PROSPECTUS RULE 424(b)(4)
JUNE 16, 1995 REGISTRATION NO. 33-60143
400,000 SHARES OF COMMON STOCK
This Prospectus relates to 400,000 shares of Common Stock, no par value
(the "Common Stock") of Key Tronic Corporation (the "Company") to be offered
and sold for the account of a certain holder of Common Stock of the Company
(the "Selling Shareholder") who acquired such shares of the Common Stock in
July 1993. See "Background of the Offering," "Plan of Distribution" and
"Selling Shareholder." The Company will not receive any of the proceeds from
the sale of the Common Stock.
The Company has been advised by the Selling Shareholder that all of the
Common Stock shall be disposed of hereunder in a "broker's transaction"
within the meaning of Section 4(4) of the Securities Act of 1933, as amended
(the "Securities Act"), where the broker acts as agent for the Selling
Shareholder and receives only the normal and customary commissions with regard
to such transaction. See "Plan of Distribution."
The Selling Shareholder and the broker who participates in the sale of
the Common Stock may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and the commissions paid or discounts
allowed to any such broker in addition to any profits received on resale of
the Common Stock, if any, of such broker should purchase any Common Stock as
a principal, may be deemed to be underwriting discounts or commissions under
the Securities Act.
The Company will pay all expenses incident to the registration of the
Common Stock, estimated to be approximately $20,481. Normal commission
expenses and brokerage fees and any applicable stock transfer taxes relating
to the Common Stock are payable by the Selling Shareholder.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"KTCC." On June 14, 1995, the last reported sales price of the Common Stock
was $13.50.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS, PAGE 3."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE TO PUBLIC $13.375 $5,350,000
UNDERWRITING DISCOUNTS OR COMMISSIONS $ .25 $ 100,000
PROCEEDS TO SELLING SHAREHOLDER (1) $13.125 $5,250,000
(1) Before deducting expenses estimated to be approximately $20,481.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the registered securities to which it relates or an offer to sell or the
solicitation of an offer to buy such securities in any circumstances in which
such an offeror solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
an implication that there has been no change in the affairs of the Company or
that information contained herein is correct as of any time subsequent to the
date hereof.
The date of this Prospectus is June 16, 1995.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at the New York Regional Office of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and the Chicago Regional Office
of the Commission at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
Securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified by
such reference. For further information regarding the Company and the
Securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits and schedules relating thereto. The Registration
Statement and the exhibits and schedules thereto may be inspected by anyone
without charge at the Office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and copies can be obtained from the Commission at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference and made a part hereof, except as superseded
or modified herein: (i) the Company's Annual Report on Form 10-K for its
fiscal year ended July 2, 1994; (ii) the Company's quarterly reports on Form
10-Q for the quarters ended October 1, 1994, December 31, 1994, and April 1,
1995; (iii) the Company's amendment on Form 10-K/A to the Company's Annual
Report on Form 10-K for its fiscal year ended July 2, 1994; (iv) the Company's
amendments on Form 10-Q/A to its quarterly reports on Form 10-Q for the
quarters ended October 1, 1994, December 31, 1994, and April 1, 1995; (v) the
Company's Current Report on Form 8-K filed with the Commission on October 31,
1994; and (vi) the Company's Registration Statement on Form 8-A dated April
3, 1984.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the Offering of the Securities
covered by this Prospectus shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in any document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that such a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this Prospectus
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
or may be incorporated by reference in this Prospectus (other than exhibits
to such documents which are not specifically incorporated by reference into
such documents). Such requests should be directed to the Company's Vice
President, Finance and Treasurer, Key Tronic Corporation, N. 4424 Sullivan
Road, Spokane, Washington 99216 (telephone: (509) 928-8000).
"Key Tronic" is a registered trademark of the Company.
RISK FACTORS
The following risks should be considered carefully in addition to other
information contained in this filing before purchasing the Common Stock
offered hereby:
Potential Fluctuations in Quarterly Results
The Company's quarterly operating results have varied in the past and
may vary in the future due to a variety of factors, including success of
customers' programs, timing of new programs, new product introductions or
technological advances by the Company and its competitors and changes in
pricing policies by the Company and its competitors. For example, the Company
relies on customers' forecasts to plan its business. If those forecasts are
overly optimistic, the Company's revenues and profits may fall short of
expectations. Conversely, if those forecasts are too conservative, the
Company could have an unexpected increase in revenues and profits.
Competition
The keyboard and other input device industry is intensely competitive.
Most of the Company's principal competitors are headquartered in Japan and
other Asian countries that have a low cost labor force. Those competitors
may be able to offer customers lower prices on certain high volume programs.
This could result in price reductions, reduced margins and loss of market
share, all of which would materially and adversely affect the Company's
business, operating results and financial condition. In addition,
competitors can copy the Company's non-proprietary designs after the Company
has invested in development of products for customers, thereby enabling such
competitors to offer lower prices on such products due to savings in
development costs.
Concentration of Major Customers
At present, the Company's customer base is highly concentrated, and
there can be no assurance that its customer base will not become more
concentrated. Three of the Company's OEM customers accounted for 21%,
11%, and 10%, individually, of net sales in fiscal 1994. In 1993, the
same customers accounted for 32%, 3% and 0% of the Company's net sales.
There can be no assurance that the Company's principal customers will
continue to purchase products from the Company at current levels.
Moreover, the Company typically does not enter into long-term volume
purchase contracts with its customers, and the Company's customers have
certain rights to extend or delay the shipment of their orders. The loss
of one or more of the Company's major customers or the reduction, delay or
cancellation of orders from such customers could materially and adversely
affect the Company's business, operating results and financial condition.
Dependence on Key Personnel
The Company's future success depends in large part on the continued
service of its key technical, marketing and management personnel and on
its ability to continue to attract and retain qualified employees. The
competition for such personnel is intense, and there can be no assurance
that the Company will be successful in attracting and retaining such
personnel. In addition, the Company does not have any employment contracts
with its key personnel. The loss of key employees could have a material
adverse effect on the Company's business, operating results and financial
condition.
Litigation
The Company currently is a party to approximately 108 lawsuits brought
by computer keyboard users in state and federal courts. These lawsuits allege
that specific keyboard products manufactured by the Company were sold with
manufacturing, design and warning defects which caused or contributed to the
claimants' alleged injuries, generally referred to as repetitive stress
injuries (RSI) or cumulative trauma disorders (CTD). The Company believes it
has valid defenses to these claims, and it will vigorously defend them. These
lawsuits are in the early stages of discovery. At this time, management
believes that it is not likely that the ultimate outcome of these lawsuits will
have a 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.
Technological Change and New Product Risk
The market for the Company's products is characterized by rapidly
changing technology, evolving industry standards, frequent new product
introductions and relatively short product life cycles. The introduction of
products embodying new technologies or the emergence of new industry standards
can render existing products obsolete or unmarketable. The Company's success
will depend upon its ability to enhance its existing products and to develop
and introduce, on a timely and cost-effective basis, new products that keep
pace with technological developments and emerging industry standards and
address evolving and increasingly sophisticated customer requirements.
Failure to do so could substantially harm the Company's competitive position.
There can be no assurance that the Company will be successful in identifying,
developing, manufacturing and marketing products that respond to technological
change, emerging industry standards or evolving customer requirements.
Dilution
As of June 1, 1995, there were outstanding options for the purchase of
3,315,302 shares, of which options for approximately 2,773,837 shares were
vested and exercisable. Purchasers of the Common Stock offered hereby will
suffer immediate and substantial dilution to the extent outstanding options
to purchase the Company's Common Stock are exercised.
Possible Volatility of Stock Price
The stock price of the Company may be subject to wide fluctuations and
possible rapid increases or declines over a short time period. These
fluctuations may be due to factors specific to the Company such as variations
in quarterly operating results or changes in analysts' earning estimates, or
to factors relating to the computer industry or to the Securities markets in
general, which, in recent years, have experienced significant price
fluctuations. These fluctuations often have been unrelated to the operating
performance of the specific companies whose stocks are traded. Investors in
the Company's Common Stock should be willing to incur the risk of such
fluctuations.
Market Price of and Dividends on the Registrant's Common Equity and Related
Shareholder Matters
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "KTCC". The following table sets forth, for the Company's fiscal
quarters indicated, the high and low closing sale prices per share of the
Common Stock as reported by Nasdaq.
1995 High Low
1st Quarter $11.500 $ 6.000
2nd Quarter $11.000 $ 9.000
3rd Quarter $14.375 $10.000
1994 High Low
1st Quarter $10.750 $ 8.750
2nd Quarter $ 9.250 $ 6.000
3rd Quarter $ 9.000 $ 6.250
4th Quarter $ 8.000 $ 6.000
1993 High Low
1st Quarter $ 7.125 $ 5.250
2nd Quarter $10.500 $ 6.625
3rd Quarter $12.875 $ 9.500
4th Quarter $14.000 $ 9.500
The Company has not paid any cash dividends on its Common Stock during
the last two fiscal years. The Company currently intends to retain its
earnings for its business and does not anticipate paying any cash dividends
on its Common Stock in the foreseeable future. The Company's ability to pay
dividends is limited by certain financial covenants in the Company's bank loan
agreements.
As of June 1, 1995, there were approximately 1,679 common shareholders of
record.
Control by the Hiller Key Tronic Partners, L.P. and The Hiller Group
Hiller Key Tronic Partners, L.P. ("HKT Partners") is a limited
partnership created by the Hiller Group, a corporate management organization.
Pursuant to an agreement between the Hiller Group and the Company, Stanley
Hiller, Jr., who currently has approximately 66.73% interest in HKT Partners,
was appointed as a Director, Chief Executive Officer, and Chairman of the
Company's Executive Committee in February 1992 and acquired the right to
designate three additional persons to be appointed to the Company's Board of
Directors. HKT Partners beneficially owns approximately 26% of the outstanding
shares of Common Stock of the Company. This concentration of ownership, in
conjunction with the agreement between the Company and the Hiller Group, will
enable the Hiller Group to continue to exert significant control over corporate
actions after the sale of the shares offered hereby and may have the effect of
delaying or preventing a change in control of the Company.
BACKGROUND OF THE OFFERING
In July 1993, pursuant to an agreement (the "Purchase Agreement") between
Honeywell, Inc., a Delaware corporation (the "Selling Shareholder") and the
Company whereby the Selling Shareholder sold to the Company certain assets and
properties used in the Selling Shareholder's keyboard business, the Selling
Shareholder acquired 400,000 shares of Common Stock of the Company and a
warrant to acquire an additional 300,000 shares of Common Stock of the Company
at an exercise price of $14.00 per share (the "Honeywell Warrant").
In connection with the Purchase Agreement, in July 1993, the Selling
Shareholder and the Company entered into a Registration Rights Agreement (the
"Registration Rights Agreement") pursuant to which the Selling Shareholder was
granted certain registration rights with respect to the Common Stock, including
the right to cause the Company to effect a Form S-3 Registration with respect
to the Common Stock held by the Selling Shareholder. The Company has filed
this Registration Statement in accordance with its obligations to the Selling
Shareholder under the Registration Rights Agreement.
Indemnification
The Company has agreed to indemnify the Selling Shareholder and its
control persons with respect to certain liabilities in connection with the
sale of the Common Stock pursuant to this Prospectus, including liabilities
under the Securities and Exchange Act. In addition, the Selling Shareholder
has agreed to indemnify the Company, its directors, officers, and control
persons against certain liabilities incurred as a result of information
provided by the Selling Shareholder for use in this Prospectus.
DESCRIPTION OF CAPITAL STOCK
Common stock
The Company is authorized to issue 25,000,000 shares of Common Stock, no
par value per share. As of June 1, 1995, there were 8,422,503 shares of
Common Stock outstanding.
The holders of Common Stock are entitled to one vote for each share held
on record on all matters submitted to a vote of the stockholders. Holders of
Common Stock do not have cumulative voting rights in the election of directors.
Holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available
therefor. Holders of Common Stock do not have preemptive rights or rights to
convert their Common Stock into any other Securities. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
have the right to a ratable portion of the assets, if any, remaining after
payment of liabilities. All outstanding shares of Common Stock are fully paid
and nonassessable.
The affirmative vote of holders of at least two-thirds of the outstanding
Common Stock is required to approve certain business combinations, including
mergers, consolidations and the sale of substantially all of the assets of the
Company, with or to any 5% or greater shareholder, as well as to approve
certain amendments to the Restated Articles of Incorporation of the Company.
During such time as there is such 5% or greater shareholder, the consent of
all the Company's shareholders, or the affirmative vote of at least two-thirds
of such shareholders plus two-thirds of the continuing directors, is required
to dissolve voluntarily the Company.
TRANSFER AND WARRANT AGENT AND REGISTRAR
The Company's transfer agent and registrar for the Common Stock is the
Chemical Mellon Shareholder Services.
PLAN OF DISTRIBUTION
The Selling Shareholder shall dispose of the Common Stock in a "broker's
transaction" within the meaning of Section 4(4) of the Securities Act where
the broker acts as agent for the Selling Shareholder and receives only the
normal and customary commissions with regard to such transaction.
The Selling Shareholder has advised the Company that during such time as
it may be engaged in the attempt to sell Common Stock registered hereunder,
it will: (i) not engage in any stabilization activity in connection with any
of the Company's Securities; (ii) cause to be furnished to each person to whom
Common Stock included herein may be offered, and to each broker-dealer, if any,
through whom Common Stock is offered, a copy of this Prospectus, as
supplemented or amended; and (iii) not bid for or purchase any of the
Company's Securities or any rights to acquire the Company's Securities or
attempt to induce any person to purchase any of the Company's Securities or
rights to acquire the Company's Securities other than as permitted under the
Exchange Act.
The Selling Shareholder, and any other persons who participate in the sale
of the Common Stock from time to time, may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act. Any commissions
paid or any discounts or concessions allowed to any such persons, and any
profits received on resale of the Securities, may be deemed to be underwriting
discounts or commissions under the Securities Act.
The Company has agreed to maintain the effectiveness of this Registration
Statement until the earlier of (i) the sale of all the Common Stock registered
pursuant to this Prospectus or (ii) 120 days from the date of this Prospectus.
No sales may be made pursuant to this Prospectus after such date.
SELLING SHAREHOLDER
The Selling Shareholder for whom the Company is registering the Common
Stock for resale to the public is Honeywell, Inc., a Delaware corporation.
The Company will not receive any of the proceeds from the sale of the Common
Stock. Prior to the offering, the Selling Shareholder beneficially owned
700,000 shares of Common Stock of the Company, of which 300,000 are shares
subject to presently exercisable warrants pursuant to the Honeywell Warrant
and 400,000 shares, all subject shares of the offering, were acquired pursuant
to the Purchase Agreement. After the completion of the offering, the Selling
Shareholder will beneficially own 300,000 shares of Common Stock of the
Company, constituting approximately 7% of the outstanding shares of Common
Stock of the Company, assuming the exercise of all warrants directly owned by
the Selling Shareholder.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Morrison & Foerster, Palo Alto, California. As of the date of
this Prospectus, Stephen M. Tennis, a partner of Morrison & Foerster, held a
1.5% limited partnership interest in HKT Partners.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended July 2, 1994 have been audited by Deloitte &
Touche, LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
With respect to the unaudited financial information for the quarters
ended October 1, 1994, December 31, 1994, and April 1, 1995 which are
incorporated herein by reference, Deloitte & Touche, LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in the Company's
quarterly report on Form 10-Q for the quarters ended October 1, 1994, December
31, 1994, and April 1, 1995 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures applied. Deloitte & Touche, LLP are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their reports on
the unaudited financial information because those reports are not "reports"
or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Sections 7 and 11 of the Act.
