Key Tronic Corporation · NASDAQ:KTCC
Key Tronic — Investor Presentation (November 2013)
32 slides from Key Tronic's investor presentation, Nov 13, 2013
Slide 1: Craig D. Gates, President and CEO
Exhibit 99.1 Craig D. Gates President and CEO
Slide 2: Leading provider of Electronic Manufacturing Services
Leading provider of Electronic Manufacturing Services (EMS) with unique combination of global capabilities and customer responsiveness Trust. Commitment. Results.
Slide 3: Safe Harbor Statement
Safe Harbor Statement This presentation may contain forward-looking statements within the meaning of the federal securities laws and are subject to the safe harbor under those laws. These forward-looking statements can be identified by the use of words such as “expect”, believe”, “anticipate”, “will
Slide 4: Key Investment Highlights
Key Investment Highlights Outsourcing market expected to continue to grow Strong competitive position: • Unique combination of global capabilities and customer responsiveness • Increasing demand for EMS services in North America and Asia • Unique degree of vertical integration • Proven ability to su
Slide 5: Electronic Manufacturing Services Market
Electronic Manufacturing Services Market In Billions $300 $250 $200 $150 $100 $50 $0 2011 2012 2013 2014 2015 2016 Source: IDC, 2012 KeyTronicEMS Confidential & Proprietary
Slide 6: EMS Provider Tiers
EMS Provider Tiers Tier I: Over $2 billion in annual revenue Tier II: $400 million to $2 billion in annual revenue Tier III: $100 million to $400 million in annual revenue Key Tronic currently 7th largest U.S. contract manufacturer
Slide 7: Integrated Global Operations: US
Integrated Global Operations: US Spokane Washington • Corporate headquarters • Command and control • Centralized program management, production control, quality control, material management • Tooling and prototyping • Low volume PCA and box build El Paso, Texas • Product distribution KeyTronicEMS Co
Slide 8: Integrated Global Operations: Mexico
Integrated Global Operations: Mexico Juarez, Mexico • Volume PCA, box build and plastic molding, sheet metal • Repair operations • 700,000 square feet • Contiguous campus of seven facilities • Long term presence since 1984 • Recently acquired Sabre Manufacturing: o Provides integrated sheet metal fa
Slide 9: Integrated Global Operations: China
Integrated Global Operations: China Shanghai, China • International material sourcing organization • High-volume PCA and box build • 130,000 square feet • Presence since 1999 KeyTronicEMS Confidential & Proprietary
Slide 10: Worldwide Production Mix
Worldwide Production Mix Spokane USA 2% Shanghai China 20% Juarez Mexico 78%
Slide 11: Leveraging Global Capacities
Leveraging Global Capacities USA-based Management Operations Materials Production Control Quality Control Engineering USA-based Production Mexico-based Production China-based Production Prototyping Low to high volume High volume Low Volume USA-based Purchasing China-based Purchasing Parts Parts
Slide 12: Virtual Tier I Capabilities
Virtual Tier I Capabilities International sourcing yields close to Tier I material pricing Chinese and Mexican production yields Tier I conversion costs One Stop Shopping: • Strong production and process design capabilities • Multiple production technologies and vertical Integration • Scalability as
Slide 13: Tier III Responsiveness
Tier III Responsiveness USA-based centralized operations management Customer interface in English Experienced program management for low/mid/high volume programs Experienced management of offshore facilities KeyTronicEMS Confidential & Proprietary
Slide 14: Cost/Service Comparison For $5 to $80 Million Program
Cost/Service Comparison For $5 to $80 Million Program Low Tier I COST Tier II Tier III High Slow RESPONSIVENESS Rapid KeyTronicEMS Confidential & Proprietary
Slide 15: Target Accounts
Target Accounts Program with $5 million to $80 million in annual revenue Involves at least two production technologies: • Plastic injection molding • Electrical assembly • Sheet metal • Full box build Challenging/unusual manufacturing skills required • Not high-volume commodity products Complex prod
Slide 16: Profitable and Diverse Customer Programs
Profitable and Diverse Customer Programs Trust. Commitment. Results.
Slide 17: From Wide-Ranging Industries
…From Wide-Ranging Industries Consumer plastic products Computer accessories Consumer electronics Industrial tools Medical devices Industrial controls Specialty printers Networking equipment Gaming Scientific instruments Telecommunications Data storage Automotive Financial Transaction Educational eq
Slide 18: Quarterly Revenue
Quarterly Revenue 120 100 80 60 40 20 0 Q4 ’09 Q1 ’ 10 Q2 ’10 Q3 ’10 Q4 ’10 Q1 ’ 11 Q2 ’11 Q3 ’11 Q4 ’11 Q1 ’ 12 Q2 ’12 Q3 ’12 Q4 ’12 Q1 ’ 13 Q2 ’13 Q3 ’13 Q4 ’13 Trust. Commitment. Results.
Slide 19: Number of Customers Producing Revenue
Number of Customers Producing Revenue 56 56 51 52 48 42 40 36 30 20 10 FY2012 FY2012 FY2012 FY2012 FY2013 FY2013 FY2013 FY2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 KeyTronicEMS Confidential & Proprietary
Slide 20: Number of Programs Producing Revenue
Number of Programs Producing Revenue 200 180 183 177 160 168 169 155 165 140 149 120 135 100 80 60 40 20 0 FY2012 FY2012 FY2012 FY2012 FY2013 FY2013 FY2013 FY2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 21: Historic Transition to EMS
Historic Transition to EMS 380 360 340 320 300 280 260 240 Keyboards 200 EMS Millions 180 Total $ 160 140 120 100 80 60 40 20 0 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 KeyTronicEMS Confidential & Proprietary
Slide 22: Growth Strategy
Growth Strategy Continue to emphasize unique combination of Tier I capabilities and Tier III responsiveness Continue to invest in volume driven capacity Continue to leverage materials and parts procurement Continue to diversify customer portfolio across many industries Expand into more high-value-ad
Slide 23: Financials
Financials Ronald F. Klawitter Chief Financial Officer and Treasurer KeyTronicEMS Confidential & Proprietary
Slide 24: Core Operating Objectives
Core Operating Objectives Grow faster than EMS industry Maintain strong operating margins and profitability Maintain strong balance sheet ROIC that exceeds cost of capital Trust. Commitment. Results.
Slide 25: Annual Revenue
Annual Revenue $400 $350 $300 $250 Millions $200 In $150 $100 $50 $- FY2009 FY2010 FY2011 FY2012 FY2013 KeyTronicEMS Confidential & Proprietary
Slide 26: Financial Model
Financial Model FY2011 FY2012 FY2013 Target Gross Margin 8.1% 8.6% 9.5% 9% - 11% Operating Expenses 5.4% 4.5% 4.5% 4% - 5% Operating Margin 2.7% 4.1% 5.0% 4% - 7% Expecting gradual improvement with long term growth
Slide 27: Annual Earnings
Annual Earnings $1.40 $1.20 EPS $1.00 Diluted $0.80 $0.60 $0.40 $0.20 $- FY 2009 FY 2010 FY 2011 FY 2012 FY 13 KeyTronicEMS Confidential & Proprietary
Slide 28: Operating Margin Percentage
Operating Margin Percentage 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 KTC Operating Margin Percentage Industry Average KeyTronicEMS Confidential & Proprietary
Slide 29: Key Balance Sheet Ratios
Key Balance Sheet Ratios 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 FY09 FY10 FY11 FY12 FY13 Current Ratio Debt to Equity Ratio
Slide 30: Return on Invested Capital
Return on Invested Capital 25% 20% 15% 10% 5% 0% FY 2009 FY2010 FY2011 FY2012 FY2013 KTC ROIC Industry Average ROIC Trust. Commitment. Results.
Slide 31: Key Investment Highlights
Key Investment Highlights Outsourcing market expected to continue to grow Strong competitive position: • Unique combination of global capabilities and customer responsiveness • Increasing demand for EMS services in North America and Asia • Unique degree of vertical integration • Proven ability to su
Slide 32: Key Tronic EMS - Trust. Commitment. Results.
I KeylronicE\ViS Trust. Commitment. Results. NASDAQ: KTCC KeyTronicEMS Confidential & Proprietary