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KEY TRONIC FIRST QUARTER OPERATING LOSS, OFFSET BY TAX BENEFITS

 SPOKANE, Wash., Oct. 29 /PRNewswire/ -- Key Tronic Corp. (NASDAQ: KTCC) today announced sales of $36,071,000 for the first quarter of fiscal 1994, with an operating loss of $1,259,000 compared to operating income of $816,000 in the same period last year on sales of $31,581,000. Net income was $7,109,000 or 77 cents per share, compared to $891,000, or 11 cents per share in the same quarter of 1993. The recent quarter's figures include two months of operations of the former Honeywell Keyboard Division, which Key Tronic acquired on July 30, 1993.
 Net income reflects an adjustment for deferred tax benefits of $8,750,000 resulting primarily from the company's net operating loss carryforwards. This adjustment is required by the Financial Accounting Standards Board in "Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes" (SFAS 109). The effect of this new accounting pronouncement is required to be recorded by the company in its first fiscal quarter of 1994.
 In announcing the results, Key Tronic's Chief Executive Officer Stanley Hiller said, "Although we have been cautioning shareholders about expected fluctuations in earnings, we are making progress in this company's rebuilding process. With the computer industry's increasing pressures on prices and margins, we were not able to move quickly enough to offset deteriorating market conditions. However, we continue to believe in the future of Key Tronic/Honeywell's base business. We are making the necessary, difficult moves to bring the company through the price wars and shakeouts of today's computer market, to become the leading global contender in our field."
 Hiller went on to say, "The computer industry will grow with major new market opportunities developing. Our strategy is for the long haul, even at the expense of immediate returns. Progress is expected to be slow until at least the beginning of next year. However, business recently awarded to Key Tronic by major computer manufacturers will begin to impact results at that time, and the dislocations of our consolidation with Honeywell's keyboard unit will have been absorbed. Key Tronic is also gaining market acceptance of new product lines to give us broader position in both the lower price end of the market spectrum and the more sophisticated, higher-margin products."
 Key Tronic is the world's largest independent producer of computer keyboards. Operating from bases in the United States, Mexico, Ireland and Asia, the company's markets are computer manufacturers, distributors and large retail outlets worldwide.
 KEY TRONIC CORP.
 FINANCIAL HIGHLIGHTS
 (In thousands, except per share amounts)
 Oct. 2, Oct. 3,
 First quarters ended 1993 1992
 Net sales $36,071 $31,58
 Gross profit 4,535 7,015
 Operating income (loss) (1,259) 816
 Earnings (loss) before
 cumulative change in
 accounting principle (1,641) 891
 Cumulative effect of change in
 accounting for income taxes 8,750 --
 Net income $ 7,109 $ 891
 Earnings (loss) per share
 before cumulative change
 in accounting principle $ (0.20) $ 0.11
 Earnings per share
 primary and fully diluted $ 0.77 $ 0.11
 -0- 10/29/93
 /CONTACT: Ronald F. Klawitter of Key Tronic, 509-927-5295/
 (KTCC)


CO: Key Tronic Corp. ST: Washington IN: CPR SU: ERN

RB-JH -- SE012 -- 8743 10/29/93 17:56 EDT
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Publication:PR Newswire
Date:Oct 29, 1993
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