Record Quarterly Revenue Up 36% Year-over-Year;

FY 2010 EPS $0.85 Up from $0.11 in FY 2009;

Strong Operating Efficiencies; Continued Revenue Diversification;

Expecting Continued Strong Growth in Fiscal 2011

Spokane Valley, WA— August 17, 2010 -- Key Tronic Corporation (Nasdaq: KTCC), a provider of electronic manufacturing services ( EMS ), today announced its results for the quarter and year ended July 3, 2010. 

For the fourth quarter of fiscal 2010, Key Tronic reported record quarterly revenue of $61.9 million, up 20% from $51.7 million in the previous quarter and up 36% from $45.5 million in the same period of fiscal 2009.  For the full year of fiscal 2010, total revenue was $199.6 million, up 8% from $184.9 million for fiscal 2009.  

Net income for the fourth quarter of fiscal 2010 was $2.3 million or $0.22 per diluted share, up from $0.3 million or $0.03 per diluted share for the same period of fiscal 2009.  For the full year of fiscal 2010, net income was $8.7 million or $0.85 per diluted share, up from $1.1 million or $0.11 per diluted share for fiscal 2009. 

The Company continued to maintain strong operating efficiencies during the fourth quarter.  For the fourth quarter of fiscal 2010, gross margin was 11% and operating margin was 5%, up from 6% and 1%, respectively, in the same period of fiscal 2009.   For the full year of fiscal 2010, gross margin was 10% and operating margin was 4%, up from 7% and 1%, respectively, in fiscal 2009.  

“We’re very pleased with our strong growth in revenue and earnings for fiscal 2010, driven by increased demand from both new and longstanding customers,” said Craig Gates, President and Chief Executive Officer, “We began the year in the depths of the global recession and ended with the highest quarterly revenue in Key Tronic’s history. We’ve remained profitable for 26 consecutive quarters and significantly increased our profitability in fiscal 2010 compared to recent years.  As we grew our business and brought many new programs into production, we controlled our costs, maintained strong operating efficiencies and improved our new product introduction processes.   

“During the fourth quarter of fiscal 2010, we continued to diversify our revenue base by winning a new program involving gaming technology and two new programs for industrial safety equipment.  To accommodate new programs moving into production, we significantly expanded our world-class production capacity in Mexico and China during the fourth quarter. Similar to recent quarters, we also had approximately $4 million in order delays from a number of customers due to industry-wide shortages in the global supply chain, which we expect to persist in coming quarters.

Moving into fiscal 2011, we have good business momentum, growing our business faster than many of our peers.  Recent forecasts predict double-digit growth for the EMS market in coming years. With our unique combination of world-class engineering, global logistics and cost-effective production, we’re increasingly well positioned to continue to capture market share and capitalize on emerging opportunities in fiscal 2011 and beyond.”

Business Outlook

For the first quarter of fiscal 2011, the Company expects to report revenue in the range of $58 million to $61 million, and earnings in the range of $0.17 to $0.20 per share.  The Company’s forecast for the first quarter of fiscal 2011 may be impacted by continuing supply chain issues that could result in variances in its results as the world’s electronic parts supply ramps up to meet demand.

Conference Call

Key Tronic will host a conference call today to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern).  A broadcast of the conference call will be available at www.keytronic.com under “Investor Relations” or by calling 877-941-2333 or +1 480-629-9723. A 48-hour replay will be available by calling 800-406-7325 or +1 303 590 3030 (Access Code: 4325641).  A replay will also be available on the Company’s Web site.

About Key Tronic

Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States , Mexico and China .  The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution.  Its customers include some of the world's leading original equipment manufacturers.  For more information about Key Tronic visit: www.keytronic.com

Some of the statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include all passages containing verbs such as ‘aims, anticipates, believes, estimates, expects, hopes, intends, plans, predicts, projects or targets’ or nouns corresponding to such verbs.  Forward-looking statements also include other passages that are primarily relevant to expected future events or that can only be fully evaluated by events that will occur in the future.  Forward-looking statements in this release include, without limitation, the Company’s statements regarding its expectations with respect to quarterly revenue and earnings during fiscal 2011. There are many factors, risks and uncertainties that could cause actual results to differ materially from those predicted or projected in forward-looking statements, including but not limited to the future of the global economic environment and its impact on our customers and suppliers; shortages in the global supply chain; the accuracy of customers’ forecasts; success of customers’ programs; timing of new programs; success of new-product introductions; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; and the other risks and uncertainties detailed from time to time in the Company’s SEC filings.