What changed in this filing

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Item 1. Financial Statements

2025-02-07 compared with 2024-11-12 · 148 added, 129 removed, 423 unchanged (40% of the section changed)

3 unchanged sentences

(Unaudited, in thousands)

September 28, 2024 June 29, 2024

December 28, 2024 June 29, 2024

Current assets:

41 unchanged sentences

(Unaudited, in thousands, except per share amounts)

Three Months Ended

September 28, 2024 September 30, 2023

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Net sales $ 113,853 $ 147,847 $ 245,411 $ 297,959

5 unchanged sentences

Total operating expenses 8,827 7,815 17,686 15,409

Operating income 4,444 3,268

Operating income (loss) ( 1,121 ) 3,948 3,323 7,216

Interest expense, net 3,904 2,961 7,167 5,972

Income before income taxes 1,181 257

Income (loss) before income taxes ( 5,025 ) 987 ( 3,844 ) 1,244

Income tax provision (benefit) ( 111 ) ( 97 ) ( 54 ) ( 175 )

Net income $ 1,124 $ 335

Net income per share — Basic $ 0.10 $ 0.03

Net income (loss) $ ( 4,914 ) $ 1,084 $ ( 3,790 ) $ 1,419

Net income (loss) per share — Basic $ ( 0.46 ) $ 0.10 $ ( 0.35 ) $ 0.13

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

Net income per share — Diluted $ 0.10 $ 0.03

Net income (loss) per share — Diluted $ ( 0.46 ) $ 0.10 $ ( 0.35 ) $ 0.13

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

3 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

September 28, 2024 September 30, 2023

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Comprehensive income (loss):

Net income $ 1,124 $ 335

Net income (loss) $ ( 4,914 ) $ 1,084 $ ( 3,790 ) $ 1,419

Other comprehensive income (loss):

Unrealized gain (loss) on hedging instruments, net of tax 42 230 ( 796 ) 288

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.

Comprehensive income (loss) $ ( 4,872 ) $ 1,314 $ ( 4,586 ) $ 1,707

Other comprehensive income (loss) for the three months ended December 28, 2024 and December 30, 2023, is reflected net of tax expense (benefit) of approximately $ 0.0 million and $ 0.1 million, respectively.

Other comprehensive (loss) for the six months ended December 28, 2024 and December 30, 2023, is reflected net of tax expense (benefit) of approximately $( 0.2 ) million and $ 0.1 million, respectively.

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

September 28, 2024 September 30, 2023

Six Months Ended

December 28, 2024 December 30, 2023

Operating activities:

Net income $ 1,124 $ 335

Net income (loss) $ ( 3,790 ) $ 1,419

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

3 unchanged sentences

Noncash lease expense 2,371 2,928

Inventory write-down to net realizable value 296 265

Provision for warranty 16 138

Provision for doubtful accounts 212 —

Loss on disposal of assets 8 —

Provision for credit losses 372 49

Loss (gain) on disposal of assets 8 ( 36 )

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

1 unchanged sentence

Deferred income taxes ( 2,166 ) ( 1,213 )

Noncash accrued compensation benefit — ( 3,907 )

Changes in operating assets and liabilities:

10 unchanged sentences

Proceeds from insurance — 2,249

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

Cash used in investing activities ( 821 ) ( 360 )

Financing activities:

4 unchanged sentences

Principal payments on finance leases ( 1,507 ) ( 2,561 )

Proceeds from issuance of long-term debt 28,000 1,161

Cash used in financing activities ( 11,224 ) ( 9,370 )

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

Net decrease in cash and cash equivalents ( 508 ) ( 650 )

Cash and cash equivalents, beginning of period 4,752 3,603

3 unchanged sentences

Income tax payments, net of refunds $ 458 $ 1,602

Recognition of operating lease liabilities and right-of-use assets $ 784 $ 3,575

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

September 28, 2024 September 30, 2023

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Total shareholders’ equity, beginning balances $ 124,343 $ 131,069 $ 123,990 $ 130,617

1 unchanged sentence

Beginning balances 10,762 10,762 10,762 10,762

Exercise of stock appreciation rights — —

Ending balances 10,762 10,762 10,762 10,762

2 unchanged sentences

Share-based compensation 16 53 83 112

Exercise of stock appreciation rights — —

Ending balances 47,367 47,839 47,367 47,839

20 unchanged sentences

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

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

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

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

2 unchanged sentences

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 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.

Other options to increase our liquidity include factoring receivables or leveraging foreign owned assets for additional borrowing capacity.

We believe that projected cash from operations, funds available under our asset-based revolving credit facility and additional financing options will be sufficient to meet our working and fixed capital requirements for at least the next 12 months.

We generated an operating loss and net loss of $( 1.1 ) million and $( 4.9 ) million, respectively, during the 3-month period ended December 28, 2024, and have positive working capital of $ 167.4 million as of December 28, 2024.

Based on current projections, we anticipate generating cash from operations as revenue is expected to increase during the third quarter of fiscal year 2025 along with anticipated cost savings from ongoing restructurings.

On December 3, 2024, we entered into an asset-based credit agreement with BMO Bank, N.A that provides for an asset-based senior secured revolving credit facility of up to $ 115 million, maturing on December 3, 2029.

On December 3, 2024, we also entered into a $ 28 million term loan credit agreement with Callodine Commercial Finance, LLC.

As of December 28, 2024, approximately $ 18.1 million was available under the credit facility.

In addition, MXN 16 million ($ 0.8 million USD) was available under the line of credit with Banorte Financial Group.

Additionally, $ 4.2 million of cash was on hand.

We believe that projected cash from operations and funds available under our asset-based revolving credit facility will be sufficient to meet our working and fixed capital requirements for at least the next 12 months.

Significant Accounting Policies

4 unchanged sentences

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.

1 unchanged sentence

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.

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.

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.”

3 unchanged sentences

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.

The Company generally enters into manufacturing service agreements (“MSA”) with its customers that outline 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.

31 unchanged sentences

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

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.

We compute our interim income tax provision through the use of an estimated tax rate (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.

28 unchanged sentences

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.

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

Inventories as of December 28, 2024 are $ 100.7 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

December 28, 2024 June 29, 2024

(in thousands)

3 unchanged sentences

Long-Term Debt

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

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

(in thousands)

Asset-based senior secured revolving credit facility (1) December 3, 2029 7.4 % $ 75,566 $ 107,149

Domestic term loan - Callodine (2) December 3, 2029 11.6 % 28,000 —

Foreign line of credit (3) December 11, 2026 13.3 % 4,143 5,403

6 unchanged sentences

Long-term debt, net $ 106,020 $ 116,382

(1) On December 3, 2024, Key Tronic Corporation (the "Company") entered into an asset-based credit agreement (the "Credit Agreement") among the Company, certain domestic subsidiaries (as co-borrowers or guarantors), BMO Bank, N.A (the "Bank"), as administrative agent and swing line lender, BMO Capital Markets as arranger and book runner, and certain financial institutions, as lenders.

The Credit Agreement provides for an asset-based senior secured revolving credit facility (the "Credit Facility") of up to $ 115 million, maturing on December 3, 2029.

Generally, under the Credit Agreement and at the Company’s option:

(i) each SOFR Loan shall bear interest at a rate per annum equal to Adjusted Term SOFR (Term SOFR plus 0.10 %, subject to a floor of 0.00 %) plus an applicable margin of 2.50 % to 3.00 %, depending on the availability of borrowing amounts under the Credit Agreement;

and (ii) each Base Rate Loan, Swing Line Loan or other Obligation shall bear interest at a rate per annum equal to the Base Rate (subject to a floor of 1.00 %) plus an applicable margin of 1.50 % to 2.00 %, depending on the availability of borrowing amounts under the Credit Agreement.

As of December 28, 2024, the applicable margin was 2.75 % for SOFR Loans and 1.75 % for Base Rate Loans.

If there is an event of default under the Credit Agreement, all loans and other obligations may bear interest at a rate of an additional 2.00 % on the otherwise applicable interest rates.

In addition to the applicable interest rates, the Company is required to pay a fee of 0.2 % per annum on the unused portion of the Credit Facility, monthly in arrears.

Availability on the line of credit is generally determined based on eligible inventory and accounts receivable balances.

Proceeds from the Credit Facility and the Term Loan discussed below were used to pay-off the Company's prior loan and security agreement, as amended, with Bank of America, N.A.

(with the related credit facility, the "Prior Credit Facility") in the amount of $ 99.7 million, as well as its outstanding equipment term loan, and financing costs related to the Credit Agreement.

The Term Loan, may also be used to pay-off certain other existing debt, to issue letters of credit, and for other business purposes, including working capital needs.

As of December 28, 2024, the Company had an outstanding balance under the asset-based revolving credit facility of $ 75.6 million, no outstanding letters of credit and $ 18.1 million available for future borrowings.

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 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:

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

The Loan Agreement, as amended, provided for an asset-based senior secured revolving credit facility with an availability of up to $ 120 million, subject to the Company’s borrowing base, and was set to mature on December 3, 2026.

The interest rate as of December 2, 2024 at the time of pay-off was approximately 9.2 %.

As of June 29, 2024, the Company had an outstanding balance under the Prior Credit Facility of $ 107.1 million, $ 0.3 million in outstanding letters of credit and $ 12.9 million available for future borrowings.

(2) On December 3, 2024, the Company entered into a $ 28 million term loan (the "Term Loan") credit agreement among the Company, certain domestic subsidiaries (as co-borrowers or guarantors), Callodine Commercial Finance, LLC (“Callodine”), as administrative agent, and certain financial institutions, as term loan lenders.

The Term Loan requires quarterly repayments of principal in the amount of $ 0.75 million.

The remainder will be payable at maturity which is the earlier of December 3, 2029 or the maturity of the Credit Agreement described above.

The Term Loan bears interest at Adjusted Term SOFR (Term SOFR plus 0.15 %, subject to a floor of 3.50 %) plus an applicable margin of 7.00 %.

If there is an event of default under the Term Loan, all loans and other obligations may bear interest at a rate of an additional 2.00 % on the otherwise applicable interest rate.

The Company had an outstanding balance of $ 28.0 million as of December 28, 2024.

(3) 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 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.

The credit facility bears interest at Iterbancario de Equilibrio Interest Rate plus 2.75 %, and as

of December 28, 2024, was 13.3 %.

As of December 28, 2024, the Company had an outstanding balance under the revolving credit facility of MXN 84 million ($ 4.14 million USD) and MXN 16 million ($ 0.8 million USD) available for future borrowings.

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

1 unchanged sentence

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.

The Company had an outstanding balance $ 4.1 million as of December 28, 2024.

(5) 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 September 28, 2024, the Company had an outstanding balance of $ 1.9 million.

As of December 28, 2024, the Company had an outstanding balance of $ 1.6 million.

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

(6) 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 September 28, 2024, the Company had an outstanding balance of $ 1.0 million.

manufacturing equipment that accrued interest at 4.85 % and was set to mature on August 14, 2025.

Under this loan agreement, equal monthly payments of approximately $ 94,000 commenced on September 14, 2020 and continued through the pay-off of the Prior Credit Facility on December 4, 2024.

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):

Debt maturities as of December 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 $ 111,083

(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.

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

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

The Company must comply with certain financial covenants, including earnings before interest, taxes, depreciation, amortization and other adjustments, availability and, if triggered, a fixed charge coverage ratio.

The credit agreement requires the Company to grant certain inspection rights to Bank of Montreal, 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.

As of December 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 $ 10.6 million of gross federal research and development tax credits as of September 28, 2024.

The Company has available approximately $ 10.8 million of gross federal research and development tax credits as of December 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 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.

Accordingly, as of December 28, 2024, the Company has recorded $ 2.9 million of unrecognized tax benefits associated with these federal tax credits, resulting in a net deferred tax benefit of approximately $ 7.9 million.

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

9 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

(in thousands, except per share information)

September 28, 2024 September 30, 2023

Net income $ 1,124 $ 335

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Net income (loss) $ ( 4,914 ) $ 1,084 $ ( 3,790 ) $ 1,419

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

1 unchanged sentence

Weighted average shares outstanding—diluted 10,762 10,889 10,762 10,889

Net income per share—basic $ 0.10 $ 0.03

Net income per share—diluted $ 0.10 $ 0.03

Net income (loss) per share—basic $ ( 0.46 ) $ 0.10 $ ( 0.35 ) $ 0.13

Net income (loss) per share—diluted $ ( 0.46 ) $ 0.10 $ ( 0.35 ) $ 0.13

Antidilutive shares not included in diluted earnings per share 48 525 — 525

1 unchanged sentence

The Company’s 2024 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.

At December 28, 2024, 1,595,362 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.

12 unchanged sentences

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

SARs granted —

SARs forfeited ( 137,500 ) 6.94

SARs expired ( 101,250 ) 8.17

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

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

Balance, June 30, 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 — — — —

Balance, December 28, 2024 136,250 $ — $ 5.10 2.6

Exercisable at December 28, 2024 — — — —

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 granted during the three months ended September 28, 2024 and September 30, 2023.

There were no SARs granted during the three or six months ended December 28, 2024 and December 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.

Total SARs expense recognized during the three months ended December 28, 2024 and December 30, 2023 was approximately $( 158,000 ) and $ 52,000 , respectively.

Total SARs expense recognized during the six months ended December 28, 2024 and December 30, 2023 was approximately $( 139,000 ) and $ 111,000 , respectively

There were no SARs exercised during the three or six month periods ended December 28, 2024 or December 30, 2023.

As of December 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 0.6 years.

Restricted Stock Units

5 unchanged sentences

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.

During the three months ended December 28, 2024, the Company granted 4,638 restricted stock units at a weighted average grant date fair value of $ 5.39 per share.

Total restricted stock unit expense recognized during the three months ended December 28, 2024 was approximately $ 176,000 .

During the six months ended December 28, 2024, the Company granted 329,457 restricted stock units at a weighted average grant date fair value of $ 4.52 per share.

Total restricted stock unit expense recognized during the six months ended December 28, 2024 was approximately $ 223,000 .

As of December 28, 2024, total unrecognized compensation expense on restricted stock units was $ 1.3 million, which is expected to be recognized over a weighted average period of approximately 2.4 years.

Commitments and Contingencies

6 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 $ 26,000 as of September 28, 2024 and $ 164,000 as of June 29, 2024.

The Company’s warranty reserve was approximately $ 26,000 as of December 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 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.

The Company recorded no gain during the three or six months ended December 28, 2024.

The Company recorded $ 0.4 million of gain during the six months ended December 30, 2023, and recorded no gain during the three months ended December 30, 2023.

Derivative Financial Instruments

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.

As of December 28, 2024, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 29.0 million through the end of the second quarter of fiscal year 2025.

During the three months ended December 28, 2024, the Company entered into $ 12.9 million of foreign currency forward contracts and settled $ 5.9 million of contracts.

During the same period of the previous year, the Company entered into $ 6.5 million of foreign currency forward contracts and settled $ 3.2 million of contracts.

During the six months ended December 28, 2024, the Company entered into $ 29.0 million of foreign currency forward contracts and settled $ 12.5 million of such contracts.

During the same periods of the previous year, the Company entered into $ 6.5 million of foreign currency forward contracts and settled $ 3.2 million of contracts.

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.

3 unchanged sentences

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 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

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

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

Foreign currency forward contracts Other current liabilities $ 1,306 $ 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):

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

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

September 28, 2024 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

December 28, 2024

Forward contracts Cost of sales $ 1,053 $ ( 543 ) $ 501 $ 1,011

Total $ 1,053 $ ( 543 ) $ 501 $ 1,011

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

September 30, 2023 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

December 30, 2023

Forward contracts Cost of sales $ — $ 263 $ ( 72 ) $ 191

Interest rate swap Interest expense ( 39 ) — 39 —

Total $ ( 39 ) $ 263 $ ( 33 ) $ 191

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

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

June 29, 2024 Effective

2 unchanged sentences

Income AOCI Balance

September 28, 2024

December 28, 2024

Forward contracts Cost of sales $ 215 $ ( 2 ) $ 798 $ 1,011

5 unchanged sentences

Income AOCI Balance

September 30, 2023

December 30, 2023

Forward contracts Cost of sales $ — $ 263 $ ( 72 ) $ 191

Interest rate swap Interest expense ( 97 ) — 97 —

Total $ ( 97 ) $ 263 $ 25 $ 191

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.

As of December 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 and Vietnam operations.

The Company does not currently manage these risk exposures by using derivative instruments.

28 unchanged sentences

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

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

During the first six 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 three months ended September 28, 2024 (in thousands):

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

Contract Assets

2 unchanged sentences

Amounts collected or invoiced ( 235,440 )

Ending balance, September 28, 2024

Ending balance, December 28, 2024

Disaggregation of Revenue

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

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

Recognition Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Over-Time $ 110,500 $ 126,635 $ 233,082 $ 258,964

6 unchanged sentences

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

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

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

Three Months Ended Six Months Ended

December 28, 2024 December 30, 2023 December 28, 2024 December 30, 2023

Lease cost Classification

7 unchanged sentences

Total lease cost $ 2,354 $ 2,641 $ 5,236 $ 5,286

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

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

December 28, 2024 June 29, 2024

Operating Leases:

16 unchanged sentences

The current portion of the total finance lease liabilities of $ 1.2 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 September 28, 2024 are as follows (in thousands):

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

Fiscal Years Ending Operating Leases Finance Leases

5 unchanged sentences

Total lease liabilities $ 13,829 $ 1,304

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

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

As of December 28, 2024, we have additional operating leases for commercial properties that have not yet commenced with future lease payments of approximately $ 22 million.

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