&type=chunk) - A majority of sales come from a **small number of customers**, and loss of orders could adversely affect business due to non-long-term contracts[129](index=129&type=chunk)[130](index=130&type=chunk) - Dependence on a **limited number of suppliers** for critical components creates risk of operational interruptions from shortages or price increases[131](index=131&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from fluctuating interest rates on its debt and foreign currency exchange rates, mitigated by forward contracts - The company is exposed to **interest rate risk** from its asset-based senior revolving credit facility, with **$80.7 million outstanding** as of September 26, 2020, subject to LIBOR fluctuations[160](index=160&type=chunk) - The company faces **foreign currency exchange risk** from operations in Mexico, China, and Vietnam, using **Mexican peso forward contracts** totaling **$30.0 million outstanding** to hedge expenses[161](index=161&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 26, 2020, with no significant changes in internal controls - Management, including the CEO and CFO, concluded that disclosure controls and procedures are **effective** as of the reporting period end[162](index=162&type=chunk) - No **significant changes** were made to the company's internal control over financial reporting during the quarter[164](index=164&type=chunk) Part II: Other Information [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course legal actions, which management expects will not materially affect financial position - The company is involved in various legal actions arising in the ordinary course of business, which management does not expect to have a **material adverse effect** on its financial condition[166](index=166&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended June 27, 2020 - There are **no material changes** to the risk factors set forth in the Company's Annual Report on Form 10-K for the year ended June 27, 2020[167](index=167&type=chunk) [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed include **CEO and CFO certifications** pursuant to Exchange Act Rules and 18 U.S.C. 1350, along with **XBRL Interactive Data Files**[168](index=168&type=chunk)

Key Tronic Corporation (NASDAQ:KTCC) Q1 2021 Earnings Conference Call October 27, 2020 5:00 PM ET Company Participants Craig Gates - President and Chief Executive Officer Brett Larsen - Chief Financial Officer Conference Call Participants Bill Dezellem - Tieton Capital Management Operator Good day and welcome to the Q1 Fiscal 2021 Key Tronic Corporation Conference Call. This conference is being recorded. At this time, I would like to hand things over to Brett Larsen. Please go ahead, sir. Brett Larsen Good ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-K ____________________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 27, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD FROM TO Commission File Number 0-11559 _________________________________ ...

Key Tronic Corporation (NASDAQ:KTCC) Q4 2020 Earnings Conference Call August 4, 2020 5:00 PM ET Company Participants Craig Gates - President and Chief Executive Officer Brett Larsen - Chief Financial Officer Conference Call Participants Bill Dezellem - Tieton Orin Hirschman - AIG Investment Partners Sheldon Grodsky - Grodsky Associates Mike Hughes - SGF Capita George Melas - MKH Management Operator Good day and welcome to the Key Tronic Q4 Fiscal 2020 Conference Call. Today’s conference is being recorded. A ...

Financial Performance - Total revenue for the third quarter of fiscal year 2020 was $111.5 million, a 3.2% increase from $108.0 million in the same period of fiscal year 2019[103][122]. - Gross profit as a percentage of net sales increased to 8.3% for the third quarter of fiscal year 2020, up from 6.3% in the same quarter of the prior fiscal year, primarily due to increased revenue and streamlining efforts[106][123]. - Operating income for the third quarter of fiscal year 2020 was 1.6% of net sales, compared to a loss of (11.6)% in the same quarter of fiscal year 2019, with a significant improvement attributed to increased revenues[107][121]. - Net income for the third quarter of fiscal year 2020 was $0.9 million or $0.08 per share, compared to a net loss of $(12.0) million or $(1.11) per share in the same quarter of fiscal year 2019[108][121]. - Net sales for the nine months ended March 28, 2020, were $333.5 million, a decrease of 7.0% compared to $358.5 million for the same period in 2019, primarily due to supply chain disruptions caused by COVID-19[132]. - Gross profit margin increased to 8.0% for the nine months ended March 28, 2020, up from 7.3% in the prior year, attributed to streamlining efforts in the Company's facilities[133]. - Operating income for the nine months ended March 28, 2020, was $5.8 million, compared to a loss of $7.4 million in the same period of 2019, reflecting a $13.2 million improvement[131]. Expenses - Research, development, and engineering expenses were $1.7 million, or 1.6% of net sales, for the three months ended March 28, 2020, compared to $1.4 million, or 1.3% of net sales, for the same period in the prior year[126]. - Selling, general, and administrative expenses were $5.7 million, or 5.1% of net sales, for the three months ended March 28, 2020, compared to $5.5 million, or 5.1% of net sales, for the same period in the prior year[127]. - Total research, development, and engineering expenses were $5.1 million for the nine months ended March 28, 2020, compared to $5.0 million in the prior year, maintaining 1.5% of net sales[135]. - Total selling, general and administrative expenses were $15.7 million for the nine months ended March 28, 2020, slightly down from $16.2 million in the prior year, with SG&A as a percentage of net sales increasing to 4.7%[136]. - Interest expense decreased to $2.0 million for the nine months ended March 28, 2020, from $2.1 million in the same period of 2019, reflecting a decrease in the average balance outstanding on the line of credit[137]. Customer and Market Dynamics - The concentration of net sales from the top three customers decreased to 34.7% in the third quarter of fiscal year 2020 from 39.1% in the same period of the prior fiscal year[104]. - The company has seen shifts in demand due to COVID-19, with increased demand for home-consumer products and healthcare equipment, while demand from the gaming industry has decreased significantly[111]. - The order backlog as of March 28, 2020, was approximately $208.1 million, up from $151.5 million on March 30, 2019, driven by increased demand for home-consumer products and healthcare[140]. Financial Position - The company maintains a strong balance sheet with a current ratio of 2.3 and a debt to equity ratio of 0.6 as of March 28, 2020[115]. - Net cash used in operating activities for the nine months ended March 28, 2020, was $32.1 million, compared to net cash provided of $3.4 million in the same period of the prior year[141]. - Cash provided by financing activities was $33.6 million during the nine months ended March 28, 2020, compared to cash used of $2.5 million in the same period of the previous fiscal year[147]. - The company has $57.2 million in borrowings under its revolving credit facility, $11.7 million on its term loan, and $1.1 million on its equipment term loan as of March 28, 2020[189]. - The company has $43.0 million in foreign currency forward contracts to hedge against exchange rate fluctuations, with a fair value of $(2.4) million as of March 28, 2020[190]. Risks and Challenges - The company is experiencing fluctuations in operating results due to changes in customer demand, which can lead to unexpected increases in inventory or accounts receivable[153]. - A significant portion of sales is concentrated among a small number of customers, and a decline in orders from these customers could adversely affect the business[158]. - The company relies on a limited number of suppliers for critical components, and shortages or price increases could disrupt operations and negatively impact financial results[160]. - Economic conditions, including inflation and recession, could adversely impact customer demand and, consequently, the company's sales[156]. - The company faces risks related to currency exchange fluctuations, particularly with operations in Mexico and China, which could increase operating costs[167]. - Start-up costs and inefficiencies associated with new programs may adversely affect operating results if these programs do not meet expected sales volumes[171]. - The company is exposed to interest rate risk under its revolving line of credit and term loan, which could adversely affect financial condition if rates change significantly[174]. - Compliance with environmental regulations is critical, as failure to comply could result in significant expenses and operational disruptions[175]. - The company has implemented health and safety measures in response to COVID-19 to protect employees and comply with regulations[176]. - The stock price is subject to volatility, influenced by factors such as quarterly operating results and broader market conditions[177]. - The company faces potential liability claims if manufacturing processes do not comply with regulatory requirements, which could lead to reduced customer orders and damage to business reputation[180]. - Increased energy prices could raise raw material and transportation costs, potentially impacting profitability if product prices cannot be adjusted accordingly[181]. - The company is involved in various legal proceedings that may require significant financial resources to address, potentially affecting financial conditions and operations[183]. - Insurance coverage may not be sufficient for potential damages or claims, which could negatively impact net income if significant losses occur[184]. - Compliance with the Sarbanes-Oxley and Dodd-Frank Acts has increased legal, financial, and accounting costs, with ongoing costs expected indefinitely[185]. - Acquisitions may require additional equity or debt financing, potentially diluting existing shareholders or affecting credit ratings[186]. - Integration of acquired businesses may face complications, diverting management's attention and potentially increasing expenses[187]. - Changes in financial accounting standards could significantly affect reported financial results and increase implementation costs[188].

Key Tronic Corporation (NASDAQ:KTCC) Q3 2020 Results Conference Call April 28, 2020 5:00 PM ET Company Participants Brett Larsen - CFO Craig Gates - President and CEO Conference Call Participants Bill Dezellem - Tieton Capital Mike Hughes - SGF Capital Bill Dezellem - Tieton Capital Mike Hughes - SGF Capital Operator Good day and welcome to the Third Quarter Fiscal Year 2020 Key Tronic Corporation Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over t ...

Financial Performance - Total revenue for the second quarter of fiscal year 2020 was $116.7 million, a decrease of 5.1% compared to $123.0 million in the same period of fiscal year 2019[92][109]. - Gross profit as a percentage of net sales was 7.0% for the second quarter of fiscal year 2020, down from 8.0% in the same quarter of the prior fiscal year, primarily due to increased factory spending[95][110]. - Operating income as a percentage of net sales decreased to 1.3% in the second quarter of fiscal year 2020 from 2.1% in the same quarter of fiscal year 2019[96]. - Net income for the second quarter of fiscal year 2020 was $0.8 million, or $0.08 per share, compared to $1.6 million, or $0.15 per share, in the same quarter of fiscal year 2019[97]. - Net sales for the six months ended December 28, 2019 were $222.0 million, a decrease of 11.4% from $250.5 million for the same period in 2018, primarily due to production delays caused by increased demand for sheet metals[119]. - Operating income for the six months ended December 28, 2019 was $4.0 million, down from $5.2 million in the same period of 2018, reflecting a decrease of 22%[119]. Expenses and Costs - Research, development, and engineering expenses were $1.7 million for the three months ended December 28, 2019, consistent with 1.5% of net sales[113]. - Selling, general, and administrative expenses decreased to $4.9 million, or 4.2% of net sales, for the three months ended December 28, 2019, down from 4.4% in the same period of the prior year[114]. - Interest expense decreased to $0.5 million for the three months ended December 28, 2019, compared to $0.7 million in the same period of the prior year[115]. - Total operating expenses decreased to $13.4 million, representing 6.0% of net sales, compared to $14.2 million or 5.7% of net sales in the prior year[123]. - Gross profit margin for the six months ended December 28, 2019 was 7.8%, slightly up from 7.7% in the prior year, with a decrease in overhead costs partially offset by increased material costs[120]. Cash Flow and Financing - Total cash used in operating activities for the six months ended December 28, 2019, was $8.4 million, with $32.0 million in borrowings on a $55.0 million revolving line of credit[101]. - Net cash used in operating activities was $8.4 million for the six months ended December 28, 2019, compared to $5.1 million in the prior year, primarily due to increased inventory and accounts receivable[128][129]. - Cash used in investing activities increased to $2.0 million for the six months ended December 28, 2019, up from $0.3 million in the same period of 2018, mainly for equipment purchases[132]. - Cash provided by financing activities was $10.3 million for the six months ended December 28, 2019, compared to $5.2 million in the same period of the previous fiscal year, driven by borrowings under the revolving line of credit[134]. - The company had approximately $22.6 million available under the revolving line of credit facility as of December 28, 2019, an increase from $20.2 million available the previous year[135]. - The company has $32.0 million in borrowings under its revolving credit facility, $13.3 million on its term loan, and $1.3 million on its equipment term loan as of December 28, 2019[178]. Market and Operational Risks - The concentration of net sales from the top three customers increased to 37.0% in the second quarter of fiscal year 2020 from 36.6% in the same period of the prior fiscal year[93]. - The company is dependent on a limited number of suppliers for critical components, which may lead to operational interruptions if shortages or price increases occur[147]. - Recent supply shortages in electronic components have been exacerbated by the coronavirus outbreak in China, potentially causing production delays[148]. - The company operates in a highly competitive EMS industry, where competitors may offer lower prices, impacting margins and market share[149]. - The company faces risks related to political and economic instability in manufacturing locations, which could affect shipping and production capabilities[152]. - Fluctuations in foreign currency exchange rates, particularly with the Mexican peso and Chinese renminbi, could increase operating costs[155]. - The company relies on key personnel for success, and the loss of such employees could adversely affect operations and financial condition[156]. - Start-up costs and inefficiencies related to new programs may negatively impact gross margins and operating results if these programs do not meet expected sales volumes[158]. - Changes in customer production timing and demand schedules complicate production scheduling and resource allocation, potentially leading to excess inventory[159]. - Increased energy prices could raise raw material and transportation costs, impacting profitability if product prices cannot be adjusted accordingly[168]. Regulatory and Compliance Issues - Compliance with the Sarbanes-Oxley Act and Dodd-Frank Act has increased legal, financial, and accounting costs, with expectations of continued cost increases indefinitely[173]. - Current and future acquisitions may require additional equity or debt financing, potentially diluting existing shareholders or affecting credit ratings[174]. - Integration of acquired businesses may face complications, including management distraction and significant restructuring charges, impacting return on invested capital[175]. - Changes in financial accounting standards may adversely affect reported financial results and increase implementation costs[176]. - The company has $25.8 million in foreign currency forward contracts to hedge against fluctuations, with a fair value of $3.1 million as of December 28, 2019[179].

Key Tronic Corporation (NASDAQ:KTCC) Q2 2020 Earnings Conference Call February 4, 2020 5:00 PM ET Company Participants Brett Larsen - CFO Craig Gates - President and CEO Conference Call Participants William Dezellem - Tieton Capital Michael Hughes - SGF Capital George Melas - MKH Management Operator Good day and welcome to the Q2 Fiscal 2020 Key Tronic Corporation Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brett Larsen. Please go ahead, s ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD FROM TO . Commission File Number 0-11559 ____________________________________________________________ Washington, D.C. 20549 ____________________________________________________________ KEY TRONIC CORPORATION (Exact name of registrant as specified in its charter) ____________________________________________________________ Washington 91-0849125 FORM 10 ...