Key Tronic Corporation Comments on Cemtrex Release
September 15 2017 - 2:46PM
On September 13, 2017, Key Tronic Corporation (Nasdaq:KTCC), a
provider of electronic manufacturing services, became aware of a
press release issued by Cemtrex, Inc. (“Issuer”) on September 13,
2017 regarding its purported exchange offer for the outstanding
shares of common stock of Key Tronic. We strongly disagree
with virtually all of the assertions made by Issuer in that press
release, including its characterization of Key Tronic’s financial
performance and value relative to that of Issuer, for several
reasons, among others:
- An actual exchange offer has not been made by Issuer pursuant
to the preliminary materials filed with the Securities and Exchange
Commission.
- If this offer were in fact made, the purported offer would give
Key Tronic shareholders only one Cemtrex share (which had a closing
price of $3.19 as of September 14, 2017) for one Key Tronic share
(which had a closing price of $6.85 as of September 14,
2017). Key Tronic believes that there is no reason to assume
that the public prices are not a significant market indicator of
the relative values of the shares of the two companies. The
exchange would have resulted in an immediate discount of
approximately 53% per share to the price of Key Tronic’s common
stock based on the closing prices on September 14, 2017.
- The financial comparisons that Issuer makes to Key Tronic are
very misleading because, among other things, Issuer does not
properly identify the periods it is comparing, appropriately
consider the size and maturities of Key Tronic and the Issuer, or
explain how ratios and percentages are calculated.
- Financial comparisons depend on reliable underlying
auditor-reviewed financial information. Key Tronic is very
skeptical of the accuracy of Issuer’s reported financial
information due in part to the fact that:
- Issuer is not audited by a nationally recognized accounting
firm.
- One published media report has raised questions about Issuer’s
auditor, Bharat Parikh & Associates, headquartered in
India. According to public records of the Public Company
Accounting Oversight Board, Bharat Parikh & Associates audited
a total of five public companies during the twelve months ending in
March 2017, all of which were small public companies.
- The Issuer has not addressed how it would be able to pay off
Key Tronic debt or address covenants contained in Key Tronic’s loan
agreements if Issuer were to consolidate or merge with Key
Tronic.
- Key Tronic has never encountered Issuer in the electronic
manufacturing services (EMS) market space, nor was Key Tronic aware
of Issuer’s existence before Issuer filed a registration statement
regarding this purported offer.
- Our initial research shows Issuer reports approximately $45
million of EMS revenue. In our opinion, this does not qualify
Issuer to make any statements as to how it might operate an EMS
business like Key Tronic which is over 10 times Issuer’s current
size in terms of revenue.
As we stated in a prior press release, Key Tronic was unaware of
any purported interest in Key Tronic by Issuer and had not had any
communication with Issuer or any of its affiliates relating to such
interests prior to becoming aware of the Issuer’s filings on
September 5, 2017. Key Tronic has extremely serious concerns
about the accuracy of Issuer’s statements and its motives, as well
as the legitimacy of the purported offer.
Key Tronic intends to focus on continuing to execute on our
strategic plan. We believe that pursuing our growth
opportunities and continuing to leverage our competitive strengths
will be in the best long-term interests of our shareholders.
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. Key Tronic 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, including statements relating to Cemtrex’s
stated intention to make an exchange offer for Key Tronic’s common
stock, and Key Tronic’s growth opportunities, competitive strengths
and execution of the strategic plan. 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.
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 the other risks
and uncertainties detailed from time to time in the Key Tronic’s
SEC filings, including its most recent annual report and subsequent
quarterly reports.
CONTACTS:
Brett LarsenChief Financial OfficerKey Tronic Corporation(509)
927-5500
Michael NewmanInvestor RelationsStreetConnect(206) 729-3625
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