KEY TRONIC CORP
For the period ended Mar 28, 2026. Filed May 8, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 28, 2026 · Filed May 8, 2026
KTCC$1.32+1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-12-27; filed 2026-02-09.
0000719733-26-000008
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-28; filed 2026-05-08.
0000719733-26-000018
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 200 previous paragraphs and 198 current paragraphs.
145 unchanged; 45 reworded; 6 added; 7 removed; 3 previous and 2 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
We reported net sales of $89.6 million the third quarter of fiscal year 2026, down 20.0 percent from $112.0 million in the same period of fiscal year 2025. Decreases in revenue were largely attributable to decreased demand from a legacy customer and an end-of-life program transition. The reported revenue for the third quarter of fiscal year 2026 was also adversely impacted by Winter Storm Fern in the South which caused temporary site closures due to facility damage that the Company expects will be largely covered by insurance. Finally, Key Tronic faced challenges during the quarter related to customer design delays on a new program with a legacy customer, as well as delays in receiving allocated components on a separate program. The Company is expecting revenue growth on increased demand from legacy customers and new program launches in its fourth quarter of 2026. This includes the ongoing ramp of a new manufacturing services contract with a large data processing OEM that consigns its material and components for new production in our Corinth, Mississippi manufacturing facility and is estimated to grow over time.
Current report
The Company reported margin improvements in the third quarter of fiscal year 2026, despite lower revenue levels compared to prior periods.This demonstrates the operating efficiencies gained from our cost-cutting initiatives during the past two years. Gross margin and operating margins were 8.0 percent and (0.3) percent, respectively, in the third quarter of fiscal year 2026 compared to 7.7 percent and (0.4) percent, respectively, for the same period of fiscal year 2025. Adjusted gross margin was 8.5% for the third quarter of fiscal year 2026 up from 8.4% in the same period of fiscal year 2025. See “Non-GAAP Financial Measures,” below for additional information about adjusted gross margin. As revenue rebounds, Key Tronic expects continued margin increases in coming periods.
Current report
As noted above, the $22.4 million decrease was primarily due to reductions in demand of approximately $16.1 million from a longstanding customer and $7.2 million on the transition of an end-of-life program. Net sales for the third quarter of fiscal year 2026 was also adversely impacted by Winter Storm Fern in the southern United States, which caused temporary site closures due to facility damage, as well as certain customer design delays on a new program with a legacy customer and delays in receiving allocated components on a separate program.
Current report
Gross profit as a percentage of net sales for the three months ended March 28, 2026 was 8.0 percent compared to 7.7 percent for the three months ended March 29, 2025. The quarter-over-quarter increases in gross margins is primarily related to the efficiency gains from the company’s cost reduction initiatives over the past two years.
Current report
In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were unauthorized. In March 2026, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to refund IEEPA tariffs collected; however, the refund process and timing remain uncertain, and the order may be subject to further government action or challenge. Accordingly, as of March 28, 2026, we have not recorded any benefit related to potential refunds of IEEPA tariffs paid.
Current report
Legal proceedings and government investigations could affect our financial condition or results of operations.
Removed paragraphs (7)
Previous report
We reported net sales of $96.3 million the second quarter of fiscal year 2026, down 15.4 percent from $113.9 million in the same period of fiscal year 2025. Net sales in the second quarter of fiscal year 2026 were adversely impacted by reductions in demand from longstanding customers and continued delays to some new program launches as we believe customers continue to face uncertainties in the global economy and also due to product design modifications to certain new customers. In addition, the Company continued to ramp its large consigned materials program that was previously announced. As this program ramps, the Company anticipates less overall revenue when compared to traditional turnkey programs, but an increase in its gross margins.
Previous report
Furthermore, as previously disclosed, the Company has been restructuring its operations in Juarez, Mexico to focus on higher volume manufacturing. In connection with this restructuring and related headcount reductions, the Company has incurred severance charges in prior periods and has incurred $3.3 million in charges related to severance during its second fiscal quarter related at its Mexico based facility. The restructuring is expected to provide approximately $1.5 million in quarterly savings after the reductions are fully executed.
Previous report
Gross profit as a percentage of net sales for the six months ended December 27, 2025 was 4.5 percent compared to 8.6 percent for the six months ended December 28, 2024. The year-to-date, year-over-year decreases in gross and operating margins are primarily related to the significant one-time expenses related to the wind-down of China manufacturing operations and severance expenses incurred in Mexico as discussed above.
Previous report
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.
Previous report
During fiscal year 2021, the Company’s Audit Committee completed an internal investigation arising from a notification from an employee regarding certain alleged accounting irregularities. In January 2021, the Company determined that improper accounting resulted in an understatement of cost of goods sold and an overstatement of inventories. Subsequent to the matter identified in January 2021, additional inventory accounting errors unrelated to the investigation were also identified by management. 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 such 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.
Previous report
All of these expenses, and the diversion of the attention of management and other personnel that has occurred and is expected to continue, could adversely affect our business, financial condition, results of operations and cash flows. In addition, publicity surrounding the foregoing, or any SEC enforcement action or settlement, even if ultimately resolved favorably for us, could have an adverse impact on our reputation, business, financial condition and results of operations.
Previous report
We are involved in various legal proceedings.
Reworded paragraphs (45)
Previous wording
This Quarterly Report contains forward-looking statements in addition to historical information. Forward-looking statements include, but are not limited to those including such words as aims, anticipates, believes, continues, could, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Risks and uncertainties that might cause such differences include, but are not limited to those outlined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risks and Uncertainties that May Affect Future Results.” Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s opinions only as of the date hereof. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaims any obligation to do so. Readers should carefully review the risk factors described in this report and other periodic reports the Company files from time to time with the Securities and Exchange Commission, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
Current wording
Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Risks and uncertainties that might cause such differences include, but are not limited to those outlined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risks and Uncertainties that May Affect Future Results.” Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s opinions only as of the date hereof. The Company undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaims any obligation to do so. Readers should carefully review the risk factors described in this report and other periodic reports the Company files from time to time with the Securities and Exchange Commission, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.
Previous wording
During the second quarter of fiscal 2026, we won new programs in automotive technology, pest control, and industrial equipment.
Current wording
During the third quarter of fiscal 2026, we won new programs in automotive technology, industrial tooling, pest control and industrial power management.
Previous wording
Gross margins were 0.6 percent in the second quarter and 4.5 percent for the year-to-date period of fiscal year 2026, compared to 6.8 percent in the second quarter and 8.6 percent for the year-to-date period in fiscal year 2025. Operating margin was (10.7) percent in the second quarter and (5.6) percent for the six-month year to date period in fiscal year 2026, down from (1.0) percent and 1.4 percent for the same periods of fiscal year 2025. The year-over-year decreases in gross and operating margins are primarily related to the significant one-time expenses related to the wind-down of China manufacturing operations and severance expenses incurred in Mexico as discussed above.
Current wording
Gross margin and operating margin was 5.6 percent and (3.9) percent for the year-to-date period of fiscal year 2026 compared to 8.3 percent and 0.8 percent, respectively, for the same period of fiscal year 2025. These decreases in gross and operating margins are primarily related to the significant one-time expenses related to the wind-down of China manufacturing operations and severance expenses incurred in Mexico as discussed above.
Previous wording
Additionally during the quarter, Key Tronic initiated a wind-down of its manufacturing operations at its China based facility and instead intends to refocus operations in China on sourcing and procurement activities intended to support its remaining global locations. This initiative is expected to shift more production to the Company’s expanding facilities in the US and Vietnam. The wind-down is expected to be completed by the end of the current fiscal year, and is anticipated to save approximately $1.2 million per quarter following completions. During the second quarter of fiscal year 2026, the Company accrued approximately $1.1 million in severance-related expenses related to this wind-down and approximately $5.0 million in additional non-cash expenses related to the transfer, disposal, and write-off of certain existing inventory, fixed assets, deferred taxes, and other assets.
Current wording
During the quarter, the Company continued to prepare for anticipated long-term growth by executing its near-shoring and tariff mitigation strategies to reduce costs while maintaining the diversity and flexibility of its key locations and capabilities. Key Tronic believes that these cost reductions have enabled the Company to become more competitive on recent quoting opportunities. During the quarter, Key Tronic continued the wind-down of its manufacturing operations at its China based facility that began in its second quarter. As previously reported, the Company instead intends to refocus operations in China on sourcing and procurement activities intended to support its remaining global locations. This initiative is expected to shift more production to the Company’s expanding facilities in the US and Vietnam. The wind-down is expected to be completed by the end of the current fiscal year, and is anticipated to save approximately $1.2 million per quarter following completion. During the third quarter of fiscal year 2026, there were no significant additional charges related to this wind-down.
Previous wording
The concentration of our top three customers’ net sales decreased to 25.1 percent of total sales in the second quarter of fiscal year 2026 from 41.8 percent in the same period of the prior fiscal year. This decrease is related to a decrease in demand from a longstanding customer as well as the transition of an end of life program. As new customer programs ramp, we expect that concentration of our top three customers will continue to decrease.
Current wording
The concentration of our top three customers’ net sales decreased to 21.6 percent of total sales in the third quarter of fiscal year 2026 from 33.5 percent in the same period of the prior fiscal year. This decrease is related to a decrease in demand from a longstanding customer as well as the transition of an end of life program. As new customer programs ramp, we expect that concentration of our top three customers will continue to decrease.
Previous wording
Net loss for the second quarter of fiscal year 2026 was $(8.6) million or $(0.79) per diluted share, as compared to net loss of $(4.9) million or $(0.46) per diluted share forthe second quarter of fiscal year 2025. Year-to-date net loss for the first half of fiscal year 2026 was$(10.8) million or $(1.00) per diluted share, compared to $(3.8) million, or $(0.35) per diluted share for the same period of fiscal year 2025. The year-over-year decreases in earnings are a result of the wind-down of manufacturing operations in China, additional headcount reductions in Mexico, and continued reduced demand from longstanding customers.
Current wording
Net loss for the third quarter of fiscal year 2026 was $(2.6) million or $(0.24) per diluted share, as compared to net loss of $(0.6) million or $(0.06) per diluted share forthe third quarter of fiscal year 2025. Year-to-date net loss for the first nine months of fiscal year 2026 was$(13.5) million or $(1.24) per diluted share, compared to $(4.4) million, or $(0.41) per diluted share for the same period of fiscal year 2025. The year-over-year decreases in earnings are a result of the wind-down of manufacturing operations in China, additional headcount reductions in Mexico, and continued reduced demand from longstanding customers.
Previous wording
The adjusted net income was $0.0 million or $0.00 per share for the second quarter of fiscal year 2026, compared to adjusted net loss of $(4.1) million or $(0.38) per share for the same period of fiscal year 2025. For the first six months of fiscal year 2026, the adjusted net loss was $(1.1) million or $(0.10) per share, compared to adjusted net loss of $(1.3) million or $(0.12) per share for the same period of fiscal year 2025. See “Non-GAAP Financial Measures,” below for additional information about adjusted net income (loss) and adjusted net income (loss) per share.
Current wording
The adjusted net income was $(2.8) million or $(0.26) per share for the third quarter of fiscal year 2026, compared to adjusted net income of $0.1 million or $0.01 per share for the same period of fiscal year 2025. For the first nine months of fiscal year 2026, the adjusted net loss was $(3.9) million or $(0.36) per share, compared to adjusted net loss of $(1.2) million or $(0.11) per share for the same period of fiscal year 2025. See “Non-GAAP Financial Measures,” below for additional information about adjusted net income (loss) and adjusted net income (loss) per share.
Previous wording
Moving into the third quarter of fiscal year 2026, we continue to see a favorable trend of contract manufacturing returning to North America, as well as continued increases in Mexican wages, and continued market uncertainty related to current and future potential tariffs. In response to these sustained and ongoing trends, the Company continues to restructure its Juarez operations to focus on higher volume manufacturing, while lower volume products with higher service level requirements will migrate to our other sites. These restructuring efforts resulted in a significant headcount reduction which started in the third quarter of fiscal year 2024 and will continue into the third quarter of fiscal year 2026 and potentially smaller further reductions throughout the remainder of fiscal year 2026. Additionally, global logistics problems, China-U.S. geopolitical tensions and related tariff increases may continue to drive Original Equipment Manufacturers (“OEMs”) to examine their traditional outsourcing strategies. The decision to onshore or near shore production appears to be becoming more widely accepted as a smart, long-term strategy. As previously announced, the Company has increased its production capacity and capabilities in its Arkansas and Vietnam facilities in order to continue to benefit from this growing customer demand for rebalancing their contract manufacturing. All of these changes to the Company's international and domestic manufacturing footprint and cost structure provide flexibility to respond to market conditions. We expect this will allow us to mitigate tariff implications and optimize pricing for our customers. As a result, we see opportunities for growth moving forward.
Current wording
Additionally, global logistics problems, China-U.S. geopolitical tensions and related tariff increases may continue to drive Original Equipment Manufacturers (“OEMs”) to examine their traditional outsourcing strategies. The decision to onshore or near shore production appears to be becoming more widely accepted as a smart, long-term strategy. As previously announced, the Company has increased its production capacity and capabilities in its Arkansas and Vietnam facilities in order to continue to benefit from this growing customer demand for rebalancing their contract manufacturing. All of these changes to the Company's international and domestic manufacturing footprint and cost structure provide flexibility to respond to market conditions. We expect this will allow us to mitigate tariff implications and optimize pricing for our customers. As a result, we see opportunities for growth moving forward.
Previous wording
We maintain a strong balance sheet with a current ratio of 2.0 and a debt-to-equity ratio of 0.9 as of December 27, 2025. Total cash provided by operating activities as defined on our cash flow statement was $14.0 million for the six months ended December 27, 2025. We believe we maintain sufficient liquidity for our expected future operations and as of December 27, 2025, had $63.0 million in borrowings under our asset-based revolving credit facility with $20.9 million remaining available and $0.8 million of cash on hand.
Current wording
We maintain a strong balance sheet with a current ratio of 2.1 and a debt-to-equity ratio of 1.0 as of March 28, 2026. Total cash provided by operating activities as defined on our cash flow statement was $10.0 million for the nine months ended March 28, 2026. We believe we maintain sufficient liquidity for our expected future operations and as of March 28, 2026, had $66.3 million in borrowings under our asset-based revolving credit facility with $20.2 million remaining available and $0.4 million of cash on hand.
Previous wording
Net sales of $96.3 million for the second quarter of fiscal year 2026 decreased by 15.4 percent as compared to net sales of $113.9 million for the second quarter of fiscal year 2025.
Current wording
Net sales of $89.6 million for the third quarter of fiscal year 2026 decreased by 20.0 percent as compared to net sales of $112.0 million for the third quarter of fiscal year 2025.
Previous wording
The level of gross margin is additionally impacted by facility utilization, product mix, timing, severity and steepness of new program ramps, pricing within the electronics industry and material costs, which can fluctuate significantly from quarter to quarter.
Current wording
The level of gross margin is additionally impacted by facility utilization, product mix, timing, severity and steepness of new program ramps, pricing within the electronics industry and material costs, all of which can fluctuate significantly from quarter to quarter.
Previous wording
Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence. We recorded an impairment of approximately $1.3 million and $0.1 million for obsolete inventory during the three months ended December 27, 2025 and December 28, 2024, respectively. We adjust the carrying value for estimated obsolesc ence as necessary in an amount equal to the difference between the cost of inventory and its net realizable value based on assumptions as to future demand and market conditions. The provisions are established for inventory that we have determined customers are not contractually responsible for and also inventory that we believe customers will be unable to purchase.
Current wording
Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence. We recorded an impairment of approximately $0.3 million and $0.0 million for obsolete inventory during the three months ended March 28, 2026 and March 29, 2025, respectively. We adjust the carrying value for estimated obsolesc ence as necessary in an amount equal to the difference between the cost of inventory and its net realizable value based on assumptions as to future demand and market conditions. The provisions are established for inventory that we have determined customers are not contractually responsible for and also inventory that we believe customers will be unable to purchase.
Previous wording
There were no significant changes to operating expenses during the second quarter of fiscal year 2026. Total research, development, and engineering (“RD&E”) expenses were $1.8 million during the three months ended December 27, 2025 and $2.3 million during the three months ended December 28, 2024, respectively. Total RD&E expenses as a percent of net sales were 1.9 percent during the three months ended December 27, 2025 and 2.0 percent during the three months ended December 28, 2024.
Current wording
There were no significant changes to operating expenses during the third quarter of fiscal year 2026. Total research, development, and engineering (“RD&E”) expenses were $1.8 million during the three months ended March 28, 2026 and $2.3 million during the three months ended March 29, 2025, respectively. Total RD&E expenses as a percent of net sales were 2.0 percent during the three months ended March 28, 2026 and 2.1 percent during the three months ended March 29, 2025.
Previous wording
Total selling, general and administrative (“SG&A”) expenses were $15.7 million during the six months ended December 27, 2025 compared to $13.1 million for the six months ended December 28, 2024. Total SG&A expenses as a percentage of net sales were 8.1 percent for the six months ended December 27, 2025 and 5.3 percent for the six months ended December 28, 2024. These increases are attributable to approximately $3.4 million in estimated reserves associated with the decision to wind-down manufacturing in China partially offset by less variable spend due to the decrease in revenues.
Current wording
Total selling, general and administrative (“SG&A”) expenses were $6.2 million during the three months ended March 28, 2026 compared to $6.8 million for the three months ended March 29, 2025. Total SG&A expenses as a percentage of net sales were 7.0 percent for the three months ended March 28, 2026 and 6.0 percent for the three months ended March 29, 2025. The decrease is attributable to less reserve charges for customer receivables.
Previous wording
Interest expense was $2.4 million during the three months ended December 27, 2025 and $3.9 million during the three months ended December 28, 2024. This decrease is largely attributable to lower interest costs as a result of refinancing our debt with a new lender, and a reduction in amounts borrowed, as described in Note 4 of the “Notes to Consolidated Financial Statements.”
Current wording
Interest expense was $2.4 million during the three months ended March 28, 2026 and $2.6 million during the three months ended March 29, 2025. This decrease is largely attributable to less overall debt outstanding.
Previous wording
The effective tax rate for the three months ended December 27, 2025 was 32.1 percent compared to 2.2 percent for the three months ended December 28, 2024. The increase was primarily due to federal research and development tax credits and permanent book-to-tax differences relative to the respective pretax income (or loss) amounts of each period, and the recognition of a full valuation allowance against net deferred tax assets in China.
Current wording
The effective tax rate for the three months ended March 28, 2026 was 0.3 percent compared to 80.1 percent for the three months ended March 29, 2025. The decrease was primarily due to permanent book-to-tax differences relative to the respective pretax income (or loss) amounts of each period, no tax benefit for losses incurred in China, and federal research and development tax credits.
Previous wording
Our judgments regarding deferred tax assets and liabilities may change due to changes in market conditions, changes in estimates, changes in tax laws or other factors. If assumptions and estimates change in the future, the deferred tax assets and liability will be adjusted accordingly and any increase or decrease will result in an additional deferred income tax expense or benefit in subsequent periods.
Current wording
Our judgments regarding deferred tax assets and liabilities may change due to changes in market conditions, changes in estimates, changes in tax laws or other factors. If assumptions and estimates change in the future, the deferred tax assets and liability will be adjusted accordingly and any increase or decrease will result in an additional deferred income tax expense or benefit in subsequent periods. For further information on taxes, see Note 5, “Income Taxes” of the Notes to Consolidated Financial Statements.
Previous wording
Comparison of the Six Months Ended December 27, 2025 with the Six Months Ended December 28, 2024
Current wording
Comparison of the Nine Months Ended March 28, 2026 with the Nine Months Ended March 29, 2025
Previous wording
The following table sets forth certain information regarding the components of our condensed consolidated statements of operations for the six months ended December 27, 2025 as compared to the six months ended December 28, 2024. It is provided to assist in assessing differences in our overall performance (in thousands):
Current wording
The following table sets forth certain information regarding the components of our condensed consolidated statements of operations for the nine months ended March 28, 2026 as compared to the nine months ended March 29, 2025. It is provided to assist in assessing differences in our overall performance (in thousands):
Previous wording
Net sales of $195.1 million for the six months ended December 27, 2025 decreased by 20.5 percent as compared to net sales of $245.4 million for the six months ended December 28, 2024.
Current wording
Net sales of $284.6 million for the nine months ended March 28, 2026 decreased by 20.4 percent as compared to net sales of $357.4 million for the nine months ended March 29, 2025.
Previous wording
The $50.3 million decrease was primarily due to reductions in demand of approximately $75 million from longstanding or end-of-life customers, offset by approximately $30 million in additional revenue from currently ramping programs or increases in demand from other longstanding customers. This includes the ongoing ramp of a new manufacturing services contract with a large data processing OEM that consigns its material and components for new production in our Corinth, Mississippi manufacturing facility. This program has the potential to ramp significantly during fiscal year 2026 and is estimated to grow over time to potentially exceed $20 million in annual revenue.
Current wording
The $72.7 million decrease was primarily due to reductions in demand of approximately $97 million from longstanding or end-of-life customers, offset by approximately $25 million in additional revenue from currently ramping programs or increases in demand from other longstanding customers. This includes the ongoing ramp of a new manufacturing services contract with a large data processing OEM that consigns its material and components for new production in our Corinth, Mississippi manufacturing facility.
Previous wording
Gross profit as a percentage of net sales for the three months ended December 27, 2025 was 0.6 percent compared to 6.8 percent for the three months ended December 28, 2024. The year-over-year decreases in gross and operating margins are primarily related to the significant one-time expenses related to the wind-down of China manufacturing operations and severance expenses incurred in Mexico as discussed above.
Current wording
Gross profit as a percentage of net sales for the nine months ended March 28, 2026 was 5.6 percent compared to 8.3 percent for the nine months ended March 29, 2025. The year-over-year decreases in gross and operating margins are primarily related to the significant one-time expenses related to the wind-down of China manufacturing operations and severance expenses incurred in Mexico as discussed above.
Previous wording
The level of gross margin is additionally impacted by facility utilization, product mix, timing, severity and steepness of new program ramps, pricing within the electronics industry and material costs, which can fluctuate significantly from quarter to quarter.
Current wording
The level of gross margin is additionally impacted by facility utilization, product mix, timing, severity and steepness of new program ramps, pricing within the electronics industry and material costs, all of which can fluctuate significantly from quarter to quarter.
Previous wording
Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence. We recorded an impairment of approximately $2.6 million and $0.0 million for obsolete inventory during the six months ended December 27, 2025 and December 28, 2024, respectively. Approximately $0.9 million of this amount is related to the wind-down of our manufacturing operations in China. We adjust the carrying value for estimated obsolesc ence as necessary in an amount equal to the difference between the cost of inventory and its net realizable value based on assumptions as to future demand and market conditions. The provisions are established for inventory that we have determined customers are not contractually responsible for and also inventory that we believe customers will be unable to purchase.
Current wording
Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence. We recorded an impairment of approximately $2.9 million and $0.0 million for obsolete inventory during the nine months ended March 28, 2026 and March 29, 2025, respectively. Approximately $1.0 million of this amount is related to the wind-down of our manufacturing operations in China. We adjust the carrying value for estimated obsolesc ence as necessary in an amount equal to the difference between the cost of inventory and its net realizable value based on assumptions as to future demand and market conditions. The provisions are established for inventory that we have determined customers are not contractually responsible for and also inventory that we believe customers will be unable to purchase.
Previous wording
There were no significant changes to operating expenses during the six months ended December 27, 2025. Total research, development, and engineering (“RD&E”) expenses were $3.9 million during the six months ended December 27, 2025 and $4.6 million during the six months ended December 28, 2024, respectively. Total RD&E expenses as a percent of net sales were 2.0 percent during the six months ended December 27, 2025 and 1.9 percent during the six months ended December 28, 2024.
Current wording
There were no significant changes to operating expenses during the nine months ended March 28, 2026. Total research, development, and engineering (“RD&E”) expenses were $5.7 million during the nine months ended March 28, 2026 and $6.9 million during the nine months ended March 29, 2025, respectively. Total RD&E expenses as a percent of net sales were 2.0 percent during the nine months ended March 28, 2026 and 1.9 percent during the nine months ended March 29, 2025.
Previous wording
Total selling, general and administrative (“SG&A”) expenses were $9.0 million during the three months ended December 27, 2025 compared to $6.5 million for the three months ended December 28, 2024. Total SG&A expenses as a percentage of net sales were 9.3 percent for the three months ended December 27, 2025 and 5.7 percent for the three months ended December 28, 2024. These increases are attributable to approximately $3.4 million in estimated reserves associated with the decision to wind-down manufacturing in China partially offset by less variable spend due to the decrease in revenues.
Current wording
Total selling, general and administrative (“SG&A”) expenses were $22.0 million during the nine months ended March 28, 2026 compared to $19.8 million for the nine months ended March 29, 2025. Total SG&A expenses as a percentage of net sales were 7.7 percent for the nine months ended March 28, 2026 and 5.6 percent for the nine months ended March 29, 2025. These increases are attributable to approximately $3.4 million in estimated reserves associated with the decision to wind-down manufacturing in China partially offset by less variable spend due to the decrease in revenues.
Previous wording
Interest expense was $5.1 million during the six months ended December 27, 2025 and $7.2 million during the six months ended December 28, 2024. This decrease is largely attributable to lower interest costs as a result of refinancing our debt with a new lender in December 2024, which resulted in a $1.0 million write-off of unamortized loan fees in December of 2024, and a reduction in amounts borrowed, as described in Note 4 of the “Notes to Consolidated Financial Statements.”
Current wording
Interest expense was $7.5 million during the nine months ended March 28, 2026 and $9.7 million during the nine months ended March 29, 2025. This decrease is largely attributable to lower interest costs as a result of refinancing our debt with a new lender in December 2024, which resulted in a $1.0 million write-off of unamortized loan fees in December of 2024, and a reduction in amounts borrowed, as described in Note 4 of the “Notes to Consolidated Financial Statements.”
Previous wording
The effective tax rate for the six months ended December 27, 2025 was 32.3 percent compared to 1.4 percent for the six months ended December 28, 2024. The increase was primarily due to federal research and development tax credits and permanent book-to-tax differences relative to the respective pretax income (or loss) amounts of each period and the recognition of a full valuation allowance against net deferred tax assets in China.
Current wording
The effective tax rate for the nine months ended March 28, 2026 was 27.8 percent compared to 36.2 percent for the nine months ended March 29, 2025. The decrease was primarily was primarily due to federal research and development tax credits, permanent book-to-tax differences relative to the respective pretax income (or loss) amounts of each period, no tax benefit for losses incurred in China, and the impairment of deferred tax assets in China.
Previous wording
On December 27, 2025, we had an order backlog of approximately $139.1 million. This compares with a backlog of approximately $162.5 million on December 28, 2024. The decrease in order backlog is primarily related to softening of demand for a number of existing programs. We expect backlog to increase in the coming periods due to recent sizable program wins. Order backlog consists of purchase orders received for products expected to be shipped within the next 12 months, although shipment dates are subject to change due to design modifications or changes in other customer requirements. Order backlog should not be considered an accurate measure of future net sales.
Current wording
On March 28, 2026, we had an order backlog of approximately $159.5 million. This compares with a backlog of approximately $138.1 million on March 29, 2025. The increase in order backlog is primarily related to strengthening of demand for a number of existing programs. We expect backlog to increase in the coming periods due to recent sizable program wins. Order backlog consists of purchase orders received for products expected to be shipped within the next 12 months, although shipment dates are subject to change due to design modifications or changes in other customer requirements. Order backlog should not be considered an accurate measure of future net sales.
Previous wording
Net cash provided by operating activities for the six months ended December 27, 2025 was $14.0 million. Net cash provided by operating activities was $11.5 million for the six months ended December 28, 2024.
Current wording
Net cash provided by operating activities for the nine months ended March 28, 2026 was $10.0 million. Net cash provided by operating activities was $10.1 million for the nine months ended March 29, 2025.
Previous wording
The $14.0 million of net cash provided by operating activities for the six months ended December 27, 2025 was primarily related to $10.8 million in net loss for the period adjusted for $5.0 million of depreciation and amortization, an $11.0 million decrease in accounts receivable, a $6.3 million decrease in inventories, a $2.5 million decrease in contract assets, and a $2.0 million increase in accrued compensation and vacation partially offset by a $1.3 million decrease in accounts payable, a $1.4 million decrease in other liabilities, and a $1.8 million increase in other assets.
Current wording
The $10.0 million of net cash provided by operating activities for the nine months ended March 28, 2026 was primarily related to $13.5 million in net loss for the period adjusted for $7.1 million of depreciation and amortization, an $9.6 million decrease in accounts receivable, a $8.6 million decrease in inventories, a $0.1 million decrease in contract assets, a $2.1 million increase in accounts payable partially offset by a $2.2 million decrease in accrued compensation and vacation, a $4.0 million decrease in other liabilities, and a $2.1 million increase in other assets.
Previous wording
The $11.5 million of net cash provided by operating activities for the six months ended December 28, 2024 was primarily related to $3.8 million in net loss for the period adjusted for $5.5 million of depreciation and amortization, a $4.4 million decrease in inventory, a $19.4 million decrease in accounts receivable, a $2.4 million decrease in contract assets, and a $1.7 million increase in other liabilities partially offset by a $15.8 million decrease in accounts payable, a $3.9 million increase in other assets, and a $0.3 million decrease in accrued compensation and vacation.
Current wording
The $10.1 million of net cash provided by operating activities for the nine months ended March 29, 2025 was primarily related to $4.4 million in net loss for the period adjusted for $7.9 million of depreciation and amortization, a $5.8 million decrease in inventory, a $19.6 million decrease in accounts receivable, a $2.2 million decrease in contract assets, and partially offset by a $14.1 million decrease in accounts payable, a $7.3 million increase in other assets, a $0.4 million decrease in other liabilities and a $0.7 million decrease in accrued compensation and vacation.
Previous wording
Cash used in investing activities was $6.5 million during the six months ended December 27, 2025 as compared to cash used in investing activities of $0.8 million during the six months ended December 28, 2024. Our primary investing activities during the six months ended December 27, 2025 and December 28, 2024, related to purchasing equipment to support increased production levels for new programs.
Current wording
Cash used in investing activities was $3.7 million during the nine months ended March 28, 2026 as compared to cash used in investing activities of $3.0 million during the nine months ended March 29, 2025. Our primary investing activities during the nine months ended March 28, 2026 and March 29, 2025, related to purchasing equipment to support increased production levels for new programs.
Previous wording
Leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership. Total capital expenditures are expected to be approximately $8-$10 million during the fiscal year, some of which may be funded through finance leases. 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 loans.
Current wording
Leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership. Total capital expenditures are expected to be approximately $5-$8 million during the fiscal year, some of which may be funded through finance leases. 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 loans.
Previous wording
Cash used in financing activities was $8.1 million during the six months ended December 27, 2025 as compared to $11.2 million used in financing activities in the same period of the previous fiscal year. Our primary financing activities during the six months ended December 27, 2025, and December 28, 2024, were borrowings and repayments under our asset-based credit agreement with BMO Bank, N.A. that provides for an asset-based senior secured revolving credit facility (the “Credit Facility”) of up to $115 million, maturing on December 3, 2029, our prior loan and security agreement, as amended, with Bank of America, N.A. and term loans.
Current wording
Cash used in financing activities was $7.2 million during the nine months ended March 28, 2026 as compared to $9.4 million used in financing activities in the same period of the previous fiscal year. Our primary financing activities during the nine months ended March 28, 2026, and March 29, 2025, were borrowings and repayments under our asset-based credit agreement with BMO Bank, N.A. that provides for an asset-based senior secured revolving credit facility (the “Credit Facility”) of up to $115 million, maturing on December 3, 2029, our prior loan and security agreement, as amended, with Bank of America, N.A. and term loans.
Previous wording
Our cash requirements are affected by the level of current operations and new programs. As discussed in Note 4 – “Long Term Debt” of the Notes to the Consolidated Financial Statements, we entered the Credit Facility, and also entered into a $28 million term loan (the "Term Loan") credit agreement with Callodine Commercial Finance, LLC.
Current wording
Our cash requirements are affected by the level of current operations and new programs. As discussed in Note 4 – “Long Term Debt” of the Notes to the Consolidated Financial Statements, we entered into the Credit Facility, and also entered into a $28 million term loan (the "Term Loan") credit agreement with Callodine Commercial Finance, LLC.
Previous wording
As of December 27, 2025, we had approximately $0.8 million of cash held by foreign subsidiaries. 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 December 27, 2025 would approximate $16,000. We have accrued withholding taxes for expected future repatriation of foreign earnings as discussed in Note 5 of the “Notes to Consolidated Financial Statements.”
Current wording
As of March 28, 2026, we had approximately $0.4 million of cash held by foreign subsidiaries. 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 March 28, 2026 would approximate $11,000. We have accrued withholding taxes for expected future repatriation of foreign earnings as discussed in Note 5 of the “Notes to Consolidated Financial Statements.”
Previous wording
On December 19, 2025 the Company committed to a plan to modify its China-based operations, and will end the manufacturing operations at its China-based facility. Instead, the Company intends to refocus operations in China on sourcing and procurement activities intended to support its remaining global locations. The wind down activities remain ongoing and are expected to be substantially completed by the end of the Company’s fiscal year 2026, after which there will still be ongoing sourcing and procurement activities intended to support its remaining global locations. As wind down activities progress, we may discover other facts necessitating additional expenses or charges that may differ from our initial expectations. In addition, we may not be able to complete the wind down activities in all respects or in the expected time frame, due to factors outside of our control. If actual amounts were to differ from our estimates, or if the full and complete wind down takes longer than expected, our results of operations and financial condition could be materially and adversely affected.
Current wording
On December 19, 2025, the Company committed to a plan to modify its China-based operations, and will end the manufacturing operations at its China-based facility. Instead, the Company intends to refocus operations in China on sourcing and procurement activities intended to support its remaining global locations. The wind down activities remain ongoing and are expected to be substantially completed by the end of the Company’s fiscal year 2026. As wind down activities progress, we may discover other facts necessitating additional expenses or charges that may differ from our initial expectations. In addition, we may not be able to complete the wind down activities in all respects or in the expected time frame, due to factors outside of our control. If actual amounts were to differ from our estimates, or if the full and complete wind down takes longer than expected, our results of operations and financial condition could be materially and adversely affected.
Previous wording
Although we maintain significant manufacturing capacity in the U.S. and are in the process of terminating our manufacturing operations in China, the majority of our manufacturing operations are currently located outside the U.S (in countries such as Vietnam and Mexico). We also source certain components and materials for our products from various countries, including China. The U.S. has imposed tariffs impacting certain components and products imported from these countries by us into the
Current wording
Although we maintain significant manufacturing capacity in the U.S. and are in the process of terminating our manufacturing operations in China, the majority of our manufacturing operations are currently located outside the U.S (in countries such as Vietnam and Mexico). We also source certain components and materials for our products from various countries, including China. The U.S. has imposed tariffs impacting certain components and products imported from these countries by us into the U.S. 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.
Previous wording
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. 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. 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. For example, we have incurred significant one-time expenses in the second quarter of 2026 related to the wind-down of our China manufacturing operations. 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. 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.
Current wording
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. 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. 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. For example, we incurred significant one-time expenses in the second quarter of 2026 related to the wind-down of our China manufacturing operations. 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. 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.
Showing the first 40 of 45 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
This Quarterly Report contains forward-looking statements in addition to historical information. Forward-looking statements include, but are not limited to those including such words as aims, anticipates, believes, continues, could, estimates, expects, hopes, intends, plans, predicts, projects, targets, or will, similar verbs, or nouns corresponding to such verbs, which may be forward looking. Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future. Forward-looking statements in this Quarterly Report include, without limitation, the Company’s statements regarding its expectations with respect to financial conditions and results, including revenue, earnings, and margins, the Company’s ability to shift its focus in China and build out production capacity in the US and Vietnam and the timing of completion of those facilities, cost savings from headcount reduction and the wind-down of manufacturing operations in China, demand for certain products and the effectiveness of some of its programs, business from customers and programs, new program launches, impacts from operational streamlining and efficiencies, including reductions in inventories, and impacts of repairs to its facilities from winter storm damage.
Current report — wording carried from elsewhere
Moving into the fourth quarter of fiscal year 2026, we continue to see a favorable trend of contract manufacturing returning to North America, and continued market uncertainty related to current and future potential tariffs. In response to these sustained and ongoing trends, the Company continues to restructure its Juarez operations to focus on higher volume manufacturing, while lower volume products with higher service level requirements will migrate to our other sites. These restructuring efforts resulted in a significant headcount reduction which started in the third quarter of fiscal year 2024, continued into the third quarter of fiscal year 2026 and may include smaller further reductions throughout the remainder of fiscal year 2026. Key Tronic believes that these cost reductions have enabled the Company to become more competitive on recent quoting opportunities, and is expecting both revenue and margin growth as a result.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
The $17.5 million decrease was primarily due to reductions in demand of approximately $28 million from a longstanding customer and transition of an end-of-life program offset by approximately $11 million in additional revenue from currently ramping programs and increased demand from other longstanding customers. This includes the ongoing ramp of a new manufacturing services contract with a large data processing OEM that consigns its material and components for new production in our Corinth, Mississippi manufacturing facility. This program has the potential to ramp significantly during fiscal year 2026 and is estimated to grow over time to potentially exceed $20 million in annual revenue.
Previous report — wording carried elsewhere
U.S. 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.
Previous report — wording carried elsewhere
competitive positions. 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.