What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-10-15 compared with 2023-09-26 · 436 added, 222 removed, 601 unchanged (52% of the section changed)

4 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Key Tronic Corporation (the “Company”) as of July 1, 2023 and July 2, 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of July 1, 2023 and July 2, 2022, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Key Tronic Corporation (the “Company”) as of June 29, 2024, July 1, 2023, and July 2, 2022, the related consolidated statements of operations, comprehensive income (loss), cash flows, and shareholders’ equity for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 29, 2024, July 1, 2023, and July 2, 2022, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Restatement of Previously Issued Financial Statements

As discussed in Note 14 to the consolidated financial statements, the consolidated financial statements for the years ended July 1, 2023 and July 2, 2022, have been restated to correct misstatements.

Basis for Opinion

15 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Notes 1 and 12 to the consolidated financial statements, the Company reported revenue of $588.1 million for the year ended July 1, 2023, of which $573.4 million related to revenue recognized over time.

As described in Notes 1 and 12 to the consolidated financial statements, the Company reported revenue of $567 million for the year ended June 29, 2024, of which $497 million related to revenue recognized over time.

The Company has determined that for the majority of its contracts, the Company is manufacturing products for which there is no alternative use due to the unique nature of the customer-specific product, intellectual property, and other contract restrictions.

The Company has an enforceable right to payment including a reasonable profit for performance completed to date with respect to these contracts.

As a result, revenue is recognized under these contracts over-time based on the input cost-to-cost method as it better depicts the transfer of control.

As a result, revenue is recognized under these contracts over-time based on the input cost-to-cost method as it better depicts the transfer of

This input method is based on the ratio of costs incurred to date as compared to the total estimated costs at completion of the performance obligation.

We identified revenue recognized over time on contracts for manufacturing products as a critical audit matter.

Management’s calculation includes reports with varying elements, to estimate costs incurred to date for various performance obligations.

Auditing management’s estimates used in the calculation of revenue recognized over time involved especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

The primary procedures we performed to address this critical audit matter included:

• Testing the design, implementation, and operating effectiveness of internal controls relating to revenue recognized over time, including controls over the quarterly calculation of in-process contracts, and the related contract assets.

• Evaluating the methodology of estimating costs incurred to date on in-process contracts and testing the completeness and accuracy of the system generated reports used to estimate costs incurred by recalculating the expected costs on in-process contracts, vouching to source documents, tracing in-process orders to subsequent sales and shipping documentation within a reasonable period after year-end, identifying and testing significant assumptions used in the revenue calculation, and performing data validation procedures.

We identified the auditing of revenue recognized over time on contracts for manufacturing products, including the total estimated costs at completion of the performance obligation as a critical audit matter.

Auditing management’s estimates used in the calculation of revenue recognized over time involved significant audit effort, as well as especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

Our audit procedures related to auditing revenue recognized over time on contracts for manufacturing products, including the total estimated costs at completion of the performance obligation, included the following, among others:

• Evaluating the methodology of estimating costs incurred to date on in-process contracts, testing the completeness and accuracy of the system generated reports used to estimate costs incurred, and performing data validation procedures.

• Recalculating the expected costs on in-process contracts, testing a selection of contracts to source documents, and tracing in-process orders to subsequent sales and shipping documentation within a reasonable period after year-end.

• Identifying and testing significant assumptions used in the revenue calculation, including the ratio of costs incurred to date as compared to the total estimated costs at completion of the performance obligations.

• Comparing margins realized to trending historic margins, and comparing total revenue recognized to independent expectations of total revenues disaggregated by revenue stream.

2 unchanged sentences

Seattle, Washington

September 26, 2023

October 15, 2024

We have served as the Company’s auditor since 2021.

2 unchanged sentences

(In thousands)

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

Current assets:

Cash and cash equivalents $ 4,752 $ 3,603 $ 1,707

Trade receivables, net of allowance for doubtful accounts of $ 23 and $ 12

Trade receivables, net of credit losses of $ 2,918 , $ 23 and $ 12

132,559 150,600 135,876

Contract assets 21,250 29,925 21,974

Inventories, net 137,911 155,741

Other 27,510 24,710

Inventories 105,099 137,911 155,741

Other, net of credit losses of $ 1,679 , $ 0 , and $ 0

24,739 27,510 24,710

Total current assets 288,399 349,549 340,008

10 unchanged sentences

Accrued compensation and vacation 6,510 13,351 11,836

Current portion of debt, net 7,849 7,402

Current portion of long-term debt 3,123 3,138 2,190

Other 15,149 19,578 28,248

1 unchanged sentence

Long-term liabilities:

Term loans 6,726 5,716

Revolving loan 114,805 94,577

Long-term debt, net 116,383 121,531 100,293

Operating lease liabilities 10,312 10,317 12,023

14 unchanged sentences

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Fiscal Year Ended

July 1, 2023 July 2, 2022

Restated Restated

June 29, 2024 July 1, 2023 July 2, 2022

Net sales $ 566,942 $ 605,315 $ 544,177

7 unchanged sentences

Interest expense, net 11,945 10,023 5,104

Income before income taxes 6,300 3,691

Income tax provision 1,143 314

Net income $ 5,157 $ 3,377

Net income per share — Basic $ 0.48 $ 0.31

Income (loss) before income taxes ( 5,187 ) 6,300 3,691

Income tax provision (benefit) ( 2,400 ) 1,143 314

Net income (loss) $ ( 2,787 ) $ 5,157 $ 3,377

Net income (loss) per share — Basic $ ( 0.26 ) $ 0.48 $ 0.31

Weighted average shares outstanding — Basic 10,762 10,762 10,762

Net income per share — Diluted $ 0.47 $ 0.31

Net income (loss) per share — Diluted $ ( 0.26 ) $ 0.47 $ 0.31

Weighted average shares outstanding — Diluted 10,762 10,938 11,063

1 unchanged sentence

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Fiscal Year Ended

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

Comprehensive income:

Net income $ 5,157 $ 3,377

Net income (loss) $ ( 2,787 ) $ 5,157 $ 3,377

Other comprehensive income:

Unrealized gain (loss) on hedging instruments, net of tax ( 118 ) 328 ( 2,497 )

Comprehensive income $ 5,485 $ 880

Other comprehensive income for fiscal years 2023 and 2022 is reflected net of tax provision (benefit) of approximately $ 0 and $( 0.8 ) million, respectively.

Comprehensive income (loss) $ ( 2,905 ) $ 5,485 $ 880

Other comprehensive income for fiscal years 2024, 2023, and 2022 is reflected net of tax provision (benefit) of approximately $( 0.1 ) million, $ 0.0 million , and $( 0.8 ) million, respectively.

See accompanying notes to consolidated financial statements.

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

KEY TRONIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

Fiscal Year Ended

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

Operating activities:

Net income $ 5,157 $ 3,377

Adjustments to reconcile net income to cash used in operating activities:

Net income (loss) $ ( 2,787 ) $ 5,157 $ 3,377

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

Depreciation and amortization 11,038 9,542 7,562

4 unchanged sentences

Provision for warranty 320 313 446

Provision for doubtful accounts 37 67

Provision for credit losses ( 84 ) 37 67

Gain on disposal of assets ( 32 ) ( 21 ) ( 12 )

2 unchanged sentences

Deferred income taxes ( 5,132 ) ( 1,989 ) 481

Noncash accrued compensation benefit ( 3,925 ) — —

Changes in operating assets and liabilities

6 unchanged sentences

Other liabilities ( 8,123 ) ( 15,953 ) ( 3,624 )

Cash used in operating activities ( 11,311 ) ( 4,907 )

Cash provided by (used in) operating activities 13,776 ( 11,311 ) ( 4,907 )

Investing activities:

11 unchanged sentences

Principal payments on finance leases ( 5,070 ) ( 4,291 ) ( 2,331 )

Cash provided by financing activities 17,741 11,192

Cash provided by (used in) financing activities ( 10,519 ) 17,741 11,192

Net increase (decrease) in cash and cash equivalents 1,149 1,896 ( 1,766 )

4 unchanged sentences

Income tax payments, net of refunds $ 2,402 $ 1,414 $ 1,315

ASC 326 Opening Balance Sheet Adjustment $ 3,278 $ — $ —

Recognition of operating lease liabilities and right-of-use assets $ 4,877 $ 5,184 $ 5,247

12 unchanged sentences

Net income 3,377 — 3,377

Unrealized gain on hedging instruments, net of tax — — — ( 2,497 ) ( 2,497 )

Unrealized loss on hedging instruments, net of tax — — — ( 2,497 ) ( 2,497 )

Share-based compensation — 293 — — 293

1 unchanged sentence

Net income — — 5,157 — 5,157

Unrealized loss on hedging instruments, net of tax — — — 328 328

Unrealized gain on hedging instruments, net of tax — — — 328 328

Share-based compensation — 254 — — 254

Balances, July 1, 2023 10,762 $ 47,728 $ 82,986 $ ( 97 ) $ 130,617

Net loss — ( 2,787 ) — ( 2,787 )

CECL opening balance sheet adjustment, net of tax — — ( 3,278 ) — ( 3,278 )

Unrealized loss on hedging instruments, net of tax — — — ( 118 ) ( 118 )

Share-based compensation — ( 444 ) — — ( 444 )

Balances, June 29, 2024 10,762 $ 47,284 $ 76,921 $ ( 215 ) $ 123,990

See accompanying notes to consolidated financial statements.

1 unchanged sentence

SIGNIFICANT ACCOUNTING POLICIES

Key Tronic Corporation and subsidiaries (the Company) is engaged in contract manufacturing for original equipment manufacturers (OEMs) and also manufactures keyboards and other input devices.

Key Tronic Corporation and subsidiaries (the Company) is engaged in contract manufacturing for original equipment manufacturers (OEMs).

The Company’s headquarters are located in Spokane Valley, Washington with manufacturing operations in Oakdale, Minnesota;

4 unchanged sentences

and Da Nang, Vietnam.

Due to the COVID-19 pandemic, the Company has seen extreme shifts in demand from its customer base, supply chain and logistics risks.

The possibility of future temporary closures, as well as adverse fluctuations in customer demand, freight and expedite costs, precautionary safety expenses and labor shortages, collectability of accounts, and future supply chain disruptions during the rapidly changing COVID-19 environment can materially impact operating results.

Additionally, continued adverse macroeconomic conditions and significant currency exchange fluctuations can also materially impact operating results.

Historically, we have financed operations and met our capital expenditure requirements primarily through cash flows provided by operations and borrowings under our credit facilities.

We generated operating and net income of $ 16.3 million and $ 5.2 million, respectively, during the 12-month period ended July 1, 2023 and have positive working capital of $ 197.6 million as of July 1, 2023.

Due to the timing between the procurement of raw materials, production cycle and payment from our customers, we have relied on borrowings on our credit facilities to fund operations as the Company increased its revenues and backlog during fiscal year 2023.

Based on current projections, we anticipate generating cash from operations as revenue slightly decreases in the first quarter of fiscal year 2024 and decreasing working capital requirements as existing backlog is manufactured and shipped.

As of July 1, 2023, we have limited additional borrowing capacity on our credit facility.

Historically, due to the timing between the procurement of raw materials, production cycle and payment from our customers, we have financed operations and met our capital expenditure requirements primarily through cash flows provided by operations and borrowings under our credit facilities.

We generated operating and net income of $ 6.8 million and $( 2.8 ) million respectively, during the 12-month period ended June 29, 2024 and have positive working capital of $ 184.2 million as of June 29, 2024.

Based on current projections, we anticipate generating cash from operations as revenue increases in the first quarter of fiscal year 2025.

As of June 29, 2024, we have limited additional borrowing capacity on our credit facility, which matures on December 3, 2025.

We are in discussions with multiple financial institutions to extend the borrowing capacity on our credit facility.

10 unchanged sentences

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Estimates include the allowance for doubtful receivables, calculating inventory impairments related to obsolete and non-saleable inventories to value at net realizable value, deferred tax assets and liabilities, uncertain tax positions, impairment of long-lived assets, medical self-funded insurance liability, long-term incentive compensation accrual, the provision for warranty costs, and the fair value of stock appreciation rights granted under the Company’s share-based compensation plan.

Estimates include the allowance for credit losses, calculating inventory impairments related to obsolete and non-saleable inventories to value at net realizable value, deferred tax assets and liabilities, uncertain tax positions, impairment of long-lived assets, medical self-funded insurance liability, long-term incentive compensation accrual, the provision for warranty costs, and the fair value of stock appreciation rights granted under the Company’s share-based compensation plan.

Due to uncertainties with respect to the assumptions and estimates, actual results could differ from those estimates.

3 unchanged sentences

The Company may have cash and cash equivalents at financial institutions that are in excess of federally insured limits from time to time.

Allowance for Doubtful Accounts

The Company evaluates the collectability of accounts receivable and records an allowance for doubtful accounts, which reduces the receivables to an amount that management reasonably estimates will be collected.

A specific allowance is recorded against receivables considered to be impaired based on the Company’s knowledge of the financial condition of the customer.

Allowance for Credit Losses

The Company evaluates the collectability of accounts receivable and records an allowance for credit losses, which reduces the receivables to an amount that management reasonably estimates will be collected.

A specific allowance is recorded against receivables considered to be impaired based on the Company’s knowledge of the financial condition of the customer, and a general allowance is calculated and applied to remaining receivables based on the Company's historical collection experience.

In determining the amount of the allowance, the Company considers several factors including the aging of the receivables, the current business environment and historical experience.

38 unchanged sentences

The Company generally enters into manufacturing service agreements (“MSA”) with its customers that outlines the terms of the business relationship between the customer and the Company.

This includes matters such as warranty,

indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, payment terms, etc.

This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, payment terms, etc.

The Company will also bid on a program-by-program basis for customers in which an executed MSA may not be in place.

10 unchanged sentences

For all other contracts that do not meet these criteria, such as manufacturing contracts for which the terms do not provide an enforceable right to payment for performance completed to date, the Company recognizes revenue when it has transferred control of the related manufactured products which generally occurs upon shipment to the customer.

Revenue from engineering services is recognized over time as the services are performed.

Revenue from engineering services is recognized over time as costs related to the services are incurred, which approximates proportional performance of the service.

This method is used because management considers it to be the best available measure of progress on the contracts.

Revenue from scrap and excess inventory sales is recognized at the point-in-time of scrap at the customers direction, or, if applicable, shipment of the material to the customer.

Shipping and Handling Fees

21 unchanged sentences

The derivative’s effectiveness represents the change in fair value of the hedge that offsets the change in fair value of the hedged item.

As of July 1, 2023, the Company did not have any outstanding foreign currency forward contracts.

As of June 29, 2024, the Company had outstanding foreign currency forward contracts with a notional amount of $ 12.5 million.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period.

Diluted earnings per common share is computed by dividing net income by the combination of other potentially dilutive weighted average common shares and the weighted average number of common shares outstanding

during the period using the treasury stock method.

The computation assumes the proceeds from the exercise of stock options were used to repurchase common shares at the average market price during the period.

The computation of diluted earnings per common share does not assume conversion, exercise, or contingent issuance of common stock equivalent shares that would have an anti-dilutive effect on earnings per share.

The computation of diluted earnings per

common share does not assume conversion, exercise, or contingent issuance of common stock equivalent shares that would have an anti-dilutive effect on earnings per share.

Foreign Currency Transactions

2 unchanged sentences

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, accounts receivable, current liabilities, and non-current operating lease liability are reflected on the balance sheets at July 1, 2023 and July 2, 2022, reasonably approximate their fair value.

The Company had an outstanding balance on the line of credit of $ 115.4 million as of July 1, 2023 and $ 95.1 million as of July 2, 2022, with a carrying value that reasonably approximates the fair value.

The Company had an outstanding balance on the term loan of $ 3.4 million as of July 1, 2023 and $ 4.6 million as of July 2, 2022, with a carrying value that reasonably approximates the fair value.

The equipment term loans were $ 6.5 million as of July 1, 2023 and $ 3.3 million as of July 2, 2022, with a carrying value that reasonably approximates the fair value.

The carrying values of cash and cash equivalents, accounts receivable, current liabilities, and non-current operating lease liability are reflected on the balance sheets at June 29, 2024, July 1, 2023, and July 2, 2022 , reasonably approximate their fair value.

The Company had an outstanding balance on its lines of credit of $ 112.6 million as of June 29, 2024, $ 115.4 million as of July 1, 2023, and $ 95.1 million as of July 2, 2022 with a carrying value that reasonably approximates the fair value.

The Company had an outstanding balance on its foreign term loan of MXN 40.5 million ($ 2.2 million USD) as of June 29, 2024, MXN 58.2 million ($ 3.4 million USD) as of July 1, 2023, and MXN 93.3 million ($ 4.6 million USD) as of July 2, 2022 with a carrying value that reasonably approximates the fair value.

The domestic equipment term loans were $ 5.8 million as of June 29, 2024, $ 6.5 million as of July 1, 2023, and $ 3.3 million as of July 2, 2022 with a carrying value that reasonably approximates the fair value.

Share-based Compensation

3 unchanged sentences

Newly Adopted and Recent Accounting Pronouncements

In January 2021, FASB issued Accounting Standard Update (ASU) 2021-01, Reference Rate Reform (Topic 848) to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation.

The Company is currently assessing the effects on its consolidated financial statements, and it intends to adopt the guidance as it becomes effective.

On December 14, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

The ASU requires entities to disclose more detailed information relating to their reconciliation of statutory tax rate to effective tax rate, income taxes paid by jurisdiction, pretax income (or loss) from continuing operations, and income tax expense (or benefit).

The ASU applies to the Company’s annual reporting period beginning in fiscal year 2026.

The Company does not anticipate early adoption of the new disclosure standards.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires public entities to disclose information about their reportable segments' oversight and significant expenses on an interim and annual basis.

The ASU is effective for the annual reporting period beginning in fiscal year 2025 and for interim periods beginning in fiscal year 2026.

Early adoption is permitted.

The Company is currently evaluating the guidance and its impact to the financial statements.

In September 2022, the FASB issued ASU No.

2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50).

This standard requires disclosure of the key terms of outstanding supplier finance programs and a roll forward of the related obligations.

The new standard does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.

The ASU became effective for the Company July 2, 2023, except for the roll forward requirement, which becomes effective June 30, 2024.

This ASU, except for the roll forward requirement, was adopted retrospectively as of July 2, 2023 and did not have a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08 amending Business Combination:

(Topic 805), which was necessary due to 2014-09, Revenue from Contracts with Customers (Topic 606).

The FASB issued this ASU to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to (1) recognition of an acquired contract liability and (2) payment terms and their effect on subsequent revenue recognized by the acquirer.

The Company adopted these amendments as of the effective date of July 2, 2023.

These amendments are to be applied prospectively to business combinations occurring on or after the effective date of the amendments.

The Company plans to apply the practical expedients as needed for any future acquisitions.

The practical expedients cover contracts that were modified prior to acquisition date as well as determining which date an acquirer would have to determine the standalone selling price of each performance obligation in an acquired contract.

This ASU did not have a material impact on our consolidated financial statements.

In March of 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, which clarifies specific issues raised by stakeholders.

Specifically, the ASU clarifies the following:

1) that all entities are required to provide the fair value option disclosures in ASC 825, Financial Instruments 2) clarifies that the portfolio exception in ASC 820, Fair Value Measurement, applies to nonfinancial items accounted for as derivatives under ASC 815, Derivatives and Hedging;

1) that all entities are required to provide the fair value option disclosures in ASC 825, Financial Instruments 2) clarifies that the portfolio exception in ASC 820, Fair

Value Measurement, applies to nonfinancial items accounted for as derivatives under ASC 815, Derivatives and Hedging;

3) clarifies that for purposes of measuring expected credit losses on a net investment in a lease in accordance with ASC 326, Financial Instruments - Credit Losses, the lease term determined in accordance with ASC 842, Leases, should be used as the contractual term;

2 unchanged sentences

The amendments in the ASU have various effective dates and transition requirements which are dependent on timing of adoption of ASU 2016-13.

The Company is currently assessing the effects on its consolidated financial statements, and it intends to adopt the guidance as they become effective.

The Company adopted this amendment as of the effective date of July 2, 2023 on a modified retrospective basis.

This ASU did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326):

1 unchanged sentence

ASU 2018-19, ASU 2019-04 and ASU 2019-05, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected.

The guidance is effective for the Company beginning in the first quarter of fiscal year 2024 with early adoption permitted.

The Company is currently assessing the impact on its consolidated financial statements, and it intends to adopt the guidance when it becomes effective in the first quarter of fiscal year 2024.

The guidance was effective for the Company beginning in the first quarter of fiscal year 2024.

The Company adopted this amendment as of the effective date of July 2, 2023, and the impacts are disclosed in opening retained earnings on the Consolidated Statement of Shareholders' Equity.

Refer to further discussion in Note 15 - "Restatement of Interim Financial Information"

The Company operates on a 52/53 week fiscal year.

Fiscal years end on the Saturday nearest June 30.

As such, fiscal years 2023 and 2022 ended on July 1, 2023 and July 2, 2022, respectively.

As such, fiscal years 2024 and 2023 ended on June 29, 2024 and July 1, 2023, respectively.

Fiscal years 2022, 2023 and 2024 were 52 week years.

Net inventory as of July 1, 2023 is $ 137.9 million compared to $ 155.7 million as of July 2, 2022.

Substantially all of the Company’s inventory balances are raw materials.

Inventory as of June 29, 2024 is $ 105.1 million compared to $ 137.9 million as of July 1, 2023 and $ 155.7 million as of July 2, 2022.

The components of inventories consist of the following (in thousands):

June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

Raw materials and supplies $ 80,570 $ 109,078 $ 131,980

Work-in-process 24,529 28,833 23,761

Inventories $ 105,099 $ 137,911 $ 155,741

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

Life July 1, 2023 July 2, 2022

Life June 29, 2024 July 1, 2023 July 2, 2022

(in years) (in thousands)

5 unchanged sentences

Furniture and fixtures 3 to 5

6,660 5,418 5,286

Total property, plant and equipment 118,564 113,734 106,341

2 unchanged sentences

Fiscal Year Ended

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

1 unchanged sentence

LONG-TERM DEBT

On August 14, 2020, the Company entered into a loan agreement with Bank of America.

The Loan Agreement replaces the Company’s prior amended and restated credit agreement, as amended, with Wells Fargo Bank.

The Loan Agreement provides for a five-year asset-based senior secured revolving credit facility of up to $ 93 million, maturing on August 14, 2025.

On September 3, 2021, the Company entered into an amendment to the Company's current loan agreement with Bank of America.

The amendment increases the Company's current credit facility of $ 93 million to $ 120 million, subject to the Company's borrowing base, maturing on September 3, 2026.

On August 26, 2022, the Company entered into a third amendment to the loan agreement with Bank of America.

The amendment removed the cash flow leverage ratio covenant and increased the interest rate by 25 basis points.

In the third quarter of fiscal year 2023, the Company entered into equipment financing agreements with Ameris Bank dba Balboa Capital ("Balboa Capital") totaling $ 4.4 million related to the Company’s existing manufacturing equipment that bears an interest rate range of 6 % - 8 % and matures in the third quarter of fiscal 2029.

Under these agreements, equal monthly payments of $ 75,000 commenced in the third quarter of fiscal year 2023 and will continue through the maturity of the equipment financing facility in the third quarter of fiscal 2029.

The Company had an outstanding balance $ 4.1 million as of July 1, 2023.

Debt consists of the following:

Maturity Date Interest Rate June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

Asset-based senior secured revolving credit facility (1) December 3, 2025 9.5 % $ 107,149 $ 115,395 $ 95,077

Foreign line of credit (2) December 11, 2026 14.0 % 5,403 — —

Domestic term loan - Balboa (3) September 19, 2030 6 % to 8 %

4,535 4,148 —

Foreign term loan - Banorte (4) April 24, 2026 5.5 % $ 2,200 $ 3,400 $ 4,600

Domestic term loan - Bank of America (5) August 14, 2025 4.9 % $ 1,277 $ 2,316 $ 3,305

Total debt 120,564 125,259 102,982

current portion of debt ( 3,123 ) ( 3,138 ) ( 2,190 )

unamortized financing costs ( 1,059 ) ( 590 ) ( 499 )

Long-term debt, net $ 116,382 $ 121,531 $ 100,293

(1) On August 14, 2020, the Company entered into a loan agreement with Bank of America (“Loan Agreement”).

The Loan Agreement replaced the Company’s prior amended and restated credit agreement, as amended, with Wells Fargo Bank.

The Loan Agreement provides for an asset-based senior secured revolving credit facility with an original availability of up to $ 93 million.

On September 3, 2021, the Company entered into an amendment to the Loan Agreement, which increased the availability under the credit facility to $ 120 million, subject to the Company’s borrowing base, and set the maturity date to September 3, 2026.

On August 26, 2022, the Company entered into a third amendment to the Loan Agreement, which removed the cash flow leverage ratio covenant and increased the interest rate by 25 basis points.

On May 7, 2024, the Company entered into a fourth amendment to the Loan Agreement, effective as of March 29, 2024, which amendment modified debt covenant provisions to reduce the minimum requirement for the fixed charge coverage ratio from 1.25 :1.00 to 1.00 :1.00 as of March 30, 2024 and allow for the add back of severance expenses incurred during the quarter ended March 30, 2024.

The minimum requirement for the fixed charge coverage ratio will increase as follows:

1.05 :1.00 on July 27, 2024, 1.15 :1.00 on October 26, 2024, 1.20 :1.00 on January 25, 2025, and 1.25 :1.00 on and after March 29, 2025.

In addition, the amendment increased the interest rate by 100 basis points beginning on March 29, 2024 and moved forward the maturity date by one year to September 3, 2025.

On September 27, 2024, the Company entered into a fifth amendment to the Loan Agreement, which extended the maturity date by three months to December 3, 2025.

On October 9, 2024, the Company entered into a sixth amendment to the Loan Agreement, The Amendment waived existing events of default relating to non-compliance with (a) prescribed fixed charge coverage ratios for the periods ending June 29, 2024 and July 27, 2024 and (b) delivering audited financial statements within 90 days of the Company's fiscal year-end.

The Amendment increased the interest rate by 50 basis points beginning on October 9, 2024 so that the applicable margin on base rate loans is 3.50 % and term SOFR loans is 4.50 %.

In addition, the Amendment increased the availability block, which reduces the calculated borrowing base under the Loan Agreement, from $ 8 million to $ 10 million, with further increases to $ 11 million and $ 12 million to be effective on December 31, 2024 and March 31, 2025, respectively.

As of June 29, 2024, the Company had an outstanding balance under the asset-based revolving credit facility of $ 107.1 million, $ 0.3 million in outstanding letters of credit and $ 12.9 million available for future borrowings.

As of July 1, 2023, the Company had an outstanding balance under the asset-based revolving credit facility of $ 115.4 million, $ 0.3 million in outstanding letters of credit and $ 4.6 million available for future borrowings.

As of July 2, 2022, the Company had an outstanding balance under the asset-based revolving credit facility of $ 95.1 million, $ 0.3 million in outstanding letters of credit and $ 10.8 million available for future borrowings.

On August 14, 2020, the Company also entered into a $ 5.0 million equipment financing facility with Bank of America relating to the Company’s existing U.S.

Generally, the interest rate applicable to loans under the Bank of America loan agreement will be, at the Company’s option:

(i) the base rate which is the highest of (a) the Prime Rate for such day, (b) the Federal Funds Rate for such day plus 0.50 %, and (c) Term SOFR for a one month interest period as of such day, plus 1.00 % (provided that in no event shall the base rate be less than zero), plus the applicable interest margin for base rate loans;

or (ii) SOFR rate for an applicable interest period, plus the applicable interest margin for SOFR rate loans.

As modified by the sixth amendment to the Loan Agreement, the applicable interest margin on:

(x) base rate loans is 3.50 % and (y) SOFR rate loans is 4.50 %, resetting on a quarterly basis.

If there is an event of default that is not waived under the Loan Agreement, all loans and other obligations will bear interest at a rate of an

additional 2.00 % on the otherwise applicable interest rates.

In addition to interest charges, the Company is required to pay a fee of 0.25 % per annum on the unused portion of the Credit Facility, monthly in arrears.

As of June 29, 2024, the interest rate on the asset-based revolving credit facility with Bank of America was 9.46 %.

(2) On December 11, 2023, the Company entered into a loan agreement in Mexican peso with Banorte Financial Group.

The agreement provides for a three-year secured line of credit up to MXN 100 million, subject to the Company’s borrowing base, maturing on December 11, 2026.

The credit facility bears interest at Iterbancario de Equilibrio Interest Rate plus 2.75 %, and as of June 29, 2024, was 13.99 %.

As of June 29, 2024, the Company had an outstanding balance under the revolving credit facility of MXN 99 million ($ 5.4 USD) and MXN 1 million ($ 0.1 million USD) available for future borrowings.

(3) On September 19, 2023, the Company entered into a $ 1.1 million equipment financing agreement with Ameris Bank dba Balboa Capital ("Balboa Capital").

Combining with other equipment financing agreements entered in the third quarter of fiscal year 2023, a total of $ 5.5 million relates to the Company’s existing manufacturing equipment that bears an interest rate range of 6 % - 8 % and matures in the first quarter of fiscal 2030.

Under these loan agreements, equal monthly payments of $ 94,000 commenced in the fourth quarter of fiscal year 2024 and will continue through the maturity of the equipment financing facility in the first quarter of fiscal 2030.

The Company had an outstanding balance $ 4.5 million as of June 29, 2024.

(4) On November 24, 2020, the Company entered into a $ 6.0 million equipment financing facility related to the Company’s existing manufacturing equipment that bears interest at 5.52 % and matures on April 24, 2026.

Under this loan agreement, equal monthly payments of $ 100,000 commenced on May 24, 2021 and will continue through the maturity of the equipment financing facility on April 24, 2026.

As of June 29, 2024, the Company had an outstanding balance of $ 2.2 million.

As of July 1, 2023, the Company had an outstanding balance of $ 3.4 million.

As of July 2, 2022, the Company had an outstanding balance of $ 4.6 million.

(5) On August 14, 2020, the Company entered into a $ 5.0 million equipment financing facility with Bank of America relating to the Company’s existing U.S.

manufacturing equipment that bears interest at 4.85 % and matures on August 14, 2025.

Under this loan agreement, equal monthly payments of approximately $ 94,000 commenced on September 14, 2020 and will continue through the maturity of the equipment financing facility on August 14, 2025.

As of June 29, 2024, the Company had an outstanding balance of $ 1.3 million.

As of July 1, 2023, the Company had an outstanding balance of $ 2.3 million.

As of July 2, 2022, the Company had an outstanding balance of $ 3.3 million.

Generally, the interest rate applicable to loans under the Bank of America loan agreement will be, at the Company’s option:

(i)(A) the base rate which is the highest of (a) the Prime Rate for such day, (b) the Federal Funds Rate for such day plus 0.50 %, or (c) Term SOFR for a one month interest period as of such day, plus 1.00 % (provided that in no event shall the base rate be less than zero), plus the applicable interest margin for base rate loans;

and (B) SOFR rate for an applicable interest period, plus

the applicable interest margin for SOFR rate loans.

Depending on average daily excess borrowing availability over applicable periods under the Credit Facility, applicable interest margins on:

(x) base rate loans will be 1.50 - 2.00 %;

and (y) SOFR rate loans will be 2.50 - 3.00 %, resetting on a quarterly basis beginning in early 2021.

If there is an event of default under the loan agreement, all loans and other obligations will bear interest at a rate of an additional 2.00 % on the last change rates above otherwise applicable interest rates.

In addition to interest charges, the Company is required to pay a fee of 0.25 % per annum on the unused portion of the Credit Facility, monthly in arrears.

On November 24, 2020, the Company entered into a $ 6.0 million financing facility related to the Company’s existing real estate located in Mexico that bears interest at 5.52 % and matures on April 24, 2026.

Under this loan agreement, equal monthly payments of $ 100,000 commenced on May 24, 2021 and will continue through the maturity of the financing facility on April 24, 2026.

The Company had an outstanding balance of $ 3.4 million and $ 4.6 million as of July 1, 2023 and July 2, 2022, respectively.

The interest rates on outstanding debt as of July 1, 2023 range from 4.85 % - 8.22 % compared to 4.50 % - 5.52 % as of July 2, 2022.

Debt maturities as of July 1, 2023 for the next five years are as follows (in thousands):

Debt maturities as of June 29, 2024 for the next five years are as follows (in thousands):

Fiscal Years Ending Amount

1 unchanged sentence

Total debt 120,564

Unamortized debt issuance costs 591

Long-term debt, net of debt issuance costs $ 124,668

The Company must comply with certain financial covenants, including a fixed charge coverage ratio and a cash flow leverage ratio.

Unamortized financing costs ( 1,059 )

Long-term debt, net of unamortized financing costs $ 119,505

The Company must comply with certain financial covenants, including a fixed charge coverage ratio.

The credit agreement requires the Company to grant certain inspection rights to Bank of America, limit or restrict the Company’s cash management;

limit or restrict the ability of the Company to incur additional liens, make acquisitions or investments, incur additional indebtedness, engage in mergers, consolidations, liquidations, dissolutions, or dispositions, pay dividends or other restricted payments, prepay certain indebtedness, engage in transactions with affiliates, and use proceeds.

Management believes the Company was in compliance with all financial covenants as of July 1, 2023.

As of June 29, 2024, The Company was not in compliance with the fixed coverage charge ratio.

On October 9, 2024, the Company executed a sixth amendment to the Loan Agreement which waived existing events of default as of that date .

Income tax benefit consists of the following:

Fiscal Year Ended

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

8 unchanged sentences

Total income tax provision $ ( 2,400 ) $ 1,143 $ 314

The Company has gross tax credit carryforwards of approximately $ 9.8 million at July 1, 2023 consisting of federal research and development (R&D) tax credits.

The Company has gross tax credit carryforwards of approximately $ 10.4 million at June 29, 2024 consisting of federal research and development (R&D) tax credits.

Management has reviewed all deferred tax assets for purposes of determining whether a valuation allowance may be required.

1 unchanged sentence

Based upon the Company’s profitability, forecasted income, and evaluation of all other positive and negative evidence, management determined that it is more likely than not that the deferred tax assets will be realized.

In the fourth quarter of fiscal year 2022, the Company, with its fiscal year 2021 federal income tax return, made automatic changes in tax accounting methods that created a fiscal year 2021 tax net operating loss.

This loss was carried back to the tax years ending in 2016, 2017, and 2019, resulting in a tax benefit of $ 0.6 million due to the higher federal income tax rate in effect in the years ending in 2016 and 2017.

On January 27, 2021, the Company received official notice from the Vietnamese tax authorities, confirming tax benefits awarded related to the Company’s principal product line in Vietnam (the “Tax Holiday”).

Under the Tax Holiday, the tax rate applied to income derived from this product line will be zero percent for four years beginning with fiscal year 2021, then five percent for nine years, then ten percent for one year (as opposed to the normal twenty percent Vietnamese statutory rate).

The Company evaluated tax law changes and regulatory guidance issued through the quarter.

Such changes and regulations include guidance under Sec.

951A, foreign tax credits, and rules relating to consolidated NOL carryback claims, a new book minimum tax on certain large corporations, and an excise tax on corporate stock buybacks among other provisions.

The Company evaluated the ongoing impact of these law and regulatory changes, which did not have a material impact on its provision for income taxes.

Subsequent to the end of the fiscal year ending June 27, 2020, the Treasury Department issued final regulations applicable to the Company’s position with respect to the U.S.

taxability of foreign earnings under the global intangible low taxed income (also known as “GILTI”) regime and the deductibility of interest expense under IRC Section 163(j).

These regulations did not have a material impact to the Company's income tax positions.

The Company continuously evaluates impact of tax law and regulatory changes.

The Company noted no changes during the current quarter or fiscal year that would have a material impact on its provision for income taxes or overall income tax position.

The 2017 Tax Cuts and Jobs Act (TCJA) mandated that, for tax years after fiscal year 2022, certain costs incurred for research and development (R&D) activities would no longer be allowed for immediate deduction but would be capitalized and amortized over 5 years (for R&D activities performed domestically) or 15 years (for R&D activities performed abroad).

The Company began capitalizing and amortizing such costs in fiscal year 2023, resulting in an increase to income taxes payable that was largely offset by the utilization of R&D credit carryovers.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in years beginning in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company is taking advantage of this NOL carryback provision by carrying back the fiscal year 2021 NOL to the fiscal 2016 and 2017 years, as described above.

In addition, the CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020.

The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income.

This modification did not have a material impact on the fiscal year 2020 or fiscal year 2021 provisions for income taxes.

Also, under the CARES Act, AMT credits not previously refunded for the tax year beginning in 2018 are refundable in the tax year beginning in 2019 rather than in years beginning in 2019-2021, and taxpayers can elect to claim 100% of the AMT credits in the first taxable year beginning in 2018 by applying for a tentative refund claim on or before December 31, 2020.

The Company has made this election by applying for a tentative refund claim.

The Company took advantage of the deferred payment payroll taxes provision, resulting in decreased deductible payroll tax payments, and increased taxable income, in fiscal years 2020 and 2021.

Other aspects of the CARES Act did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.

In future years, repatriations of cash will generally be tax-free in the U.S.

10 unchanged sentences

Fiscal Year Ended

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

2 unchanged sentences

Foreign tax rate differences ( 71 ) 137 336

Federal rate differences applied to net operating loss carryback

Net operating loss carryback — — ( 593 )

Effect of income tax credits ( 929 ) ( 1,020 ) ( 920 )

1 unchanged sentence

Inflation adjustments 132 118 178

Tax penalties & interest — 179

Tax penalties & interest included in tax provision — — 179

Global Intangible Low-Taxed Income (GILTI) tax 53 33 59

2 unchanged sentences

Foreign Exchange Gains/Losses Unrealized for Tax Purposes ( 126 ) 277 23

Other 24 251 32

Income tax provision (benefit) $ ( 2,400 ) $ 1,143 $ 314

Prior year presentation of certain items in the above table has been adjusted to reflect current year classification.

The domestic and foreign components of income before income taxes were:

Fiscal Year Ended

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

3 unchanged sentences

Deferred income tax assets and liabilities consist of the following at:

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

Deferred tax assets:

Net operating loss $ — $ 486

Tax credit carryforwards, net $ 7,544 $ 6,812 $ 7,990

Net operating loss — — 486

Inventory 252 267 247

1 unchanged sentence

Accruals 2,340 2,421 2,406

PPE 1,328 1,200

Property, plant, and equipment — 1,328 1,200

ASC 606 deferred costs 3,852 4,802 4,216

6 unchanged sentences

Accrued withholding tax - unremitted earnings ( 796 ) ( 754 ) ( 754 )

Property, plant, and equipment ( 127 ) — —

Right-of-use assets ( 3,609 ) ( 3,857 ) ( 3,663 )

11 unchanged sentences

The Company’s R&D tax credits expire in various fiscal years from 2033 to 2044.

As of July 1, 2023, the Company had unrecognized tax benefits of $ 3.0 million related to its gross R&D tax credits.

As of June 29, 2024, the Company had unrecognized tax benefits of $ 2.9 million related to its gross R&D tax credits.

The unrecognized tax benefits relate to certain R&D tax credits generated from 2005 to 2024.

1 unchanged sentence

Fiscal Year Ended

July 1, 2023 July 2, 2022

June 29, 2024 July 1, 2023 July 2, 2022

(in thousands)

7 unchanged sentences

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in its income tax provision.

The Company has not recognized any interest or penalties in the fiscal years presented in these financial statements, except for

$ 0.2 million in fiscal year 2022.

The Company has not recognized any interest or penalties in the fiscal years presented in these financial statements.

The Company is subject to income tax in the U.S.

6 unchanged sentences

These antidilutive securities occur when equity awards outstanding have an option price greater than the average market price for the period:

Fiscal Year Ended

(in thousands, except per share information)

July 1, 2023 July 2, 2022

Net income $ 5,157 $ 3,377

Fiscal Year Ended (in thousands, except per share information)

June 29, 2024 July 1, 2023 July 2, 2022

Net income (loss) $ ( 2,787 ) $ 5,157 $ 3,377

Weighted average shares outstanding—basic 10,762 10,762 10,762

1 unchanged sentence

Weighted average shares outstanding—diluted 10,762 10,938 11,063

Net income per share – basic $ 0.48 $ 0.31

Net income per share – diluted $ 0.47 $ 0.31

Net income (loss) per share—basic $ ( 0.26 ) $ 0.48 $ 0.31

Net income (loss) per share—diluted $ ( 0.26 ) $ 0.47 $ 0.31

Antidilutive SARs not included in diluted earnings per share 515 376 619

STOCK OPTION AND BENEFIT PLANS

STOCK-BASED COMPENSATION AND BENEFIT PLANS

The Company’s incentive plan provides for equity and liability awards to employees and non-employee directors in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock-based or cash-based awards.

4 unchanged sentences

All awards with performance conditions are measured over the vesting period and are charged to compensation expense over the requisite service period based on the number of shares expected to vest.

The SARs cliff vest after a three-year period from date of grant and expire five years from date of grant.

The SARs cliff vest after a three-year period from date of grant based on the performance metric and expire five years from date of grant.

On July 29, 2022, the Compa ny granted 145,000 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $ 5.10 and a grant date fair value of $ 2.09 .

As of July 1, 2023, 140,000 remain outstanding.

As of June 29, 2024, 136,250 remain outstanding.

The grant date fair value for the awards granted during fiscal year 2023, were estimated using the Black Scho les option valuation method with the following weighted average assumptions as of July 29, 2022:

6 unchanged sentences

On August 9, 2021, the Compa ny granted 165,000 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $ 7.17 and a grant date fair value of $ 2.73 .

As of July 1, 2023, 140,000 remain outstanding.

As of June 29, 2024, 136,250 remain outstanding.

The grant date fair value for the awards granted during fiscal year 2022, were estimated using the Black Scho les option valuation method with the following weighted average assumptions as of August 9, 2021:

5 unchanged sentences

Expected life 4.00

On July 23, 2020, the Company granted 155,000 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $ 6.94 and a grant date fair value of $ 2.32 .

As of July 1, 2023, 130,000 remain outstanding.

The grant date fair value for the awards granted during fiscal year 2021, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of July 23, 2020:

Fiscal Year 2021

July 23, 2020

Expected dividend yield — %

Risk – free interest rate 0.17 %

Expected volatility 42.85 %

Expected life 4.00

Share-based compensation expense is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations.

This forfeiture rate will be revised, if necessary, in subsequent periods if actual forfeitures differ from the amount estimated.

Share-based compensation expense for fiscal years ended July 1, 2023 and July 2, 2022 was $ 0.3 million and $ 0.3 million, respectively.

The Black-Scholes option valuation model is used by the Company for estimating the fair value of SARs.

1 unchanged sentence

Changes in these assumptions can materially affect the fair value estimates.

There were no SARs exercised during fiscal year 2023 and fiscal year 2022.

As of July 1, 2023, total unrecognized compensation expense related to nonvested share-based compensation arrangements was approximately $ 0.3 million.

This forfeiture rate will be revised, if necessary, in subsequent periods if actual forfeitures differ from the amount estimated.

Share-based compensation expense for fiscal years ended June 29, 2024, July 1, 2023 and July 2, 2022 was $( 0.4 ) million, $ 0.3 million and $ 0.3 million, respectively.

The fiscal year 2024 amount relates to reversal of prior expense for which performance metrics were not ultimately attained.

There were no SARs exercised during fiscal year 2024, fiscal year 2023 and fiscal year 2022.

As of June 29, 2024, total unrecognized compensation expense related to nonvested share-based compensation arrangements was approximately $ 0.1 million.

This expense is expected to be recognized over a weighted-average period of 1.0 years.

The following table summarizes the Company’s Options and SARs activity for all plans from July 3, 2022 through July 1, 2023:

The following table summarizes the Company’s SARs activity from July 3, 2021 through June 29, 2024:

For Grant SARs

3 unchanged sentences

Balances, July 3, 2021 688,084 791,250 $ 7.15 1.9

Shares authorized — $ —

SARs granted ( 165,000 ) 165,000 $ 7.17

SARs forfeited 197,500 ( 197,500 ) $ 8.17

SARs exercised

SARs expired 197,500 ( 197,500 ) $ 8.17

Balances, July 2, 2022 720,584 758,750 $ — $ 6.89 2.1

Shares authorized — —

SARs granted ( 145,000 ) 145,000 $ 5.10

SARs forfeited 90,000 ( 90,000 ) $ 6.55

SARs exercised — — — —

SARs expired 187,500 ( 187,500 ) $ 7.26

Balances, July 1, 2023 853,084 626,250 $ — $ 6.41 2.2

Exercisable at July 1, 2023 226,250 $ — $ 6.45 0.6

Additional information regarding SARs outstanding and exercisable as of July 1, 2023, is as follows:

Exercise Prices Number Outstanding Weighted Avg.

Contractual Life (yrs.) Weighted Avg.

Exercise Price Number

Exercisable Weighted

$ 4.93 – $ 7.43

525,000 2.1 $ 6.06 120,000 $ 4.93

$ 7.44 – $ 9.44

101,250 14.6 8.17 106,250 8.17

$ 4.93 to $ 9.44

626,250 2.2 $ 6.41 226,250 $ 6.45

SARs forfeited 137,500 ( 137,500 ) $ 6.90

SARs expired 101,250 ( 101,250 ) $ 8.17

Balances, June 29, 2024 1,091,834 387,500 $ — $ 5.78 1.8

Exercisable at June 29, 2024 115,000 $ — $ 4.93 0.1

The Company has defined contribution plans available to U.S.

employees who have attained age 21.

Company contributions to the plans were approximately $ 1.1 million and $ 0.9 million during fiscal years 2023 and 2022, respectively.

Company contributions to the plans were approximately $ 1.3 million, $ 1.1 million and $ 0.9 million during fiscal years 2024, 2023 and 2022, respectively.

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

The determination of such allowances requires the Company to make estimates of product return rates and expected costs to repair or to replace the products under warranty.

If actual return rates and/or repair and replacement costs differ significantly from management's estimates, adjustments to recognize additional cost of sales may be required in future periods.

As of July 1, 2023 and July 2, 2022, the reserve for warranty costs was approximately $ 29,000 and $ 31,000 , respectively.

If actual return rates and/or repair and replacement costs

differ significantly from management's estimates, adjustments to recognize additional cost of sales may be required in future periods.

As of June 29, 2024, July 1, 2023, and July 2, 2022 the reserve for warranty costs was approximately $ 164,000 , $ 29,000 , and $ 31,000 respectively.

Please refer to Footnote “Leases” of the “Notes to Consolidated Financial Statements” for information regarding lease commitments.

11 unchanged sentences

DERIVATIVE FINANCIAL INSTRUMENTS

As of July 1, 2023, the Company did not have any outstanding foreign currency forward contracts.

During the fiscal year ended July 2, 2022, the Company entered into $ 13.9 million of foreign currency forward contracts and settled $ 24.6 million of such contracts.

As of June 29, 2024, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 12.5 million.

The maturity dates for these contracts extend through December 2024.

For the three months ended June 29, 2024, the Company entered into $ 12.5 million of foreign currency forward contracts and did not settle any of contracts.

During the same period of the previous year, the Company did not enter or settle any foreign currency forward contracts.

For the twelve months ended June 29, 2024, the Company entered into $ 19.0 million of foreign currency forward contracts and settled $ 6.5 million of contracts.

During the same period of the previous year, the Company did not enter into or settle any foreign currency forward contracts.

On November 6, 2019, the Company entered into an interest rate swap contract with an effective date of November 6, 2019 and a termination date of September 30, 2022, related to the borrowings outstanding under the term loan with Wells Fargo Bank.

This interest rate swap contract was terminated on August 14, 2020 when the Company entered into a loan and security agreement with Bank of America.

At date of termination this interest rate swap was in a liability position of $ 148,400 , which will be amortized to interest expense over the original term of the swap.

At date of termination this interest rate swap was in a liability position of $ 148,400 , which was amortized to interest expense over the original term of the swap.

On November 6, 2019, the Company entered into an interest rate swap contract with an effective date of November 6, 2019 and a termination date of November 1, 2023, related to the borrowings outstanding under the line of credit with Wells Fargo Bank.

This interest rate swap contract was terminated on August 14, 2020 when the Company entered into a loan and security agreement with Bank of America.

At date of termination this interest rate swap was in a liability position of $ 776,500 , which will be amortized to interest expense over the original term of the swap.

The following table summarizes the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the fiscal year 2023 (in thousands):

At date of termination this interest rate swap was in a liability position of $ 776,500 , which was amortized to interest expense over the original term of the swap.

The following table summarizes the fair value of the derivative instruments in the Consolidated Balance Sheets as of June 29, 2024, July 1, 2023 and July 2, 2022 (in thousands):

Derivatives designated as hedging instruments under Subtopic 815-20 Balance Sheet Location June 29, 2024 July 1, 2023 July 2, 2022

Foreign currency forward contracts Other current liabilities $ 277 $ — $ —

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Operations for the fiscal year 2024, 2023 and 2022, respectively (in thousands):

Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance

2 unchanged sentences

Reclassified From

AOCI Into Income AOCI Balance

Income AOCI Balance

June 29, 2024

Forward contracts Cost of sales — 287 ( 72 ) 215

1 unchanged sentence

Total $ ( 97 ) 287 25 215

The following table summarizes the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Income for the fiscal year 2022 (in thousands):

Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance

2 unchanged sentences

Reclassified From

AOCI Into Income AOCI Balance

Income AOCI Balance

Forward contracts Cost of sales $ ( 79 ) $ — $ 79 $ —

1 unchanged sentence

Total $ ( 425 ) $ — $ 328 $ ( 97 )

As of July 1, 2023, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.

Derivatives Designated as Hedging Instruments Classification of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) AOCI Balance

June 28, 2021 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

Forward contracts Cost of sales $ 2,721 $ 950 ( 3,750 ) $ ( 79 )

Interest rate swap Interest expense ( 649 ) — 303 ( 346 )

Total $ 2,072 $ 950 $ ( 3,447 ) $ ( 425 )

As of June 29, 2024, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.

The Company is subject to the risk of fluctuating interest rates from our line of credit and foreign currency risk resulting from our China operations.

6 unchanged sentences

and Level 3 – inputs are unobservable inputs for the asset or liability.

There have been no changes in the fair value methodologies used at July 1, 2023 and July 2, 2022.

The carrying values of cash and cash equivalents, accounts receivable, contract assets, and current liabilities are reflected on the balance sheets at July 1, 2023 and July 2, 2022, reasonably approximate their fair value.

The Company’s long-term debt, which is measured at amortized cost, primarily consists of an asset-based revolving credit facility, lease liability, and equipment loans.

There have been no changes in the fair value methodologies used at June 29, 2024, July 1, 2023, and July 2, 2022 .

The carrying values of cash and cash equivalents, accounts receivable, contract assets, and current liabilities are reflected on the balance sheets at June 29, 2024, July 1, 2023, and July 2, 2022 and reasonably approximate their fair value.

The Company’s long-term debt, which is measured at amortized cost, primarily consists of an asset-based revolving credit facility, and equipment loans.

These borrowings bear interest at SOFR plus 4.5 % per the loan agreement.

1 unchanged sentence

As a result of the determinable market rates for our asset-based revolving credit facility and equipment loans, they are classified within Level 2 of the fair value hierarchy.

Further, the carrying value of each of these instruments reasonably approximates their fair value as of July 1, 2023 and July 2, 2022.

Further, the carrying value of each of these instruments reasonably approximates their fair value as of June 29, 2024, July 1, 2023, and July 2, 2022.

ENTERPRISE-WIDE DISCLOSURES

1 unchanged sentence

The Company’s chief operating decision maker is its Chief Executive Officer.

As of July 1, 2023, the Company operates and internally manages a single operating segment, Electronics Manufacturing Services as this is the only discrete financial information that is regularly reviewed by the chief operating decision maker.

As of June 29, 2024, the Company operates and internally manages a single operating segment, Electronics Manufacturing Services as this is the only discrete financial information that is regularly reviewed by the chief operating decision maker.

This segment provides integrated electronic and mechanical engineering, assembly, sourcing and procurement, logistics, and new product testing for our customers.

Products and Services

Of the revenues for the years ended July 1, 2023 and July 2, 2022, contract manufacturing sales and services were $ 588.1 million and $ 531.8 million, respectively.

Of the revenues for the years ended June 29, 2024, July 1, 2023, and July 2, 2022 contract manufacturing sales and services were $ 566.9 million, $ 605.3 million, and $ 544.2 million respectively.

Geographic Areas

Net sales and long-lived assets (property, plant, and equipment) by geographic area for the years ended and as of July 1, 2023 and July 2, 2022 are summarized in the following table.

Net sales and long-lived assets (property, plant, and equipment) by geographic area for the years ended and as of June 29, 2024, July 1, 2023, and July 2, 2022 are summarized in the following table.

Net sales set forth below are based on the shipping destination.

2 unchanged sentences

(in thousands)

Restated Restated

2024 2023 2022

Geographic net sales:

10 unchanged sentences

Fiscal Year Ended

2024 2023 2022

United States 77 % 86 % 83 %

China 22 % 13 % 15 %

Other foreign countries (a)

4 unchanged sentences

Percentage of Net Sales

Fiscal Year Percentage of Trade Accounts Receivable

Fiscal Year Percentage of Trade Receivables

2024 2023 2022 2024 2023 2022

Customer A 20 % 12 % 12 % 21 % 16 % 13 %

Customer B * * 13 % * * *

Revenue Recognition

17 unchanged sentences

Revenue from engineering services is recognized over time as the services are performed.

Revenue from engineering services is recognized over time as costs related to the services are incurred, which approximates proportional performance of the service.

This method is used because management considers it to be the best available measure of progress on the contracts.

Revenue from scrap and excess inventory sales is recognized at the point-in-time of scrap at the customers direction, or, if applicable, shipment of the material to the customer.

The Company’s typical payment terms are 30 to 45 days and its sales arrangements do not contain any significant financing component for its customers.

9 unchanged sentences

Contract assets are classified separately on the condensed consolidated balance sheet and transferred to receivables when the right to payment becomes unconditional.

The following table summarizes the activity in the Company’s contract assets during the twelve months ended June 29, 2024 (in thousands):

Contract Assets

Beginning balance, July 1, 2023

Revenue recognized 497,348

Amounts collected or invoiced ( 506,023 )

Ending balance, June 29, 2024

The following table summarizes the activity in the Company’s contract assets during the twelve months ended July 1, 2023 (in thousands):

11 unchanged sentences

Disaggregation of Revenue

The following table presents the Company’s revenue disaggregated for the twelve months ended July 1, 2023 and the twelve months ended July 2, 2022 (in thousands):

Recognition July 1, 2023 July 2, 2022

The following table presents the Company’s revenue disaggregated for the twelve months ended June 29, 2024, the twelve months ended July 1, 2023, and the twelve months ended July 2, 2022 (in thousands):

Recognition June 29, 2024 July 1, 2023 (Restated) July 2, 2022 (Restated)

Over-Time $ 497,348 $ 590,624 $ 528,193

2 unchanged sentences

Revenues and associated costs from engineering design, development services and tooling, which are performed under contract of short term durations, are recognized over time as the services are performed.

Revenue from engineering design, development

services and tooling represented approximately 6.6 % and 9.6 % of total revenue in fiscal year 2023 and 2022, respectively.

The Company has several commitments under operating and financing leases for warehouses, manufacturing facilities, office buildings, and equipment with initial terms that expire at various dates during the next 1 year to 10 years.

3 unchanged sentences

The weighted average discount rate is disclosed in the tables below.

The components of lease cost were as follows as of July 1, 2023 and July 2, 2022 (in thousands):

Year Ended Year Ended

Lease cost Classification July 1, 2023 July 2, 2022

The components of lease cost were as follows as of June 29, 2024, July 1, 2023 and July 2, 2022 (in thousands):

Year Ended Year Ended Year Ended

Lease cost Classification June 29, 2024 July 1, 2023 July 2, 2022

Operating lease cost Cost of sales $ 4,814 $ 4,519 $ 6,442

6 unchanged sentences

Total lease cost $ 10,619 $ 9,308 $ 9,489

Amounts reported in the Consolidated Balance Sheet as of July 1, 2023 and July 2, 2022 were (in thousands, except weighted average lease term and discount rate):

July 1, 2023 July 2, 2022

Amounts reported in the Consolidated Balance Sheet as of June 29, 2024, July 1, 2023 and July 2, 2022 were (in thousands, except weighted average lease term and discount rate):

June 29, 2024 July 1, 2023 July 2, 2022

Operating Leases:

1 unchanged sentence

Operating lease liabilities (1) $ 15,416 $ 16,202 $ 16,731

16,202 16,731

Weighted-average remaining lease term (in years)

9 unchanged sentences

Financing leases 11.18 % 9.96 % 8.82 %

(1) For fiscal year 2023 and 2022, the current portion of the total operating lease liabilities is classified under Other Current Liabilities .

(1) The current portion of the total operating lease liabilities of $ 5.1 million is classified under Other Current Liabilities , resulting in $ 10.3 million classified under Operating Lease Liabilities in the Long-term Liabilities section of the condensed consolidated balance sheet.

(2) The total finance lease right of use assets of $ 3.6 million is classified under Other Long-term Assets .

The current portion of the total finance lease liabilities of $ 4.7 million is classified under Current portion of debt, net, resulting in $ 3.6 million classified in Other Long-term Liabilities section of the condensed consolidated balance sheet.

Other information related to leases was as follows (in thousands):

July 1, 2023 July 2, 2022

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases 5,714 4,261

Financing cash flows used in financing leases 4,291 2,331

Future lease payments under non-cancellable leases as of July 1, 2023 are as follows (in thousands):

The current portion of the total finance lease liabilities of $ 1.9 million is classified under Other Current Liabilities , resulting in $ 0.2 million classified in Other Long-term Liabilities section of the condensed consolidated balance sheet.

Future lease payments under non-cancellable leases as of June 29, 2024 are as follows (in thousands):

Fiscal Years Ending Operating Leases Finance Leases

1 unchanged sentence

2026 4,147 501

2026 3,365 670

2027 2,464 71

Thereafter 822 —

2 unchanged sentences

Total lease liabilities $ 15,416 $ 2,128

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with the preparation of the Company's consolidated financial statements as of and for the year ended June 29, 2024, the Company concluded that cost recovery of material price variances was not being consistently recorded across its facilities.

Material price variance occurs when the price the Company pays for materials exceeds the price quoted to customers, and the Company typically recovers the excess cost from customers through a sales price adjustment.

Per Company policy, this

cost recovery should be recorded as net sales when inventory enters the production process, however, certain of the Company’s facilities were recording the cost recovery as a reduction to cost of sales.

These errors resulted in an understatement of both net sales and cost of sales for the years ended July 1, 2023 and July 2, 2022 (the "impacted annual periods").

As a result, the Company has restated its consolidated statements of operations for the impacted annual periods presented herein.

The nature of the restatement adjustments shown below and their impact on the previously issued consolidated statements of operations is to increase net sales and increase cost of sales to appropriately reflect these transactions as sales price adjustments.

Fiscal Year Ended 7/1/2023

CORRECTED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share information) As previously reported Adjustments As restated

Net sales $ 588,135 $ 17,180 $ 605,315

Cost of sales 540,663 17,180 557,843

Gross profit 47,472 — 47,472

Research, development and engineering expenses 9,735 — 9,735

Selling, general and administrative expenses 25,715 — 25,715

Gain on insurance proceeds, net of losses ( 4,301 ) — ( 4,301 )

Total operating expenses 31,149 — 31,149

Operating income 16,323 — 16,323

Interest expense, net 10,023 — 10,023

Income before income taxes 6,300 — 6,300

Income tax provision 1,143 — 1,143

Net income $ 5,157 $ — $ 5,157

Net income per share — Basic $ 0.48 $ — $ 0.48

Weighted average shares outstanding — Basic 10,762 — 10,762

Net income per share — Diluted $ 0.47 $ — $ 0.47

Weighted average shares outstanding — Diluted 10,938 — 10,938

Fiscal Year Ended 7/2/2022

CORRECTED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share information) As previously reported Adjustments As restated

Net sales $ 531,815 $ 12,362 $ 544,177

Cost of sales 488,601 12,362 500,963

Gross profit 43,214 — 43,214

Research, development and engineering expenses 9,821 — 9,821

Selling, general and administrative expenses 24,598 — 24,598

Gain on insurance proceeds, net of losses — — —

Total operating expenses 34,419 — 34,419

Operating income 8,795 — 8,795

Interest expense, net 5,104 — 5,104

Income before income taxes 3,691 — 3,691

Income tax provision 314 — 314

Net income $ 3,377 $ — $ 3,377

Net income per share — Basic $ 0.31 $ — $ 0.31

Weighted average shares outstanding — Basic 10,762 — 10,762

Net income per share — Diluted $ 0.31 $ — $ 0.31

Weighted average shares outstanding — Diluted 11,063 — 11,063

All referenced amounts for prior periods in these financial statements and the notes herein reflect the balances and amounts on a restated basis.

RESTATEMENT AND REVISION OF INTERIM FINANCIAL INFORMATION

Restatement of Unaudited Consolidated Statements of Operations

In connection with the preparation of the Company’s consolidated financial statements as of and for the year ended June 29, 2024, the Company concluded that cost recovery of material price variances was not being consistently recorded across its facilities.

Per Company policy, this cost recovery should be recorded as net sales when inventory enters the production process, however, certain of the Company’s facilities were recording the cost recovery as a reduction to cost of sales.

These errors resulted in an understatement of both net revenues and cost of sales for the quarters ended March 30, 2024, December 30, 2023, September 30, 2023, April 1, 2023, December 31, 2022, October 1, 2022, April 2, 2022, January 1, 2022, and October 2, 2022 (the “impacted quarterly periods”).

As a result of these errors, the Company has restated its unaudited consolidated statements of operations for the impacted quarterly periods in the following tables.

The unaudited consolidated balance sheets, statements of comprehensive income, shareholders’ equity and cash flows for the impacted quarters were not impacted by the errors noted above and have not been restated;

provided, that the unaudited consolidated balance sheets as of March 30, 2024, December 30, 2023, September 30, 2023 have been revised as a result of error related to the adoption of ASU 326 as discussed below under "Revision of Unaudited Consolidated Balance Sheets."

Interim periods - fiscal year 2024 (in thousands, except per share information)

CORRECTED CONSOLIDATED STATEMENT OF OPERATIONS As restated - three months ended 9/30/23 As restated - three months ended 12/30/23 As restated - three months ended 3/30/24 Three months ended 6/29/24 Twelve months ended 6/29/24

Net sales $ 150,112 [1] $ 147,847 [2] $ 142,427 [3] $ 126,556 $ 566,942

Cost of sales 139,250 [1] 136,084 [2] 134,346 [3] 117,383 527,063

Gross profit 10,862 11,763 8,081 9,173 39,879

Research, development and engineering expenses 2,241 1,758 2,234 2,100 8,333

Selling, general and administrative expenses 5,784 6,057 6,422 6,956 25,219

Gain on insurance proceeds, net of losses ( 431 ) — — — ( 431 )

Total operating expenses 7,594 7,815 8,656 9,056 33,121

Operating income 3,268 3,948 ( 575 ) 117 6,758

Interest expense, net 3,011 2,961 2,800 3,173 11,945

Income (loss) before income taxes 257 987 ( 3,375 ) ( 3,056 ) ( 5,187 )

Income tax provision (benefit) ( 78 ) ( 97 ) ( 1,154 ) ( 1,071 ) ( 2,400 )

Net income (loss) $ 335 $ 1,084 $ ( 2,221 ) $ ( 1,985 ) $ ( 2,787 )

Net income (loss) per share — Basic $ 0.03 $ 0.10 $ ( 0.21 ) $ ( 0.18 ) $ ( 0.26 )

Weighted average shares outstanding — Basic 10,762 10,762 10,762 10,762 10,762

Net income (loss) per share — Diluted $ 0.03 $ 0.10 $ ( 0.21 ) $ ( 0.18 ) $ ( 0.26 )

Weighted average shares outstanding — Diluted 11,003 10,889 10,762 10,762 10,762

[1] - Includes an increase of $ 2,349 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[2] - Includes an increase of $ 2,430 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[3] - Includes an increase of $ 1,900 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

Interim periods - fiscal year 2023 (in thousands, except per share information)

CORRECTED CONSOLIDATED STATEMENT OF OPERATIONS As restated - three months ended 10/1/22 As restated - three months ended 12/31/22 As restated - three months ended 4/1/23 As restated - three months ended 7/1/23 As restated - twelve months ended 7/1/23

Net sales $ 140,971 [1] $ 127,592 [2] $ 167,758 [3] $ 168,994 [4] $ 605,315

Cost of sales 130,592 [1] 118,672 [2] 153,482 [3] 155,096 [4] 557,843

Gross profit 10,379 8,920 14,276 13,898 47,472

Research, development and engineering expenses 2,296 2,287 2,580 2,573 9,735

Selling, general and administrative expenses 5,656 5,735 6,961 7,363 25,715

Gain on insurance proceeds, net of losses ( 934 ) ( 2,710 ) ( 396 ) ( 261 ) ( 4,301 )

Total operating expenses 7,018 5,312 9,145 9,675 31,149

Operating income 3,361 3,608 5,131 4,223 16,323

Interest expense, net 1,887 2,507 2,688 2,941 10,023

Income before income taxes 1,474 1,101 2,443 1,282 6,300

Income tax provision 322 134 467 220 1,143

Net income $ 1,152 $ 967 $ 1,976 $ 1,062 $ 5,157

Net income per share — Basic $ 0.11 $ 0.09 $ 0.18 $ 0.10 $ 0.48

Weighted average shares outstanding — Basic 10,762 10,762 10,762 10,762 10,762

Net income per share — Diluted $ 0.11 $ 0.09 $ 0.18 $ 0.10 $ 0.47

Weighted average shares outstanding — Diluted 10,832 10,832 10,865 10,996 10,938

[1] - Includes an increase of $ 3,708 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[2] - Includes an increase of $ 3,884 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[3] - Includes an increase of $ 3,205 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[4] - Includes an increase of $ 6,384 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

Interim periods - fiscal year 2022 (in thousands, except per share information)

CORRECTED CONSOLIDATED STATEMENT OF OPERATIONS As restated - three months ended 10/2/21 As restated - three months ended 1/1/22 As restated - three months ended 4/2/22 As restated - three months ended 7/2/22 As restated - twelve months ended 7/2/22

Net sales $ 133,130 [1] $ 136,407 [2] $ 140,714 [3] $ 133,926 [4] $ 544,177

Cost of sales 122,992 [1] 126,599 [2] 129,206 [3] 122,166 [4] 500,963

Gross profit 10,138 9,808 11,508 11,760 43,214

Research, development and engineering expenses 2,449 2,498 2,526 2,348 9,821

Selling, general and administrative expenses 5,595 5,659 6,193 7,151 24,598

Gain on insurance proceeds, net of losses — — — — —

Total operating expenses 8,044 8,157 8,719 9,499 34,419

Operating income 2,094 1,651 2,789 2,261 8,795

Interest expense, net 992 1,095 1,551 1,466 5,104

Income before income taxes 1,102 556 1,238 795 3,691

Income tax provision (benefit) 287 ( 31 ) 231 ( 173 ) 314

Net income $ 815 $ 587 $ 1,007 $ 968 $ 3,377

Net income per share — Basic $ 0.08 $ 0.05 $ 0.09 $ 0.09 $ 0.31

Weighted average shares outstanding — Basic 10,762 10,762 10,762 10,762 10,762

Net income per share — Diluted $ 0.07 $ 0.05 $ 0.09 $ 0.09 $ 0.31

Weighted average shares outstanding — Diluted 11,052 11,057 11,062 11,071 11,063

[1] - Includes an increase of $ 368 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[2] - Includes an increase of $ 1,951 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[3] - Includes an increase of $ 2,323 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

[4] - Includes an increase of $ 7,720 over amounts previously reported in the Net Sales and Cost of Sales lines, respectively.

Revision of Unaudited Consolidated Balance Sheets

In addition, in connection with the preparation of the Company’s consolidated financial statements as of and for the year ended June 29, 2024, the Company concluded that it had not recorded an immaterial adjustment related to its adoption on July 2, 2023 of ASU 2016-13 Financial Instruments - Credit Losses (ASU 326):

Measurement of Credit Losses on Financial Instruments .

As of July 2, 2023, the Company should have performed an assessment and recorded any adjustment as a modified retrospective adjustment through its opening retained earnings balance.

The error resulted in an immaterial overstatement of accounts receivable, contract assets, other assets and retained earnings as of March 30, 2024, December 30, 2023 and September 30, 2023.

Given the restatement described above, the Company elected to revise its unaudited consolidated balance sheets as of March 30, 2024, December 30, 2023 and September 30, 2023 in the following tables.

The related unaudited consolidated statements of operations, statements of comprehensive income, shareholders’ equity and cash flows were not materially impacted by this error and have not been revised for this matter.

CORRECTED CONSOLIDATED BALANCE SHEETS (in thousands) As revised - as of 9/30/23 As revised - as of 12/30/23 As revised - as of 3/30/24

Current assets:

Cash and cash equivalents $ 3,574 $ 2,953 $ 5,255

Trade receivables, net of credit losses [1] 138,463 $ 131,913 $ 132,663

Contract assets [1] 32,878 $ 27,745 $ 28,594

Inventories 126,778 $ 124,054 $ 115,115

Other [1] 21,700 $ 21,382 $ 20,994

Total current assets 323,393 $ 308,047 $ 302,621

Property, plant and equipment, net 28,085 $ 28,935 $ 29,046

Operating lease right-of-use assets, net 15,928 $ 18,104 $ 16,790

Other assets:

Deferred income tax asset [1] 14,161 $ 14,117 $ 15,533

Other 7,500 $ 6,243 $ 6,109

Total other assets 21,661 $ 20,360 $ 21,642

Total assets $ 389,067 $ 375,446 $ 370,099

LIABILITIES AND SHAREHOLDERS ’ EQUITY

Current liabilities:

Accounts payable $ 101,638 $ 91,358 $ 82,198

Accrued compensation and vacation 11,860 $ 5,677 $ 7,071

Current portion of long-term debt 2,886 $ 3,068 $ 3,094

Other 16,640 $ 18,263 $ 17,040

Total current liabilities 133,024 $ 118,366 $ 109,403

Long-term liabilities:

Long-term debt, net 115,789 $ 114,894 $ 122,193

Operating lease liabilities 10,939 $ 12,380 $ 11,351

Deferred income tax liability 324 22 $ 19

Other long-term obligations 1,201 627 $ 336

Total long-term liabilities 128,253 127,923 $ 133,899

Total liabilities 261,277 246,289 $ 243,302

Commitments and contingencies (Note 9)

Shareholders’ equity:

Common stock, no par value—shares authorized 25,000 ;

issued and outstanding 10,762 , 10,762 , and 10,762 shares, respectively

47,786 47,839 47,891

Retained earnings [1] 80,043 81,127 78,906

Accumulated other comprehensive (loss) income ( 39 ) 191 —

Total shareholders’ equity 127,790 129,157 126,797

Total liabilities and shareholders’ equity $ 389,067 $ 375,446 370,099

[1] - Each presented period includes a reduction for expected credit losses of $( 2,979 ) related to receivables, $( 1,230 ) related to Other, $( 25 ) related to Contract Assets, $ 956 related to deferred income tax asset, and $( 3,278 ) related to Retained Earnings.

These adjustments serve to reflect a modified retrospective adoption of ASC 326 - Financial Instruments, Credit Losses.

The related tax-effects and subsequent inter-period adjustments are considered immaterial for presentation on an interim basis.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data