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Key Tronic Corporation (KTCC) Reports Fourth Quarter Earnings Well Above Guidance

Key Tronic Corporation (KTCC), a provider of electronic manufacturing services (EMS) to original equipment manufacturers (OEMs), reported fourth quarter and fiscal 2008 year-end financial results this afternoon after the closing bell. Revenues rose 17% for the quarter to $57.3 million, compared to $49.2 million in Q4 2007. Net income for the quarter was $2.6 million, or 25 cents per share, compared to $2.7 million, or 26 cents per share, in the prior year.

Last year’s Q4 net income included a gain of $1.5 million, or 14 cents per share, on the sale of a facility. On a comparable basis, excluding the one-time gain, operational net income increased 117% in the fourth quarter. On April 29, 2008, the company guided for Q4 earnings of 10-15 cents per share on $50-$54 million in revenues. For fiscal 2008, the company earned $5.6 million, or 54 cents per share fully diluted, on revenues of $204.1 million. In fiscal 2007, Key Tronic earned 51 cents per diluted share on $201.7 million.

“We are pleased with our performance for the fourth quarter and for the year,” said Jack Oehlke, President and Chief Executive Officer. “Our year-over-year revenue growth was driven by increased demand from new customer programs, which continue to ramp up. For the fourth quarter and for the year, we achieved the highest revenue since implementing our EMS strategy. In the fourth quarter, we saw very strong year-over-year revenue growth and the strongest gross margins we’ve seen in many years.

“During the fourth quarter, we continued to diversify our customer portfolio across a wide range of industries, winning new customers involved in telecommunications, industrial equipment, fuel cell technology and consumer products. While the industry confronts the challenging economic environment, our sustained investment in our world-class facilities in Mexico provides us with strong competitive advantages in a time of rising labor, fuel and transportation costs. We believe Key Tronic is increasingly well-positioned to pursue and win new opportunities for profitable growth in fiscal 2009 and beyond.”

The company issued tepid guidance for the first quarter of fiscal 2009, with revenues expected in a range of $45 – $48 million, and earnings per share of $0.02 – $0.05. Shares of KTCC closed at $3.73 today and have traded in a 52-week range of $2.05 – $4.99. With 10.2 million shares outstanding, KTCC has a market cap of $38 million and trades at a steep discount to book value of $49.1 million, or approximately $4.81 per share. Excluding $765,000 in goodwill, KTCC has a tangible book value of $48.3 million. Shares are trading 5% lower after hours at $3.55 on light volume.

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