SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1994 Commission File Number
Number 0-11559
KEY TRONIC CORPORATION
Washington 91-0849125
(State of Incorporation) (I.R.S. Employer
Identification No.)
----------------------
North 4424 Sullivan
Spokane, Washington 99216
(509) 928-8000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
At January 17, 1995, 8,343,621 shares of Common Stock, no par value (the
only class of common stock), were outstanding.
KEY TRONIC CORPORATION
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Independent Accountants Review Report 3
Consolidated Balance Sheets - December 31, 1994
and July 2, 1994 4-5
Consolidated Statements of Income - Second Quarter
Ended December 31, 1994 and January 1, 1994 6
Consolidated Statements of Income - Two Quarters 7
Ended December 31, 1994 and January 1, 1994
Consolidated Statements of Cash Flows - Two Quarters
Ended December 31, 1994 and January 1, 1994 8
Notes to Consolidated Financial Statements 9-11
Item 2. Management's Discussion and Analysis of the Financial
Condition and Results of Operations 12-14
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Events 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Shareholders
Key Tronic Corporation
We have reviewed the accompanying consolidated balance sheet of Key Tronic
Corporation (the Corporation) and subsidiaries as of December 31, 1994, and the
related consolidated statements of operations for the three month and six months
ended December 31, 1994 and January 1, 1994, and cash flows for the six month
periods ended December 31, 1994 and January 1, 1994. These financial statements
are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Key Tronic Corporation and
subsidiaries as of July 2, 1994, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated August 24, 1994, we expressed an
unqualified opinion on those consolidated financial statements.
/s/ Deloitte & Touche LLP
January 27, 1995
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, July 2,
1994 1994
------------ --------
(Unaudited) (Audited)
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,417 $ 4,996
Trade receivables, less allowance for
doubtful accounts of $1,225 and $1,539 27,066 25,435
Inventories (Note 2) 24,874 21,787
Real estate held for sale 2,339 2,339
Deferred income tax asset - current 2,663 2,940
Other 3,510 1,838
------------ --------
Total current assets 62,869 59,335
Property, plant and equipment - at cost 84,912 82,348
Less accumulated depreciation 51,597 47,579
------------ --------
Total property, plant and equipment 33,315 34,769
Other Assets:
Deferred income tax asset - non-current 5,483 5,810
Goodwill 1,722 1,760
Other 1,398 254
------------ --------
Total other assets 8,603 7,824
------------ --------
$ 104,787 $101,928
============ ========
See accompanying notes to consolidated financial statements.
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
December 31, July 2,
1994 1994
------------ --------
(Unaudited) (Audited)
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations $ 2,609 $ 4,721
Accounts payable 16,603 17,159
Employee compensation and accrued vacation 3,503 2,929
Taxes other than income tax 1,551 1,496
Commissions payable 373 339
Other 4,666 5,076
------------ --------
Total current liabilities 29,305 31,720
------------ --------
Long-term obligations, less current portion
above 28,826 25,696
------------ --------
Commitments and Contingencies (Note 3)
Shareholders' Equity:
Common stock, no par value, authorized
25,000 shares; issued and outstanding
8,339 and 8,271 shares 36,693 36,251
Retained earnings 9,497 8,320
Foreign currency translation adjustment 466 (59)
------------ --------
Total shareholders' equity 46,656 44,512
------------ --------
$ 104,787 $101,928
============ ========
See accompanying notes to consolidated financial statements.
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Second Quarter Ended
December 31, January 1,
1994 1994
------------ ----------
(in thousands, except per share amounts)
Net sales $ 48,748 $ 41,262
Cost of sales (including warranty
provision of $296 and $250) 41,188 36,708
------------ ----------
Gross profit on sales 7,560 4,554
Operating Expenses:
Research, development and engineering 1,454 1,636
Selling 1,381 2,146
General and administrative (including
provision for doubtful accounts receivable
of $161 and $124) 2,597 2,681
------------ ----------
Operating income (loss) 2,128 (1,909)
Net interest expense & other
(includes interest income of $22 and $27) (806) (436)
------------ ----------
Income (loss) before federal taxes on income 1,322 (2,345)
Provision (benefit) for income taxes 473 (42)
------------ ----------
Net income $ 849 $ (2,303)
============ ==========
Earnings Per Share (See exhibit 11):
Net income (loss) per weighted average
share $ .10 $ (0.28)
------------ ----------
Primary earnings per common share N.A. N.A.
------------ ----------
Fully diluted earnings per common share N.A. N.A.
------------ ----------
Weighted average shares outstanding 8,314 8,255
------------ ----------
Primary shares outstanding N.A. N.A.
------------ ----------
Fully diluted shares outstanding N.A. N.A.
------------ ----------
See accompanying notes to consolidated financial statements.
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Two Quarters Ended
December 31, January 1,
1994 1994
------------ ----------
(in thousands, except per share amounts)
Net sales $ 94,184 $ 77,332
Cost of sales (including warranty
provision of $489 and $384) 80,281 68,244
------------ ----------
Gross profit on sales 13,903 9,088
Operating Expenses:
Research, development and engineering 2,779 2,927
Selling 2,607 3,983
General and administrative (including
provision for doubtful accounts receivable
of $345 and $218) 5,194 5,346
------------ ----------
Operating income (loss) 3,323 (3,168)
Net interest expense & other
(includes interest income of $43 and $62) (1,467) (747)
------------ ----------
Income (loss) before federal taxes on income 1,856 (3,915)
Provision for income taxes 679 29
------------ ----------
Earnings (loss) before cumulative effect of
change in accounting 1,177 (3,944)
Cumulative effect to July 4, 1993, of change
in accounting for income taxes (Note 5) 0 8,750
------------ ----------
Net income $ 1,177 $ 4,806
============ ==========
Earnings (Loss) Per Share (See exhibit 11):
Before cumulative effect of change in
accounting N.A. $ (.48)
============ ==========
Net income per weighted average share $ .14 N.A.
============ ==========
Primary earnings per common share net of
cumulative effect to July 4, 1993 of
change in accounting for income taxes N.A. $ .55
============ ==========
Fully diluted earnings per common share
net of cumulative effect to July 4, 1993
of change in accounting for income taxes N.A. $ .55
============ ==========
Weighted average shares outstanding 8,294 N.A.
============ ==========
Primary shares outstanding N.A. 9,244
============ ==========
Fully diluted shares outstanding N.A. 9,244
============ ==========
See accompanying notes to consolidated financial statements.
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Two Quarters Ended
December 31, January 1,
1994 1994
------------ ----------
(in thousands)
Cash Flows from Operating Activities:
Net income $ 1,177 $ 4,806
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Depreciation and amortization 4,287 4,100
Gain on disposal of property and equipment (92) (5)
Cumulative effect of change in accounting
for income taxes (Note 5) 0 (8,750)
Changes in Operating Assets and Liabilities:
Trade receivables (1,631) (349)
Inventories (3,087) 1,958
Deferred income tax asset 604
Other assets (1,700) 807
Accounts payable (556) 1,158
Employee compensation and accrued vacation 574 30
Taxes other than income tax 55 (472)
Commissions payable 34 (169)
Other current liabilities (410) (2,618)
------------ ----------
Cash provided by (used in) operating
activities (745) 496
------------ ----------
Cash Flows from Investing Activities:
Assets acquired in acquisition (Note 1) 0 (39,719)
Liabilities assumed in acquisition (Note 1) 0 17,719
Proceeds from sale of property and equip. 238 5
Purchase of property and equipment (2,874) (3,480)
------------ ----------
Cash used in investing activities (2,636) (25,475)
------------ ----------
Cash Flows from Financing Activities:
Refinancing fees (1,183)
Issuance of common stock 442 86
Proceeds from long-term obligations 26,900 22,269
Payments on long-term obligations (25,882) (170)
------------ ----------
Cash provided by financing activities 277 22,185
------------ ----------
Effect of exchange rate changes on cash 525 (678)
------------ ----------
Net decrease in cash and cash equivalents (2,579) (3,472)
Cash and cash equivalents, beginning of year 4,996 6,205
------------ ----------
Cash and cash equivalents, end of second
quarter $ 2,417 $ 2,733
============ ==========
Non-Cash Investing and Financing Activities:
See note 6 to these financial statements
See accompanying notes to consolidated financial statements.
KEY TRONIC CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary for a fair presentation of results
of operations for such periods. The results of operations for any interim period
are not necessarily indicative of results for the full year. These financial
statements should be read in conjunction with the financial statements and notes
thereto contained in the Company's annual report for the year ended July 2,
1994.
- - - - ----------------------------------------------------------------------------
1. BUSINESS COMBINATION
On July 30, 1993, the Company acquired substantially all of the assets and
liabilities of Honeywell, Inc.'s Keyboard Division (HKD). The acquisition was
accounted for under the purchase accounting method of accounting and,
accordingly, the purchase price was allocated to the underlying acquired assets
and assumed liabilities at their estimated fair market values at July 30, 1993.
A summary of the acquisition follows:
(in thousands)
--------------
Cash $ 22,000
Note to Honeywell, Inc. 3,650
Company common stock (400,000 shares) 3,200
Acquisition costs 5,000
--------------
Total consideration $ 33,850
==============
Estimated fair value of net
assets acquired $ 33,850
==============
Details of this transaction are more fully reported on Form 8-K dated July
30, 1993.
2. INVENTORIES
December 31, July 2,
1994 1994
------------ --------
(Unaudited) (Audited)
(in thousands)
Finished goods $ 4,407 $ 3,385
Work-in-process 3,406 3,048
Raw materials and supplies 21,319 19,145
Reserve for obsolescence (4,258) (3,791)
------------ --------
$ 24,874 $ 21,787
============ ========
The increase in raw materials and work-in-process inventory is primarily to
support demand based on increases in customer forecasts. The increase in
finished goods inventory is to support anticipated demand in the retail
channels.
3. COMMITMENTS AND CONTINGENCIES
CAPITAL COMMITMENTS - The amount of firm commitments to contractors and
suppliers for capital expenditures was approximately $115,000 at December 31,
1994.
LITIGATION - The Company used Mica Sanitary landfill until early 1975. Mica
landfill is a State lead National Priority List site. Following the remedial
investigation by Spokane County, the county began work on an Interim Remedial
Action. The Company has not been named as a Potentially Liable Party under the
State Toxic Control Act, or as a potentially responsible party under CERCLA as
amended. The Company has made a provision, based upon information currently
available to it, for its estimate of all costs to be associated with this
matter. However, given the inherent uncertainty, limited information available,
limited information on the number of potentially liable parties, uncertainty
regarding insurance coverage, the complexity of the circumstances surrounding
this matter, management's estimate is subject to and will change as facts and
circumstances warrant.
The Company has assumed certain potential liabilities pursuant to the
Amended and Restated Purchase and Sale Agreement between Honeywell, Inc. and the
Company dated July 30, 1993 ("AGREEMENT"). The Company has reserved for its
costs related to environmental matters related to the Honeywell assets acquired
arising through July 29, 1995 and for the Company's costs related to Honeywell
products liability matters arising prior to July 29, 1998 as provided for in the
AGREEMENT. No provision has been made for any potential liabilities related to
any such matters that may arise thereafter. Given the inherent uncertainty in
litigation, in environmental matters and in contract interpretation, the limited
information available and the complexity of the circumstances surrounding these
matters, management's estimates are subject to and will change or be established
as facts and circumstances warrant.
Management of the Company believes it is not likely the ultimate outcome of
the foregoing matters will have a material adverse effect on the Company's
financial position beyond the amounts for which the Company has provided.
The Company has assumed certain obligations under the AGREEMENT related to
intellectual property claims associated with Honeywell products. The Company
has made provision, based upon information currently available to it, for its
estimate of costs to be associated with these matters.
These matters are in the early stages of discovery. At this time,
management believes that it is not likely that the ultimate outcome of these
matters will have a material adverse effect on the Company's financial position
beyond the amounts for which the Company has provided, however given the limited
information currently available, the complexity and inherent uncertainty of
these issues, management's position will change if warranted by facts and
circumstances.
The Company currently has one-hundred suits by computer keyboard users
which are in State or Federal Courts in California, Florida, Kansas, Kentucky,
New Jersey, New York, Pennsylvania and Texas. These suits allege that specific
keyboard products manufactured by the Company were sold with manufacturing,
design and warning defects which caused or contributed to their injuries. The
alleged injuries are not specifically identified but are referred to as
repetitive stress injuries (RSI) or cumulative trauma disorders (CTD). These
suits seek compensatory damages and some seek punitive damages. The
compensatory damages, if awarded, may be covered by insurance, however punitive
damages, if awarded may not be covered by insurance. A total of twelve suits
have been dismissed from New York, California, Kentucky, and Texas. The
dismissal of one California suit was recently reversed on appeal. The Company
believes it has valid defenses and will vigorously defend these claims. These
claims are in the early stages of discovery. At this time, management believes
that it is not likely that the ultimate outcome of these suits will have
material adverse effect on the Company's financial position, however, given the
limited information currently available, the complexity of the litigation, the
inherent uncertainty of litigation and the ultimate resolution of insurance
coverage issues, management's position will change if warranted by facts and
circumstances.
4. LONG TERM OBLIGATIONS
On October 24, 1994 the Company entered into a secured financing agreement
with the CIT Group/Business Credit, Inc. (CIT). The agreement contains a $12
million term note and a revolving loan for up to $28 million. The agreement is
secured by the assets of the Company. This agreement replaces a $5.0 million
secured revolving credit agreement and a $20.9 million note payable to a
financial institution.
Details of this transaction are more fully reported on Form 8-K dated
October 31, 1994.
Long-term obligations consist of:
December 31, July 2,
1994 1994
------------ --------
(in thousands)
Note payable - CIT $ 12,000 $ 0
Revolving loan - CIT 14,733 0
Note payable - financial institution 0 22,000
Revolving line - financial institution 0 3,715
Note payable - Honeywell, Inc. 3,649 3,649
Deferred compensation obligation 676 698
Capital lease obligations 374 321
Installment contracts 3 34
------------ --------
31,435 30,417
Less current portion (2,609) (4,721)
------------ --------
$ 28,826 $ 25,696
============ ========
5. INCOME TAXES
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes," as of July 4, 1993. The
standard changes the method of accounting for income taxes to the asset and
liability method. The result of this accounting change, recorded cumulatively
in the first quarter of 1994, was to increase net earnings for the year ended
July 2, 1994, by $8,750,000 or $1.16 per primary common share. This change did
not have a material effect on the income tax provision recorded in 1994.
6. SUPPLEMENTAL CASH FLOW INFORMATION
Second Quarter Ended
December 31, January 1,
1994 1994
------------ ----------
(in thousands)
Interest payments $ 521 $ 447
Income tax payments 0 0
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Company used cash flows of $.7 million in operating activities over the
first two quarters of fiscal 1995 versus $.5 million of cash provided by
operating activities during the same period of the prior year. During the first
two quarters of 1995, $2.9 million was expended in capital additions.
During the first two quarters of the prior year, $3.5 million was expended
in capital additions. The Company anticipates capital expenditures of
approximately $5.0 million through the remainder of the current fiscal year
ending July 1, 1995. Capital expenditures are expected to be financed with the
combination of internally generated funds, capital leases, and limited amounts
of secured indebtedness.
On October 24, 1994 the Company entered into a secured financing agreement
with The CIT Group/Business Credit, Inc. (CIT) (see note 4 to the financial
statements). The agreement contains covenants that relate to minimum net worth,
minimum working capital, income statement and balance sheet ratios and restricts
investments, disposition of assets, and payment of dividends. The agreement
contains a $12,000,000 term note and a revolving loan for up to $28,000,000.
The agreement is secured by the assets of the corporation.
The term note is payable in quarterly installments of principal, each in
the amount of $500,000, commencing in November 1995 and maturing in November
2001. This note bears interest at one and three quarters percent (1.75%) in
excess of the Chemical Bank Rate, which approximates prime (8.50% at December
31, 1994).
The revolving loan is renewable and covers an initial period of
approximately three years expiring on the first business day of November 1997.
This loan bears interest at one and one half percent (1.50%) in excess of the
Chemical Bank Rate, which approximates prime. Borrowings outstanding under this
agreement at December 31, 1994 amounted to $14,733,000.
This agreement replaces a $5.0 million secured revolving credit agreement
and $20.9 million note payable to a financial institution.
As a result of the acquisition of substantially all of the assets and
liabilities of the Honeywell Keyboard Division (HKD) (see note 1 to the
financial statements), the Company issued a $3.6 million note to Honeywell, Inc.
This note is payable in four installments of principal and interest on the last
business day of July and October of 1995 and January and April of 1996. This
note bears interest at the prime rate.
The Company believes that cash, cash equivalents, funds available under the
line of credit, and internally generated funds can satisfy cash requirements for
a period in excess of 12 months.
NET SALES
Net sales for the fiscal 1995 second quarter, which ended December 31,
1994, were $48.7 million compared to $41.3 million for the second quarter of the
previous year. The increase in revenue is a result of additional revenue from
new customers and product lines.
Keyboard shipments increased 19.8% over the second quarter from the prior
year while the average selling price declined approximately 4.3%. The increase
in units shipped is due primarily to the sale of new products. Non-keyboard
revenue accounted for 9.1% of total revenue in the second quarter versus 7.6% in
the second quarter of the prior year.
COST OF SALES
Cost of sales were 84.5% of revenue in the second quarter of 1995 compared
to 89.0% for the second quarter of 1994. The cost of sales percentage decreased
due to increased margins resulting from cost reductions, higher margins in new
products, and manufacturing efficiencies gained due to the redeployment of
production from the company's Cheney WA plant to other locations (details of
this transaction were more fully reported on Form 10-Q dated April 2, 1994).
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses were $1.5 million in the
second quarter of fiscal 1995 and $1.6 million for the same period of fiscal
1994. As a percentage of sales, R, D & E expenditures were 3.0% in the second
quarter of 1995 compared to 4.0% in the second quarter of 1994. As a percent of
revenue the decrease is due primarily to the increase in the revenue base.
SELLING EXPENSES
Selling expenses were $1.4 million in the second quarter of 1995 compared
to $2.1 million in the second quarter of 1994. Selling expenses as a percentage
of revenue were 2.8% for the quarter compared to 5.2% in the same quarter of
fiscal 1994. Selling expenses decreased, both in dollars and as a percentage of
revenue, due to efficiencies gained upon combining with HKD operations and
decreased commissions. Commissions decreased due to the company's decision to
discontinue the use of outside sales representatives.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $2.6 million in the second quarter
of 1995 compared to $2.7 million in the second quarter of fiscal 1994. As a
percent of revenue G&A expenses were 5.3% in the second quarter compared to 6.5%
during the second quarter of the prior year. As a percent of revenue the
decrease is primarily due to the increased revenue base.
INTEREST
Net interest expense was $806,000 in the second quarter of 1995 compared to
$436,000 for the second quarter of 1994. This increase is due to a combination
of increased borrowings and higher interest rates.
INCOME TAXES
Income taxes provision (benefit) was $473,000 and ($42,000) for the second
quarters of 1995 and 1994, respectively. In the second quarter of 1995 $48,000
of this provision and $35,000 of 1994's second quarter benefit relate to taxes
on earnings of foreign subsidiaries. The remaining $425,000 of the second
quarter 1995 provision relates to taxes on U.S. earnings. The Company has tax
loss carryforwards of approximately $27.7 million which expire in varying
amounts in the years 2003 through 2009.
ESOP
No contributions to the Employee Stock Ownership Plan (ESOP) were made
during the second quarter of fiscal years 1995 and 1994.
BACKLOG
The Company's backlog at the end of the second fiscal quarter of 1995 was
$32.1 million compared to $35.5 million at the end of the 1994 fiscal year and
$29.1 million at the end of the second quarter of fiscal 1994.
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Events
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
Exhibit 99 - Pro Forma Statement of Operations for the second
quarters ended December 31, 1994 and January 1, 1994
Notes to Pro Forma Financial Statements
(b) Reports on Form 8-K
Form 8-K dated October 31, 1994 reporting the secured financing
agreement with The CIT Group/Business Credit, Inc.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEY TRONIC CORPORATION
/s/ Thomas Cason 2/13/95
----------------------- ----------
Thomas W. Cason Date
President &
Chief Operating Officer
/s/ Ronald F. Klawitter 2/13/95
----------------------- ----------
Ronald F. Klawitter Date
Principal Financial &
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Key
Tronic Corporation second quarter Form 10-Q for 1995 and is qualified in its
entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> DEC-31-1994
<CASH> 2,417
<SECURITIES> 0
<RECEIVABLES> 28,291
<ALLOWANCES> (1,225)
<INVENTORY> 24,874
<CURRENT-ASSETS> 62,869
<PP&E> 84,912
<DEPRECIATION> 51,597
<TOTAL-ASSETS> 104,787
<CURRENT-LIABILITIES> 29,305
<BONDS> 0
<COMMON> 36,693
0
0
<OTHER-SE> 9,963
<TOTAL-LIABILITY-AND-EQUITY> 104,787
<SALES> 48,748
<TOTAL-REVENUES> 48,748
<CGS> 41,188
<TOTAL-COSTS> 41,188
<OTHER-EXPENSES> 5,313
<LOSS-PROVISION> 161
<INTEREST-EXPENSE> 764
<INCOME-PRETAX> 1,322
<INCOME-TAX> 473
<INCOME-CONTINUING> 849
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 849
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
<TABLE>
<C><S> Exhibit 11
<FN>
KEY TRONIC CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
SECOND QUARTER ENDED TWO QUARTERS ENDED
December 31, January 1, December 31, January 1,
1994 1994 1994 1994
------------ ---------- ------------ ----------
Primary
Earnings
Net Income NOT NOT NOT $ 4,806
<F1>
Add after tax interest expense APPLICABLE APPLICABLE APPLICABLE
applicable to term debt * 252
<F1>
Add after tax interest income
applicable to short term paper * 0
----------
Income applicable to common stock $ 5,058
==========
<F2>
Shares **
Weighted average shares outstanding 8,192
<F1>
Assuming exercise of options reduced
by the number of shares which could
have been purchased with the proceeds
from exercise of such options * 1,052
----------
Adjusted common stock outstanding 9,244
==========
Primary earnings per common share $ 0.55
==========
Assuming full dilution
Earnings
Net Income NOT NOT NOT $ 4,806
<F3>
Add after tax interest expense APPLICABLE APPLICABLE APPLICABLE
applicable to term debt *** 260
<F3>
Add after tax interest income
applicable to short term paper *** 0
----------
Income applicable to common stock $ 5,066
==========
<F2>
Shares **
Weighted average shares outstanding 8,192
<F3>
Assuming exercise of options reduced
by the number of shares which could
have been purchased with the proceeds
from exericse of such options *** 1,052
----------
Adjusted common stock outstanding 9,244
==========
Fully diluted earnings per common share $ 0.55
==========
ADDITIONAL FISCAL 1994 COMPUTATIONAL INFORMATION:
Net loss before cumulative effect of change
in accounting ($3,944)
Weighted average shares outstanding 8,192
Net loss per common share before cumulative
effect of change in accounting ($0.48)
<F1>
* Proceeds calculated using average market price for the quarter.
<F2>
** Application of modified treasury stock method of calculating common stock
equivalents due to potential dilution exceeding 20% (APB Opinion No. 15).
<F3>
*** Proceeds calculated using higher of average or ending market price for the
quarter.
</FN>
</TABLE>
<TABLE>
<C><S> Exhibit 99
KEY TRONIC CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
For the two quarters ended December 31, 1994 and January 1, 1994
Two Quarters Ended
January 1, 1994 December 31, 1994
Honeywell
Keyboard Key Tronic Key Tronic
Division Corporation Combined Corporation
--------- ----------- ------------ ----------------
(in thousands, except per share amounts)
(unaudited)
Net sales $ 5,539 $ 77,332 $ 82,871 $ 94,184
Cost of sales 5,296 68,244 73,540 80,281
--------- ----------- ------------ ----------------
Gross profit on sales 243 9,088 9,331 13,903
Operating Expenses:
Research, development and engineering 383 2,927 3,310 2,779
Selling 417 3,983 4,400 2,607
General and administrative 324 5,346 5,670 5,194
--------- ----------- ------------ ----------------
Operating Income (Loss) (881) (3,168) (4,049) 3,323
Net Interest Income (Expense) & Other 46 (747) (701) (1,467)
--------- ----------- ------------ ----------------
Income (Loss) before federal taxes on
income and cumulative effect of change
in accounting (835) (3,915) (4,750) 1,856
Provision (Benefit) for Income Taxes 0 29 29 679
--------- ----------- ------------ ----------------
Earnings (Loss) before cumulative
effect of change in accounting (835) (3,944) (4,779) 1,177
Cumulative effect to July 4, 1993, of
change in accounting for income taxes 0 8,750 8,750 0
--------- ----------- ------------ ----------------
Net Income (Loss) ($835) $ 4,806 $ 3,971 $ 1,177
========= =========== ============ ================
Earnings (Loss) Per Share:
Before cumulative effect of change in
accounting N.A. ($0.48) ($0.58) N.A.
Net Income per weighted average share N.A. N.A. N.A. $0.14
Primary Earnings Per Common Share net of
cumulative effect of change in accounting N.A. $0.55 $0.45 N.A.
Fully Diluted Earnings Per Common Share
net of cumulative effect of change in
accounting N.A. $0.55 $0.46 N.A.
Weighted Average Shares Outstanding N.A. N.A. N.A. 8,294
Primary Shares Outstanding N.A. 9,244 9,290 N.A.
Fully Diluted Shares Outstanding N.A. 9,244 9,290 N.A.
See accompanying notes to pro forma finanical statements
</TABLE>
Exhibit 99
KEY TRONIC CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
The objective of the Pro Forma Statement of Operations is to show what the
significant effects on the historical financial information might have been
had the Company acquired the Keyboard Division of Honeywell, Inc. on July
4, 1993. The amounts are based upon certain assumptions and estimates which
Key Tronic Corporation believes are reasonable. The pro forma results do
not necessarily represent results which would have occurred if the entities
had constituted a single entity during such period and may not be
indicative of future results.
NOTE 1
PRO FORMA STATEMENT OF OPERATIONS
As required by APB Opinion No. 16, pro forma information on results of
operations is presented for the two quarter periods ended December 31, 1994
and January 1, 1994. The results of operations is being reported as if the
companies had combined at the beginning of each respective fiscal year.
For the two quarters ended January 1, 1994 the information reported is one
month of results of operations for the Honeywell Keyboard Division and the
actual results of operations for Key Tronic Corporation, as Key Tronic
Corporation's actual results include five months of operations of the
former Honeywell Keyboard Division.
