KEY TRONIC CORP - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended December 28, 2002

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 February 8, 2003 9,672,580 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:

	Consolidated Statements of Operations (Unaudited) Second Quarters Ended December 28, 2002 and December 29, 2001	3

	Consolidated Statements of Operations (Unaudited) Six Months Ended December 28, 2002 and December 29, 2001	4

	Consolidated Balance Sheets – December 28, 2002 (Unaudited) and June 29, 2002	5

	Consolidated Statements of Cash Flows (Unaudited) Six Months Ended December 28, 2002 and December 29, 2001	6

	Notes to Consolidated Financial Statements	7-10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11-16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16

Item 4.	Controls and Procedures	16

PART II.	OTHER INFORMATION:

Item 1.	Legal Proceedings	17

Item 2.	Changes in Securities and Use of Proceeds*

Item 3.	Defaults upon Senior Securities*

Item 4.	Submission of Matters to a Vote of Security Holders	17

Item 5.	Other Information	17

Item 6.	Exhibits and Reports on Form 8-K	17

Signatures		18

Officer’s Certifications		19-20

*Items

are not applicable

PART I: FINANCIAL INFORMATION

Item 1: Financial Statements

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Second Quarters Ended
	December 28, 2002			December 29, 2001
	(in thousands, except per share amounts)
Net sales	$	30,552		$	50,516
Cost of sales		27,068			45,639

Gross profit on sales		3,484			4,877
Operating expenses:
Research, development and engineering		774			689
Selling		456			747
General and administrative		1,832			2,449

Total operating expenses		3,062			3,885
Operating income		422			992
Interest expense		260			361
Litigation settlement		—			17,000
Other income		(28	)		(229	)

Income (loss) before income tax provision		190			(16,140	)
Income tax provision		116			5,455

Net income (loss)	$	74		$	(21,595	)

Earnings (loss) per share:
Earnings (loss) per common share—basic and diluted	$	0.01		$	(2.23	)
Weighted average shares outstanding—basic and diluted		9,673			9,673

See accompanying notes to consolidated financial statements.

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Six Months Ended
	December 28, 2002			December 29, 2001
	(in thousands, except per share amounts)
Net sales	$	64,586		$	85,142
Cost of sales		57,596			78,134

Gross profit on sales		6,990			7,008
Operating expenses:
Research, development and engineering		1,484			1,247
Selling		923			1,468
General and administrative		3,626			4,194

Total operating expenses		6,033			6,909
Operating income		957			99
Interest expense		497			703
Litigation settlement		(12,186	)		17,000
Other income		(262	)		(259	)

Income (loss) before income tax provision		12,908			(17,345	)
Income tax provision		355			5,232

Net income (loss)	$	12,553		$	(22,577	)

Earnings (loss) per share:
Earnings (loss) per common share—basic and diluted	$	1.30		$	(2.33	)
Weighted average shares outstanding—basic and diluted		9,673			9,673

See accompanying notes to consolidated financial statements.

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 28, 2002			June 29, 2002
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	1,233		$	1,205
Restricted cash		701			280
Trade receivables, less allowance for doubtful accounts of $107 and $444		15,896			20,978
Inventories		19,501			18,395
Other		2,240			2,588

Total current assets		39,571			43,446

Property, plant and equipment—at cost		85,675			85,286
Less: Accumulated depreciation		73,479			73,054

Total property, plant and equipment		12,196			12,232

Other assets:
Other (net of accumulated amortization of $416 and $240)		1,017			996
Goodwill		765			765

Total assets	$	53,549		$	57,439

Liabilities and shareholders’ equity
Current liabilities:
Current portion of long—term obligations	$	403		$	228
Accounts payable		12,639			14,409
Accrued compensation and vacation		2,947			2,803
Litigation settlement—short-term		1,051			293
Other		2,770			3,172

Total current liabilities		19,810			20,905
Long-term liabilities:
Revolving loan—long-term		6,864			6,475
Litigation settlement—long–term		3,421			19,186
Other		1,190			1,162

Total long–term liabilities		11,475			26,823
Commitments and contingencies (Note 7)
Shareholders’ equity:
Common stock, no par value—shares authorized
25,000; issued and outstanding 9,673 and 9,673		38,393			38,393
Accumulated deficit		(16,129	)		(28,682	)

Total shareholders’ equity		22,264			9,711

Total liabilities and stockholders’ equity	$	53,549		$	57,439

See accompanying notes to consolidated financial statements.

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