What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-12 compared with 2024-05-14 · 197 added, 185 removed, 355 unchanged (52% of the section changed)

3 unchanged sentences

(Unaudited, in thousands)

March 30, 2024 July 1, 2023

September 28, 2024 June 29, 2024

Current assets:

Cash and cash equivalents $ 6,555 $ 4,752

Trade receivables, net of allowance for doubtful accounts of $ 85 and $ 23

Trade receivables, net of credit losses of $ 3,129 and $ 2,918

133,984 132,559

1 unchanged sentence

Inventories 95,845 105,099

Other 22,224 27,510

Other, net of credit losses of $ 1,642 and $ 1,679

28,273 24,739

Total current assets 288,283 288,399

10 unchanged sentences

Accrued compensation and vacation 6,870 6,510

Current portion of debt, net 5,928 7,849

Current portion of long-term debt 3,057 3,123

Other 18,450 15,149

1 unchanged sentence

Long-term liabilities:

Term loans 5,681 6,726

Revolving loan 116,512 114,805

Long-term debt, net 109,675 116,383

Operating lease liabilities 9,573 10,312

16 unchanged sentences

(Unaudited, in thousands, except per share amounts)

Three Months Ended Nine Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Three Months Ended

September 28, 2024 September 30, 2023

Net sales $ 131,558 $ 150,112

5 unchanged sentences

Total operating expenses 8,859 7,594

Operating income (loss) ( 575 ) 5,131 6,641 12,099

Operating income 4,444 3,268

Interest expense, net 3,263 3,011

Income (loss) before income taxes ( 3,375 ) 2,443 ( 2,131 ) 5,018

Income before income taxes 1,181 257

Income tax provision (benefit) 57 ( 78 )

Net income (loss) $ ( 2,221 ) $ 1,976 $ ( 802 ) $ 4,094

Net income (loss) per share — Basic $ ( 0.21 ) $ 0.18 $ ( 0.07 ) $ 0.38

Net income $ 1,124 $ 335

Net income per share — Basic $ 0.10 $ 0.03

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

Net income (loss) per share — Diluted $ ( 0.21 ) $ 0.18 $ ( 0.07 ) $ 0.38

Net income per share — Diluted $ 0.10 $ 0.03

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

3 unchanged sentences

(Unaudited, in thousands)

Three Months Ended Nine Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Three Months Ended

September 28, 2024 September 30, 2023

Comprehensive income (loss):

Net income (loss) $ ( 2,221 ) $ 1,976 $ ( 802 ) $ 4,094

Net income $ 1,124 $ 335

Other comprehensive income (loss):

Unrealized gain (loss) on hedging instruments, net of tax ( 838 ) 58

Comprehensive income (loss) $ ( 2,412 ) $ 2,034 $ ( 705 ) $ 4,364

Other comprehensive income (loss) for the three months ended March 30, 2024 and April 1, 2023, is reflected net of tax expense (benefit) of approximately $( 0.1 ) million and $ 0.0 million , respectively.

Other comprehensive income (loss) for the nine months ended March 30, 2024 and April 1, 2023, is reflected net of tax expense (benefit) of approximately $ 0.0 million and $ 0.0 million, respectively.

Comprehensive income $ 286 $ 393

Other comprehensive income (loss) for the three months ended September 28, 2024 and September 30, 2023, is reflected net of tax expense (benefit) of approximately $( 0.3 ) million and $ 0.0 million, respectively.

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Nine Months Ended

March 30, 2024 April 1, 2023

Three Months Ended

September 28, 2024 September 30, 2023

Operating activities:

Net income (loss) $ ( 802 ) $ 4,094

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

Net income $ 1,124 $ 335

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 3,011 2,787

5 unchanged sentences

Provision for doubtful accounts 212 —

Gain on disposal of assets ( 32 ) ( 124 )

Loss on disposal of assets 8 —

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

9 unchanged sentences

Other liabilities 2,170 ( 961 )

Cash provided by (used in) operating activities 6,081 ( 17,099 )

Cash provided by operating activities 9,947 5,623

Investing activities:

1 unchanged sentence

Proceeds from insurance — 2,249

Cash used in investing activities ( 1,033 ) ( 1,367 )

Cash (used in) provided by investing activities ( 377 ) 1,722

Financing activities:

Payment of financing costs ( 126 ) ( 491 )

Proceeds from issuance of long term debt 1,161 —

Repayments of long term debt ( 778 ) ( 707 )

2 unchanged sentences

Principal payments on finance leases ( 847 ) ( 1,326 )

Cash (used in) provided by financing activities ( 3,396 ) 16,796

Cash used in financing activities ( 7,767 ) ( 7,374 )

Net increase (decrease) in cash and cash equivalents 1,803 ( 29 )

4 unchanged sentences

Income tax payments, net of refunds $ 228 $ 1,168

Recognition of operating lease liabilities and right-of-use assets $ 3,621 $ 5,152

Recognition of financing lease liabilities and right-of-use assets $ — $ 4,404

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended Nine Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Three Months Ended

September 28, 2024 September 30, 2023

Total shareholders’ equity, beginning balances $ 123,990 $ 130,617

10 unchanged sentences

Beginning balances $ 76,921 $ 82,986

Net income (loss) ( 2,221 ) 1,976 ( 802 ) 4,094

Net income 1,124 335

Ending balances 78,045 83,321

14 unchanged sentences

The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2023.

The Company’s reporting period is a 52/53 week fiscal year ending on the Saturday closest to June 30.

The three month and nine month periods ended March 30, 2024 and April 1, 2023, were both 13 week and 39 week periods, respectively.

The three month periods ended September 28, 2024 and September 30, 2023, were both 13 week periods.

Fiscal year 2025 will end on June 28, 2025, which is a 52 week year.

Fiscal year 2023 which ended on July 1, 2023, was also a 52 week year.

Fiscal year 2024 which ended on June 29, 2024, was also a 52 week year.

Management’s Assessment of Liquidity

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 an operating loss and net loss of $( 0.6 ) million and $( 2.2 ) million, respectively, during the 3-month period ended March 30, 2024, and have positive working capital of $ 197.5 million as of March 30, 2024.

Based on current projections, we anticipate generating cash from operations as revenue is expected to remain flat during the fourth quarter of fiscal year 2024 and decreasing working capital requirements as existing backlog is manufactured and shipped.

As of March 30, 2024, approximately $ 7.1 million was available under the asset-based revolving credit facility with Bank of America, an additional MXN 22.0 million ($ 1.3 million USD) was available under the line of credit with Banorte Financial Group, and $5.3 million of cash was on hand.

We are also in discussions with multiple financial institutions to either extend the borrowing capacity or maturity date on our asset-based revolving credit facility or to refinance the credit facility in whole.

We generated operating income and net income of $ 4.4 million and $ 1.1 million, respectively, during the 3-month period ended September 28, 2024, and have positive working capital of $ 176.1 million as of September 28, 2024.

Based on current projections, we anticipate generating cash from operations as revenue is expected to increase during the second quarter of fiscal year 2025 and decreasing working capital requirements as existing backlog is manufactured and shipped.

As of September 28, 2024, approximately $ 18.5 million was available under the asset-based revolving credit facility with Bank of America, an additional MXN 1 million ($ 0.04 million USD) was available under the line of credit with Banorte Financial Group, and $ 6.6 million of cash was on hand.

As of September 28, 2024, we have limited 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.

If we are unable to meet projected operating results or restructure or refinance our asset-based revolving credit facility, we may need to delay the purchase of raw materials or require our customers to fund inventory raw material costs ahead of production.

5 unchanged sentences

These reclassifications had no effect on reported income, comprehensive income, cash flows, total assets, or shareholders' equity as previously reported.

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.

After all attempts to collect a receivable have failed, the receivable is written off against the allowance.

Lease assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using the Company’s incremental borrowing rate, unless the implicit rate is readily determinable.

Our incremental borrowing

rate represents the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment.

Lease assets also include any lease prepayments.

Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of income.

For further information, please refer to Footnote “Leases” of the “Notes to Consolidated Financial Statements.”

Revenue Recognition

The first step in its process for revenue recognition is to identify the contract with a customer.

A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations.

A contract can be written, oral, or implied.

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.

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

In these instances, as well as when we have an MSA in place, we receive customer purchase orders for specific quantities and timing of products.

As a result, the Company considers its contract with a customer to be the combination of the MSA and the purchase order.

The transaction price is fixed and set forth in each purchase order.

In the Company's normal course of business, there are no variable pricing components, or material amounts refunded to customers in the form of refunds or rebates.

The Company assesses whether control of the product or services promised under the contract is transferred to the customer at a point in time (shipment) or over time (as we manufacture the product).

The Company is first required to evaluate whether its contracts meet the criteria for 'over-time' or 'point-in-time' recognition.

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, IP 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.

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.

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 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.

Earnings Per Common Share

15 unchanged sentences

The Company does not enter into derivative instruments for trading or speculative purposes.

The tax expense for the quarter ended March 30, 2024, and the nine months ended March 30, 2024, has been computed based on actual year-to-date results, a departure from the estimated annual effective tax rate (ETR) method applied to the quarter ended April 1, 2023, and prior quarters in fiscal year 2024.

We departed from the ETR method for determining interim income tax expense because the significant permanent book-to-tax differences in several jurisdictions, the impact of the tax holiday in Vietnam, and significant tax benefits related to federal research and development tax credits resulted in an inability to reliably estimate the annual effective tax rate applicable to projected full-year worldwide consolidated pretax income.

In prior quarters, including the comparable quarter ended April 1, 2023, we had computed our interim income tax provision through the use of an ETR applied to year-to-date operating results and specific events that are discretely recognized as they occur.

We compute our interim income tax provision through the use of an ETR applied to year-to-date operating results and specific events that are discretely recognized as they occur.

In determining the estimated annual ETR, we analyze various factors, including projections of our annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and available tax planning alternatives.

14 unchanged sentences

Recently Issued Accounting Standards

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

On November 4, 2024 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures.

The ASU requires entities to disclose in the notes to the financial statements specified information about certain costs and expenses.

The ASU applies to the Company’s annual reporting period beginning in fiscal year 2028 and interim reporting periods beginning in fiscal year 2029.

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

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

4 unchanged sentences

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.

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.

6 unchanged sentences

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;

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;

4) clarifies that when an entity regains control of financial assets sold, it should recognize an allowance for credit losses in accordance with ASC 326;

and 5) aligns the disclosure requirements for debt securities in ASC 320, Investments - Debt Securities, with the corresponding requirements for depository and lending institutions in ASC 942, Financial Services - Depository and Lending.

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 adopted this amendment as of the effective date of July 2, 2023.

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):

Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance:

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.

The Company adopted this amendment as of the effective date of July 2, 2023.

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

Inventories as of March 30, 2024 are $ 115.1 million compared to $ 137.9 million as of July 1, 2023.

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

Inventories as of September 28, 2024 are $ 95.8 million compared to $ 105.1 million as of June 29, 2024.

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

September 28, 2024 June 29, 2024

(in thousands)

Raw materials and supplies 71,286 80,570

Work-in-process 24,559 24,529

Inventories $ 95,845 $ 105,099

Long-Term Debt

Maturity Date Interest Rate September 28, 2024 June 29, 2024

(in thousands)

Asset-based senior secured revolving credit facility (1) December 3, 2025 9.0 % $ 101,477 $ 107,149

Foreign line of credit (2) December 11, 2026 13.8 % 5,059 5,403

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

Foreign term loan - Banorte (4) April 24, 2026 5.5 % 1,900 2,200

Domestic term loan - Bank of America (5) August 14, 2025 4.9 % 1,010 1,277

Total debt 113,778 120,564

current portion of debt ( 3,057 ) ( 3,123 )

unamortized financing costs ( 1,046 ) ( 1,059 )

Long-term debt, net $ 109,675 $ 116,382

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

3 unchanged sentences

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 executed 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.

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 unchanged sentence

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.

As of March 30, 2024, the Company had an outstanding balance under the asset-based revolving credit facility of $ 112.9 million, $ 0.3 million in outstanding letters of credit and $ 7.1 million available for future borrowings.

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

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 September 28, 2024, the Company had an outstanding balance under the asset-based revolving credit facility of $ 101.5 million, $ 0.4 million in outstanding letters of credit and $ 18.5 million available for future borrowings.

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

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

1 unchanged sentence

or (ii) 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 2.50 %- 3.00 %;

and (y) SOFR rate loans will be 3.50 %- 4.00 %, resetting on a quarterly basis.

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 otherwise applicable interest rates.

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 March 30, 2024, the interest rate on the asset-based revolving credit facility with Bank of America was 8.44 %.

As of September 28, 2024, the interest rate on the asset-based revolving credit facility with Bank of America was 8.97 %.

(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 Itercambaria de Equilibrio Interest Rate plus 2.75 %, and as of March 30, 2024, was 14.25 %.

As of March 30, 2024, the Company had an outstanding balance under the revolving credit facility of MXN 78 million and MXN 22 million available for future borrowings.

The credit facility bears interest at Iterbancario de Equilibrio Interest Rate plus 2.75 %, and as of September 28, 2024, was 13.8 %.

As of September 28, 2024, the Company had an outstanding balance under the revolving credit facility of MXN 99 million ($ 5.06 million USD) and MXN 1 million ($ 0.03 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 third 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 $ 4.7 million as of March 30, 2024.

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 $ 4.3 million as of September 28, 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 March 30, 2024, the Company had an outstanding balance of $ 2.5 million.

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

As of September 28, 2024, the Company had an outstanding balance of $ 1.9 million.

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

1 unchanged sentence

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 March 30, 2024, the Company had an outstanding balance of $ 1.5 million.

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

Debt maturities as of March 30, 2024 for the next five years and thereafter are as follows (in thousands):

As of September 28, 2024, the Company had an outstanding balance of $ 1.0 million.

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

Debt maturities as of September 28, 2024 for the next five years are as follows (in thousands):

Fiscal Years Ending Amount

3 unchanged sentences

Long-term debt, net of debt issuance costs $ 112,732

(1) Represents scheduled payments for the remaining three-month period ending June 29, 2024.

(1) Represents scheduled payments for the remaining nine-month period ending June 28, 2025.

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

As of March 30, 2024, the Company was in compliance with all financial covenants except for the fixed charge coverage ratio under the Loan Agreement.

As noted above, the Company executed a fourth amendment to the Loan Agreement on May 7, 2024, effective as of March 29, 2024, 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, effectively waiving the Company’s default of the fixed charge coverage ratio for the quarter ended March 30, 2024.

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.

As of September 28, 2024, the Company was in compliance with all financial covenants.

The Company expects to repatriate a portion of its foreign earnings based on increased net sales growth driving additional capital requirements domestically, cash requirements for potential acquisitions and to implement certain tax strategies.

8 unchanged sentences

Withholding taxes would not apply to future repatriations from Mexico or Vietnam.

The Company has available approximately $ 9.8 million of gross federal research and development tax credits as of March 30, 2024.

The Company has available approximately $ 10.6 million of gross federal research and development tax credits as of September 28, 2024.

ASC 740 requires the Company to recognize in its financial statements uncertainties in tax positions taken that may not be sustained upon examination by the taxing authorities.

Accordingly, as of March 30, 2024, the Company has recorded $ 3.1 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 6.7 million.

Accordingly, as of September 28, 2024, the Company has recorded $ 2.8 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 7.8 million.

The Company evaluated tax law changes and regulatory guidance issued through the prior fiscal year.

10 unchanged sentences

Three Months Ended

(in thousands, except share and per share information)

March 30, 2024 April 1, 2023

Net income (loss) $ ( 2,221 ) $ 1,976

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

Effect of dilutive common stock awards — 103

Weighted average shares outstanding—diluted 10,762 10,865

Net income (loss) per share—basic $ ( 0.21 ) $ 0.18

Net income (loss) per share—diluted $ ( 0.21 ) $ 0.18

Antidilutive SARs not included in diluted earnings per share 525 376

Nine Months Ended

(in thousands, except per share information)

March 30, 2024 April 1, 2023

September 28, 2024 September 30, 2023

Net income $ 1,124 $ 335

4 unchanged sentences

Net income per share—diluted $ 0.10 $ 0.03

Antidilutive SARs not included in diluted earnings per share 652 516

Share-based Compensation

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.

Antidilutive shares not included in diluted earnings per share 136 270

Stock-Based Compensation and Benefit Plans

The Company’s 2010 Incentive Plan provides for equity and liability awards to employees and non-employee directors with service and performance vesting conditions 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.

At September 28, 2024, 1,018,265 shares were available for grant.

Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sold, research, development and engineering, and selling, general and administrative expenses.

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

Share-based compensation is recognized only for those awards that are expected to vest.

For SARs awards forfeitures are estimated at the date of grant based on historical experience and future expectations.

Due to a lack of historical experience and a different grant pool than SARs, forfeitures for restricted stock units are accounted for prospectively as they occur.

Stock Appreciation Rights

In addition to service conditions, SARs contain a performance condition.

2 unchanged sentences

These awards 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 grant date fair value for the awards granted below were estimated using the Black-Scholes option valuation method:

July 29, 2022

If the performance and service conditions are attained, then the SARs cliff vest after the completion of the three-year period from date of grant and expire five years from date of grant.

SARs Aggregate

thousands) Weighted

Price Weighted

Balance, July 1, 2023 626,250 — $ 6.41 2.2

SARs granted —

Strike Price $ 5.10

Fair Value $ 2.09

Total share-based compensation expense recognized during the three months ended March 30, 2024 and April 1, 2023 was approximately $ 52,000 and $ 76,000 , respectively.

Total share-based compensation expense recognized during the nine months ended March 30, 2024 and April 1, 2023 was approximately $ 164,000 and $ 178,000 , respectively.

As of March 30, 2024, total unrecognized compensation expense related to unvested share-based compensation arrangements was approximately $ 0.2 million.

This expense is expected to be recognized over a weighted average period of 1.08 years.

No SARs were exercised during the three or nine months ended March 30, 2024 or April 1, 2023.

SARs forfeited ( 137,500 ) 6.94

SARs expired ( 101,250 ) 8.17

Balance, September 30, 2023 387,500 $ — $ 5.78 1.8

Balance, June 29, 2024 387,500 — $ 5.78 1.8

SARs granted —

SARs forfeited ( 136,250 ) 7.17

SARs expired ( 115,000 ) 4.93

Balance, September 28, 2024 136,250 $ — $ 5.10 2.8

Exercisable at September 28, 2024 — — — —

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

Option valuation models require the input of highly subjective assumptions, particularly for the expected term and expected stock price volatility.

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

There were no SARs granted during the three months ended September 28, 2024 and September 30, 2023.

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.

Total SARs expense recognized during the three months ended September 28, 2024 and September 30, 2023 was approximately $ 19,000 and $ 59,000 , respectively.

There were no SARs exercised during the three months ended September 28, 2024 or September 30, 2023.

As of September 28, 2024, total unrecognized compensation expense for SARs awards was approximately $ 0.1 million, which is expected to be recognized over a weighted average period of approximately 0.8 years.

Restricted Stock Units

The Company grants restricted stock units that have a performance condition and/or a service condition.

Restricted stock units with only a service condition generally vest in equal annual installments over a maximum of three years .

Certain restricted stock units are granted with a performance condition.

The final number of shares issued will be determined annually based on the achievement of annual financial targets.

Forfeitures for restricted stock units are accounted for prospectively as they occur.

The fair value of restricted stock units is the market close price on the date of grant.

During the three months ended September 28, 2024, the Company granted 324,819 restricted stock units at a weighted average grant date fair value of $ 4.51 per share.

Total restricted stock unit expense recognized during the three months ended September 28, 2024 was approximately $ 48,000 .

As of September 28, 2024, total unrecognized compensation expense on restricted stock units was $ 1.4 million, which is expected to be recognized over a weighted average period of approximately 2.6 years.

Commitments and Contingencies

2 unchanged sentences

The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the financial position, results of operations or cash flow of the Company.

On May 6, 2024, we detected unauthorized third party access to portions of our information technology (“IT”) systems.

Upon detection of this outside threat, we activated our cyber incident procedure to investigate, contain, and remediate the incident, including beginning an investigation with external cybersecurity experts and notifying law enforcement.

The incident has caused disruptions, and limitation of access, to portions of the Company’s business applications supporting aspects of the Company’s operations and corporate functions, including financial and operating reporting systems.

As the investigation of the incident is ongoing, the full scope, nature and impact of the incident are not yet known, but based on the information reviewed to date, we believe the unauthorized activity has been contained and is working diligently to bring the impacted portions of out IT systems back online.

While we do not believe the incident is reasonably likely to have a material impact on our financial condition or results of operations, we continue to investigate the incident.

The Company provides warranties on certain product sales.

2 unchanged sentences

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.

The Company’s warranty reserve was approximately $ 96,000 as of March 30, 2024 and $ 29,000 as of July 1, 2023.

The Company’s warranty reserve was approximately $ 26,000 as of September 28, 2024 and $ 164,000 as of June 29, 2024.

Gain from Insurance Recoveries, Net of Losses

Gain from insurance recoveries, net of losses, relate to losses incurred from storm damage to the Company’s Arkansas facility on July 29, 2022, as the result of a lightning strike.

During the nine months ended March 30, 2024, the Company recorded a gain from insurance recoveries, net of losses, of $ 0.4 million.

The Company did not record a gain during the three months ended March 30, 2024.

Gain from insurance recoveries, net of losses, relate to losses incurred from storm damage to the Company’s Arkansas facility on July 29, 2022, as the result of a lightning strike and were recorded throughout fiscal year 2024 and fiscal year 2023.

The Company recorded no gain during the three months ended September 28, 2024 and $ 0.4 million during the three months ended September 30, 2023.

Derivative Financial Instruments

As of March 30, 2024, the Company did not have any outstanding foreign currency forward contracts.

For the three months ended March 30, 2024, the Company did not enter into foreign currency forward contracts and settled $ 3.4 million of contracts.

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

For the nine months ended March 30, 2024, the Company entered into $ 6.5 million of foreign currency forward contracts and settled $ 6.5 million of contracts.

As of September 28, 2024, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 22.0 million through the end of the fourth quarter of fiscal year 2025.

During the three months ended September 28, 2024, the Company entered into $ 16.1 million of foreign currency forward contracts and settled $ 6.6 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 the Loan Agreement with Bank of America.

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

Changes in the fair value of the forward contracts are recognized as a component of OCI and will be recognized in cost of sales when the hedged item affects earnings.

The amount of net losses expected to be reclassified into earnings in the next 12 months is $ 1.4 million.

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.

1 unchanged sentence

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

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Operations for the three months ended March 30, 2024 and April 1, 2023, respectively (in thousands):

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

December 31, 2023 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

March 30, 2024

Forward contracts Cost of sales $ 191 $ ( 191 ) $ — $ —

Interest rate swap Interest expense — — — —

Total $ 191 $ ( 191 ) $ — $ —

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

January 1, 2023 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

April 1, 2023

Forward contracts Cost of sales $ — $ — $ — $ —

Interest rate swap Interest expense ( 213 ) — 58 ( 155 )

Total $ ( 213 ) $ — $ 58 $ ( 155 )

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Operations for the nine months ended March 30, 2024 and April 1, 2023, respectively (in thousands):

The following table summarizes the fair value of the derivative instruments in the Consolidated Balance Sheets as of September 28, 2024 and September 30, 2023 (in thousands):

Derivatives designated as hedging instruments under Subtopic 815-20 Balance Sheet Location September 28, 2024 June 29, 2024

Foreign currency forward contracts Other current liabilities $ 1,360 $ 277

The following tables summarize the gain (loss) on derivative instruments, net of tax, on the Consolidated Statements of Operations for the three months ended September 28, 2024 and September 30, 2023, respectively (in thousands):

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

July 1, 2023 Effective

June 30, 2024 Effective

AOCI Effective Portion

1 unchanged sentence

Income AOCI Balance

March 30, 2024

September 28, 2024

Forward contracts Cost of sales $ 215 $ 540 $ 298 $ 1,053

Interest rate swap Interest expense ( 97 ) — 97 —

Total $ 215 $ 540 $ 298 $ 1,053

4 unchanged sentences

Income AOCI Balance

April 1, 2023

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

September 30, 2023

Interest rate swap Interest expense ( 97 ) — 58 ( 39 )

Total $ ( 97 ) $ — $ 58 $ ( 39 )

As of March 30, 2024, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.

As of September 28, 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.

19 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 services.

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 sales arrangements do not contain any significant financing component for its customers.

3 unchanged sentences

therefore, the primary performance obligation in the majority of our contracts is the delivery of a specific good through the purchase order submitted by our customer.

The Company elected not to disclose information about remaining performance obligations as they are part of contracts that that have expected durations of one year or less.

The Company elected not to disclose information about remaining performance obligations as they are part of contracts that have expected durations of one year or less.

The Company has elected to expense costs to obtain contracts as incurred as these costs are immaterial to the financial statements.

During the first nine months of fiscal year 2024, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods.

During the first three months of fiscal year 2025, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods.

Contract Balances

1 unchanged sentence

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 nine months ended March 30, 2024 (in thousands):

The following table summarizes the activity in the Company’s contract assets during the three months ended September 28, 2024 (in thousands):

Contract Assets

Beginning balance, July 1, 2023

Beginning balance, June 29, 2024

Revenue recognized 122,582

Amounts collected or invoiced ( 120,206 )

Ending balance, March 30, 2024

Ending balance, September 28, 2024

Disaggregation of Revenue

The following table presents the Company’s revenue disaggregated for the three and nine months ended March 30, 2024 and April 1, 2023 (in thousands):

Recognition Three Months Ended Nine Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

The following table presents the Company’s revenue disaggregated for the three months ended September 28, 2024 and September 30, 2023 (in thousands):

Recognition Three Months Ended

September 28, 2024 September 30, 2023

Over-Time $ 122,582 $ 132,329

6 unchanged sentences

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

The components of lease cost for the three months and nine months ended March 30, 2024 and were (in thousands):

Three Months Ended Nine Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

The components of lease cost for the three months ended September 28, 2024 and September 30, 2023 were (in thousands):

Three Months Ended

September 28, 2024 September 30, 2023

Lease cost Classification

7 unchanged sentences

Total lease cost $ 2,883 $ 2,644

Amounts reported in the Consolidated Balance Sheet as of March 30, 2024 were (in thousands, except weighted average lease term and discount rate):

March 30, 2024 July 1, 2023

Amounts reported in the Consolidated Balance Sheet as of September 28, 2024 and June 29, 2024 were (in thousands, except weighted average lease term and discount rate):

September 28, 2024 June 29, 2024

Operating Leases:

16 unchanged sentences

The current portion of the total finance lease liabilities of $ 1.8 million is classified under Current portion of debt, net , resulting in $ 0.1 million classified in Other Long-term Liabilities section of the condensed consolidated balance sheet.

Future lease payments under non-cancellable leases as of March 30, 2024 are as follows (in thousands):

Future lease payments under non-cancellable leases as of September 28, 2024 are as follows (in thousands):

Fiscal Years Ending Operating Leases Finance Leases

1 unchanged sentence

2026 4,288 563

2026 $ 4,147 $ 501

2027 $ 3,238 $ —

2028 $ 2,281 $ —

Thereafter 822 —

2 unchanged sentences

Total lease liabilities $ 14,612 $ 1,883

(1) Represents estimated lease payments for the remaining three-month period ending June 29, 2024.

Subsequent Events

On May 6, 2024, we detected unauthorized third party access to portions of our information technology (“IT”) systems.

As the investigation of the incident is ongoing, the full scope, nature and impact of the incident are not yet known, but based on the information reviewed to date, we believe the unauthorized activity has been contained and are working diligently to bring the impacted portions of our IT systems back online.

While we do not believe the incident is reasonably likely to have a material impact on the Company, including our financial condition or results of operations, we continue to investigate the incident.

(1) Represents estimated lease payments for the remaining nine-month period ending June 28, 2025.

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-Q

Item 1. Financial Statements