What changed in this filing

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Item 1. Financial Statements

2026-02-09 compared with 2025-11-07 · 153 added, 108 removed, 475 unchanged (35% of the section changed)

3 unchanged sentences

(Unaudited, in thousands)

September 27, 2025 June 28, 2025

December 27, 2025 June 28, 2025

Current assets:

36 unchanged sentences

Retained earnings 57,778 68,603

Accumulated other comprehensive loss 729 1,029

Accumulated other comprehensive income 395 1,029

Total shareholders’ equity 106,174 117,134

4 unchanged sentences

(Unaudited, in thousands, except per share amounts)

Three Months Ended

September 27, 2025 September 28, 2024

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Net sales $ 96,319 $ 113,853 $ 195,069 $ 245,411

6 unchanged sentences

Interest expense, net 2,371 3,904 5,147 7,167

Income (loss) before income taxes ( 3,360 ) 1,181

Income tax (benefit) provision ( 1,105 ) 57

Net income (loss) $ ( 2,255 ) $ 1,124

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

Loss before income taxes ( 12,629 ) ( 5,025 ) ( 15,989 ) ( 3,844 )

Income tax benefit ( 4,059 ) ( 111 ) ( 5,164 ) ( 54 )

Net loss $ ( 8,570 ) $ ( 4,914 ) $ ( 10,825 ) $ ( 3,790 )

Net loss per share — Basic $ ( 0.79 ) $ ( 0.46 ) $ ( 1.00 ) $ ( 0.35 )

Weighted average shares outstanding —Basic 10,859 10,762 10,815 10,762

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

Net loss per share — Diluted $ ( 0.79 ) $ ( 0.46 ) $ ( 1.00 ) $ ( 0.35 )

Weighted average shares outstanding — Diluted 10,859 10,762 10,815 10,762

1 unchanged sentence

KEY TRONIC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)

Three Months Ended

September 27, 2025 September 28, 2024

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Comprehensive income (loss):

Net income (loss) $ ( 2,255 ) $ 1,124

Net loss $ ( 8,570 ) $ ( 4,914 ) $ ( 10,825 ) $ ( 3,790 )

Other comprehensive income (loss):

Unrealized loss on hedging instruments, net of tax ( 334 ) 42 ( 634 ) ( 796 )

Comprehensive income (loss) $ ( 2,555 ) $ 286

Other comprehensive income (loss) for the three months ended September 27, 2025 and September 28, 2024, is reflected net of tax expense (benefit) of approximately $( 0.1 ) million and $( 0.3 ) million, respectively.

Comprehensive loss $ ( 8,904 ) $ ( 4,872 ) $ ( 11,459 ) $ ( 4,586 )

Other comprehensive loss for the three months ended December 27, 2025 and December 28, 2024, is reflected net of tax expense (benefit) of approximately $( 0.1 ) million and $ 0.0 million , respectively.

Other comprehensive loss for the six months ended December 27, 2025 and December 28, 2024, is reflected net of tax benefit of approximately $( 0.2 ) million and $( 0.2 ) million, respectively.

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

September 27, 2025 September 28, 2024

Six Months Ended

December 27, 2025 December 28, 2024

Operating activities:

Net income (loss) $ ( 2,255 ) $ 1,124

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

Net loss $ ( 10,825 ) $ ( 3,790 )

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

Depreciation and amortization 4,984 5,536

27 unchanged sentences

Cash used in financing activities ( 8,091 ) ( 11,224 )

Net (decrease) increase in cash and cash equivalents ( 261 ) 1,803

Net decrease in cash and cash equivalents ( 596 ) ( 508 )

Cash and cash equivalents, beginning of period 1,384 4,752

10 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

September 27, 2025 September 28, 2024

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Total shareholders’ equity, beginning balances $ 114,800 $ 124,343 $ 117,134 $ 123,990

9 unchanged sentences

Beginning balances $ 66,348 $ 78,045 $ 68,603 $ 76,921

Net income (loss) ( 2,255 ) 1,124

Net loss ( 8,570 ) ( 4,914 ) ( 10,825 ) ( 3,790 )

Ending balances 57,778 73,131 57,778 73,131

16 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 period ended September 27, 2025 and September 28, 2024, were both 13 week periods.

The three month period ended December 27, 2025 and December 28, 2024, were both 13 week periods.

Fiscal year 2026 will end on June 27, 2026, 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 cash from operations of $ 7.6 million and $ 9.9 million, respectively, during the three-month periods ended September 27, 2025, and September 28, 2024, respectively, and have positive working capital of $ 127.2 million as of September 27, 2025.

We generated cash from operations of $ 14.0 million and $ 11.5 million, respectively, during the six-month periods ended December 27, 2025, and December 28, 2024, respectively, and have positive working capital of $ 105.4 million as of December 27, 2025.

Based on current projections, we anticipate continuing to generate cash from operations as revenue is expected to increase throughout fiscal year 2026 along with further gross margin improvements.

1 unchanged sentence

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

As of September 27, 2025, approximately $ 20.9 million was available under the asset-based senior secured revolving credit facility.

In addition, MXN 39 million ($ 2.1 million USD) was available under the line of credit with Banorte Financial Group.

Additionally, $ 1.1 million of cash was on hand.

As of December 27, 2025, approximately $ 20.9 million was available under the asset-based senior secured revolving credit facility.

Finally, $ 0.8 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

Reclassifications

Certain prior period reclassifications were made to conform with the current period presentation.

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

Allowance for Credit Losses

7 unchanged sentences

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 operations.

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

For further information, please refer to Note 11.

“Leases” of the “Notes to Consolidated Financial Statements.”

Revenue Recognition

36 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 estimated tax rate (“ETR”) applied to year-to-date operating results and specific events that are discretely recognized as they occur.

We generally 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.

In the current quarter and for the full fiscal year 2026, we have departed from the ETR approach with respect to China, as the decision to end manufacturing operations has caused a change in judgment regarding the realizability of our deferred tax assets in China, resulting in projected zero ETR in China for fiscal year 2026.

Discrete items, including the effect of changes in tax laws, tax rates, and certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments, are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than included in the estimated annual ETR..

27 unchanged sentences

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

Inventories as of September 27, 2025 are $ 97.6 million compared to $ 97.3 million as of June 28, 2025.

On November 25, 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815), Hedge Accounting Improvements.

This update was made to clarify certain aspects of the guidance on hedge accounting and to address several incremental hedge accounting issues arising from the global reference rate reform initiative.

The ASU is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.

Early adoption is permitted.

The Company is currently assessing the impact of the requirements on its consolidated financial statements.

On December 4, 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832), Accounting for Government Grants Received by Business Entities.

The FASB is issuing this Update to improve generally accepted accounting principles (GAAP) by establishing authoritative guidance on the accounting for government grants received by business entities.

The ASU is effective for public business entities for annual reporting periods beginning after December 15, 2029, and interim reporting

periods within those annual reporting periods.

Early adoption is permitted.

The Company does not expect any material changes to its consolidated financial statements as a result of this update.

On December 8, 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), Narrow-Scope Improvements.

This update is intended to improving the navigability of the required interim disclosures and clarifying when that guidance is applicable.

The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods.

The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities.

Early adoption is permitted.

The Company is currently assessing the impact of the requirements on its consolidated financial statements.

On December 17, 2025 the FASB issued ASU 2025-12, Codification Improvements.

This evergreen project facilitates Codification updates for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements.

The resulting amendments are collectively referred to as Codification improvements.

The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.

The types of issues considered through this project are improvements that are not expected to have a significant effect on current accounting practice or result in significant costs to most entities, and the Company is currently assessing the impact of the requirements on its consolidated financial statements.

Inventories as of December 27, 2025 are $ 88.4 million compared to $ 97.3 million as of June 28, 2025.

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

September 27, 2025 June 28, 2025

December 27, 2025 June 28, 2025

(in thousands)

3 unchanged sentences

Long-Term Debt

Maturity Date Interest Rate September 27, 2025 June 28, 2025

Maturity Date Interest Rate December 27, 2025 June 28, 2025

(in thousands)

6 unchanged sentences

Domestic term loan - Avtech 9 (7) June 30, 2028 11.7 % 4,355 4,996

Foreign term loan - Banorte (3) September 7, 2030 11.0 % 2,155 —

Total debt 100,000 107,629

6 unchanged sentences

(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.

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 September 27, 2025, the applicable margin was 2.75 % for SOFR Loans and 1.75 % for Base Rate Loans.

8 unchanged sentences

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 September 27, 2025, the Company had an outstanding balance under the asset-based revolving credit facility of $ 64.5 million, $ 0.4 million in outstanding letters of credit and $ 20.9 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, 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, 2025.

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

As of December 27, 2025, the Company had an outstanding balance under the asset-based revolving credit facility of $ 63.0 million, $ 0.7 million in outstanding letters of credit and $ 20.9 million available for future borrowings.

As of June 28, 2025, the Company had an outstanding balance under the Credit Facility of $ 67.9 million, $ 0.4 million in outstanding letters of credit and $ 25.0 million available for future borrowings.

9 unchanged sentences

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 27, 2025, was 11 %.

As of September 27, 2025, the Company had an outstanding balance under the revolving credit facility of MXN 61 million ($ 3.3 million USD) and MXN 39 million ($ 2.1 million USD) available for future borrowings.

On October 2, 2025, the company refinanced its loan agreement with Banorte Financial Group.

The refinanced agreement separated the existing MXN 100 million line of credit into two separate debt instruments.

The first instrument allows for a line of credit of up to MXN 20 million, subject to the Company’s borrowing base, maturing on December 11, 2026.

The second component is a MXN 40 million term loan, requiring monthly payments of MXN 678 thousand through maturity on September 7, 2030.

The agreement is subject to certain financial covenants which are reviewed on an annual basis.

No proceeds were received as a result of the refinanced agreement.

The credit facility bears interest at Iterbancario de Equilibrio Interest Rate plus 2.75 %, and as of December 27, 2025, was 10.4 %.

As of December 27, 2025, the Company had an outstanding balance under the revolving credit facility of MXN 20 million ($ 1.1 million USD) and MXN 0 million ($ 0.0 million USD) was 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").

4 unchanged sentences

(6) On May 1, 2025, the Company entered into a $ 4.0 million equipment financing facility related to new manufacturing equipment that bears interest at 13.6 % and matures on October 31, 2028.

Under this loan agreement, equal quarterly payments of $ 383,679 will commence when the full amount of the facility is drawn and will continue through the maturity of the equipment financing facility on October 31, 2028.

On December 16, 2025, the equipment financing facility was amended and restated to reduce the financing proceeds to $ 0.7 million and equal quarterly payments of $ 69,022 .

The equipment financing facility will mature on December 16, 2028.

(7) On March 6, 2025, the Company entered into a $ 5.0 million equipment financing facility related to the Company’s existing manufacturing equipment that bears interest at 11.71 % and matures on June 30, 2028.

Under this loan agreement, equal quarterly payments of $ 464,361 commenced on July 15, 2025 and will continue through the maturity of the equipment financing facility on June 30, 2028.

Debt maturities as of September 27, 2025 for the next five years are as follows (in thousands):

Debt maturities as of December 27, 2025 for the next five years are as follows (in thousands):

Fiscal Years Ending Amount

2026 (1) $ 3,369

Thereafter 114

Total debt 100,000

1 unchanged sentence

Long-term debt, net of debt issuance costs $ 97,686

(1) Represents scheduled payments for the remaining nine-month period ending June 27, 2026.

(1) Represents scheduled payments for the remaining six-month period ending June 27, 2026.

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

1 unchanged sentence

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 27, 2025, the Company was in compliance with all applicable financial covenants.

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

The Company currently expects to repatriate approximately $ 2.3 million of foreign earnings in the future.

All other unremitted foreign earnings are expected to remain permanently reinvested for planned fixed assets purchases and improvements in foreign locations.

As of December 27, 2025, the Company was in compliance with all applicable financial covenants.

Currently, all unremitted foreign earnings are expected to remain permanently reinvested for planned fixed assets purchases and improvements in foreign locations.

Repatriations of cash will generally be tax-free in the U.S.

However, withholding taxes in China may still apply to any such future repatriations.

Accordingly, management estimates that future repatriations of cash from China may result in approximately $ 0.2 million of withholding tax.

We do not anticipate there would be any offsetting foreign tax credits in the U.S.

and as such, this potential liability is a direct cost associated with actual repatriations.

Currently, management estimates no future repatriations of cash from China that would result in withholding tax.

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

The Company has available approximately $ 11.2 million of gross federal research and development tax credits as of September 27, 2025 expiring in various fiscal years from 2033 to 2046.

The Company has available approximately $ 11.4 million of gross federal research and development tax credits as of December 27, 2025 expiring in various fiscal years from 2033 to 2046.

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 27, 2025, 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 $ 8.3 million.

Accordingly, as of December 27, 2025, 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 $ 8.5 million.

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

A valuation allowance against deferred tax assets is required if it is more likely than not that some of the deferred tax assets will not be realized.

In spite of the Company’s current cumulative loss position before nonrecurring items such as cyber losses and restructuring costs, based upon the Company’s historical profitability and forecasted income, management determined that it is more likely than not that the deferred tax assets will be realized.

The Company’s largest deferred tax assets are federal research and development tax credits, deferred research and development expenses, and interest expense deduction carryforwards.

4 unchanged sentences

The Company has closely monitored the realizability of deferred tax assets, tracking book income, permanent differences, and nonrecurring items while projecting future utilization of deferred tax assets, and will continue to do so as future actual results are compared to forecasted results.

The Company’s decision to end manufacturing operations in China has resulted in loss carryforwards that more likely than not will not be realized in the carryforward period.

Therefore, the Company has placed a full valuation allowance on the net deferred tax asset in China as of December 27, 2025.

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

4 unchanged sentences

The Company’s Advance Pricing Agreement for intercompany transfer pricing has expired, and our Mexico subsidiary is now subject to the Mexico safe harbor transfer pricing regulations.

As a result, we expect our current tax liability in Mexico to increase.

As a result, we generally expect our current tax liability in Mexico to increase.

Overall, we do not expect the application of the safe harbor transfer pricing regulations to have a material impact on our consolidated tax position.

4 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 27, 2025 September 28, 2024

Net income (loss) $ ( 2,255 ) $ 1,124

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Net loss $ ( 8,570 ) $ ( 4,914 ) $ ( 10,825 ) $ ( 3,790 )

Weighted average shares outstanding—basic 10,859 10,762 10,815 10,762

6 unchanged sentences

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 27, 2025, 1,045,674 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.

At December 27, 2025, 1,056,448 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 sales, research, development and engineering, and selling, general and administrative expenses.

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

13 unchanged sentences

SARs expired ( 115,000 ) $ 4.93

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

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

Outstanding, June 28, 2025 136,250 — $ 5.10 2.1

SARs forfeited ( 136,250 ) $ 5.10

Outstanding, September 27, 2025 — $ — $ — —

Exercisable, September 27, 2025 — $ — $ — —

Outstanding, December 27, 2025 — $ — $ — —

Exercisable, December 27, 2025 — $ — $ — —

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 27, 2025 and September 28, 2024.

There were no SARs granted during the three or six-months ended December 27, 2025 and December 28, 2024.

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.

No SARs expense was recognized during the three months ended September 27, 2025 and $ 19,000 was recognized during the three months ended September 28, 2024.

There were no SARs exercised during the three month periods ended September 27, 2025 or September 28, 2024.

No SARs expense was recognized during the three months ended December 27, 2025 and $( 158,000 ) was recognized during the three months ended December 28, 2024.

No SARs expense was recognized during the six months ended December 27, 2025 and $( 139,000 ) was recognized during the six months ended December 28, 2024.

There were no SARs exercised during the three or six month periods ended December 27, 2025 or December 28, 2024.

Restricted Stock Units

9 unchanged sentences

Granted 329,457 $ 4.52

Outstanding, September 28, 2024 324,819

Outstanding, December 28, 2024 329,457 $ 4.52

Outstanding, June 28, 2025 281,577 $ 4.52

2 unchanged sentences

Forfeited ( 12,688 ) 3.28

Outstanding, September 27, 2025 734,640 $ 3.22

Vested but not released, September 27,2025 —

Total restricted stock unit expense recognized during the three months ended September 27, 2025 and September 28, 2024 was approximately $ 221,000 and $ 48,000 .

As of September 27, 2025 total unrecognized compensation expense on restricted stock units was $ 2.2 million, which is expected to be recognized over a weighted average period of approximately 2.4 years.

Outstanding, December 27, 2025 723,866 $ 3.22

Vested but not released, December 27,2025 —

Total restricted stock unit expense recognized during the three months ended December 27, 2025 and December 28, 2024 was approximately $ 278,000 and $ 176,000 .

Total restricted stock unit expense recognized during the six months ended December 27, 2025 and December 28, 2024 was approximately $ 499,000 and $ 223,000 .

As of December 27, 2025 total unrecognized compensation expense on restricted stock units was $ 1.9 million, which is expected to be recognized over a weighted average period of approximately 2.2 years.

Commitments and Contingencies

5 unchanged sentences

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

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

The Company’s warranty reserve was approximately $ 25,300 as of September 27, 2025 and $ 26,000 as of June 28, 2025.

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 $ 25,300 as of December 27, 2025 and $ 26,000 as of June 28, 2025.

Derivative Financial Instruments

1 unchanged sentence

As a part of our risk management strategy, we use Mexican Peso forward contracts to hedge foreign currency fluctuations for a portion of our Mexican Peso denominated expenses.

As of September 27, 2025, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 6.4 million through the end of the second quarter of fiscal year 2026.

During the three months ended September 27, 2025, the Company did not enter into foreign currency forward contracts and settled $ 6.5 million of contracts.

During the same period of the previous year, the Company entered into $ 16.1 million of foreign currency forward contracts and settled $ 6.6 million of contracts.

As of December 27, 2025, the Company had outstanding foreign currency forward contracts with a total notional amount of $ 14.3 million that mature through the first quarter of fiscal year 2027.

During the three months ended December 27, 2025, the Company entered into $ 15.3 million of foreign currency forward contracts and settled $ 7.3 million of such contracts.

During the same period of the previous year, the Company entered into $ 12.9 million of foreign currency forward contracts and settled $ 5.9 million of such contracts.

During the six months ended December 27, 2025, the Company entered into $ 15.3 million of foreign currency forward contracts and settled $ 13.8 million of such contracts.

During the same periods of the previous year, the Company entered into $ 29.0 million of foreign currency forward contracts and settled $ 12.5 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.

The amount of net losses expected to be reclassified into earnings in the next 3 months is $ 0.7 million.

The following table summarizes the fair value of the derivative instruments in the Consolidated Balance Sheets as of September 27, 2025 and June 28, 2025 (in thousands):

Derivatives designated as hedging instruments under Subtopic 815-20 Balance Sheet Location September 27, 2025 June 28, 2025

The amount of net earnings expected to be reclassified into earnings in the next 9 months is $ 0.4 million.

The following table summarizes the fair value of the derivative instruments in the Consolidated Balance Sheets as of December 27, 2025 and June 28, 2025 (in thousands):

Derivatives designated as hedging instruments under Subtopic 815-20 Balance Sheet Location December 27, 2025 June 28, 2025

Foreign currency forward contracts Other current assets $ 511 $ 1,330

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 27, 2025 and September 28, 2024, 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 27, 2025 and December 28, 2024, respectively (in thousands):

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

June 28, 2025 Effective

September 27, 2025 Effective

AOCI Effective Portion

1 unchanged sentence

Income AOCI Balance

September 27, 2025

December 27, 2025

Forward contracts Cost of sales $ ( 729 ) $ 1,324 $ ( 990 ) $ ( 395 )

1 unchanged sentence

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

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 27, 2025 and December 28, 2024, respectively (in thousands):

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

June 28, 2025 Effective

2 unchanged sentences

Income AOCI Balance

September 28, 2024

December 27, 2025

Forward contracts Cost of sales ( 1,029 ) 2,423 ( 1,789 ) ( 395 )

$ ( 1,029 ) 2,423 ( 1,789 ) ( 395 )

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

June 29, 2024 Effective

AOCI Effective Portion

Reclassified From

Income AOCI Balance

December 28, 2024

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

Total $ 215 ( 2 ) 798 1,011

As of September 27, 2025, the Company does not have any foreign exchange contracts with credit-risk-related contingent features.

As of December 27, 2025, 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 lines of credit and foreign currency risk resulting from our China and Vietnam operations.

29 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 2026, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods.

During the first six months of fiscal year 2026, no revenues were recognized from performance obligations satisfied or partially satisfied in previous periods.

Contract Balances

1 unchanged sentence

Current 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 27, 2025 (in thousands):

The following table summarizes the activity in the Company’s contract assets during the six months ended December 27, 2025 (in thousands):

Contract Assets

2 unchanged sentences

Amounts collected or invoiced ( 183,924 )

Ending balance, September 27, 2025

The Company also has long term contract assets of approximately $ 10.4 million at September 27, 2025, and June 28, 2025, classified under Other long-term assets in the condensed consolidated balance sheet.

No revenue was recognized, and no amounts were collected or invoiced related to these balances during the period.

Ending balance, December 27, 2025

The Company also has long term contract assets of approximately $ 10.4 million at December 27, 2025, and June 28, 2025, classified under Other long-term assets in the condensed consolidated balance sheet.

No revenue was recognized, and approximately $ 16,000 was collected or invoiced related to these balances during the period.

The remaining performance obligations related to these amounts are tied to the manufacturing of electronic products.

Disaggregation of Revenue

The following table presents the Company’s revenue disaggregated for the three and three months ended September 27, 2025 and September 28, 2024 (in thousands):

Recognition Three Months Ended

September 27, 2025 September 28, 2024

The following table presents the Company’s revenue disaggregated for the three and six months ended December 27, 2025 and December 28, 2024 (in thousands):

Recognition Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Over-Time $ 91,303 $ 110,500 $ 186,387 $ 233,082

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 September 27, 2025 and September 28, 2024 were (in thousands):

Three Months Ended

September 27, 2025 September 28, 2024

The components of lease cost for the three months and six months ended December 27, 2025 and December 28, 2024 were (in thousands):

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Lease cost Classification

7 unchanged sentences

Total lease cost $ 1,894 $ 2,354 $ 3,921 $ 5,236

Amounts reported in the Consolidated Balance Sheet as of September 27, 2025 and June 28, 2025 were (in thousands, except weighted average lease term and discount rate):

September 27, 2025 June 28, 2025

Amounts reported in the Consolidated Balance Sheet as of December 27, 2025 and June 28, 2025 were (in thousands, except weighted average lease term and discount rate):

December 27, 2025 June 28, 2025

Operating Leases:

15 unchanged sentences

(2) The total finance lease right of use assets of $ 7.5 million is classified under Other Long-term Assets.

The current portion of the total finance lease liabilities of $ 1.8 million is classified under Current portion of debt, net , resulting in $ 2.3 million classified in Other Long-term Liabilities section of the condensed consolidated balance sheet.

Future lease payments under non-cancellable leases as of September 27, 2025 are as follows (in thousands):

The current portion of the total finance lease liabilities of $ 2.3 million is classified under Other Current Liabilities , resulting in $ 3.5 million classified in Other Long-term Liabilities section of the condensed consolidated balance sheet.

Future lease payments under non-cancellable leases as of December 27, 2025 are as follows (in thousands):

Fiscal Years Ending Operating Leases Finance Leases

2 unchanged sentences

2028 5,909 2,115

2029 4,511 913

2030 4,006 50

Thereafter 14,346 —

2 unchanged sentences

Total lease liabilities $ 29,193 $ 5,797

(1) Represents estimated lease payments for the remaining nine-month period ending June 27, 2026.

As of September 27, 2025, we have finance leases for commercial properties and equipment that have not yet commenced with future lease payments of approximately $ 5.1 million.

(1) Represents estimated lease payments for the remaining six-month period ending June 27, 2026.

Segment Information

1 unchanged sentence

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

As of September 27, 2025, the Company operates and internally manages a single operating segment, Electronics Manufacturing Services, as this is the only discrete financial information that is regularly reviewed by the chief operating decision maker.

As of December 27, 2025, the Company operates and internally manages a single operating segment, Electronics Manufacturing Services, as this is the only discrete financial information that is regularly reviewed by the chief operating decision maker.

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

4 unchanged sentences

In accordance with the adoption of ASU 2023-07 in 2025, the Company determined that significant segment measures included gross profit which is primarily composed of materials and labor costs as follows (in thousands):

Three Months Ended

September 27, 2025 September 28, 2024

Three Months Ended Six Months Ended

December 27, 2025 December 28, 2024 December 27, 2025 December 28, 2024

Materials $ 53,078 $ 68,552 $ 107,036 $ 146,619

3 unchanged sentences

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