"We are very pleased to be working with a world-class customer like Kaz," said Jack Oehlke, President and Chief Executive Officer. "The Kaz programs will leverage our strong engineering, account management and production capabilities. This important new relationship represents the kind of quality programs we are pursuing and winning, which are expanding our customer base and contributing to profitable long-term growth."

About Kaz, Incorporated

Headquartered in Southborough, Massachusetts, Kaz, Incorporated is a leading global healthcare and home comfort device company. Kaz has offered high-quality healthcare and home environment products since founder Max Katzman's invention of the world's first electric vaporizer over 80 years ago. Today, Kaz Inc. is a privately held company which designs, manufactures and distributes innovative products worldwide.

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. 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.

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 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. Forward-looking statements in this release include, without limitation, the Company's statements regarding its expectations with respect to revenue. 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 level of demand in the marketplace for customer products; the accuracy of customer forecasts; success of new customer programs; timing of the ramp up of new programs and the other risks and uncertainties detailed from time to time in the Company's SEC filings.

SOURCE: Key Tronic Corporation

Key Tronic Corporation 
Chief Financial Officer 
Ron Klawitter, 509-927-5295 
or 
StreetConnect 
Investor Relations 
Michael Newman, 206-729-3625

Expected next investor conference call information:
Conference Call Date: 10/28/2008
Conference Call Time: 5:00 PM
Conference Call URL: http://www.stct.com/ktcc/ktccnew/corporate/event_calendar2.html

For the first quarter of fiscal 2009, Key Tronic reported total revenue of $48.2 million, up 8% from $44.6 million in the same period of fiscal 2008. Net income for the first quarter of fiscal 2009 was $0.4 million or $0.04 per diluted share, up from $0.2 million or $0.02 diluted share for the same period of fiscal 2008.

"We are pleased with our performance for the first quarter, despite the challenging economic situation," said Jack Oehlke, President and Chief Executive Officer. "As expected, we saw an increased contribution from new customer programs, offsetting the anticipated decline in some of our existing programs.

"As we move into the second quarter, the global economic situation is creating uncertainty and slowdowns among some of our customers. While most of our promising new customer programs continue to move into production and ramp up, some have reduced their forecasts for coming periods. Revenue from our new programs is now expected to grow at a slower rate than previously anticipated. In response, our flexible business model allows us to take immediate steps to reduce operating expenses in our manufacturing facilities.

"In the face of the challenging economic environment, we continue to believe that our sustained investment in our world-class facilities provides us with strong competitive advantages. Over the longer term, we expect to continue to successfully win new business and further diversify our customer portfolio across a wide range of industries."

Business Outlook

For the second quarter of fiscal 2009, the Company expects revenue in the range of $42 million to $45 million, with earnings in the range of breakeven to $0.02 per share.

Conference Call

Key Tronic will host a conference call today to discuss its financial results at 2:00 PM Pacific (5:00 PM Eastern). A broadcast of the conference call will be available at www.keytronic.com under "Investor Relations" or by calling 800-219-6110 or +1 303-262-2138. A 48-hour replay will be available by calling 800-405-2236 or +1 303-590-3000 (Reservation No. 11120242). A replay will also be available on the Company's Web site.

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. 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.

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 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. Forward-looking statements in this release include, without limitation, the Company's statements regarding its expectations with respect to quarterly revenue and earnings during fiscal 2009. 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 future of the global economic environment and its impact on our customers and suppliers, the accuracy of customers' forecasts; success of customers' programs; timing of new programs; success of new-product introductions; acquisitions or divestitures of operations or facilities; technology advances; changes in pricing policies by the Company, its competitors, customers or suppliers; and the other risks and uncertainties detailed from time to time in the Company's SEC filings.

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
                                                      First Quarters Ended
                                                      September 27           September 29
                                                              2008                   2007
Net sales                                             $       48,237         $       44,550
Cost of sales                                                 44,830                 41,488
Gross profit on sales                                         3,407                  3,062
Operating expenses:
Research, development and engineering                         626                    677
Selling and administrative                                    2,137                  1,898
                                                              2,763                  2,575
Operating income                                              644                    487
Interest expense                                              182                    269
Income before income taxes                                    462                    218
Income tax provision                                          54                     35
Net income                                            $       408            $       183
Earnings per share:
Earnings per common share - basic                     $       0.04           $       0.02
Weighted average shares outstanding - basic                   10,040                 9,928
Earnings per common share - diluted                   $       0.04           $       0.02
Weighted average shares outstanding - diluted                 10,212                 10,328

KEY TRONIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                                         September 27           June 28
                                                                                 2008                  2008
ASSETS
Current Assets:
Cash and cash equivalents                                                $       2,772          $      2,879
Trade receivables - net                                                          28,284                36,018
Inventories                                                                      39,658                37,927
Other                                                                            5,396                 4,893
Total current assets                                                             76,110                81,717
Property, plant and equipment, net                                               10,533                10,798
Other Assets:
Restricted cash                                                                  1,220                 39
Deferred income tax asset - net                                                  4,104                 4,210
Other - net                                                                      806                   815
Goodwill                                                                         765                   765
Total other assets                                                               6,895                 5,829
Total Assets                                                             $       93,538         $      98,344
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable                                                         $       25,219         $      29,497
Accrued compensation and vacation                                                2,862                 4,388
Current portion of long term obligations                                         475                   470
Revolving loan                                                                   12,838                -
Other                                                                            1,806                 1,667
Total current liabilities                                                        43,200                36,022
Long-Term Liabilities:
Revolving loan                                                                   -                     12,348
Other                                                                            796                   893
Total long-term liabilities                                                      796                   13,241
Shareholders' Equity:
Common stock, no par value, authorized 25,000 shares; issued and                 39,355                39,301
outstanding 10,063 and 10,024 shares
Retained earnings                                                                10,187                9,780
Total shareholders' equity                                                       49,542                49,081
Total Liabilities and Shareholders' Equity                               $       93,538         $      98,344

SOURCE: Key Tronic Corporation

Key Tronic Corporation 
Chief Financial Officer 
Ron Klawitter, 509-927-5295 
or 
StreetConnect 
Investor Relations 
Michael Newman, 206-729-3625