UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE PERIOD ENDED JANUARY 1, 2005
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
(Exact name of registrant as specified in its charter)
| Washington | 91-0849125 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) |
N. 4424 Sullivan Road
Spokane Valley, 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 during the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No x.
At February 1, 2005, 9,680,913 shares of common stock, no par value (the only class of common stock), were outstanding.
Index
| Page No. | ||||
| PART I. |
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| Item 1. |
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| Consolidated Balance Sheets – January 1, 2005 (Unaudited) and July 3, 2004 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7-10 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10-16 | ||
| Item 3. |
17 | |||
| Item 4. |
17 | |||
| PART II. |
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| Item 1. |
Legal Proceedings* |
|||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds* |
|||
| Item 3. |
Defaults upon Senior Securities* |
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| Item 4. |
18 | |||
| Item 5. |
Other Information* |
|||
| Item 6. |
18 | |||
| 19 | ||||
| * | Items are not applicable |
2
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| January 1, 2005 |
July 3, 2004 |
|||||||
| (in thousands) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,093 | $ | 600 | ||||
| Trade receivables, less allowance for doubtful accounts of $202 and $60 |
26,937 | 24,439 | ||||||
| Inventories |
30,387 | 27,848 | ||||||
| Other |
2,454 | 1,833 | ||||||
| Total current assets |
60,871 | 54,720 | ||||||
| Property, plant and equipment - net |
10,445 | 11,131 | ||||||
| Other assets: |
||||||||
| Restricted cash |
1,013 | 705 | ||||||
| Other (net of accumulated amortization of $737 and $696) |
595 | 617 | ||||||
| Goodwill |
765 | 765 | ||||||
| Total other assets |
2,373 | 2,087 | ||||||
| Total assets |
$ | 73,689 | $ | 67,938 | ||||
| Liabilities and shareholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Current portion of long-term obligations |
$ | 422 | $ | 606 | ||||
| Accounts payable |
26,011 | 24,354 | ||||||
| Accrued compensation and vacation |
3,682 | 4,015 | ||||||
| Litigation settlement - short-term |
1,795 | 925 | ||||||
| Other |
1,854 | 1,352 | ||||||
| Total current liabilities |
33,764 | 31,252 | ||||||
| Long-term liabilities: |
||||||||
| Revolving loan |
14,930 | 10,851 | ||||||
| Litigation settlement – long-term |
— | 1,536 | ||||||
| Other |
991 | 1,065 | ||||||
| Total long-term liabilities |
15,921 | 13,452 | ||||||
| Total liabilities |
49,685 | 44,704 | ||||||
| Commitments and contingencies (Note 8) |
||||||||
| Shareholders’ equity: |
||||||||
| Common stock, no par value - shares authorized 25,000; issued and outstanding 9,681 and 9,676 |
38,411 | 38,397 | ||||||
| Accumulated deficit |
(14,407 | ) | (15,163 | ) | ||||
| Total shareholders’ equity |
24,004 | 23,234 | ||||||
| Total liabilities and stockholders’ equity |
$ | 73,689 | $ | 67,938 | ||||
See accompanying notes to consolidated financial statements.
3
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Second Quarters Ended |
||||||||
| January 1, 2005 |
December 27, 2003 |
|||||||
| (in thousands, except per share amounts) | ||||||||
| Net sales |
$ | 51,226 | $ | 32,567 | ||||
| Cost of sales |
47,235 | 29,895 | ||||||
| Gross profit on sales |
3,991 | 2,672 | ||||||
| Operating expenses: |
||||||||
| Research, development and engineering |
708 | 589 | ||||||
| Selling |
528 | 278 | ||||||
| General and administrative |
1,848 | 1,730 | ||||||
| Total operating expenses |
3,084 | 2,597 | ||||||
| Operating income |
907 | 75 | ||||||
| Interest expense |
308 | 265 | ||||||
| Other income |
(11 | ) | (13 | ) | ||||
| Income (loss) before income tax provision |
610 | (177 | ) | |||||
| Income tax provision |
120 | 110 | ||||||
| Net income (loss) |
$ | 490 | $ | (287 | ) | |||
| Earnings (loss) per share – basic and diluted: |
$ | 0.05 | $ | (0.03 | ) | |||
| Weighted average shares outstanding - basic |
9,681 | 9,673 | ||||||
| Weighted average shares outstanding - diluted |
9,966 | 9,673 | ||||||
See accompanying notes to consolidated financial statements.
4
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Six Months Ended |
||||||||
| January 1, 2005 |
December 27, 2003 |
|||||||
| (in thousands, except per share amounts) | ||||||||
| Net sales |
$ | 100,000 | $ | 67,219 | ||||
| Cost of sales |
92,461 | 61,192 | ||||||
| Gross profit on sales |
7,539 | 6,027 | ||||||
| Operating expenses: |
||||||||
| Research, development and engineering |
1,413 | 1,288 | ||||||
| Selling |
1,022 | 725 | ||||||
| General and administrative |
3,516 | 3,495 | ||||||
| Total operating expenses |
5,951 | 5,508 | ||||||
| Operating income |
1,588 | 519 | ||||||
| Interest expense |
607 | 522 | ||||||
| Other income |
(13 | ) | (19 | ) | ||||
| Income before income tax provision |
994 | 16 | ||||||
| Income tax provision |
238 | 283 | ||||||
| Net income (loss) |
$ | 756 | $ | (267 | ) | |||
| Earnings (loss) per share – basic and diluted: |
$ | 0.08 | $ | (0.03 | ) | |||
| Weighted average shares outstanding - basic |
9,679 | 9,673 | ||||||
| Weighted average shares outstanding - diluted |
9,942 | 9,673 | ||||||
See accompanying notes to consolidated financial statements.
5
KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended |
||||||||
| January 1, 2005 |
December 27, 2003 |
|||||||
| (in thousands) | ||||||||
| Increase (decrease) in cash and cash equivalents: |
||||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 756 | $ | (267 | ) | |||
| Adjustments to reconcile net income (loss) to cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,206 | 1,438 | ||||||
| Provision for doubtful accounts |
140 | — | ||||||
| Provision for (recovery of) obsolete inventory |
30 | (575 | ) | |||||
| Provision for warranty |
123 | 70 | ||||||
| Loss on disposal of assets |
38 | 14 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Trade receivables |
(2,638 | ) | (1,668 | ) | ||||
| Inventories |
(2,569 | ) | 3,031 | |||||
| Other assets |
(672 | ) | (375 | ) | ||||
| Accounts payable |
1,657 | 1,803 | ||||||
| Accrued compensation and vacation |
(333 | ) | (1,368 | ) | ||||
| Litigation settlement |
(666 | ) | (746 | ) | ||||
| Other liabilities |
393 | (1,441 | ) | |||||
| Cash used in operating activities |
(2,535 | ) | (84 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(470 | ) | (368 | ) | ||||
| Increase (decrease) in restricted cash |
(308 | ) | 542 | |||||
| Proceeds from sale of property and equipment |
6 | 2 | ||||||
| Cash provided by (used in) investing activities |
(772 | ) | 176 | |||||
| Cash flows from financing activities: |
||||||||
| Payment of financing costs |
(60 | ) | (35 | ) | ||||
| Repayment of other liabilities |
(233 | ) | — | |||||
| Borrowings under revolving credit agreement |
103,353 | 67,622 | ||||||
| Repayment of revolving credit agreement |
(99,274 | ) | (67,766 | ) | ||||
| Proceeds from exercise of stock options |
14 | — | ||||||
| Cash provided by (used in) financing activities |
3,800 | (179 | ) | |||||
| Net increase (decrease) in cash and cash equivalents |
493 | (87 | ) | |||||
| Cash and cash equivalents, beginning of period |
600 | 956 | ||||||