KEY TRONIC CORP

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 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 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 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 plans to address production constraints, including its ability to access additional capital, 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, cost savings from 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, future utilization of certain tax benefits, and impacts of repairs to its facilities from winter storm damage.

Previous wording

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 wording

Gross margin and operating margins were 2.5 percent and (4.2) percent, respectively, in the first quarter of fiscal year 2027 compared to 8.4 percent and (0.6) percent, respectively, for the same period of fiscal year 2026. Adjusted gross margin was 4.2% for the first quarter of fiscal year 2027 down from 9.6% in the same period of fiscal year 2026. See “Non-GAAP Financial Measures,” below for additional information about adjusted gross margin. As revenue rebounds, Key Tronic expects margin increases in coming periods as revenues rebound and expected continued cost structure improvement measures take hold.

Previous 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.

Current wording

The concentration of our top three customers’ net sales increased to 31.6 percent of total sales in the first quarter of fiscal year 2027 from 30.5 percent in the same period of the prior fiscal year. This increase is related to a increase in demand from a longstanding customer. As new customer programs ramp, we expect that concentration of our top three customers to decrease overtime.

Previous 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.

Current wording

The adjusted net income was $(7.9) million or $(0.72) per share for the first quarter of fiscal year 2027, compared to adjusted net income of $(1.1) million or $(0.10) per share for the same period of fiscal year 2026. See “Non-GAAP Financial Measures,” below for additional information about adjusted net income (loss) and adjusted net income (loss) per share.

Previous 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.

Current wording

We maintain a strong balance sheet with a current ratio of 1.9 and a debt-to-equity ratio of 1.8 as of September 26, 2026. Total cash used in operating activities as defined on our cash flow statement was $(2.1) million for the three months ended September 26, 2026. We believe we maintain sufficient liquidity for our expected future operations and as of September 26, 2026, had $79.2 million in borrowings under our asset-based revolving credit facility with $14.4 million remaining available (further limited by the availability block in the loan agreement) and $1.6 million of cash on hand.

Previous 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.

Current wording

Net sales of $98.7 million for the first quarter of fiscal year 2027 decreased by 0.1 percent as compared to net sales of $98.8 million for the first quarter of fiscal year 2026.

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 $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.

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 $0.8 million and $1.2 million for obsolete inventory during the three months ended September 26, 2026 and September 27, 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 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.

Current wording

There were no significant changes to operating expenses during the first quarter of fiscal year 2027. Total research, development, and engineering (“RD&E”) expenses were $2.3 million during the three months ended September 26, 2026 and $2.1 million during the three months ended September 27, 2025, respectively. Total RD&E expenses as a percent of net sales were 2.3 percent during the three months ended September 26, 2026 and 2.1 percent during the three months ended September 27, 2025.

Previous 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.

Current wording

Total selling, general and administrative (“SG&A”) expenses were $7.5 million during the three months ended September 26, 2026 compared to $6.8 million for the three months ended September 27, 2025. Total SG&A expenses as a percentage of net sales were 7.6 percent for the three months ended September 26, 2026 and 6.8 percent for the three months ended September 27, 2025. The increase period over period largely relates to increased professional fees incurred for consulting services.

Previous 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.

Current wording

The effective tax rate for the three months ended September 26, 2026 was (11.3) percent compared to 32.9 percent for the three months ended September 27, 2025. The decrease was primarily due toreceiving no tax benefit for losses incurred in the United States and China, and the fact that we have income tax expense in Vietnam and Mexico, while we have a consolidated net loss for the three months ended September 26, 2026.

Previous wording

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 (loss), and adjusted net income (loss) per share, diluted. We provide these non-GAAP financial measures because we believe they provide greater transparency related to our core operations and represent supplemental information used by management in its financial and operational decision making. We exclude (or include) certain items in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe this facilitates operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain income and expense items that would not otherwise be apparent on a GAAP basis.

Current wording

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 income loss per share, diluted. We provide these non-GAAP financial measures because we believe they provide greater transparency related to our core operations and represent supplemental information used by management in its financial and operational decision making. We exclude (or include) certain items in our non-GAAP financial measures as we believe the net result is a measure of our core business. We believe this facilitates operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain income and expense items that would not otherwise be apparent on a GAAP basis.

Previous wording

In addition, during this period, we have provided adjusted cost of sales, adjusted gross profit, and adjusted gross margin. These additions supplement adjusted net income (loss) by mapping the portion of the identified adjustments utilized in the calculation of adjusted net income (loss) to relevant financial statement line items for re-calculation of the adjusted metrics presented. We have provided these additional non-GAAP financial measures because we believe they provide greater transparency related to our core operations and represent supplemental information used by management in its financial and operational decision making.

Current wording

In addition, during this period, we have provided adjusted cost of sales, adjusted gross profit, and adjusted gross margin. These additions supplement adjusted net loss by mapping the portion of the identified adjustments utilized in the calculation of adjusted net loss to relevant financial statement line items for re-calculation of the adjusted metrics presented. We have provided these additional non-GAAP financial measures because we believe they provide greater transparency related to our core operations and represent supplemental information used by management in its financial and operational decision making.

Previous wording

See the table below entitled “Reconciliation of GAAP to non-GAAP measures” for reconciliations of adjusted net income (loss) and adjusted cost of sales to the most directly comparable GAAP measure, which is GAAP net income (loss), and GAAP cost of sales, respectively, as well as the computation of adjusted gross profit, adjusted gross margin, and adjusted net income (loss) per share, diluted.

Current wording

See the table below entitled “Reconciliation of GAAP to non-GAAP measures” for reconciliations of adjusted net loss and adjusted cost of sales to the most directly comparable GAAP measure, which is GAAP net loss, and GAAP cost of sales, respectively, as well as the computation of adjusted gross profit, adjusted gross margin, and adjusted net loss per share, diluted.

Previous 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.

Current wording

On September 26, 2026, we had an order backlog of approximately $245.9 million. This compares with a backlog of approximately $139.9 million on September 27, 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 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.

Current wording

Net cash used by operating activities for the three months ended September 26, 2026 was $2.1 million. Net cash provided by operating activities was $7.6 million for the three months ended September 27, 2025.

Previous 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.

Current wording

The $2.1 million of net cash used by operating activities for the three months ended September 26, 2026 was primarily related to $7.5 million in net loss for the period adjusted for $3.3 million of depreciation and amortization, a $5.3 million decrease in accounts receivable, a $1.4 million decrease in contract assets, a $6.7 million decrease in accounts payable, and a $3.1 million decrease in other liabilities partially offset by a $3.2 million gain on insurance (net of losses), a $9.0 million increase in inventories, and a $4.8 million increase in other assets.

Previous 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.

Current wording

The $7.6 million of net cash provided by operating activities for the three months ended September 27, 2025 was primarily related to $2.3 million in net loss for the period adjusted for $2.5 million of depreciation and amortization, a $14.7 million decrease in accounts receivable, and a $2.1 million increase in other liabilities, partially offset by a $4.9 million increase in contract assets, a $2.7 million decrease in accounts payable, a $0.8 million increase in other assets, and a $1.3 million decrease in accrued compensation and vacation.

Previous 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.

Current wording

Cash provided by investing activities was $1.5 million during the three months ended September 26, 2026 as compared to cash used in investing activities of $3.2 million during the three months ended September 27, 2025. Our primary source of cash from investing activities during the three months ended September 26, 2026 , related to proceeds received from insurance claims related to storm damage at our Mississippi facility. The primary sources of cash used in investing activities for the three months ended September 26, 2026 and September 27, 2025 relates to investments in facility and equipment upgrades.

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 $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.

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 $7-$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.

Previous 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.

Current wording

Cash provided by financing activities was $1.6 million during the three months ended September 26, 2026 as compared to $4.7 million used in financing activities in the same period of the previous fiscal year. Our primary financing activities during the three months ended September 26, 2026, and September 27, 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, and various term loans.

Previous 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.”

Current wording

As of September 26, 2026, we had approximately $1.3 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 September 26, 2026 would approximate $36,000. We have accrued withholding taxes for expected future repatriation of foreign earnings as discussed in Note 5 of the “Notes to Condensed Consolidated Financial Statements.”

Previous wording

We have included a summary of our Contractual Obligations in our Annual Report on Form 10-K for the fiscal year ended June 28, 2025. There have been no material changes in contractual obligations outside the ordinary course of business since June 28, 2025. See Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements for additional information.

Current wording

We have included a summary of our Contractual Obligations in our Annual Report on Form 10-K for the fiscal year ended June 27, 2026. There have been no material changes in contractual obligations outside the ordinary course of business since June 27, 2026. See Note 4 - “Long-Term Debt” of the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

•cash liquidity, the ability to acquire new debt capacity, and capital constraints;

Current wording

•cash liquidity, the ability to acquire new debt capacity and related interest expenses, and capital constraints;

Previous wording

•burdens of complying with a wide variety of foreign laws and labor practices; subject to trade wars and tariffs;

Current wording

•burdens of complying with a wide variety of foreign laws and labor practices;

Previous wording

Our quarterly operating results have varied in the past and may vary in the future due to a variety of factors, including adverse changes in the U.S. and global macroeconomic environment, volatility in overall demand for our customers’ products, success of customers’ programs, timing of new programs, new product introductions or technological advances by us, our customers and our competitors, and changes in pricing policies by us, our customers, our suppliers, and our competitors. 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.

Current wording

Our quarterly operating results have varied in the past and may vary in the future due to a variety of factors, including adverse changes in the U.S. and global macroeconomic environment, volatility in overall demand for our customers’ products, success of customers’ programs, timing of new programs, new product introductions or technological advances by us, our customers and our competitors, and changes in pricing policies by us, our customers, our suppliers, and our competitors. 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, we and our customers could be adversely impacted by illiquidity in the credit markets which could directly impact our operating results.

Previous wording

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. 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. 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.

Current wording

Unfavorable economic conditions could also 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. 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.

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. 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 cease manufacturing activities at its China-based facility. The manufacturing wind-down has been substantially completed, and the Company has refocused its China operations on sourcing and procurement activities intended to support its remaining global locations. Although only limited transition and administrative activities remain, the Company may identify additional obligations, costs, or adjustments associated with the wind-down that were not previously anticipated. Further, the timing and resolution of these remaining matters may be affected by factors outside of the Company’s control. If actual costs or obligations differ from current estimates, our results of operations and financial condition could be 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 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.

Current wording

Although we maintain significant manufacturing capacity in the U.S. and have substantially completed 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

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 wording

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, we only record refunds at the time of receipt.

Previous wording

We rely on timely and regular payments from our customers, and the inability or failure of our principal customers to meet their obligations to us or their bankruptcy, insolvency or liquidation may adversely affect our business, financial condition and results of operations. 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. For example, in the first quarter of fiscal 2026, our financial results were affected by inventory and receivable write-offs due to a customer bankruptcy. Customer bankruptcies also entail the risk of potential recovery by the bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws. There can be no assurance that customers will not declare bankruptcy or suffer financial distress, in which case our future revenues, net income and cash flow could be reduced.

Current wording

We rely on timely and regular payments from our customers, and the inability or failure of our principal customers to meet their obligations to us or their bankruptcy, insolvency or liquidation may adversely affect our business, financial condition and results of operations. 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. For example, in the first and fourth quarter of fiscal 2026, our financial results were affected by inventory and receivable write-offs due to a customer bankruptcy. Customer bankruptcies also entail the risk of potential recovery by the bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws. There can be no assurance that customers will not declare bankruptcy or suffer financial distress, in which case our future revenues, net income and cash flow could be reduced.

Previous wording

Certain components that we use in our manufacturing process are petroleum-based. In addition, we, along with our suppliers and customers, rely on various energy sources in our transportation activities. While significant uncertainty currently exists about the future levels of energy prices, a significant increase, such as the increased fuel prices experienced in fiscal year 2022, is possible. Increased energy prices could cause an increase to our raw material costs and transportation costs. In addition, increased transportation costs related to certain suppliers and customers could be passed along to us. 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.

Current wording

Certain components that we use in our manufacturing process are petroleum-based. In addition, we, along with our suppliers and customers, rely on various energy sources in our transportation activities. While significant uncertainty currently exists about the future levels of energy prices, current fuel levels are at all-time highs. Further increases in energy prices could also cause continued increases to our raw material and transportation costs. In addition, increased transportation costs related to certain suppliers and customers could be passed along to us. 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.

Previous wording

Our asset-based senior secured revolving credit facility (the “Credit Facility”), also includes certain financial covenants, including average and daily availability and, if triggered, earnings before interest, taxes, depreciation, amortization and other adjustments and a fixed charge coverage ratio covenant will apply. We have in the past failed to meet certain covenants, and 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. 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. 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. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements.

Current wording

Our asset-based senior secured revolving credit facility (the “Credit Facility”), also includes certain financial covenants, including average and daily availability and, if triggered, earnings before interest, taxes, depreciation, amortization and other adjustments and a fixed charge coverage ratio covenant will apply. We have in the past failed to meet certain covenants, and 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. 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. 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. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Condensed Consolidated Financial Statements.

Previous wording

There is no assurance that we will be able to retain, renew, or refinance our credit arrangements in the future.

Current wording

There is no assurance that we will be able to retain, renew, or refinance our credit arrangements in the future or to maintain sufficient collateral to support our borrowing capacity.

Previous wording

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. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements.

Current wording

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. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Condensed Consolidated Financial Statements.

Previous wording

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. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements.

Current wording

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. For a summary of our debt obligations, see Note 4 - “Long-Term Debt” of the Notes to Condensed Consolidated Financial Statements.

Previous wording

Our stock price has and may continue to be subject to wide fluctuations and possible rapid increases or declines over a short time period. These fluctuations may be due to factors specific to us such as our stock's thinly traded nature, variations in quarterly operating results, changes in earnings estimates, matters arising from the subject matter of the Audit Committee's internal investigation, or to factors relating to the contract manufacturing industry or to the securities markets in general, which, in recent years, have experienced significant price fluctuations. 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.

Current wording

Our stock price has and may continue to be subject to wide fluctuations and possible rapid increases or declines over a short time period. These fluctuations may be due to factors specific to us such as our stock's thinly traded nature, variations in quarterly operating results, changes in earnings estimates, or to factors relating to the contract manufacturing industry or to the securities markets in general, which, in recent years, have experienced significant price fluctuations. 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.

Previous wording

We cannot assure you that we will not discover deficiencies in our internal control over financial reporting. Moreover, as discussed in the following risk factor, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected on a timely basis, or at all. We are a non-accelerated filer under the Securities Exchange Act of 1934 (the “Exchange Act”) and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Therefore, our internal controls over financial reporting will not receive the level of review provided by the process relating to the auditor attestation included in annual reports of issuers that are subject to the auditor attestation requirements.

Current wording

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”). We cannot assure you that we will not discover deficiencies in our internal control over financial reporting. Moreover, as discussed in the following risk factor, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected on a timely basis, or at all. We are a non-accelerated filer under the Securities Exchange Act of 1934 (the “Exchange Act”) and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Therefore, our internal controls over financial reporting will not receive the level of review provided by the process relating to the auditor attestation included in annual reports of issuers that are subject to the auditor attestation requirements.

Previous wording

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. Controls and Procedures of our Annual Report on Form 10-K for the fiscal year ended June 28, 2025, 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. 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.

Current wording

For the fiscal year ended June 29, 2024, 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. 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. We completed a remediation plan designed to address the material weaknesses, and such material weaknesses are considered remediated.

Previous wording

We completed a remediation plan, as described in Item 9A. Controls and Procedures of our Annual Report on Form 10-K for the fiscal year ended June 28, 2025, designed to address the material weaknesses. Although these material weaknesses are considered remediated and internal control over financial reporting and control disclosures and procedures were effective as of June 28, 2025, there is no assurance that similar material weaknesses could arise from future changes in systems, personnel, or processes. Any of these risks could have a material adverse impact on our business and financial condition.

Current wording

Our internal control over financial reporting and disclosure controls and procedures were effective as of June 28, 2025 and June 27, 2026 but there is no assurance that similar material weaknesses could arise from future changes in systems, personnel, or processes.

Previous wording

Further and continued determinations that there are deficiencies in the effectiveness of the Company’s internal control over financial reporting could result in another restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, reduce our ability to obtain financing, negatively affect investor confidence in our management and the accuracy of our financial statements and disclosures, or result in adverse publicity and concerns from investors, any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties or stockholder litigation, and materially adversely impact our business, financial condition, results of operations and cash flows.

Current wording

Further or continued determinations that there are deficiencies in the effectiveness of the Company’s internal control over financial reporting could result in another restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, reduce our ability to obtain financing, negatively affect investor confidence in our management and the accuracy of our financial statements and disclosures, or result in adverse publicity and concerns from investors, any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties or stockholder litigation, and materially adversely impact our business, financial condition, results of operations and cash flows.