Key Tronic Corp. - Computer Peripherals -  Category Directory 

(509) 928-8000

N. 4424 Sullivan Road
Spokane, WA 99216
www.keytronic.com
 

Sales

$131 million

Business Description 
Key Tronic Corporation (dba KeyTronicEMS), a Washington corporation organized in 1969, and its subsidiaries (hereinafter collectively called the “Company” or “Key Tronic” unless the context otherwise requires) are principally engaged in electronic manufacturing services (EMS) for original equipment manufacturers (OEMs). The Company also manufactures keyboards for personal computers, terminals, and workstations primarily in standard layouts that can be sold directly from inventory on hand.

BACKGROUND

Historically, Key Tronic was a manufacturer of only electronic keyboards, but about five years ago, after assessing its strengths and capabilities, the Company’s focus was shifted to electronic manufacturing services (EMS). Presently, Key Tronic is known as an independent provider of a mix of EMS services for OEMs. The Company’s manufacturing capabilities include tool making, precision molding, prototype design, liquid plastic injection molding, printed circuit board assembly (both through-hole and surface-mount), and full box build.

Operations are currently conducted in facilities in the United States, China, Ireland and Mexico. This global production capability provides customers with benefits of improved supply-chain management, reduced inventory, lower transportation costs and reduced product fulfillment time.

The EMS industry is comprised of companies that provide a range of manufacturing services for OEMs. The EMS industry has experienced rapid growth over the past several years as more OEMs shift to external manufacturing, and it is expected to continue in this growth pattern for several years.

CUSTOMERS AND MARKETING

OEM MARKETS

The Company provides manufacturing services for outsourced OEM products. Key Tronic is capable of providing a mix of EMS services including product design, tool making, precision molding, prototype design, liquid plastic injection molding, printed circuit board assembly, full box builds, and printing screened silver flexible circuit membranes. The percentage of revenues from EMS services for the fiscal years ended June 28, 2003, June 29, 2002, and June 30, 2001 were 88.6%, 89.4%, and 76.2%, respectively. Sales of such products are generally not seasonal in nature.

Clorox accounted for 31% of consolidated revenue in fiscal year 2003 compared to 39% in fiscal year 2002. Hewlett Packard accounted for approximately 8%, 10%, and 39% of the Company’s consolidated revenues in fiscal years 2003, 2002, and 2001, respectively. Lexmark accounted for 8%, 13%, and 27% of consolidated revenues in fiscal years 2003, 2002, and 2001, respectively. No other customers accounted for 10% or more of consolidated revenues in the three fiscal years presented. In the fiscal years ended June 28, 2003, June 29, 2002, and June 30, 2001, the five largest customers, including Clorox, Hewlett Packard, and Lexmark, accounted for 63%, 76%, and 81% of total sales, respectively.

Although keyboard manufacturing is still included in the Company’s product offerings, annual sales continue to decline. During the fiscal years ended June 28, 2003, June 29, 2002, and June 30, 2001, the Company realized revenues of approximately $14.6 million, $18.3 million, and $38.6 million, respectively, from the sale of keyboards representing approximately 11.1%, 10.4%, and 23.3% of consolidated revenues. The keyboard market has continued to trend toward standard keyboard layouts. In order to accommodate the demand for standard products, the Company maintains a purchase-from-stock program. The most popular standard layouts are built and stocked for immediate availability. These products serve as enhancements to or replacements for the original system-supplied keyboards. Keyboard sales can increase somewhat during the last half of each calendar year in conjunction with the holiday season, but generally sales of these products are not seasonal in nature.

The Company markets its products and services primarily through its direct sales organization aided by strategically located field sales people and distributors. Although the Company established relationships with several independent sales organizations to assist in marketing the Company’s EMS product lines in the U.S., commissions earned and paid during fiscal year 2003 were insignificant.

MANUFACTURING

Since inception, the Company has made substantial investments in developing and expanding its now extensive capital equipment base to achieve selective vertical integration in its manufacturing processes. The Company designs and develops tooling for injection molding machines and manufactures the majority of plastic parts used in the products it manufactures. Additionally, the Company has invested in equipment to produce printed screened silver flexible circuit membranes.

The Company’s automated manufacturing processes enable it to work closely with its customers during design and prototype stages of production for new custom products and to jointly increase productivity and reduce response time to the marketplace. Key Tronic uses computer-aided design techniques and unique software to assist in preparation of the tool design layout and tool fabrications, to reduce tooling costs, improve component and product quality and enhance turnaround time during product development.

Key Tronic uses a variety of manual and highly automated assembly processes in its facilities, depending upon product complexity and degree of customization. Automated processes include component insertion, surface-mount technology, flexible robotic assembly, computerized vision system quality inspection, automated switch and keytop installation, and automated functional testing.

The Company purchases materials and components for its products from many different suppliers both domestic and international. Key Tronic develops close working relationships with its suppliers, many of whom have been supplying products to the Company for several years.
 

Ticker

KTCC

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