Key Tronic Corporation Announces Completion of Audit Committee Investigation
July 06 2021 - 7:37PM
Key Tronic Corporation (Nasdaq: KTCC) (the
“Company”), a provider of electronic manufacturing services (EMS),
today announced that the Audit Committee of the Company’s Board of
Directors (the “Audit Committee”) has completed its internal
investigation, which was originally announced in February 2021. The
Audit Committee, assisted by independent legal counsel and a
forensic accounting firm, conducted an investigation related to a
notification from an employee regarding potential irregularities of
the classification of inventory at a production facility.
The Audit Committee concluded that inventory and cost of goods
sold was improperly recorded at its Oakdale, MN production facility
during the fourth quarter of fiscal year 2020 and during the first
six months of fiscal year 2021. The investigation identified
accounting errors resulting in an understatement of cost of goods
sold and an overstatement of inventory. Additional inventory
accounting errors unrelated to the investigation were also
identified by management. These errors were a result of
deficiencies in the Company’s internal control over financial
reporting. The financial impact of the improper recording of
inventory and cost of goods sold and the other accounting errors
unrelated to the investigation did not result in a restatement of
any audited or unaudited financial statements.
Additionally, the Audit Committee found that certain employee
actions regarding the improper recording of inventory and cost of
goods sold at the Oakdale facility were inconsistent with the
Company’s Code of Conduct and related policies. The Audit Committee
referred these findings to the Company, which has taken and is
reviewing appropriate actions.
The Audit Committee, the Board of Directors and Company
management have proposed certain remedial actions which the Company
has adopted or will adopt, including: control design enhancements
related to existing controls; the design, implementation, and
maintenance of additional controls; systems upgrades; changes in
reporting structures; additional training; and enhanced financial
and operational oversight at the production facilities in Arkansas,
Minnesota and Mississippi.
As previously disclosed, the Company has not filed its Quarterly
Reports on Form 10-Q for the quarters ended December 26, 2020 and
April 3, 2021 (the “Quarterly Reports”) on a timely basis pending
the completion of the internal investigation. As the internal
investigation and subsequent accounting review have now concluded,
the Company is filing both Quarterly Reports today. These
reports will be available on the SEC website at market open
tomorrow.
Also as previously announced, the Company continues to cooperate
with the Securities and Exchange Commission (the “SEC”) regarding
this matter.
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, China and Vietnam. 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.
Forward-Looking Statements
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, but are not
limited to, those including such words as anticipates, continues,
expects, will, intends, similar verbs, or nouns corresponding to
such verbs, which may be forward looking. Forward-looking
statements also include other passages that are relevant to
expected future events, performances, and actions or that can only
be fully evaluated by events that will occur in the future.
Forward-looking statements in this press release include, without
limitation, the Company’s statements regarding its ability to file
and the timing of any such filing of its Quarterly Reports on Form
10-Q, the Company’s expectations and its and others’ actions with
respect to the investigation and related matters, including
expected financial conditions and results, and the Company’s
intended actions regarding the recommendations and referrals of the
Audit Committee, Board of Directors and management. 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
findings of the investigation, related actions by the Securities
and Exchange Commission (“SEC”), accountants and other third
parties, finalization of the Company’s controls review, and
factors, risks, and uncertainties detailed from time to time in the
Company’s SEC filings.
CONTACTS: |
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Brett
Larsen |
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Michael
Newman |
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Chief Financial Officer |
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Investor Relations |
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Key Tronic Corporation |
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StreetConnect |
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(509) 927-5500 |
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(206) 729-3625 |
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