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What changed in KEY TRONIC CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of KEY TRONIC CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+185 added−215 removedSource: 10-K (2025-09-17) vs 10-K (2024-10-15)

Top changes in KEY TRONIC CORP's 2025 10-K

185 paragraphs added · 215 removed · 145 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeLARSEN – President and Chief Executive Officer Mr. Larsen, age 51, has served as President and Chief Executive Officer since July 2024. Previously he was the Executive Vice President of Administration, Chief Financial Officer, and Treasurer from July 2015 through June 2024. He was Vice President of Finance and Controller from February 2010 to July 2015.
Biggest changeVoorhees, age 51, has served as Executive Vice President of Administration, Chief Financial Officer, and Treasurer since July 2024. Previously, he was Vice President of Finance and Controller from November 2021 to June 2024, Senior Manager of Corporate Finance from July 2015, and Manager of Financial Reporting since April 2010. Prior to joining Key Tronic, Mr.
We use computer-aided design techniques and software to assist in preparation of the tool design layout and component placement, to reduce tooling and production costs, improve component and product quality, and enhance turnaround time during product development. We purchase materials and components for our products from many different suppliers, including both domestic and international sources.
We use computer-aided design techniques and software to assist in preparation of the tool design layout and component placement, to reduce tooling and production costs, improve component and product quality, and enhance turnaround time during product development. 5 We purchase materials and components for our products from many different suppliers, including both domestic and international sources.
Given our competitive advantages and the growing pressure for new potential customers to move forward with their outsourcing strategies, we feel that we are strongly positioned to win new business in coming periods and grow our revenue and profits. The contract manufacturing industry is intensely competitive.
Given our competitive advantages and the growing pressure for new potential customers to move forward with their outsourcing strategies, we feel that we are strongly positioned to win new business in coming periods and grow our revenue and profits. 4 The contract manufacturing industry is intensely competitive.
There are numerous competitors in the contract manufacturing industry, many of which have substantially more resources and are more geographically diverse than we are. Some of our competitors have similar international production capabilities, large financial resources and some have 6 substantially greater manufacturing, research and development, and marketing resources.
There are numerous competitors in the contract manufacturing industry, many of which have substantially more resources and are more geographically diverse than we are. Some of our competitors have similar international production capabilities, large financial resources and some have substantially greater manufacturing, research and development, and marketing resources.
Voorhees has a bachelor degree in Accounting from the University of Idaho and is a Certified Public Accountant. PHILIP S. HOCHBERG – Executive Vice President of Customer Relations and Integration Mr. Hochberg, age 62, has been Executive Vice President of Customer Relations and Integration since July 2012. Prior to this, Mr.
Mr. Voorhees has a bachelor degree in Accounting from the University of Idaho and is a Certified Public Accountant. PHILIP S. HOCHBERG – Executive Vice President of Customer Relations and Integration Mr. Hochberg, age 63, has been Executive Vice President of Customer Relations and Integration since July 2012. Prior to this, Mr.
Ongoing challenges that we face include but are not limited to the following: continuing to win programs from new and existing customers, balancing capital employed, production capacity and key personnel in support of new customer programs, improving operating efficiencies, controlling costs while developing competitive pricing strategies, and successfully transitioning new program wins to full production.
Ongoing challenges that we face include but are not limited to the following: continuing to win programs from new and existing customers, balancing capital employed, production capacity and key personnel in support of new customer programs, improving operating efficiencies, controlling costs while developing competitive pricing strategies, and successfully transitioning new program wins to full production with minimal delays.
Knaggs, age 43, has been Executive Vice President of Quality, Regulatory Affairs, and Information Systems since May 2021. Previously, he was Vice President of Quality and Regulatory Affairs from November 2017 to May 2021. He was Vice President of Quality since October 2016. Before joining Key Tronic, Mr.
Knaggs, age 44, has been Executive Vice President of Quality, Regulatory Affairs, and Information Systems since May 2021. Previously, he was Vice President of Quality and Regulatory Affairs from November 2017 to May 2021. He was Vice President of Quality since October 2016. Before joining Key Tronic, Mr.
Foreign Markets Information concerning net sales and long-lived assets (property, plant, and equipment) by geographic areas is set forth in Note 11 - “Enterprise-Wide Disclosures” of the “Notes to Consolidated Financial Statements” of this Annual Report on Form 10-K and that information is incorporated herein by reference.
Foreign Markets Information concerning net sales and long-lived assets (property, plant, and equipment) by geographic areas is set forth in Note 11 - “Segment Information and Enterprise-Wide Disclosures” of the “Notes to Consolidated Financial Statements” of this Annual Report on Form 10-K and that information is incorporated herein by reference.
OREBAUGH – Executive Vice President of Engineering Mr. Orebaugh, age 53, has been Executive Vice President of Engineering since September 2021. Previously he served as Vice President of Engineering since April 2017. Prior to this, Mr. Orebaugh served as Director of Engineering since May 2013. From April 2010 to May 2013, he served as Manager of Engineering.
OREBAUGH – Executive Vice President of Engineering Mr. Orebaugh, age 54, has been Executive Vice President of Engineering since September 2021. Previously he served as Vice President of Engineering since April 2017. Prior to this, Mr. Orebaugh served as Director of Engineering since May 2013. From April 2010 to May 2013, he served as Manager of Engineering.
Hochberg has an MBA from the University of British Columbia, a BA in Psychology, with a minor in Business from Washington University in St. Louis. DUANE D. MACKLEIT – Executive Vice President of Operations Mr. Mackleit, age 56, has been Executive Vice President of Operations since December 2019. Prior to this, Mr.
Hochberg has an MBA from the University of British Columbia, a BA in Psychology, with a minor in Business from Washington University in St. Louis. 7 DUANE D. MACKLEIT – Executive Vice President of Operations Mr. Mackleit, age 57, has been Executive Vice President of Operations since December 2019. Prior to this, Mr.
The following table summarizes the customers that represented 10 percent or more of total net sales during the last two fiscal years: Percentage of Net Sales by Fiscal Year 2024 2023 2022 Customer A 20% 12% 12% Customer B * * 13% There can be no assurance that the Company’s principal customers will continue to purchase products from the Company at current levels.
The following table summarizes the customers that represented 10 percent or more of total net sales during the last two fiscal years: Percentage of Net Sales by Fiscal Year 2025 2024 Customer A 25% 20% There can be no assurance that the Company’s principal customers will continue to purchase products from the Company at current levels.
Prior to that, he worked at Moss Adams, LLP as a Senior Assurance Associate from November 2004 to August 2007. Between September 2001 and August 2004, Mr. Voorhees held senior level accounting positions at Boise State University and Idaho State Department of Agriculture. Mr.
Voorhees worked at Coldwater Creek from August 2007 to March 2010 as a Senior Financial Reporting Accountant. Prior to that, he worked at Moss Adams, LLP as a Senior Assurance Associate from November 2004 to August 2007. Between September 2001 and August 2004, Mr. Voorhees held senior level accounting positions at Boise State University and Idaho State Department of Agriculture.
MARK COURTNEY – Vice President of Supply Chain 8 Mark Courtney, age 58, has been Vice President of Supply Chain of the company since August 2019.
MARK COURTNEY – Vice President of Supply Chain Mark Courtney, age 59, has been Vice President of Supply Chain of the company since August 2019.
Although our customer base is growing, we still have less than 1% of the potential global market and our revenue can fluctuate significantly due to reliance on a concentrated base of customers.
We have less than 1% of the potential global market and our revenue can fluctuate significantly due to reliance on a concentrated base of customers.
Order backlog consists of purchase orders received for products expected to be shipped approximately within the next twelve months, although shipment dates are subject to change due to design modifications, customer forecast changes, or other customer requirements.
If there are canceled or rescheduled orders, we typically negotiate fees to cover the costs we have incurred. Order backlog consists of purchase orders received for products expected to be shipped approximately within the next twelve months, although shipment dates are subject to change due to design modifications, customer forecast changes, or other customer requirements.
We aim to diversify our customer base by adding additional programs and customers. We expect net sales to our five largest customers as a percentage of total net sales to approximate current levels going forward.
We expect net sales to our five largest customers as a percentage of total net sales to approximate current levels going forward.
Larsen was an audit manager for the public accounting firm BDO USA, LLP. He also held various auditing and supervisory positions with Grant Thornton LLP from 1997 to 2002. Mr. Larsen has a Bachelor of Science degree in Accounting and a Masters degree in Accounting from Brigham Young University and is a Certified Public Accountant. ANTHONY G.
He also held various auditing and supervisory positions with Grant Thornton LLP from 1997 to 2002. Mr. Larsen has a Bachelor of Science degree in Accounting and a Masters degree in Accounting from Brigham Young University and is a Certified Public Accountant. ANTHONY G. VOORHEES - Executive Vice President of Administration, Chief Financial Officer, and Treasurer Mr.
As of June 29, 2024, we had 4,122 full-time employees compared to 5,447 on July 1, 2023. Since we can have significant fluctuations in product demand, we seek to maintain flexibility in our workforce by utilizing skilled temporary labor in some of our manufacturing facilities in addition to full-time employees.
Since we can have significant fluctuations in product demand, we seek to maintain flexibility in our workforce by utilizing skilled temporary labor in some of our manufacturing facilities in addition to full-time employees. Backlog On June 28, 2025, our order backlog was valued at approximatel y $159.1 million, compared to approximately $249.6 million on June 29, 2024.
Due to the relationships with our customers, we will occasionally allow orders to be canceled or rescheduled and as a result it is not a meaningful indicator of future financial results. If there are canceled or rescheduled orders, we typically negotiate fees to cover the costs we have incurred.
The amount of backlog is not necessarily indicative of future sales but can be indicative of trends in expected future sales revenue. Due to the relationships with our customers, we will occasionally allow orders to be canceled or rescheduled and as a result it is not a meaningful indicator of future financial results.
Sales of the majority of our products have not historically been seasonal in nature, but may be seasonal in the future if there are changes in the types of products manufactured.
Sales of the majority of our products have not historically been seasonal in nature, but may be seasonal in the future if there are changes in the types of products manufactured. Sales can, however, fluctuate significantly between quarters from changes in customers and customer demand due to the concentration of sales generated by our largest customers.
However, material costs and liabilities may arise from these requirements or from new or modified requirements, which could have a material adverse effect on our business and results of operations.
However, material costs and liabilities may arise from these requirements or from new or modified requirements, which could have a material adverse effect on our business and results of operations. 6 Information about Our Executive Officers The table below sets forth the name, current age, and current position of our executive officers and other significant employees: Name Age Positions Held Executive Officers Brett R.
This international production capability provides our customers with the benefits of improved supply-chain management, reduced inventory, lower labor costs, lower transportation costs, and reduced product fulfillment time.
This international production capability provides our customers with the benefits of improved supply-chain management, reduced inventory, lower labor costs, lower transportation costs, and reduced product fulfillment time. We are also planning to significantly increase production capacity in our Arkansas and Vietnam facilities in order to continue to benefit from the growing customer demand for rebalancing their contract manufacturing.
Sales can, however, fluctuate significantly between quarters from changes in customers and customer demand due to the concentration of sales generated by our largest customers. 5 For the fiscal years 2024, 2023, and 2022, the five largest customers in each year accounted for 34 percent, 35 percent, and 39 percent of combined total net sales, respectively.
For the fiscal years 2025 and 2024 the five largest customers in each year accounted for 48 percent, and 34 percent of combined total net sales, respectively. We aim to diversify our customer base by adding additional programs and customers.
He was Chief Financial Officer of FLSmidth Spokane, Inc. from December 2008 to February 2010. From October 2005 through November 2008, Mr. Larsen served as Controller of Key Tronic Corporation. From May 2004 to October 2005, Mr. Larsen served as Manager of Financial Reporting of Key Tronic Corporation. From 2002 to May 2004, Mr.
Larsen served as Controller of Key Tronic Corporation. From May 2004 to October 2005, Mr. Larsen served as Manager of Financial Reporting of Key Tronic Corporation. From 2002 to May 2004, Mr. Larsen was an audit manager for the public accounting firm BDO USA, LLP.
VOORHEES - Executive Vice President of Administration, Chief Financial Officer, and Treasurer Mr. Voorhees, age 50, has served as Executive Vice President of Administration, Chief Financial Officer, and Treasurer since July 2024.
Orebaugh 54 Executive Vice President of Engineering Mark Courtney 59 Vice President of Supply Chain Executive Officers BRETT R. LARSEN – President and Chief Executive Officer Mr. Larsen, age 52, has served as President and Chief Executive Officer since July 2024.
Hochberg 62 Executive Vice President of Customer Relations and Integration Duane D. Mackleit 56 Executive Vice President of Operations David H. Knaggs 43 Executive Vice President of Quality, Regulatory Affairs, and Information Systems Chad T. Orebaugh 53 Executive Vice President of Engineering Mark Courtney 58 Vice President of Supply Chain 7 Executive Officers BRETT R.
Larsen 52 President and Chief Executive Officer Anthony G. Voorhees 51 Executive Vice President of Administration, Chief Financial Officer, and Treasurer Philip S. Hochberg 63 Executive Vice President of Customer Relations and Integration Duane D. Mackleit 57 Executive Vice President of Operations David H. Knaggs 44 Executive Vice President of Quality, Regulatory Affairs, and Information Systems Chad T.
Removed
Backlog On June 29, 2024, our order backlog was valued at approximatel y $249.6 million, compared to approximately $343.0 million on July 1, 2023. The amount of backlog is not necessarily indicative of future sales but can be indicative of trends in expected future sales revenue.
Added
We believe these initiatives should help mitigate the adverse impact and uncertainties surrounding the recently announced tariffs on goods manufactured in China and Mexico.
Removed
Information about Our Executive Officers The table below sets forth the name, current age, and current position of our executive officers and other significant employees: Name Age Positions Held Executive Officers Brett R. Larsen 51 President and Chief Executive Officer Anthony G. Voorhees 50 Executive Vice President of Administration, Chief Financial Officer, and Treasurer Philip S.
Added
As of June 28, 2025, we had 3,539 full-time employees compared to 4,122 on June 29, 2024. This headcount reduction is related to active efforts to streamline our operations, optimize our cost structure, and become more cost competitive in new quote opportunities.
Removed
Previously, he was Vice President of Finance and Controller from November 2021 to June 2024, Senior Manager of Corporate Finance from July 2015, and Manager of Financial Reporting since April 2010. Prior to joining Key Tronic, Mr. Voorhees worked at Coldwater Creek from August 2007 to March 2010 as a Senior Financial Reporting Accountant.
Added
Previously he was the Executive Vice President of Administration, Chief Financial Officer, and Treasurer from July 2015 through June 2024. He was Vice President of Finance and Controller from February 2010 to July 2015. He was Chief Financial Officer of FLSmidth Spokane, Inc. from December 2008 to February 2010. From October 2005 through November 2008, Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMatters relating to or arising from the subject of the Audit Committee’s internal investigation, including expenses and diversion of personnel and resources, regulatory investigations, and proceedings and litigation matters, could have an adverse effect on our business, results of operations and financial condition. 15 We have incurred, and may continue to incur, significant expenses related to legal, accounting and other professional services in connection with matters relating to or arising from the subject of the Audit Committee’s internal investigation in fiscal year 2022.
Biggest changeDue to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. 15 Matters relating to or arising from the subject of the Audit Committee’s internal investigation, including expenses and diversion of personnel and resources, regulatory investigations, and proceedings and litigation matters, could have an adverse effect on our business, results of operations and financial condition.
If we or our vendors are unable to prevent such outages, our operations could be disrupted. If we are unable to maintain our technological and manufacturing process expertise, our business could be adversely affected. The markets for our customers’ products are characterized by rapidly changing technology, evolving industry standards, frequent new product introductions and short product life cycles.
If we or our vendors are unable to prevent such outages, our operations could be disrupted. 13 If we are unable to maintain our technological and manufacturing process expertise, our business could be adversely affected. The markets for our customers’ products are characterized by rapidly changing technology, evolving industry standards, frequent new product introductions and short product life cycles.
There can be no assurance that our customers will be successful in identifying, developing and marketing products that respond to technological change, emerging industry standards or evolving customer requirements. 13 RISKS RELATED TO CAPITAL AND FINANCING Our failure to comply with the covenants in our credit arrangements could materially and adversely affect our financial condition.
There can be no assurance that our customers will be successful in identifying, developing and marketing products that respond to technological change, emerging industry standards or evolving customer requirements. RISKS RELATED TO CAPITAL AND FINANCING Our failure to comply with the covenants in our credit arrangements could materially and adversely affect our financial condition.
Our customers are required to indemnify us against liability associated with designing products to meet their specifications. However, if our customers are responsible for the defects, they may not, or may not have resources to, assume responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims.
Our customers are required to indemnify us against liability associated with designing products to meet their specifications. However, if our 12 customers are responsible for the defects, they may not, or may not have resources to, assume responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims.
Our ability to manage growth effectively requires us to continue to implement and improve these systems; avoid cost overruns; maintain customer, supplier and other favorable 12 business relationships during possible transition periods; continue to develop the management skills of our managers and supervisors; and continue to train, motivate and manage our employees.
Our ability to manage growth effectively requires us to continue to implement and improve these systems; avoid cost overruns; maintain customer, supplier and other favorable business relationships during possible transition periods; continue to develop the management skills of our managers and supervisors; and continue to train, motivate and manage our employees.
Additionally, in the event that our business grows rapidly or there is uncertainty in the macroeconomic climate, additional financing resources could be necessary in the current or future fiscal years. There is no assurance that we will be able to obtain equity or debt financing at acceptable terms, or at all, in the future.
In the event that our business grows rapidly or there is uncertainty in the macroeconomic climate, additional financing resources could be necessary in the current or future fiscal years. There is no assurance that we will be able to obtain equity or debt financing at acceptable terms, or at all, in the future.
To the extent we have excess cash in foreign locations that could be used in, or is needed by, our operations in the United States, we may incur significant penalties and/or taxes to repatriate these funds. 9 We may experience fluctuations in quarterly results of operations.
To the extent we have excess cash in foreign locations that could be used in, or is needed by, our operations in the United States, we may incur significant penalties and/or taxes to repatriate these funds. We may experience fluctuations in quarterly results of operations.
The contraction in demand from certain industries could impact our customer orders and have a negative impact on our operations over the foreseeable future. Our inability to enforce contracts with, or the bankruptcy or insolvency of, any of our principal customers could adversely affect our business.
The contraction in demand from certain industries could impact our customer orders and have a negative impact on our operations over the foreseeable future. 10 Our inability to enforce contracts with, or the bankruptcy or insolvency of, any of our principal customers could adversely affect our business.
If such institutions were to become insolvent during which time it held our cash and cash equivalents in excess of the insurance limit, it could be necessary to obtain other credit financing to operate our facilities. Our stock price is volatile.
If such institutions were to become insolvent during which time it held our cash and cash equivalents in excess of the insurance limit, it could be necessary to obtain other credit financing to operate our facilities. 14 Our stock price is volatile.
Financial difficulties experienced by one or more of our customers could negatively affect our business by 10 decreasing demand from such customers and through the potential inability of these companies to make full payment on amounts owed to us.
Financial difficulties experienced by one or more of our customers could negatively affect our business by decreasing demand from such customers and through the potential inability of these companies to make full payment on amounts owed to us.
A change in those policies can have a significant effect on our reported results and may affect our 16 reporting of transactions which are completed before a change is announced.
A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions which are completed before a change is announced.
We are dependent on many suppliers, including sole source suppliers, to provide key components and raw materials used in manufacturing customers’ products. We have seen supply shortages in certain electronic components. In addition, our suppliers' facilities may also experience closures or limited production due to natural disasters or other reasons, which may cause a shortage of components.
We are dependent on many suppliers, including sole source suppliers, to provide key components and raw materials used in manufacturing customers’ products. We have seen supply shortages in certain electronic components. In addition, our suppliers' facilities may also experience closures or limited production due to macroeconomic conditions, natural disasters or other reasons, which may cause a shortage of components.
We are required to evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting on a periodic basis and publicly disclose the results of these evaluations and related matters in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. As described in Item 9A.
We are required to evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting on a periodic basis and publicly disclose the results of these evaluations and related matters in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). As described in Item 9A.
These operations may be subject to a number of risks, including: • difficulties in staffing, turnover and managing onshore and offshore operations; • political and economic instability (including acts of terrorism, pandemics, civil unrest, forms of violence and outbreaks of war), which could impact our ability to ship, manufacture, and/or receive product; • unexpected changes in regulatory requirements and laws, including those related to climate change; • longer customer payment cycles and difficulty collecting accounts receivable; • cash liquidity, the ability to acquire new debt capacity, and capital constraints; • export duties, import controls and trade barriers (including quotas); • governmental restrictions on the transfer of funds; • burdens of complying with a wide variety of foreign laws and labor practices; subject to trade wars and tariffs; • our locations are subject to physical and operational risks from natural disasters, severe weather events, and climate change • our locations may also be impacted by future temporary closures and labor constraints as a result of local mandates for medical, climate, and unforeseen emergencies; and • our locations may be impacted by future temporary closure related to cyberattacks.
These operations may be subject to a number of risks, including: • difficulties in staffing, turnover, and managing onshore and offshore operations; • political and economic instability (including acts of terrorism, pandemics, civil unrest, forms of violence and outbreaks of war), which could impact our ability to ship, manufacture, and/or receive product; • impact of tariffs assessed or threatened on countries in which we may manufacture product or from which we may buy components; • unexpected changes in regulatory requirements and laws, including those related to climate change; • longer customer payment cycles and difficulty collecting accounts receivable; • cash liquidity, the ability to acquire new debt capacity, and capital constraints; • export duties, import controls and trade barriers (including quotas); • governmental restrictions on the transfer of funds; • burdens of complying with a wide variety of foreign laws and labor practices; subject to trade wars and tariffs; • our locations are subject to physical and operational risks from natural disasters, severe weather events, and climate change • our locations may also be impacted by future temporary closures and labor constraints as a result of local mandates for medical, climate, and unforeseen emergencies; and • our locations may be impacted by future temporary closure related to cyberattacks.
Unfavorable economic conditions could affect the demand for our customers’ products by triggering a reduction in orders as well as a decline in forecasts which could adversely affect our sales in future periods.
Unfavorable economic conditions could affect the demand for our customers’ products by triggering a reduction or delaying orders as well as a decline in forecasts which could adversely affect our sales in future periods.
We have manufacturing operations located in Mexico and China. A significant portion of our operations are denominated in the Mexican Peso and the Chinese currency, the renminbi ("RMB"). Currency exchange rates fluctuate daily as a result of a number of factors, including changes in a country's political and economic policies.
We have manufacturing operations located in Mexico, China, and Vietnam. A significant portion of our operations are denominated in the Mexican Peso, the Chinese currency, the renminbi ("RMB"), and the Vietnamese dong. Currency exchange rates fluctuate daily as a result of a number of factors, including changes in a country's political and economic policies.
Our customer base is diverse in the markets they serve, however, decreases in demand, particularly from customers in certain industries could affect future quarterly results. Additionally, our customers could be adversely impacted by illiquidity in the credit markets which could directly impact our operating results.
Our customer base is diverse in the markets they serve, however, decreases in demand, particularly from customers in certain industries, have affected our results and could affect future quarterly results. Additionally, our customers could be adversely impacted by illiquidity in the credit markets which could directly impact our operating results.
As of June 29, 2024, we are a non-accelerated filer under the Exchange Act and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act).
As of June 29, 2025, we are a non-accelerated filer under the Exchange Act and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
For example, as previously disclosed in our Form 8-K filed with the SEC on May 10, 2024, as amended, we became aware of unauthorized access to our IT systems that resulted in a material impact on our financial condition and results of operations during the fourth quarter ending June 29, 2024 (the "Previously Disclosed Cyber Incident").
For example, as previously disclosed in our Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on May 10, 2024, as amended, we became aware of unauthorized access to our IT systems that resulted in a material impact on our financial condition and results of operations during the fourth quarter of fiscal year 2024 ending on June 29, 2024 (the "Previously Disclosed Cyber Incident").
LEGAL AND ACCOUNTING RISKS We have restated certain of our prior consolidated financial statements, which has resulted in unanticipated costs and may lead to additional risks and uncertainties, including loss of investor confidence, regulatory action or litigation. In this Annual Report on Form 10-K, we have restated or revised certain of our previously issued financial statements.
LEGAL AND ACCOUNTING RISKS We restated certain of our prior consolidated financial statements in our 2024 Annual Report on Form 10-K, which resulted in unanticipated costs and may lead to additional risks and uncertainties, including loss of investor confidence, regulatory action or litigation.
Future temporary closures of production facilities in Mexico could also cause significant changes in our ability to qualify for hedge accounting treatment of our forward contracts to hedge foreign currency fluctuations. Our success will continue to depend to a significant extent on our key personnel and our ability to execute our management succession plans.
Future headcount reductions or decrease in manufacturing capacity in Mexico could also cause significant changes in our ability to qualify for hedge accounting treatment of our forward contracts to hedge foreign currency fluctuations. Our success will continue to depend to a significant extent on our key personnel and our ability to execute our management succession plans.
Additionally, the financial strength of our customers and suppliers and their ability to obtain and rely on credit financing may affect their ability to fulfill their obligations to us and have an adverse effect on our financial results. Adverse macroeconomic conditions, such as those that were a result of COVID-19 have and may continue to affect our business.
Additionally, the financial strength of our customers and suppliers and their ability to obtain and rely on credit financing may affect their ability to fulfill their obligations to us and have an adverse effect on our financial results. Adverse macroeconomic conditions have and may continue to affect our business.
To the extent these steps taken to remediate identified deficiencies in our internal controls over financial reporting were not successful, we may incur significant additional time and expense. In addition, we continue to cooperate with the Securities and Exchange Commission (the “SEC”) regarding matters related to the internal investigation.
To the extent the steps taken to remediate identified deficiencies in our internal controls over financial reporting were not successful, we may incur significant additional time and expense. In addition, we continue to cooperate with the SEC in its inquiries related to the internal investigation.
Controls and Procedures of this Annual Report on Form 10-K, we have identified a material weakness in the design and implementation of effective controls over the accounting for revenue recognition relating to cost recovery of material price variances. We have also identified a material weakness in the design and implementation of effective controls over the adoption of new accounting standards.
Controls and Procedures of our Annual Report on Form 10-K, in the previous fiscal year we identified a material weakness in the design and implementation of effective controls over the accounting for revenue recognition relating to cost recovery of material price variances.
The products which we manufacture for our customers have relatively short product lifecycles. Therefore, our business, operating results and financial condition are dependent in a significant way on our ability to obtain orders from new customers and new product programs from existing customers. Operating results can also fluctuate if changes are made to significant estimates and assumptions.
Therefore, our business, operating results and financial condition are dependent in a significant way on our ability to obtain orders from new customers and new product programs from existing customers. 9 Operating results can also fluctuate if changes are made to significant estimates and assumptions.
At times, such balances may be in excess of the federal depository insurance limit or may be on deposit at institutions which are not covered by insurance.
We place our cash with high credit quality institutions. At times, such balances may be in excess of the federal depository insurance limit or may be on deposit at institutions which are not covered by insurance.
Any of these risks could have a material adverse impact on our business and financial condition. If we fail to maintain proper and effective internal controls, our business and financial condition could be materially adversely impacted. We cannot assure you that we will not discover additional deficiencies in our internal control over financial reporting.
If we fail to maintain proper and effective internal controls, our business and financial condition could be materially adversely impacted. We cannot assure you that we will not discover deficiencies in our internal control over financial reporting.
We may not meet the minimum fixed charge coverage ratio or comply with other covenants in the future and may not be able to obtain waivers or amendments from the relevant lenders on terms acceptable to us, or at all.
We may not meet such covenants in the future and may not be able to obtain waivers or amendments from the relevant lenders on terms acceptable to us, or at all.
Significant estimates and assumptions include the allowance for credit losses, provision for inactive, obsolete, and surplus inventory, stock-based compensation, the valuation allowance on deferred tax assets, impairment of long-lived assets, long-term incentive compensation accrual, the provision for warranty costs, and the impact of hedging activities.
Significant estimates and assumptions include the allowance for credit losses, provision for inactive, obsolete, and surplus inventory, stock-based compensation, the valuation allowance on deferred tax assets, impairment of long-lived assets, long-term incentive compensation accrual, the provision for warranty costs, and the impact of hedging activities. During the COVID-19 pandemic, we saw extreme shifts in demand from our customer base.
If we do not manage our growth effectively, our profitability could decline. When our business is experiencing growth, such growth can place considerable additional demands upon our management team and our operational, financial and management information systems.
If we do not manage our growth effectively, our profitability could decline. When our business or manufacturing capacity is experiencing growth, such as the expansion currently occurring in our Arkansas and Vietnam facilities, such growth can place considerable additional demands upon our management team and our operational, financial and management information systems.
At present, our customer base is concentrated and could become more or less concentrated. There can be no assurance that our principal customers will continue to purchase products from us at current levels.
The majority of our sales come from a small number of customers, and a decline in sales to any of these customers could adversely affect our business. At present, our customer base is concentrated and could become more or less concentrated. There can be no assurance that our principal customers will continue to purchase products from us at current levels.
This process has been time-consuming and expensive, including unanticipated costs for accounting and legal fees. The restatement and revisions also expose us to additional risks that could adversely affect our business and financial condition, such as litigation, regulatory action or loss of investor confidence.
The restatement and revisions also expose us to additional risks that could adversely affect our business and financial condition, such as litigation, regulatory action or loss of investor confidence.
Changes in securities laws and regulations will increase our costs and risk of noncompliance. We are subject to additional requirements contained in the U.S. federal securities laws, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).
We are subject to additional requirements contained in the U.S. federal securities laws, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). The Sarbanes-Oxley and Dodd-Frank Acts required or will require changes in some of our corporate governance, securities disclosure and compliance practices.
In addition, holders of our common stock will suffer immediate dilution to the extent outstanding equity awards are exercised to purchase common stock. 14 RISKS RELATED TO OUR CONTROLS AND PROCEDURES AND THE INTERNAL INVESTIGATION We have concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of June 29, 2024 due to material weaknesses, which has adversely affected our ability to report our financial results in a timely and accurate manner and could have a material adverse impact our business and financial condition.
RISKS RELATED TO OUR CONTROLS AND PROCEDURES AND THE INTERNAL INVESTIGATION In the past, we have concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective due to the existence of material weaknesses, which has adversely affected our ability to report our financial results in a timely and accurate manner and similar recurrences could have a material adverse impact our business and financial condition.
Compliance with these new rules and future rules has increased and may increase further our legal, financial and accounting costs as well as a potential risk of noncompliance. Absent significant changes in related rules, which we cannot assure, we anticipate some level of increased costs related to these new regulations to continue indefinitely.
The SEC and NASDAQ Global Market have promulgated new rules over time, resulting in increased legal, financial and accounting costs as well as a potential risk of noncompliance. Absent significant changes in related rules, which we cannot assure, we anticipate some level of increased costs related to these new regulations to continue indefinitely.
Item 1A. RISK FACTORS There are risks and uncertainties that could affect our business. These risks and uncertainties include but are not limited to, the risk factors described below, in Item 7A: “Quantitative and Qualitative Disclosures about Market Risk” and elsewhere in this Annual Report on Form 10-K.
These risks and uncertainties include but are not limited to, the risk factors described below, in Item 7A: “Quantitative and Qualitative Disclosures about Market Risk” and elsewhere in this Annual Report on Form 10-K. 8 RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS The following risks and uncertainties could affect our actual results and could cause results to differ materially from past results or those contemplated by our forward-looking statements.
There can be no assurance that we will be successful in attracting and retaining such personnel, particularly in our manufacturing locales that may be experiencing high demand for similar key personnel. The loss of key employees could have a material adverse effect on our business, operating results and financial condition.
There can be no assurance that we will be successful in attracting and retaining such personnel, particularly in our manufacturing locales that may be experiencing high demand for similar key personnel.
The conditions affect the Company’s ability to predict and plan for future supply chain disruptions, fluctuations in customer demand and costs, and the ability to operate as there is uncertainty over future temporary closures. Inflation has also risen globally to historically high levels.
The conditions affect the Company’s ability to predict and plan for future supply chain disruptions and fluctuations in customer demand and costs. Inflation has also risen globally to historically high levels. Continuing high levels of inflation have increased the costs of labor and other expenses, and may continue to increase.
We cannot provide assurances that any changes of management personnel will not cause disruption to operations or customer relationships or a decline in our operating results. 11 Start-up costs and inefficiencies related to new or transferred programs can adversely affect our operating results and such costs may not be recoverable if such new programs or transferred programs are canceled or don’t meet expected sales volumes.
Start-up costs and inefficiencies related to new or transferred programs can adversely affect our operating results and such costs may not be recoverable if such new programs or transferred programs are canceled or don’t meet expected sales volumes.
As a result of these material weaknesses, our management concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of June 29, 2024. We are engaged in developing and implementing a remediation plan, as described in Item 9A.
We also identified a material weakness in the design and implementation of effective controls over the adoption of new accounting standards. As a result of these material weaknesses, our management concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of June 29, 2024.
Any significant leadership change or senior management transition involves inherent risks and any failure to ensure a smooth transition could hinder our strategic planning, business execution, and future performance.
For example, our former Chief Executive Officer retired at the end of fiscal year 2024 and was succeeded by our former Chief Financial Officer. Any significant leadership change or senior management transition involves inherent risks and failure to ensure a smooth transition could hinder our strategic planning, business execution, and future performance.
Adverse changes in the interest rates of our borrowings could adversely affect our financial condition. We are exposed to interest rate risk under our revolving line of credit and term loans. We have not historically hedged the interest rate on our credit facility; therefore, unless we do so, significant changes in interest rates could adversely affect our results of operations.
We have not historically hedged the interest rate on our credit facility; therefore, unless we do so, significant changes in interest rates could adversely affect our results of operations. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements. Cash and cash equivalents are exposed to concentrations of credit risk.
Conversely, our customers may abruptly lower or cancel production which may lead to a sudden, unexpected increase in inventory or accounts receivable for which we may not be reimbursed even when under contract with customers. In addition, because many of our operating expenses are relatively fixed, a reduction in customer demand can harm our gross profit and operating results.
Conversely, our customers may abruptly lower, cancel, or delay production or new production launch which may lead to a sudden, unexpected increase in inventory or accounts receivable for which we may not be reimbursed even when under contract with customers.
RISKS RELATED TO OUR BUSINESS AND STRATEGY Our operations may be subject to certain risks. We manufacture product in facilities located in Mexico, China, Vietnam and the United States.
When used herein, the words “expects,” “believes,” “anticipates” and other similar expressions are intended to identify forward-looking statements. RISKS RELATED TO OUR BUSINESS AND STRATEGY Our operations may be subject to certain risks. We manufacture product in facilities located in Mexico, China, Vietnam and the United States.
The completion of the internal investigation in fiscal year 2022 did not automatically resolve the SEC’s inquiries. If the SEC or any other regulator were to commence legal action against us, we could be required to pay significant penalties and become subject to injunctions, cease and desist orders or other remedies.
If the SEC or any other regulator were to commence legal action against us, we could be required to pay significant penalties and become subject to injunctions, cease and desist orders or the SEC could impose other sanctions against us or against our officers and members of our Board of Directors.
Any litigation or dispute resolution, even where a claim is without merit, could result in substantial costs and diversion of resources. Accordingly, the resolution or adjudication of such disputes, even those encountered in the ordinary course of business, could have a material effect on our business, consolidated financial conditions and results of operations.
Accordingly, the resolution or adjudication of such disputes, even those encountered in the ordinary course of business, could have a material effect on our business, consolidated financial conditions and results of operations. 16 Changes in securities laws and regulations will increase our costs and risk of noncompliance.
The amendment of our credit arrangements on unfavorable terms or the acceleration of our payment obligations thereunder, would have a material adverse effect on our business, financial condition, results of operations and cash flows. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements.
Under those circumstances our borrowings could become immediately payable. The amendment of our credit arrangements on unfavorable terms or the acceleration of our payment obligations thereunder, would have a material adverse effect on our business, financial condition, results of operations and cash flows.
We are exposed to general economic conditions, which could have a material adverse impact on our business, operating results and financial condition. Adverse economic conditions and uncertainty in the global economy such as unstable global financial and credit markets, inflation, and recession can negatively impact our business.
Adverse economic conditions and uncertainty in the global economy such as unstable global financial and credit markets, changing trade policies, inflation, and recession can negatively impact our business.
Due to the COVID-19 pandemic, we have seen extreme shifts in demand from our customer base. The possibility of future temporary closures and labor constraints, as well as the inability to predict customer demand, costs, and future supply chain disruptions during pandemics can materially impact operating results.
The possibility of future temporary closures and labor constraints, as well as the inability to predict customer demand, costs, and future supply chain disruptions during pandemics or otherwise can materially impact operating results. We are exposed to general economic conditions, which could have a material adverse impact on our business, operating results and financial condition.
Controls and Procedures of this Annual Report on Form 10-K, designed to address the material weaknesses, but our remediation efforts are not complete and are ongoing.
We completed a remediation plan, as described in Item 9A. Controls and Procedures of our Annual Report on Form 10-K, designed to address the material weaknesses.
For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements. Cash and cash equivalents are exposed to concentrations of credit risk. We place our cash with high credit quality institutions.
For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements. Adverse changes in the interest rates of our borrowings could adversely affect our financial condition. We are exposed to interest rate risk under our revolving line of credit and term loans.
These fluctuations often have been unrelated to the operating performance of the specific companies whose stocks are traded.
These fluctuations often have been unrelated to the operating performance of the specific companies whose stocks are traded. In addition, holders of our common stock will suffer immediate dilution to the extent outstanding equity awards are exercised to purchase common stock.
As the inflation rate continues to increase, the costs of labor and other expenses have and may continue to increase. We may not be able to increase our product prices enough to offset these increased costs. In addition, any increase in our product prices may reduce our future customer orders and profitability.
We may not be able to increase our product prices enough to offset these increased costs. In addition, any increase in our product prices may reduce our future customer orders and profitability. Inflation may further exacerbate other risk factors discussed in this Annual Report on Form 10-K, including disruptions to international operations.
Our ability to secure and maintain sufficient credit arrangements is key to our continued operations. There is no assurance that we will be able to retain, renew, or refinance our credit arrangements on terms acceptable to us, or at all.
For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements. Our ability to secure and maintain sufficient credit arrangements is key to our continued operations. There is no assurance that we will be able to retain, renew, or refinance our credit arrangements in the future.
In the event we breach any covenant that results in an event of default, our lenders could choose to accelerate payment of the amounts owed by the Company. Under those circumstances our borrowings could become immediately payable.
In the event we breach any covenant that results in an event of default, we may be required to amend the credit facility on terms that would be less favorable to us, such as an increase in the interest rate. Similarly, our lenders could choose to accelerate payment of the amounts owed by the Company.
In addition, we must successfully manage transition issues that may result from the departure or retirement of members of our leadership team. For example, our Chief Executive Officer retired at the end of fiscal year 2024 and is succeeded by our former Chief Financial Officer.
The loss of key employees could have a material adverse effect on our business, operating results and financial condition. 11 In addition, we must successfully manage transition issues that may result from the departure or retirement of members of our leadership team.
We have not always met these covenants in the past and have had to obtain waivers and amend our Loan Agreement, including for events of default related to breaches of the fixed charge coverage ratio for fiscal quarter ended March 30, 2024 and the periods ended June 29, 2024 and July 27, 2024.
We have not always met these covenants in the past and have had to obtain waivers and amend the Loan Agreement under our Term Loan, including for an event of default related to a breach of non-compliance with minimum required earnings before interest, depreciation, amortization, and other adjustments for the period ending March 29, 2025.
Removed
RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS The following risks and uncertainties could affect our actual results and could cause results to differ materially from past results or those contemplated by our forward-looking statements. When used herein, the words “expects,” “believes,” “anticipates” and other similar expressions are intended to identify forward-looking statements.
Added
Item 1A. RISK FACTORS There are risks and uncertainties that could affect our business.
Removed
Inflation may further exacerbate other risk factors discussed in this Annual Report on Form 10-K, including disruptions to international operations. The majority of our sales come from a small number of customers, and a decline in sales to any of these customers could adversely affect our business.
Added
In addition, because many of our operating expenses are relatively fixed, a reduction in customer demand can harm our gross profit and operating results. The products which we manufacture for our customers have relatively short product lifecycles.
Removed
The amendment waiving the event of default for fiscal quarter ended March 30, 2024 resulted in an increase in interest rates and shortened the maturity date to September 3, 2025.In addition, this amendment reduced the minimum requirement for the fixed charge coverage ratio from 1.25:1.00 to 1.00:1.00 as of March 30, 2024, with the minimum requirement to 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.
Added
Current and future U.S. trade policy could adversely affect our business and results of operations. Although we maintain significant manufacturing capacity in the U.S., the majority of our manufacturing operations are currently located outside the U.S (in countries such as Vietnam, China, and Mexico). We also source certain components and materials for our products from various countries.
Removed
As noted above, we were unable to meet this ratio for the periods ended June 29, 2024 and July 27, 2024, and we also breached a covenant requiring us to deliver audited financial statements to the lender within 90 days of the Company’s fiscal year-end. As a result, we had to further amend our Loan Agreement on October 9, 2024.
Added
The U.S. has imposed tariffs impacting certain components and products imported from these countries by us into the U.S.
Removed
The amendment waiving these events of default resulted in an increase in interest rates and 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.
Added
These tariffs apply to both components imported into the U.S. from these countries for use in the manufacture of products at our U.S. plants and to certain of our customers’ products that we manufacture for them in these countries and that are then imported into the U.S.
Removed
As noted in the prior risk factor, a recent amendment to our Loan Agreement shortened the maturity date to September 3, 2025. On September 27, 2024, in connection with the preparation of this Annual Report on Form 10-K, we entered into an additional amendment to the Loan Agreement to extend the maturity date by three months to December 3, 2025.
Added
Changes in tariffs and other trade policies can be announced with little or no advance notice. The recent broad increase in tariffs on imported products and components from certain countries, including higher tariff levels on those imported from China and Mexico have resulted, and are expected to further result, in retaliatory measures on U.S. goods by those countries and others.
Removed
Because our Loan Agreement terminates on December 3, 2025, we need to extend, renew or refinance this agreement in the coming months. The terms available to us may be less favorable than the terms of our existing Loan Agreement. Our inability to extend, renew, or refinance our indebtedness on a timely basis could also result in unfavorable accounting treatment.
Added
If maintained, these tariffs, and the potential escalation of trade disputes, could pose a risk to our business that could affect our revenue and cost of sourcing materials. We are currently shielded from Mexico related tariffs under the United States-Mexico-Canada Agreement, but there is no assurance that this agreement will not be amended or cancelled in the future.
Removed
This could include management and our independent auditors concluding on risks over the Company's ability to continue as a going concern. Our inability to extend, renew or refinance our credit arrangements could have a material adverse impact on our business, financial condition, results of operations and cash flows.
Added
Actions we take to adapt to new tariffs or trade restrictions may increase our costs or may cause us to modify our operations, and could drive up our prices to customers. Any decision by a large number of our customers to cease using our manufacturing services due to the application of tariffs could materially reduce our revenue and net income.
Removed
Although we are working to remedy the ineffectiveness of the Company’s internal control over financial reporting, there can be no assurance as to when the remediation plan will be fully developed, when it will be fully implemented or the aggregate cost of implementation.
Added
In addition, tariffs or other trade restrictions have caused, and may continue to cause, adverse changes and uncertainty in U.S. and global financial and economic conditions, which adversely impacts the demand for our products.
Removed
Until our remediation plan is fully implemented, our management will continue to devote time and attention to these efforts.
Added
We cannot provide assurances that any changes of management personnel will not cause disruption to operations or customer relationships or a decline in our operating results.
Removed
If we do not complete our remediation in a timely fashion, or at all, or if our remediation plan is inadequate, there will continue to be an increased risk that we will be unable to timely file future periodic reports with the SEC and that our future consolidated financial statements could contain errors that will be undetected.
Added
The amendment permanently adds an additional reporting requirement, and requires minimum earnings before interest, taxes, depreciation, amortization, and other adjustments only if average daily availability for the applicable fiscal quarter is less than 12.5% of the combined borrowing base.
Removed
If we are unable to report our results in a timely and accurate manner, our stock may be delisted from the NASDAQ Global Market and we will not be able to comply with the applicable covenants in our financing arrangements, including our Loan Agreement, as described in —Risks Related to Capital and Financing—“Our failure to comply with the covenants in our credit arrangements could materially and adversely affect our financial condition.” In addition, we could be subject to regulatory investigations and penalties or stockholder litigation.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese updates include information regarding cybersecurity strategies, management structure, mitigation activities and an analysis of any actual or potential cybersecurity incidents. 17 Our management team, including our Chief Executive Officer and Executive Vice President of Quality and Information Systems, is responsible for assessing and managing our material risks from cybersecurity threats.
Biggest changeOur management team, including our Chief Executive Officer and Executive Vice President of Quality and Information Systems, is responsible for assessing and managing our material risks from cybersecurity threats.
Our cybersecurity processes are a part of our risk management system, sharing governance processes and reporting structures with other components of our enterprise-wide system. Our cybersecurity processes include security monitoring and threat hunting through a third-party managed vendor and mandatory, Company-wide employee training.
Our cybersecurity processes are a part of our risk management system, sharing governance processes and reporting structures with other components of our enterprise- 17 wide system. Our cybersecurity processes include security monitoring and threat hunting through a third-party managed vendor and mandatory, Company-wide employee training.
At each regularly scheduled quarterly meeting, and more frequently as necessary, management provides updates to the Audit Committee and our Board of Directors regarding the risks from cybersecurity threats.
At each regularly scheduled quarterly meeting, and more frequently as necessary, management provides updates to the Audit Committee and our Board of Directors regarding the risks from cybersecurity threats. These updates include information regarding cybersecurity strategies, management structure, mitigation activities and an analysis of any actual or potential cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed2 unchanged
Biggest changeAll our facilities are ISO certified to ISO 9001:2015 standard and to Customs Trade Partnership against Terrorism (CTPAT). • The Spokane, Washington facility is registered to IATF 16949 automotive standard, ISO 13485:2016 medical devices, ISO 14001:2015 environmental standard, and ISO 45001 Occupational Health and Safety Management System. • The Juarez, Mexico facility is registered to IATF 16949 automotive standard, ISO 13485:2016 medical devices, ISO 14001:2015 environmental standard, ISO 45001 Occupational Health and Safety Management System, and has a certified ANSI/ESD S20.20 Electrostatic Discharge Program. • The Da Nang, Vietnam facility is additionally registered to IATF 16949 automotive standard. • The Shanghai, China facility is additionally registered to ISO 45001 Occupational Health and has a certified ANSI/ESD S20.20 Electrostatic Discharge Control Program. • The Oakdale, Minnesota facility is additionally registered to ISO 13485:2016 medical devices standard, AS9100D aviation, space and defense standard, and has a certified ANSI/ESD S20.20 Electrostatic Discharge Control Program. • The Fayetteville, Arkansas facility is additionally registered to AS9100D aviation, space and defense standard and has a certified ANSI/ESD S20.20 Electrostatic Discharge Control Program. • The Corinth, Mississippi facility is additionally registered to ISO 14001:2015 and ISO/IEC 80079-34 explosive atmospheres. 19 • The Oakdale, Minnesota; and Spokane, Washington facilities are registered with the U.S.
Biggest changeAll our facilities are ISO certified to ISO 9001:2015 standard and meet Customs Trade Partnership against Terrorism (CTPAT) standards. • The Spokane, Washington facility is registered to IATF 16949 automotive standard, ISO 13485:2016 medical devices, ISO 14001:2015 environmental standard, and ISO 45001 Occupational Health and Safety Management System. • The Juarez, Mexico facility is registered to IATF 16949 automotive standard, ISO 13485:2016 medical devices, ISO 14001:2015 environmental standard, ISO 45001 Occupational Health and Safety Management System, and has a certified ANSI/ESD S20.20 Electrostatic Discharge Program. • The Da Nang, Vietnam facility is additionally registered to IATF 16949 automotive standard. • The Shanghai, China facility is additionally registered to ISO 45001 Occupational Health and has a certified ANSI/ESD S20.20 Electrostatic Discharge Control Program. • The Oakdale, Minnesota facility is additionally registered to ISO 13485:2016 medical devices standard, AS9100D aviation, space and defense standard, and has a certified ANSI/ESD S20.20 Electrostatic Discharge Control Program. 19 • The Fayetteville, Arkansas facility is additionally registered to AS9100D aviation, space and defense standard and has a certified ANSI/ESD S20.20 Electrostatic Discharge Control Program.
Type of Interest (Leased/Owned) Description of Use Corinth, Mississippi 350,000 Leased Manufacturing and warehouse El Paso, Texas 80,000 Leased Shipping and warehouse Fayetteville, Arkansas 105,000 Leased Manufacturing and warehouse Oakdale, Minnesota 103,000 Leased Manufacturing and warehouse Spokane Valley, Washington 95,000 Leased Sales, research, administration and manufacturing Spokane Valley, Washington 36,000 Leased Manufacturing Total USA 769,000 Juarez, Mexico 193,000 Leased Warehouse Juarez, Mexico 174,000 Owned Manufacturing and warehouse Juarez, Mexico 115,000 Owned Manufacturing and warehouse Juarez, Mexico 103,000 Owned Manufacturing and warehouse Juarez, Mexico 72,000 Leased Manufacturing and warehouse Juarez, Mexico 66,000 Owned Manufacturing and warehouse Juarez, Mexico 60,000 Owned Manufacturing and warehouse Juarez, Mexico 116,000 Leased Manufacturing and warehouse Total Mexico 899,000 Shanghai, China 103,000 Leased Manufacturing and warehouse Total China 103,000 Da Nang, Vietnam 133,000 Leased Manufacturing and warehouse Total Vietnam 133,000 Grand Total 1,904,000 The geographic diversity of these locations allows us to offer services near certain of our customers and major electronics markets with the additional benefit of reduced labor costs.
Type of Interest (Leased/Owned) Description of Use Corinth, Mississippi 350,000 Leased Manufacturing and warehouse El Paso, Texas 80,000 Leased Shipping and warehouse Fayetteville, Arkansas 105,000 Leased Manufacturing and warehouse Lowell, Arkansas 290,540 Leased Manufacturing and warehouse Oakdale, Minnesota 103,000 Leased Manufacturing and warehouse Spokane Valley, Washington 95,000 Leased Sales, research, administration and manufacturing Spokane Valley, Washington 36,000 Leased Manufacturing Total USA 1,059,540 Juarez, Mexico 193,000 Leased Warehouse Juarez, Mexico 174,000 Owned Manufacturing and warehouse Juarez, Mexico 115,000 Owned Manufacturing and warehouse Juarez, Mexico 103,000 Owned Manufacturing and warehouse Juarez, Mexico 72,000 Leased Manufacturing and warehouse Juarez, Mexico 66,000 Owned Manufacturing and warehouse Juarez, Mexico 60,000 Owned Manufacturing and warehouse Juarez, Mexico 116,000 Leased Manufacturing and warehouse Total Mexico 899,000 Shanghai, China 103,000 Leased Manufacturing and warehouse Total China 103,000 Da Nang, Vietnam 133,000 Leased Manufacturing and warehouse Total Vietnam 133,000 Grand Total 2,194,540 The geographic diversity of these locations allows us to offer services near certain of our customers and major electronics markets with the additional benefit of reduced labor costs.
Removed
State Department for International Traffic in Arms Regulations (ITAR).
Added
All standards will be transferred to the new Springdale, Arkansas facility over the second quarter of fiscal year 2026. • The Corinth, Mississippi facility is additionally registered to ISO 14001:2015 and ISO/IEC 80079-34 explosive atmospheres. • The Oakdale, Minnesota; and Spokane, Washington facilities are registered with the U.S. State Department for International Traffic in Arms Regulations (ITAR).

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the NASDAQ Global Market under the symbol “KTCC.” Quarterly high and low sales prices for our common stock for fiscal year 2024 and fiscal year 2023 were as follows: 2024 2023 High Low High Low First Quarter $ 6.24 $ 4.32 $ 5.50 $ 4.00 Second Quarter $ 4.50 $ 3.72 $ 5.18 $ 4.03 Third Quarter $ 5.14 $ 4.04 $ 7.50 $ 4.33 Fourth Quarter $ 4.85 $ 3.69 $ 7.53 $ 5.18 High and low stock prices are based on the daily sales prices reported by the NASDAQ Stock Market.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the NASDAQ Global Market under the symbol “KTCC.” Quarterly high and low sales prices for our common stock for fiscal year 2025 and fiscal year 2024 were as follows: 2025 2024 High Low High Low First Quarter $ 6.00 $ 3.70 $ 6.24 $ 4.32 Second Quarter $ 6.03 $ 3.99 $ 4.50 $ 3.72 Third Quarter $ 4.28 $ 2.56 $ 5.14 $ 4.04 Fourth Quarter $ 3.13 $ 2.26 $ 4.85 $ 3.69 High and low stock prices are based on the daily sales prices reported by the NASDAQ Stock Market.
As a result of our credit agreements, we are restricted from declaring or paying dividends in cash or stock without Bank of America’s prior written consent. We have not paid a cash dividend and do not anticipate payment of dividends in the foreseeable future.
As a result of our credit agreements, we are restricted from declaring or paying dividends in cash or stock without Bank of Montreal's prior written consent. We have not paid a cash dividend and do not anticipate payment of dividends in the foreseeable future.
These quotations represent prices between dealers without adjustment for markups, markdowns, and commissions, and may not represent actual transactions. Holders and Dividends As of June 29, 2024, we had 561 shareholders of common stock on record.
These quotations represent prices between dealers without adjustment for markups, markdowns, and commissions, and may not represent actual transactions. Holders and Dividends As of June 28, 2025, we had 532 shareholders of common stock on record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

51 edited+18 added−52 removed25 unchanged
Biggest changeFiscal Year Ended (in thousands) June 29, 2024 % of net sales July 1, 2023 % of net sales $ change % point change (Restated) Net sales $ 566,942 100.0% $ 605,315 100.0% $ (38,373) — Cost of sales 527,063 93.0 557,843 92.2 (30,780) 0.8 Gross profit 39,879 7.0 47,472 7.8 (7,593) (0.8) Operating expenses: Research, development and engineering 8,333 1.5 9,735 1.6 (1,402) (0.1) Selling, general and administrative 25,219 4.4 25,715 4.2 (496) 0.2 Gain on insurance proceeds, net of losses (431) (0.1) (4,301) (0.7) 3,870 0.6 Total operating expenses 33,121 5.8 31,149 5.1 1,972 0.7 Operating income 6,758 1.2 16,323 2.7 (9,565) (1.5) Interest expense, net 11,945 2.1 10,023 1.7 1,922 0.4 Income (loss) before income taxes (5,187) (0.9) 6,300 1.0 (11,487) (1.9) Income tax provision (benefit) (2,400) (0.4) 1,143 0.2 (3,543) (0.6) Net income (loss) $ (2,787) (0.5)% $ 5,157 0.9% $ (7,944) (1.4) Effective income tax rate 46.3 % 18.1 % Net Sales The decrease in net sales of $38.4 million from the prior fiscal year was primarily due to production stoppages due to the cybersecurity incident which caused the company to be unable to fulfill approximately $15 million of revenue during the fourth quarter of fiscal year 2024, as well as softer demand from Mexico-based programs. 22 The following table shows the revenue by industry sectors as a percentage of revenue for fiscal years 2024 and 2023: Fiscal Year Ended June 29, 2024 July 1, 2023 Industrial 46 42 Consumer 45 44 Communication 4 9 Medical 3 1 Gaming 1 1 Transportation 1 3 Total 100% 100% We provide services to customers in a number of industries and produce a variety of products for our customers in each industry.
Biggest changeFiscal Year Ended (in thousands) June 28, 2025 % of net sales June 29, 2024 % of net sales $ change % point change Net sales $ 467,871 100.0% $ 566,942 100.0% $ (99,071) — Cost of sales 431,444 92.2 527,063 93.0 (95,619) (0.8) Gross profit 36,427 7.8 39,879 7.0 (3,452) 0.8 Operating expenses: Research, development and engineering 9,163 2.0 8,333 1.5 830 0.5 Selling, general and administrative 26,702 5.7 25,219 4.4 1,483 1.3 Gain on insurance proceeds, net of losses — — (431) (0.1) 431 0.1 Total operating expenses 35,865 7.7 33,121 5.8 2,744 1.9 Operating income 562 0.1 6,758 1.2 (6,196) (1.1) Interest expense, net 12,523 2.7 11,945 2.1 578 0.6 Loss before income taxes (11,961) (2.6) (5,187) (0.9) (6,774) (1.7) Income tax benefit (3,643) (0.8) (2,400) (0.4) (1,243) (0.4) Net Loss $ (8,318) (1.8)% $ (2,787) (0.5)% $ (5,531) (1.3) Effective income tax rate 30.5 % 46.3 % Net Sales Net sales decreased $99.1 million from the prior fiscal year.
We record our inventories at net realizable value based on specific identification of inventory against current demand and recent usage. We also consider our customers' ability to pay for inventory whether or not there is a lead-time assurance agreement for a specific program.
We record our inventories at net realizable value based on specific identification of inventory against current demand and recent usage. We also consider our customers' ability to pay for inventory and whether or not there is a lead-time assurance agreement for a specific program.
For further information on taxes, please review Footnote " Income Taxes” of the “Notes to Consolidated Financial Statements”. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States (GAAP), we use certain non-GAAP financial measures, adjusted net income and adjusted net income per share, diluted.
For further information on taxes, please review Footnote " Income Taxes” of the “Notes to Consolidated Financial Statements”. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States (GAAP), we use certain non-GAAP financial measures, adjusted net loss and adjusted net loss per share, diluted.
Revenue from engineering 29 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 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.
The amounts charged to expense are determined based on an estimate of warranty exposure. The net warranty expense was approximately $0.3 million and $0.3 million in fiscal years 2024 and 2023, respectively. Gross Profit Gross profit as a percentage of net sales was 7.0 percent in fiscal year 2024 and 7.8 percent in fiscal year 2023.
The amounts charged to expense are determined based on an estimate of warranty exposure. The net warranty expense was approximately $0.0 million and $0.3 million in fiscal years 2025 and 2024, respectively. Gross Profit Gross profit as a percentage of net sales was 7.8 percent in fiscal year 2025 and 7.0 percent in fiscal year 2024.
Our estimates of the realization of the deferred tax assets related to our tax credits are based upon our estimates of future taxable income which may change. New and Future Accounting Pronouncements See Note 1 “Significant Accounting Policies” of the “Notes to Consolidated Financial Statements.” 30
Our estimates of the realization of the deferred tax assets related to our tax credits are based upon our estimates of future taxable income which may change. New and Future Accounting Pronouncements See Note 1 “Significant Accounting Policies” of the “Notes to Consolidated Financial Statements.” 28
During fiscal year 2024, the source of cash provided by investing activities came from insurance claims paid for replacing equipment and facility repairs in our Arkansas facility related to a lightning strike and water damage. Leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership.
During fiscal year 2024, there was a source of cash provided by investing activities from insurance claims paid for replacing equipment and facility repairs in our Arkansas facility related to a lightning strike and water damage. Leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership.
The $13.8 million of net cash provided by operating activities during fiscal year 2024 is primarily related to $2.8 million of net loss adjusted for $11.0 million of depreciation and amortization, $15.8 million decrease in accounts receivable, a $32.5 million decrease in inventory, an $8.7 million decrease in contract assets partially offset by a $36.5 million decrease in accounts payable, a $2.9 million decrease in accrued compensation and vacation, $0.6 million increase in other assets and a $8.1 million decrease in other liabilities.
The $13.8 million of net cash provided by operating activities during fiscal year 2024 was primarily related to $2.8 million of net loss adjusted for $11.0 million of depreciation and amortization, an $15.8 million decrease in accounts receivable, a $32.5 million decrease in inventory, an $8.7 million decrease in contract assets partially offset by a $36.5 million decrease in accounts payable, a $2.9 million decrease in accrued compensation and vacation, and an $8.1 million decrease in other liabilities.
Selling, General and Administrative Selling, general, and administrative expenses (SG&A) consist principally of salaries and benefits, advertising and marketing programs, sales commissions, travel expenses, provision for credit losses, facilities costs, and professional services. Total SG&A expenses were $25.2 million and $25.7 million in fiscal years 2024 and 2023, respectively.
Selling, General and Administrative Selling, general, and administrative expenses (SG&A) consist principally of salaries and benefits, advertising and marketing programs, sales commissions, travel expenses, provision for credit losses, facilities costs, and professional services. Total SG&A expenses were $26.7 million and $25.2 million in fiscal years 2025 and 2024, respectively.
See the table below for reconciliations of adjusted net income to the most directly comparable GAAP measure, which are GAAP net income and the computation of adjusted net income per share, diluted.
See the table below for reconciliations of adjusted net loss to the most directly comparable GAAP measure, which are GAAP net loss and the computation of adjusted net loss per share, diluted.
We continue to see improvement across the metrics associated with business development, including a significant increase in the number of active quotes with prospective customers. We aim to diversify our customer base by adding additional programs and customers.
We continue to see improvement across the metrics associated with business development, including an increase in the number of active quotes with prospective customers. We aim to diversify our customer base by adding additional programs and customers.
The amounts charged to expense for these inventories were approximately $0.3 million and $0.4 million in fiscal years 2024 and 2023, respectively. We provide warranties on certain products we sell and estimate warranty costs based on historical experience and anticipated product returns. Warranty expense is related to workmanship claims.
The amounts charged to expense for these inventories were approximately $0.1 million and $0.3 million in fiscal years 2025 and 2024, respectively. We provide warranties on certain products we sell and estimate warranty costs based on historical experience and anticipated product returns. Warranty expense is related to workmanship claims.
The level of gross margin is impacted by product mix, timing of the startup of new programs, facility utilization, and pricing within the electronics industry and material costs, which can fluctuate significantly from quarter-to-quarter and year-to-year. Operating income as a percentage of net sales for fiscal year 2024 was 1.2 percent compared to 2.7 percent for fiscal year 2023.
The level of gross margin is also impacted by product mix, timing of the startup of new programs, facility utilization, and pricing within the electronics industry and material costs, which can fluctuate significantly from quarter-to-quarter and year-to-year. Operating income as a percentage of net sales for fiscal year 2025 was 0.1 percent compared to 1.2 percent for fiscal year 2024.
The additional cash provided in fiscal year 2024 was due to a focus on collecting accounts receivable and working down inventory balances to be in line with current revenue levels.
The additional cash provided in fiscal year 2025 was due to a focus on collecting accounts receivable faster and working down inventory balances to be in line with current revenue levels.
For the first quarter of fiscal year 2025, we believe global logistics problems, China-US political tensions and continued supply-chain concerns will continue to drive the favorable trend of contract manufacturing returning to North America, as well as to our expanding Vietnam facilities.
For the first quarter of fiscal year 2026, we believe ongoing tariff-related concerns, global logistics problems, China-US political tensions and continued supply-chain concerns will continue to drive the favorable trend of contract manufacturing returning to North America, as well as to our expanding Vietnam facilities.
The Company further notes projected cash from operations is projected to improve in the coming quarters as supply chain availability will boost additional inventory turns and existing inventory is consumed by fulfilling customer backlog. As of June 29, 2024, we had approximately $4.7 million of cash held by foreign subsidiaries.
The Company further notes projected cash from operations is projected to improve in the coming quarters as supply chain availability will boost additional inventory turns and existing inventory is consumed by fulfilling customer backlog. As of June 28, 2025, we had approximately $1.4 million of cash held by foreign subsidiaries.
Foreign sales (based on shipping instructions) from our worldwide operations, including domestic exports, were $127.6 million and $86.5 million in fiscal years 2024 and 2023, respectively. Products and manufacturing services provided by our subsidiary operations are often shipped to customers directly by the parent company.
Foreign sales (based on shipping instructions) from our worldwide operations, including domestic exports, were $99.3 million and $127.6 million in fiscal years 2025 and 2024, respectively. Products and manufacturing services provided by our subsidiary operations are often shipped to customers directly by the parent company.
Investing Cash Flow Cash flows used in investing activities were $2.1 million for fiscal year 2024. Cash flows used in investing activities were $4.5 million in fiscal year 2023. Our primary use of cash in investing activities during fiscal years 2024 and 2023 was purchasing equipment to support increased production levels for new programs.
Investing Cash Flow Cash flows used in investing activities were $4.2 million for fiscal year 2025 and $2.1 million in fiscal year 2024. Our primary use of cash in investing activities during fiscal years 2025 and 2024 was purchasing equipment to support production for new programs.
RESULTS OF OPERATIONS Comparison of the Fiscal Year Ended June 29, 2024 with the Fiscal Year Ended July 1, 2023 The following table sets forth for the periods indicated certain items of the consolidated statements of income expressed as a percentage of net sales.
RESULTS OF OPERATIONS Comparison of the Fiscal Year Ended June 28, 2025 with the Fiscal Year Ended June 29, 2024 The following table sets forth for the periods indicated certain items of the consolidated statements of income expressed as a percentage of net sales.
Sales to foreign locations represented 22.5 percent and 14.3 percent of our total net sales in fiscal years 2024 and 2023, respectively. Cost of Sales Total cost of sales as a percentage of net sales was 93.0 percent in fiscal year 2024 and 92.2 percent in fiscal year 2023.
Sales to foreign locations represented 21.2 percent and 22.5 percent of our total net sales in fiscal years 2025 and 2024, respectively. Cost of Sales Total cost of sales as a percentage of net sales was 92.2 percent in fiscal year 2025 and 93.0 percent in fiscal year 2024.
Our current customer relationships involve a variety of products including sheet metal fabrication, medical devices and components, water purification products, consumer security products, aerospace and defense products, recreational and outdoor equipment, and plastics. Gross profit as a percentage of net sales was 7.0 percent in fiscal year 2024, down from 7.8 percent in 2023.
Our current customer relationships involve a variety of products including sheet metal fabrication, medical devices and components, water purification products, data processing equipment, utilities inspection, consumer security products, aerospace and defense products, recreational and outdoor equipment, and plastics. Gross profit as a percentage of net sales was 7.8 percent in fiscal year 2025, up from 7.0 percent in 2024.
We also write down inventory values related to specific customers covered by lead-time assurance agreements when those customers are experiencing financial difficulties or reimbursement is not reasonably assured. Allowance for Credit Losses We value our accounts receivable net of an allowance for credit losses. As of June 29, 2024, the allowance for credit losses was approximately $2.9 million.
We also write down inventory values related to specific customers covered by lead-time assurance agreements when those customers are experiencing financial difficulties or reimbursement is not reasonably assured. 27 Allowance for Credit Losses We value our accounts receivable net of an allowance for credit losses. As of June 28, 2025, the allowance for credit losses was approximately $3.5 million.
Capital expenditures and periodic lease payments are expected to be financed with internally generated funds as well as our revolving line of credit facility and equipment term loan . Financing Cash Flow Cash flows used in financing activities were $10.5 million in fiscal year 2024 and cash flows provided by financing activities were $17.7 million in fiscal year 2023.
Capital expenditures and periodic lease payments are expected to be financed with internally generated funds as well as our revolving line of credit facility and equipment term loan . 25 Financing Cash Flow Cash flows used in financing activities were $18.1 million in fiscal year 2025 and $10.5 million in fiscal year 2024.
Total RD&E expenses were $8.3 million and $9.7 million in fiscal years 2024 and 2023, respectively. Total RD&E expenses as a percent of net sales was 1.5 percent in fiscal year 2024 and 1.6 percent in fiscal year 2023.
Total RD&E expenses were $9.2 million and $8.3 million in fiscal years 2025 and 2024, respectively. Total RD&E expenses as a percent of net sales was 2.0 percent in fiscal year 2025 and 1.5 percent in fiscal year 2024.
Twelve Months Ended (in thousands, except per share amounts) June 29, 2024 July 1, 2023 GAAP net income (loss) $ (2,787) $ 5,157 Cybersecurity expenses 2,340 — Severance expenses (benefit) 945 354 Gain on insurance proceeds (net of losses) (431) (4,301) Stock-based compensation expense (444) 254 Income tax effect of non-GAAP adjustments (1) (482) 739 Adjusted net income (loss): $ (859) $ 2,203 Adjusted net income (loss) per share — non-GAAP Diluted $ (0.08) $ 0.20 Weighted average shares outstanding — Diluted 10,762 10,938 (1) Income tax effects are calculated using an effective tax rate of 20%, which approximates the statutory tax rates for the presented periods. 24 International Subsidiaries We offer customers a complete global manufacturing solution.
Twelve Months Ended (in thousands, except per share amounts) June 28, 2025 June 29, 2024 GAAP net loss $ (8,318) $ (2,787) Cybersecurity expenses — 2,340 Severance expenses 2,908 1,743 Gain on insurance proceeds (net of losses) — (431) Stock-based compensation expense 218 (444) Write-off of unamortized loan fees 1,012 — Income tax effect of non-GAAP adjustments (1) (828) (642) Adjusted net loss: $ (5,008) $ (221) Adjusted net loss per share — non-GAAP Diluted $ (0.47) $ (0.02) Weighted average shares outstanding — Diluted 10,762 10,762 (1) Income tax effects are calculated using an effective tax rate of 20%, which approximates the statutory tax rates for the presented periods. 24 International Subsidiaries We offer customers a complete global manufacturing solution.
The income tax benefit/expense recognized during both fiscal years 2024 and 2023 was primarily a function of U.S. and foreign taxes recognized at statutory rates, the net benefit associated with federal research and development tax credits, and the impact of foreign exchange gains in fiscal year 2023.
The income tax benefit recognized during both fiscal years 2025 and 2024 was primarily a function of U.S. and foreign taxes recognized at statutory rates, the net benefit associated with federal research and development tax credits, and the change in deferred tax liability related to future distributions from China in fiscal year 2025.
The $11.3 million of net cash used in operating activities during fiscal year 2023 was primarily related to $5.2 million of net income adjusted for $9.5 million of depreciation and amortization, $14.8 million increase in accounts receivable, a $16.0 27 million decrease in other liabilities, a $5.5 million decrease in accounts payable, a $8.0 million increase in contract assets partially offset by a $17.4 million decrease in inventory, and a $1.5 million increase in accrued compensation and vacation.
The $18.9 million of net cash provided by operating activities during fiscal year 2025 is primarily related to $8.3 million of net loss adjusted for $9.6 million of depreciation and amortization, $32.4 million decrease in accounts receivable, a $7.7 million decrease in inventory, a $3.8 million decrease in contract assets, and a $1.6 million increase in accrued compensation and vacation partially offset by a $15.7 million decrease in accounts payable, a $10.5 million increase in other assets and a $3.6 million decrease in other liabilities.
Our mission is to provide our customers with superior manufacturing and engineering services at the lowest total cost for the highest quality products, and create long-term mutually beneficial business relationships by employing our “Trust, Commitment, Results” philosophy. Executive Summary During the fourth quarter of fiscal year 2024, we won new programs involving medical devices, sheet metal fabrication, and consumer products.
Our mission is to provide our customers with superior manufacturing and engineering services at the lowest total cost for the highest quality products, and create long-term mutually beneficial business relationships by employing our “Trust, Commitment, Results” philosophy.
Income Tax Provision We had an income tax benefit of approximately $2.4 million during fiscal year 2024 and an income tax expense of approximately $1.1 million during fiscal year 2023.
Income Tax Provision We had income tax benefits of approximately $3.6 million during fiscal year 2025 and $2.4 million during fiscal year 2024.
Management believes the most complex and sensitive judgments, because of their significance to our consolidated financial statements, result primarily from the need to make estimates about effects of matters that are inherently uncertain. The most significant areas involving management judgments are described below. Actual results in these areas could differ from management’s estimates.
Note 1 “Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” describes the significant accounting policies used in the preparation of our consolidated financial statements. Management believes the most complex and sensitive judgments, because of their significance to our consolidated financial statements, result primarily from the need to make estimates about effects of matters that are inherently uncertain.
The following table shows the revenue by industry sectors as a percentage of revenue for fiscal years 2023 and 2022: Fiscal Year Ended July 1, 2023 July 2, 2022 Consumer 44 50 Industrial 42 42 Communication 9 8 Medical 3 — Gaming 1 1 Transportation 1 — Printers — 1 Computer and Peripheral — 1 Total 56% 53% We provide services to customers in a number of industries and produce a variety of products for our customers in each industry.
The following table shows the revenue by industry sectors as a percentage of revenue for fiscal years 2025 and 2024: Fiscal Year Ended June 28, 2025 June 29, 2024 Industrial 52 46 Consumer 38 45 Communication 6 4 Medical 3 3 Gaming — 1 Transportation 1 1 Total 100% 100% 22 We provide services to customers in a number of industries and produce a variety of products for our customers in each industry.
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.
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.
The total amount of tax payments required for the amount of foreign subsidiary cash on hand as of June 29, 2024 would approximate $15,893. 28 The Company also has approximately $38.5 million of foreign earnings that have not been repatriated to the U.S. of that amount, the Company estimates that $8.0 million is to be repatriated in the future, requiring foreign withholding taxes of $0.8 million that is currently accrued in our deferred tax liabilities.
The Company also has approximately $26.4 million of foreign earnings that have not been repatriated to the U.S. of that amount, the Company estimates that $2.9 million is to be repatriated in the future, requiring foreign withholding taxes of $0.3 million that is currently accrued in our deferred tax liabilities.
The following information should be read in conjunction with the consolidated financial statements included herein and with Part II Item 1A, Risk Factors included as part of this filing.
We continue to make investments in all of our operating facilities to give us the production capacity, capabilities and logistical advantages to continue to win new business. The following information should be read in conjunction with the consolidated financial statements included herein and with Part II Item 1A, Risk Factors included as part of this filing.
As of July 1, 2023, the allowance for credit losses was approximately $23,000. The increase during fiscal year 2024 relates to the adoption of ASC 326, which was adopted on a modified retrospective basis. This allowance is based on estimates of the portion of accounts receivable that may not be collected in the future.
As of June 29, 2024, the allowance for credit losses was approximately $2.9 million. This allowance is based on estimates of the portion of accounts receivable that may not be collected in the future, and the increase during fiscal year 2025 relates to ongoing revisions to this estimated amount.
If cash is to be repatriated in the future from these foreign subsidiaries, the Company would be subject to certain withholding taxes in the foreign jurisdictions.
If cash is to be repatriated in the future from these foreign subsidiaries, the Company would be subject to certain withholding taxes in the foreign jurisdictions. The total amount of tax payments required for the amount of foreign subsidiary cash on hand as of June 28, 2025 would approximate $14,000.
Critical Accounting Policies and Estimates Preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. Note 1 “Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” describes the significant accounting policies used in the preparation of our consolidated financial statements.
For a summary of our long-term debt obligations as of June 28, 2025, please refer to Note 4 “Long-Term Debt” of the “Notes to Consolidated Financial Statements”. 26 Critical Accounting Policies and Estimates Preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses.
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. Further, the Company has an enforceable right to payment including a reasonable profit for performance completed to date with respect to these contracts.
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.
Total SG&A expenses as a percent of net sales were 4.4 percent and 4.2 percent in fiscal years 2024 and 2023, respectively. 23 Interest Expense We had net interest expense of $11.9 million and $10.0 million in fiscal years 2024 and 2023, respectively.
Total SG&A expenses as a percent of net sales were 5.7 percent and 4.4 percent in fiscal years 2025 and 2024, respectively. This increase is largely attributable to approximately $1.8 million in adjustments for estimated collections from customers. 23 Interest Expense We had net interest expense of $12.5 million and $11.9 million in fiscal years 2025 and 2024, respectively.
We maintained a strong balance sheet with a current ratio of 2.8 and a debt-to-equity ratio of 0.96. Total cash provided by operating activities as defined on our cash flow statement was $13.8 million during fiscal year 2024, as we have continued to focus on decreasing accounts receivable and inventory balances.
Total cash provided by operating activities as defined on our cash flow statement was $18.9 million during fiscal year 2025, as we have continued to focus on optimizing inventory balances and reducing the days to collect accounts receivable.
Revenue The Company specializes in services ranging from product manufacturing to engineering and tooling services. 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.
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.
In addition, we have contracts with many of our customers that minimize our exposure to losses for material purchased within lead-times necessary to meet customer forecasts. Purchase orders generally can be cancelled without penalty within specified ranges that are determined in negotiations with our suppliers.
Actual needs under these blanket purchase orders fluctuate with our manufacturing levels and as such cannot be broken out between fiscal years. In addition, we have contracts with many of our customers that minimize our exposure to losses for material purchased within lead-times necessary to meet customer forecasts.
These agreements depend in part on the type of materials purchased as well as the circumstances surrounding any requested cancellations. We do not use off-balance sheet financing techniques other than traditional operating leases, and we have not guaranteed the obligations of any entity that is not one of our wholly owned subsidiaries.
We do not use off-balance sheet financing techniques other than traditional operating leases, and we have not guaranteed the obligations of any entity that is not one of our wholly owned subsidiaries. For a summary of our lease obligations as of June 28, 2025, please refer to Note 13 “Leases” of the “Notes to Consolidated Financial Statements”.
The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution. Its customers include some of the world’s leading original equipment manufacturers. Our combined capabilities and vertical integration are proving to be a desirable offering to our expanded customer base.
Its customers include some of the world’s leading original equipment manufacturers. Our combined capabilities and vertical integration are proving to be a desirable offering to our expanded customer base. Our domestic and international production capability provides our customers with benefits of improved supply-chain management, reduced inventories, lower transportation costs, and reduced product fulfillment time.
The remaining $30.5 million is considered to be permanently reinvested in Mexico, China and Vietnam. If these amounts were required to be repatriated, we estimate it would create an additional $0.8 million in foreign withholding taxes payable.
The remaining $23.5 million is considered to be permanently reinvested in Mexico and Vietnam. If these amounts were required to be repatriated, it would result in no foreign withholding taxes payable. We have accrued withholding taxes for expected future repatriation of foreign earnings as discussed in Note 5 “Income Taxes” of the “Notes to Consolidated Financial Statements”.
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.
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.
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.
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).
Our primary financing activities during both fiscal year 2024 and fiscal year 2023 were borrowings and repayments under our revolving line of credit facility as well as repayments on our term loans and principal payments on finance leases. In fiscal year 2024, there was a significantly higher percentage of repayments against the borrowings on the revolving line of credit.
Our primary financing activities during both fiscal year 2025 and fiscal year 2024 were borrowings and repayments under our asset-based revolving line of credit facility with Bank of Montreal, our Prior Credit Facility with Bank of America, and term loans.
The Company generally enters into manufacturing service agreements (“MSA”) with its customers that outlines the terms of the business relationship between the customer and the Company. This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, payment terms, etc.
This includes matters such as warranty, indemnification, transfer of title and risk of loss, liability for excess and obsolete inventory, pricing, payment terms, etc. The Company will also bid on a program-by-program basis for customers in which an executed MSA may not be in place.
We have accrued withholding taxes for expected future repatriation of foreign earnings as discussed in Note 5 “Income Taxes” of the “Notes to Consolidated Financial Statements”. Off-Balance Sheet Arrangements and Contractual Obligations In the normal course of business, we enter into contracts which obligate us to make payments in the future.
Off-Balance Sheet Arrangements and Contractual Obligations In the normal course of business, we enter into contracts which obligate us to make payments in the future. We have certain contractual obligations that extend beyond fiscal year 2025 under lease obligations and debt arrangements. As of June 28, 2025, we had open purchase order commitments for materials and other supplies.
For additional information regarding these interim periods, see Note 15 – “Restatement and Revision of Interim Financial Information” of the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K. Overview Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China, and Vietnam.
Item 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Key Tronic is a leading contract manufacturer offering value-added design and manufacturing services from its facilities in the United States, Mexico, China, and Vietnam. The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution.
Removed
Item 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Restatement This Management’s Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatement of the Company’s previously issued consolidated financial statements as of and for the years ended July 1, 2023 and July 2, 2022.
Added
Executive Summary During the fourth quarter of fiscal year 2025, we continued to win new programs in pest control, personal protection, air purification, automotive, medical technology and utilities inspection equipment. We also announced a new manufacturing services contract with a large data processing OEM that will consign its material and components for new production in our Corinth, Mississippi manufacturing facility.
Removed
The restatement was due to errors in recording cost recovery related to material price variances in certain of the Company’s facilities. These errors led to an understatement of both revenue and cost of goods sold during the impacted periods.
Added
We have never had a consigned program at this scale, which has the potential to ramp significantly during fiscal year 2026 and is estimated to eventually exceed $20 million in annual revenue. We reported net sales of $467.9 million for fiscal year 2025, down 17.5 percent from $566.9 million for fiscal year 2024.
Removed
For additional information, see Note 14 - "Restatement of Previously Issued Financial Statements" in the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
Added
The revenue in fiscal year 2025 was adversely impacted by the continued worldwide economic disruptions caused by the recent escalation and fluctuations in global tariffs, which caused business paralysis throughout much of the year and ultimately led to delays in new programs originally scheduled to ramp in the year.
Removed
The Company’s previously issued unaudited interim consolidated statements of operations for the quarters ended March 30, 2024, December 30, 2023, September 30, 2023, April 1, 2023, December 31, 2022, October 1, 2022, April 2, 2022, January 1, 2022, and October 2, 2021 have also been restated due to these errors, and the Company's previously issued unaudited interim balance sheets as of March 30, 2024, December 30, 2023, September 30, 2023 have been revised due to errors related to the adoption of ASU 326.
Added
In addition, approximately $48 million of this decrease related to a reduction in scrap and component sales in fiscal year 2025, as certain large programs went end of life in 2024 and their final shipments of product, inventory, and any scrap were recorded at that time. Key Tronic expects long-term growth and profitability despite revenue trends in fiscal year 2025.
Removed
Our domestic and international production capability provides our customers with benefits of improved supply-chain management, reduced inventories, lower transportation costs, and reduced product fulfillment time. We continue to make investments in all of our operating facilities to give us the production capacity, capabilities and logistical advantages to continue to win new business.
Added
In order to better align costs with current customer demand and boost automation, the Company cut approximately 300 more jobs during the fourth quarter of fiscal year 2025, for a total net headcount reduction during fiscal year 2025 of approximately 600. These measures have improved competitiveness for new program bids, which have increased recently.
Removed
We reported net sales of $566.9 million for fiscal year 2024, down 6.3 percent from $605.3 million for fiscal year 2023. The decrease in fiscal year 2024 was driven by softer demand from Mexico-based programs, and production stoppages due to a cybersecurity incident that occurred in the fourth quarter, as previously reported.
Added
To support its near-shoring and tariff mitigation strategies, Key Tronic is also expanding its manufacturing footprint, with a new US facility and added capacity in Vietnam.
Removed
Moving into fiscal year 2025, we expect revenue and earnings to rebound as production has resumed across our facilities.
Added
During fiscal year 2025, the increase in gross margin is largely related to operational efficiencies gained from the reductions in workforce offset by the expenses incurred for the related severance.
Removed
Additionally, the Company is beginning to realize operational efficiencies as a result of headcount reductions announced in the third quarter of fiscal year 2024, coupled with a favorable weakening of the Mexican Peso to the US dollar of approximately 10% beginning in June. We continue to win new programs and reduce inventories to be more aligned with current revenue levels.
Added
In addition to the factors discussed above, this decrease is primarily related to approximately $1.8 million in adjustments for estimated collections from customers during 2025. 21 The net loss for fiscal year 2025 was $(8.3) million or $(0.77) per share, compared to a net loss of $(2.8) million or $(0.26) per share for fiscal year 2024.
Removed
During fiscal year 2024, our gross margin was also adversely impacted by a cybersecurity incident late in the year, and continued increases in 21 Mexican wages as well as the strengthening of the Mexican Peso relative to the US Dollar.
Added
The net loss in 2025 is primarily related to reductions in demand, severance expenses incurred, and adjustments for estimated collections from customers. We maintained a strong balance sheet with a current ratio of 2.5 and a debt-to-equity ratio of 0.90.
Removed
Additionally, as previously disclosed, a restructuring of our Mexico-based facility to focus on higher volume manufacturing resulted in severance expenses incurred late in the year which we expect to provide benefits to the gross profit margin in future periods.
Added
Approximately $48 million of this decrease related to a reduction in scrap and component sales in fiscal year 2025, as certain large programs went end of life in 2024 and their final shipments of product, inventory, and any scrap were recorded at that time.
Removed
In addition to the factors discussed above, we incurred expenses related to the cybersecurity incident late in the year, and our 2023 results included a significant gain on insurance related to losses incurred from storm damage to the Company's Arkansas facility in 2022.
Added
Additionally, worldwide economic disruptions caused by the recent escalation and fluctuations in global tariffs led to disruptions throughout the year and ultimately led to delays in new programs originally scheduled to ramp in the year.
Removed
Net loss for fiscal year 2024 was $2.8 million or $0.26 per share, as compared to net income of $5.2 million or $0.47 per share for fiscal year 2023. Earnings for fiscal 2024 continued to be adversely impacted by increased interest expense and were also impacted by the cybersecurity incident, and severance expenses.
Added
During fiscal year 2025, the increase in gross margin was primarily driven by cost reductions and strategic headcount reductions implemented in prior quarters, partially offset by the related severance expenses.
Removed
During fiscal year 2024, we incurred expenses related to a cybersecurity incident late in the year of approximately $2.3 million. Additionally, we incurred severance expenses related to a headcount reduction in our Mexico based facilities, and starting in the fourth quarter of fiscal year 2024, we are beginning to realize the operational efficiencies as a result of these headcount reductions.
Added
This increase is largely attributable to the write-off in the second quarter of fiscal year 2025 of approximately $1.0 million of unamortized loan fees related to refinancing our debt, partially offset by a reduction in maturing equipment leases and a lower average revolving credit loan balance.
Removed
The increase in interest expense is primarily related to increased interest rates due to the amended line of credit agreement, and an increase in the average balance outstanding throughout the year.
Added
RESULTS OF OPERATIONS Comparison of the Fiscal Year Ended June 29, 2024 with the Fiscal Year Ended July 1, 2023 To review the results of operations comparison of the fiscal year ended June 29, 2024 with the fiscal year ended July 1, 2023 please refer to our Annual Report on Form 10-K filed October 15, 2024 with the Securities and Exchange Commission or follow the link below. https://www.sec.gov/ix?doc=/Archives/edgar/data/719733/000071973324000113/ktcc-20240629.htm Capital Resources and Liquidity Operating Cash Flow Net cash provided by operating activities for fiscal year 2025 was $18.9 million compared to net cash provided by operating activities of $13.8 million in fiscal year 2024.
Removed
RESULTS OF OPERATIONS Comparison of the Fiscal Year Ended July 1, 2023 with the Fiscal Year Ended July 2, 2022 The following table sets forth for the periods indicated certain items of the consolidated statements of income expressed as a percentage of net sales.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed4 unchanged
Biggest changeThere was outstanding $107.1 million in borrowings under our asset-based senior secured revolving credit facility, MXN99 million ($5.4 million USD) outstanding in borrowing under our line of credit, and $8.0 million outstanding on our equipment financing facilities as of June 29, 2024.
Biggest changeThere was outstanding $67.9 million in borrowings under our asset-based senior secured revolving credit facility, MXN61 million ($3.3 million USD) outstanding in borrowing under our line of credit, and outstanding on our equipment financing facilities as of June 28, 2025.
See Note 9 - “Derivative Financial Instruments” to the Notes to Consolidated Financial Statements for additional information regarding our derivative instruments. 31
See Note 9 - “Derivative Financial Instruments” to the Notes to Consolidated Financial Statements for additional information regarding our derivative instruments. 29
From time to time, we use Mexican Peso forward contracts to hedge foreign currency fluctuations for a portion of our Mexican Peso denominated expenses. There was $12.5 million of foreign currency forward contracts outstanding as of June 29, 2024.
From time to time, we use Mexican Peso forward contracts to hedge foreign currency fluctuations for a portion of our Mexican Peso denominated expenses. There was $12.9 million of foreign currency forward contracts outstanding as of June 28, 2025.

Other KTCC 10-K year-over-year comparisons