Welcome to the Key Tronic Corporation Third Quarter of Fiscal 2012 Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday May, 01, 2012. And I’d now like to turn the conference over to Craig Gates, President and Chief Executive Officer. Please go ahead.

Good afternoon everyone. I’m Craig Gates, President and Chief Executive Officer of Key Tronic. I’d like to thank everyone for joining us today for our investor conference call. Joining me here in Spokane Valley Headquarters is Ron Klawitter, our Chief Financial Officer. Today we released our results for the third quarter of fiscal 2012. So far it's been an outstanding year for Key Tronic. We are very pleased with our strong growth in revenue and earnings which is primarily driven by production ramps and new programs. Since the third quarter last year our revenue has grown from $63 million to $95 million and this third quarter of fiscal 2012 is the fifth in a row to set new record quarterly revenue. Meanwhile and in spite of the challenges that go along with rapid growth, we have increased our operating efficiencies; this is rather small feet particularly since our revenue growth has been entirely organic. We added new facilities, new people, new production processes and made several significant business process changes to enable our continued profitable growth. I’m extremely proud of our people and of their performance during this challenging and rewarding period in our history. During the third quarter, we continue to capitalize on our unique combination of world-class engineering, global logistics and cost effective production as well as our advanced capability to produce products that have not traditionally been outsourced. As a result we continue to diversify our future revenue base by winning new programs involving transportation management, medical and consumer electronic devices. Now I’d like to turn the call over to Ron to review our financial performance. Then I will come back on to discuss our strategy going forward. Ron?

Thanks, Craig. As always I’d like to remind you that during the course of this call, we might make projections or other forward-looking statements regarding future events of the company’s future financial performance. Please remember that such statements are only predictions, actual events or results may differ materially, for more information you may review the risk factors outlined in the documents that the company has filed with the SEC, specifically our latest 10-K, quarterly 10-Qs and 8-Ks. Please note that on this call we will discuss historical financial and other statistical information regarding our business and operations. Some of this information s included in today’s press release and a recorded version of this call will be available on our website. Today, we released the results for the quarter ended March 31, 2012. For the third quarter of fiscal 2012 we reported total revenue of $95.5 million this is our 51% from the $63.4 million in revenue in the same period of fiscal 2011. The first 9 months of fiscal 2012, total revenue is $249.7 million this is up 33% from the $187.8 million in the same period of fiscal 2011. I liked the fact that the third quarter was quite backend loaded with around half our shipments in the last month and the fact that we have been moving many new programs into production; we have continued to improve our gross margins. Our gross margin was 9% in the third quarter of 2012 this is up from 8% in the previous quarter and 7% in the same period of fiscal 2012. For the fourth quarter we expect to see our gross margins continue to be around 9% to 10%. Operating expenses were $4 million in the third quarter, this is up 22% in the third quarter of last fiscal year, but it's up much less than our year-over-year growth in revenue. With the new program startups that fueled our revenue growth have required the addition of new engineers and program managers. We have done a pretty good job of controlling our cost and the percentage of operating expenses continue to decline as a percentage of revenue. Net income for the third quarter of fiscal 2012 was $3.4 million or $0.32 per share; this is up from $700,000 or $0.07 per share for the same period of fiscal 2011. The first 9 months of fiscal 2012, net income was $7.8 million or $0.74 per share this is up 86% and the $4.2 million or $0.40 per share the same period of fiscal 2011. Turning to the balance sheet. We continue to maintain our strong financial position as we rapidly expand our business. Our inventory was up only 1% from the previous quarter despite our much higher production levels and preparations for future growth, we are continuing to see an improvement in our overall inventory turns. Trade receivables were $59.7 million at the end of the third quarter; this is up 26% from the end of the prior quarter, reflecting our significant growth in revenue. Our DSOs were about 50 days which is really comparable to recent quarters. Our capital expenditures for the third quarter of fiscal 2012 were approximately $600,000. And this concludes the build out of our newest manufacturing facility in Juarez, Mexico. We expect CapEx to be about $5 million for fiscal 2012 which is comparable at fiscal 2011. Moving into the fourth quarter of 2012, many of our new programs continue to ramp up, and despite the uncertainty in the global macroeconomic environment we still expect to see revenues go up in the fourth quarter. Taking these factors into consideration we expect revenue in the range of $93 million to $98 million in the fourth quarter of fiscal 2012. In the fourth quarter we expect to see our gross margins to remain around 9% to 10%. We also expect our operating expenses to continue to increase at a slower rate than our revenue growth in coming periods. Taking these factors into consideration, we expect earnings in the range of $0.31 to $0.37 per share for the fourth quarter and this excludes any tax benefits that may be recognized during that period. We expect that earnings range assumes an effective income tax rate of 30%. In summary, the financial health of our company is excellent and we believe Key Tronic is well positioned to continue profitably expanding our business. Alright, Craig that’s it from me.

Thanks, Ron. So, to summarize Q3, it was our fifth consecutive record revenue quarter. At our current run rate we are entering the second tier in our market; this gives us more opportunities to win larger programs. We are now the ninth largest U.S. contract manufacturer and expect to be sixth next year. New business has powered our record growth and we now have 42 different customers and 155 discreet programs, while our pipeline of new business opportunities remains strong. There are three major competitive advantages behind our continued success. First, increasing cost in China are forcing localized production, Mexico for North America, and China for Asia. We stand alone in the excellence and breadth of our Mexican operations. Second, our unique organizational structure which we have honed over 25 years of experience running offshore operations, bring significant advantages to OEMs who want offshore cost but fear IP loss do not want to manage an offshore relationship, fear offshore schedule risk and inventory uncertainty and want onshore engineering and prototyping. Third, our size and responsiveness compared to our degree of vertical integration in engineering capability become even more attractive as the push for localized production intensifies. With these three competitive advantages powering us, we expect to continue to win market share and focus on profitable growth over the long-term. This concludes the formal portion of our presentation; Ron and I will now be pleased to answer your questions.

[Operator Instructions] And our first question comes from the line of Mike Cikos with Sidoti.

Just a couple of quick questions for you, first was how many programs were you working on this quarter that were generating revenue for you?

Well, the number I gave you, 155, the programs that are actually in the factory generating revenue. There more than that, that have not yet made it to the factories, we get to the progress of sending it up in our documentation system and getting parts in place and getting the process that’s put in place.

And then how many new customers or programs did you win during the quarter?

We won 3 new customers.

Okay. And that’s for the transportation management, the medical and consumer electronic devices?

Correct.

My other question for you was the size that you guys are getting to, you are the ninth biggest in the United States by your projections you will be the sixth largest in the U.S. next year at this time. As you get to that size, I mean will you be working on bigger projects than which will be able to widen your gross margin?

Well we actually just sat through a 2-hour meeting about 1.5 hours ago, trying to figure out of all of the new programs we have won, what direction we are going as we look at programs that in the $1 million, $2 million, $3 million range versus those that are in $10 million to $15 million versus those that are in the $30 million to $50 million. As we have been growing we have been starting to I guess, put a little bit of a sort on our shelter on the programs we are willing to quote and on the type of program that we think are going be worth our time. It's not necessarily true that a $1 million program is too small for us, because there are companies and opportunities that may have started at $1 million but we think they are going to grow to $15 million or $20 million. So, it's also not true that the programs that’s only a $1 million is too small, because it maybe something that’s destined only for Spokane and we want to continue to use Spokane as our prototype and NPI shop. So there is a whole lot of different tractors that have to go into the citing, which programs we are going to take and which programs we are going to really focus on. So, it's kind of complex to answer that question. We do think that as we get bigger we will get full opportunities that are on bigger programs than what we used to see before. And we are seeing that happen already as we have gone from $190 million to pushing to $400 million run rate, we are getting opportunities at bigger quotes than what we used to be a lot even quote on before.

But it's not necessarily true, Mike, that the bigger programs are going to be higher gross margins, if anything it’s going to be more competitive and I think that was part of your question. So, you get a lot more absorption obviously with the bigger programs, so incrementally, it might have some good benefits, but we have to bid those a lot tighter, because there is a lot more competition, the bigger the programs.

And I guess it's the multi-million dollar question, is as we continue to grow we are going to be able to continue to increase our revenues quicker than we have to ad people and cost to service those revenues. So, far we see those lines continuing to diverge and as we are able to quote and win bigger programs that will continue to diverge, but that’s kind of unknown.

And just one follow-up question. With the new programs that you won for a transportation management, medical, consumer electronic, I was hoping you could also discuss any markets where you are seeing particular strength as far as potential customers wanting to outsource manufacturing services?

We have taken a strange approach to that, at least it appears to be strange from the feedback we get from the people we talk to on the road shows and other discussions, we have never focused on a particular market, so we will go after any business that a, is moral and b, makes use of our unique advantages, the vertical integration we have. The growing amount of strange we have, when I say strange, a lot of people talk about contract manufacturing is box build and by that they mean they are going to slide an assembled PCV into a white box and tested. If you are to take a tour to our factories you’d see a strange and bewildering array of products a lot of which move, a lot of which are strange in large and bulky, a lot of them have gears and pulleys and belts and chaffs and bearings, so it's not your typical box build. So, in terms of the market that we see strength in, I will just looking at Phil's, our VP of sales, board, white board, and there is a wide, wide range of different markets up there for quotes that we expect to win in this quarter. So, it's not really any one market that we see is driving it, it's more of the descriptors or the attributes of the market that people that value those 3 competitive advantages that I talked to you in just a minute ago.

And our next question comes from the line of Orin Hirschman with AIGH Investment Partners.

You mentioned 3 new customers, how we can view, is that a good number in terms of 3 new customers, is it not meaningful which is we have to really look at the number of programs ramping from existing customers which in some way it might be better. How are we supposed to view that number?

Well I’d say you should view that as encouraging. We are running between 2 to 5 new customers at quarter win, if you look back to quarter conference call. So, as long as we are within that range for new customer wins, it would suggest that the pipeline is as full as it should be. On the other hand if we have quarter where we only won one I wouldn’t get concerned about that because the next quarter it looks like we might win 6. It's not that you can say this is a very constant and steady flow, but can say that 3 is a good number and should be about what we expect.

You had mentioned or attempt to that in prior calls that clearly you were almost unable to begin to cherry pick in terms of projects that you won and projects that you don’t want because there is a lot of demand for small and mid-sized programs with someone who is responsible like Key Tronic is and has a good proven track record. Does that remain the case and is it even accelerating because of the trend that you mentioned in terms of people wanting to move back on sort of to some degree.

Yes, it's definitely the case, we are getting a lot higher I guess you will call quality of quote opportunities. We are able to be more selective, we every now and then will take a risk on a startup company and we are a lot more harsh with those opportunities that we used to be and that will require upfront cash. So, it's across the board. We are able to be quite a bit more selective than we used to be.

Okay. And I don’t know if you can disclose this, but when you indicated we’d liked to be in terms of 5 for next year and move from #9 to #6, what drives #6?

Well, I’m not going to give you that number, you will have to look on the documentation for the industry. We try to give a 12-month number a year ago and it didn’t work out, so we decided we are just going to stick with quarters.

If we just take our current run rate and annualize it, and compare it to that list of the top 50 EMS companies worldwide that’s where we would have landed on the list #6, at our current annualized run rate.

And just one additional follow-up, in terms of getting [indiscernible] towards magic $0.5 billion number. In terms of your existing infrastructure are there any major overhauls you need to do at some point meaning is this $500 million to $600 million is [indiscernible] and all of a sudden you can’t handle it anymore with the existing infrastructure without some major overhaul or that’s not the case here.

No, it's pretty much a step in a repeat, as far as bricks and mortar go, we are okay, and as you can imagine real estate situation in Juarez is working in our favor quite a bit. The only issue we see is our growth can’t outstrip the availability of new people that our ability to get these people into the company and get them into our culture. So, I don’t see there is anyone single step function where we hit $522 million we are in trouble, but overall we are adding people as we go and as much as you might find it hard to believe it's hard to find exactly the right kind of people we want. So, I don’t think there is any big inflection point it's just a continual pressure on let’s not get too many people, so we don’t over lower ourselves, but we have to keep up with the people we get in time for the business, because the worse you could do is work hard to land a piece of business and then lose it because you can’t service it.

And our next question comes from the line of Bill Dezellem with Tieton Capital Management.

I have a group of questions. First of all, you mentioned $95 million run rate, do you see anything coming in say the next three quarter over the remainder of this calendar year, whether it be seasonality or customer programs and being or any other factors that and by the way customer programs ending that aren’t going to be replaced by those customer is bringing the next program up. If anything that you believe will, let me phrase it differently, anything that you know today will lead to a decline in your revenues from the current level?

As you know I’ve talked, we really can’t look out for more than quarter and know for sure what’s going to happen. I have told you probably, I guess the best way to say is that we used to talk about the mismatch where we knew something was a mismatch and was going to go away, because either the customer or the program didn’t fit us or we didn’t fit them. So, if we look at our current customer base, we don’t see any mismatches like we use to see. We don’t see any overhang where somebody is threatening to leave; we don’t see any customer who is unhappy because of the way the business is going with us; we see ups and downs everywhere we look, but in terms of those big mismatches that we used to fear and try to run away from as fast as we could. There is none of that’s hanging over our heads right now.

And seasonality, is there anything that you see there with your makeup of customers that will lead to any particular quarter following off whether it's Europe and the September quarter or anything else?

It's not that we can see, we have seasonal products, but there are so many of them now that they tend to offset each other.

And then what’s the shift to the three new programs that you won, I think in response to an earlier question you said that hose are three new customers, is that correct?

Yes.

And what is the size of each of those customer wins that you are thinking once they're fully ramped?

All three of those are between $5 and $15 million per year.

And then finally when we look at your incremental gross margin in the current quarter versus the year ago quarter, March ’11, it look like it was something in the neighborhood of 14% versus the December quarter it was approaching 17%. Is that range call it 15% plus or minus an appropriate incremental gross margin to be thinking about as you build the revenues going forward?

That’s the model that I’d recommend. If you are building a model and have them look for a single point number that would be at about 15% incremental.

And then you did something what I think is a little bit miraculous and that is that the revenues were up $11 million sequentially and yet your operating expenses, I’d normally say they were flat but they were actually down a few thousand dollars. I mean that does seem nearly impossible to accomplish. How did you do that?

Well, if you think back to the conference calls we were talking about the severe problems we were having with backend loading and getting new programs in place. And spending money on air freight overtime and so that’s the answer to your question is we have got quite a bit of the program, technical risks under control now. The forecasting and the procurement of materials for those new programs is more under control now. So, we are able to run a bit more efficiently than we were in the previous quarters.

You were talking about operating expenses, right Bill?

That’s correct.

Yes, so operating expenses which is it really drives out primarily is headcount, and that’s our engineers and program managers and a good portion of that, I always look at about almost at least 80% of its fixed, if we were going to be hiring in that the variable component of the operating expenses is primarily the engineers that we have to hire to handle new programs and the program managers. Other than that we do have other functions at the corporate level that are variable, but not nearly as much as you will see on the cost of goods sold.

[Operator Instructions] We have a follow-up question from the line of Bill Dezellem with Tieton Capital Management.

So you mentioned that things went a little more smoothly this quarter and yet I think in the opening remarks it was mentioned, Ron, I think you said that the quarter was a backend loaded and roughly half a year revenue came in that last month, that actually leads to 2 questions; the first is, why, what was the cause of that backend loading. And then secondarily, what if any costs did you incur to deal with half of your revenues coming in that last month?

Well, the cost this time was customers, their forecast when their orders came in, compared to when they thought they were going to come in. And the reason that even though we have to build it into second into the third month of the quarter, the reason that it was a little bit easier, is because the programs were in a more mature state. So, although the orders came in a little bit later than we thought we were in a position that we could build the product rather than out there trying to figure out how to build it. Same thing with the supply channel, even though the orders were late, we were expecting them to come and we had new supplier setup and the products in the pipeline. So, just because it's built-in 1/2 of the revenue was in the third month, that can be either an absolute disaster where everybody is working 20 hours a day trying to figure out it get built or it can be relatively smooth and you work some overtime in the factory. So, in this case it tended towards the smooth rather than running around like a chicken with your head cutoff situation.

I don’t want to give more credit than you deserve, but does this imply that you are actually getting better at growing?

No, I think that would be credit we don’t deserve, I think it's more the timing of what new products are actually ramping in the factory in that given quarter. The engineering capabilities of the customers from whom we won the business, and the technical maturity of the products that we are trying to transfer into the factory. So, all that’s kind of a bunch of random numbers you can generate. So, if you were to imagine that a customer gave us awarded us a new program that had never been built before, and we had to put it in our factory and figure out how to built it and we can really count on no advantage from our customer where we are having built it before. And then if you can imagine that product has some technical difficulties. So, our engineers are either in Juarez or China, trying to figure out how to make this thing. And at the same time as we are figuring out, a couple of parts have to be modified, so we have to go back to the supply chain and get different parts. That’s kind of a worst case scenario where it's just going to be really, really hard to get that built in the third month. So, that’s kind of what happened previously than the opposite of that is if you get a business award that has a mature product, it's basically a process of just transferring it out of one factory, the product was being built well into another factory, all the documentation is there. The supply chain is just a matter of switching the pipes from the guy that was building it before to us. And it's just a matter of getting our people trained that’s kind of the other end of the spectrum.

And this next question maybe has been answered in part over the course of the entire call, but at a high level, what would you say well during the quarter and what went quarter or that you would have liked to improved upon. And again if already been addressed everything there is nothing to add then fine, but if there is it would be helpful.

Well I’d say well was that the factory, our procurement people all responded to some very tight timing and we are able to turn around very quickly, a lot of production in a smooth fashion and with the high degree of quality control. That’s what we enroll. What was tough was we had a couple of pretty high volume products that we just put into the factory that required our engineering intervention in order to more or less modify the design a little bit, and cure some inherent issues with the product before we can actually ramp it. So, you can look at that as glass as 1/2 full or glass as 1/2 empty. From the 1/2 empty side it was bad, because we had to spend a lot of people’s time, working a lot of overtime in the technical ranks to figure out what was wrong with this product. The good side is that the customer is now quite a bit more aware of what we can do and understands the value that we can bring even beyond what they knew when they picked us. So, it pays off in the end for us.

And that’s a very nice segue to what I think is going to be my final question, and that is as you have grown and have moved from 20 some customers to 40 some customers. To what degree has your awareness increased with prospective customers. And I guess the question is really oriented towards the idea of the degree to which the ease of the selling process has improved.

Well, if you go back to the $140 million days to the $180 million days to, if you want to call it $400 million run rate today, it's almost unrecognizable, the sales process that we used to have versus the one we have now. Back in the bad old days, every program we won we have the day out from under a rock, nobody knew who we were. We had to take them through a factory that didn’t look like a contract manufacturing factory, it looked like a keyboard factory and we had to convince them that we have the wherewithal to figure out how to build their product. But if you contrast that with today, we have a growing cadre of people in the marketplace who work with us, and have left one company and gone to another. So, we get a lot of calls from folks who lands somewhere knew and calls up and say, hey I just got in here and I want you guys to come in and quote this, because it worked out so far, so well for me and company xyz. Then when we bring people into our factories they get to see just a beautiful, wonderful example of what a CM factory should look like. And instead of having to convince them that we can figure out how to build their strange product we can take them out and show them any number of products that nobody ever thought of outsourcing before. And then when we talk about our ability to provide them with the kind of services they have to have because they are laying to their company’s future on the line. We can in essence give them our list of customers and say, stick a pin in it and I’ll give you the name of the person to call of that customer and you can get a reference from them. So, it's gone from swimming in mud to walk it on water in terms of how hard this is to win new customers.

And we have a follow-up question from the line of Mike Cikos from Sidoti.

Just to piggy back on couple of questions if they were asked earlier, first question was the three new customers ranging in $5 million to $15 million a year once fully ramped. About how long do you think it's going to take to get those guys fully ramped. Are we still looking at the, what is it, I think it was 12 to 18 months?

Well, one of them is going to be pretty quick, unusually quick, the other 2 are going to probably take the typical year to year and a half.

Okay. And just a point of, I was a little confused when you were discussing with Bill, their operating expenses declining sequentially. I know Ron, was discussing how about 80% of the operating expenses is fixed. But then he was talking about hiring additional engineers here and there to help support the sales growth that you guys are seeing. With the growth that you are seeing, are there plans to increase the number of engineers working for you in this upcoming quarter then?

We have been adding people petty steadily for the last 1.5 years. Again it's a matter of when you find them and when you add them. So, we expect that we are going to continue to have to add and we are right now looking for lost count is probably over 15 people in the engineering and program management ranks. So, it's fixed in the short-term that varies with the business in the long-term.

Okay. So, the operating expenses that we saw decline on a sequential basis then from Q2 to Q3. We would attribute that to being more of a fluke in light of the fact you will need to hire additional engineers. I’d take it then that there wasn’t as much hiring in this third quarter?

We wish we could have done some hiring but we couldn’t find them. And you are exactly right it was a timing fluke rather than anything that you can count on going forward.

And our next question comes from the line of Matthew Dodson with Edmunds White Partners.

Yes, you mentioned this quarter was more backend weighted. So, your net working capital or working capital should sequentially get better, can you kind of walk us through how much cash you are planning on generating this quarter and what you guys are planning on doing with the cash?

Second part of your question first is, we just use our cash to pay down debt. So, we had about $16 million of [indiscernible] revolver at the end of the third quarter. So, as we generate cash, we clean on the revolver and then withdrawn the revolver as working capital goes up. What happens with that backend loading of the revenue, it really hits our accounts receivable, as we are averaging about 50 days payment and so we have got half year revenue in the last month we are not going to collect that and that’s going to show up as at the end of the quarter spike in receivables and use of cash. But as far as generating cash going forward we got about $500,000 to $600,000 a quarter in depreciation expense and we are looking at to hit our earnings range that is about $5 million pre-tax earnings, and we are not really paying any cash taxes. So, you expect to run $5 million to $6 million of generating cash just from operations, just from the business, as we get only 40% of our revenue in the last month instead of 50% of our revenue in the last month. That will have an impact of about $4 million to $5 million of earlier collection of receivables. So, hope that gives you the numbers to work with, but as far as a single point in time EBITDA should be around $5.5 million, $5.5 million to $6 million. And then working capital receivables will come down if we get revenue earlier in the quarter and less at backend loaded.

And our next question comes from the line of Orin Hirschman with AIGH Investment Partners.

In terms the ease of customer acquisition and also the value added it sounds like from your ability to help the customer on the product side is really beginning to take hold. I just have one additional follow-up, so just in terms of we keep talking about the new customers, I believe there is a lot of new programs for existing customer, they are in the process of ramping, can you just comment on that as well?

Well I don’t know what to say about that that we haven’t already said, there are a lot of new programs that we are ramping in the factory, there are a lot of new customer programs that haven’t hit the factory yet. There is a lot of new wins that haven’t gotten through the pipeline of what it takes to put in the factory. So, we have always kind of argued with ourselves whether or not we should try to get very precise on this or whether we should just give a qualitative, it's looking good and continues to look good, because if we are trying to get qualitative, we have to somehow map out all of these different customers, all of these different programs and at what stage they are in. And they just didn’t seem to us like that was going to help anybody out so we haven’t done it. So, I can’t answer your question with lot more other than what I just said.

Would you agree there exist a penetration of the existing customers continue to increase?

On a customer-by-customer basis the answer is either a resounding yes or a no. So, that’s my problem, so there is 42 of them, so if I just take the top five there is one of them that we fully penetrated and the only way we are going to getting more revenue out of them is if they grow. If I take the next one, we are only 15% penetrated into what they can give us, if they make what we think are right decisions in the future, about whether they should outsource or stay internally, there could be big opportunities for growth there. And if I just went through the top 10 I’d have a different answer for you on each one. This is a very strange business, it's really hard to characterize an average.

And the bottom line is they are happy with you. That’s the matter if they are doing more outsourcing you think you have a good chaff at it.

The example I used, yes, that is indeed the case. And there is always a in our business and particularly in Key Tronic caution or niche in this business, we end up with a lot of let’s call them first time outsourcers. So, they still have production capability in their own company. And so there is always the ongoing debate with these customers on whether or not they should go 100% outsourced or whether they should stay split between in-sourced and outsourced or whether they should reverse and go back to in sourced. So, our role is to make sure we do a really great job so that they can see the advantages of outsourcing and then hope that the decision goes in our favor, but it's always it's an interesting process.

And our next question comes from the line of Ethan Steinberg with Friess Associates.

Just on that last question, I’m sort of curious with the growth last couple of quarter has obviously been dramatic, can you give us sort of sense of how much has been from new programs versus growth with the existing programs or existing customers? And just a rough approximation, I’m just wondering if what the primary driver behind the sequential growth rates and then also in the quarter you just guided to.

Okay. So, if we think about it this way, about half of the growth has come from our increased penetration of our top customers. The other 1/2 has come from new programs with new customers. And that’s really proved if you maybe.

And that’s been pretty consistent for the last couple of months, or I mean last couple of quarter and for the quarter you just guided to?

Yes, it has.

Okay. Interesting. And then is there any or much seasonality to the business that we should be thinking about as you, I don’t know in the quarter you just did or this next quarter as get farther through the calendar year.

There is a lot of seasonality customer-to-customer, but so far it seems to offset.

Okay. So, not really as far as [indiscernible].

No.

Okay. And then understanding the cadence of the quarter, it sounds like the third month was a lot higher than the first 2 months, is that just has to do with the customer forecast being less accurate on the timing and the deliveries coming in later.

Yes, it does. We get pretty frustrating with it, so we forced our unfortunate planning people to keep really tight records, and now we can say with surety that’s it's not new lack of parts it's not due to engineering issues in this last quarter, it do purely to when the customers got the orders they thought they were going to get.

Okay. So, then just on the cadence if you are thinking about does that means the average for the quarter was monthly was lower than the run rate coming out of the quarter but the guidance and I missed the beginning of the call, so maybe you covered this, but the guidance implies the mid-point almost the same revenues sequentially. But it sounds like I guess the momentum leaving the quarter is higher plus you have got new wins and programs ramping, why aren’t the revenues expected to be up more sequentially?

Well, it's the same process where the customers will forecast say $10 million and I think it's going to get spread 3, 3 and 3 and instead it gets spread much more thinner in the front 2 and thicker in the last one and the same process will happen again. So, lot of these customers are public companies and they are all trying to push the envelope and get the revenue. So, though forecast is if it's even but everybody will be up beating the bushes in the last month for trying to hit their goals.

Okay. So, have you seen that step down in the May, so did April step down from March?

I don’t want to give you that answer because then we were talking about stuff we are not supposed to disclose.

Okay. But then how about just taking the mid-point of the guidance is essentially flat and it's great number. So don’t take it the wrong way, but it's essentially flat sequentially but it sounds like you have got a number of existing programs that are still growing as well as some new programs. Is there any reason you wouldn’t have them more positive sequential trend because of that?

The reason we don’t have a more positive trend is that the lot of these things are up, down, in and out. When we got 155 programs, it's pretty hard to have a nice steady line and you can say this is a straight line, this is the trend that we are going to be plus or minus 2% of it. So, we have some customers that find out they have too much inventory, we have other customers who find that they only have enough. And it's not something where you can say this is going to be a smooth, steady, straight line growth that you can count on plus or minus 1%. It's going to be lumpy. The overall trend is going to be positive, we believe, everything we see so it's going to be positive but week-to-week, month-to-month you can’t say that everything is going to go smoothly in the same direction.

Sure, any reason to think this quarter is a lot less or more backend loaded?

From the data we just spent a bunch of time gathering I suspect this current quarter is maybe going to be a little bit better and the one we just finished was maybe a little bit worse. We got a Board member who has been around for probably a couple of centuries, but he gave me a lecture said, I needed to calm down, it's been like this for 50 years and you [indiscernible] forever.

And we have a follow-up question from the line of Bill Dezellem with Tieton Capital Management.

I couldn’t help myself, but you may have just answered one of these questions which was, that it seems as though if we put some of the different pieces of the puzzle together, if you don’t see anything that you know will take revenues down. And you have all of these new programs that are ramping in the factory and those that are still need to move into the factory to begin their ramp, directionally revenue over at least a foreseeable future should be increasing, am I missing anything conceptually there?

No, you are not, that’s our hope.

The only thing you missed in, Bill, is obviously is how well our customer do in the marketplace. So, we are still at the mercy of how well they do, and so all we can do if it work off the forecast we have gotten from our customers. Now they come in with some upsides that would be great, but that’s the best information we have right now that niche customer is unique.

It's like the discussion you and I had long time back, Bill, we can’t have the same jobs, I can’t tell you what’s going to happen for sure in this quarter or next, but my job is over the long run to make sure that the trend is up, just like yours is. And from what we can see, the trend should look like it's up, but we sure can’t guarantee that it's going to be up every quarter or every month.

And then in response to a prior question, you mentioned that one of the three new customers if you won this quarter, so it's actually going to be a bit unique that they are actually going to ramp more quickly and matter of fact it sounds like quite a quick ramp. Would you please discuss the backdrop with that customer and maybe which one of the 3 whether it's the transportation, medical or consumer electronics. And then what it is about their situation leading to this unusually quick ramp. And also of course, we like to know what the size is, whether it's one of the $5 million or the $15 million?

Okay. First of all, I don’t want to tell you which one it is because I’m going to end up dog cussing one of my competitors, so that's not classy. The reason these guys have to leave quickly and come to us quickly is that one of our competitors has let them down pretty severely. So, they are in a situation where our customers never want to be, where their CM is not performing and not performing to the extent that it's damaging their business. And so, even though it's going to be a very sweaty transfer and absorb a lot of their time to make it happen, they are willing to invest that burst of energy and effort and distraction from running their business to get the business transferred from our competitor to us. And this is between $5 million and $15 million.

Thank you. And at this time I’m showing no further questions in the queue, I’d like to turn the conference back over to management for closing comments.

Okay. Thanks everybody for participating in the conference call. And we look forward to talking with you next quarter. Have a good day.

Ladies and gentlemen this does conclude the Key Tronic Corporation third quarter of fiscal 2012 conference call. If you like to listen to our replay of today’s conference you may do so by dialing, 303-590-3030 or 1800-406-7325 and entering the access code of 4522733#. We thank you for your participation.