Key Tronic Corporation — Fiscal 2026 Form 10-K Summary
Business context and reporting period
Key Tronic Corporation is a contract manufacturer providing electronic and mechanical engineering, printed-circuit-board and product assembly, precision plastics, sheet-metal fabrication, tooling, sourcing, logistics, testing and related services to original equipment manufacturers. The company operates manufacturing facilities in the United States, Mexico and Vietnam and maintains procurement operations in China.
The filing covers the 52-week fiscal year ended June 27, 2026, compared with the fiscal year ended June 28, 2025. Key Tronic is a smaller reporting company and non-accelerated filer. Its common stock trades on Nasdaq under the symbol KTCC.
Financial performance and key metrics
| Metric | FY 2026 | FY 2025 | Change |
|---|---|---|---|
| Net sales | $386.7 million | $467.9 million | Down 17.4% |
| Gross profit | $23.9 million | $36.4 million | Down $12.5 million |
| Gross margin | 6.2% | 7.8% | Down 1.6 percentage points |
| Operating income (loss) | $(14.7) million | $0.6 million | Down $15.3 million |
| Operating margin | (3.8%) | 0.1% | Down 3.9 percentage points |
| Net loss | $(47.8) million | $(8.3) million | Loss increased $39.5 million |
| Net loss per diluted share | $(4.41) | $(0.77) | Loss increased $3.64 per share |
| Cash provided by operating activities | $4.4 million | $18.9 million | Down $14.5 million |
| Capital expenditures | $6.4 million | $4.1 million | Increased $2.3 million |
Industrial products represented 58% of revenue, consumer products 24%, communications 11%, medical products 4%, computer and peripheral products 2%, and transportation products 1%. The five largest customers represented 39% of sales, compared with 48% in the prior year; one customer represented 14% of fiscal 2026 sales.
Backlog was approximately $204.1 million at June 27, 2026, compared with $159.1 million at June 28, 2025. Management cautions that backlog is subject to cancellation, rescheduling, design changes and customer forecast changes and is not necessarily indicative of future revenue.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $0.6 million at year-end, down from $1.4 million.
- Current assets were $223.8 million and current liabilities were $106.5 million, producing a current ratio of approximately 2.1 and positive working capital of approximately $117.3 million.
- Total debt was $108.3 million, including $74.7 million outstanding under the asset-based revolving credit facility, $23.5 million under the domestic Callodine term loan and other equipment and foreign borrowings.
- Net debt-to-equity was reported by management as 1.54. Total shareholders’ equity declined to $69.2 million from $117.1 million, primarily because of the fiscal-year net loss.
- The revolving credit facility matures December 3, 2029. Gross borrowing capacity was approximately $16.5 million at June 27, 2026, subject to availability limitations, including a $13 million availability block and covenant restrictions.
- Management believes operating cash flow, available revolving-credit capacity and potential additional financing will meet working-capital and fixed-capital requirements for at least twelve months. The filing notes that this conclusion depends on projected improvement in operating results and access to financing.
- The company was in compliance with applicable financial covenants under its primary credit agreement. Its Mexican subsidiary was not in compliance with certain Banorte debt covenants, although Banorte elected not to accelerate the outstanding borrowings.
Material changes versus the prior comparable period
- Revenue declined primarily because of approximately $80 million of lower demand from existing customers and approximately $48 million from end-of-life programs. These declines were partly offset by approximately $38 million from new or significantly ramped programs.
- Gross margin declined because of lower revenue, restructuring charges related to the China wind-down and Mexico workforce reductions, product mix, utilization and new-program start-up effects.
- SG&A increased to $36.5 million from $26.7 million, largely because of an approximately $10.4 million increase in estimated customer collection charges.
- Approximately $10.3 million of distressed-customer long-term receivables were written off during the year. The allowance for credit losses increased to approximately $14.0 million from $5.4 million.
- The company recorded a $28.4 million non-cash valuation allowance against U.S. deferred tax assets after cumulative losses and fourth-quarter results reduced the support for projected future taxable income. Total valuation allowances were approximately $29.5 million.
- Restructuring charges were $13.2 million, compared with $2.9 million in fiscal 2025. The company also recognized a $5.9 million net insurance gain related to storm damage at its Mississippi facility.
- The company substantially completed its China manufacturing wind-down, retaining China primarily for sourcing and procurement. It expanded manufacturing capacity in Vietnam, opened a technology and research center in Arkansas, and right-sized its Mexico operations.
- Full-time employees declined to 3,298 from 3,539, primarily because of Mexico restructuring and the China manufacturing wind-down.
Guidance, outlook, management commentary and risks
Management expects long-term revenue and profitability growth, supported by new programs, supply-chain diversification and expanded capacity. The company reported more than $60 million of new program awards during the fourth quarter and expects its Arkansas facility to deliver double-digit revenue growth in fiscal 2027 as programs ramp.
For the first quarter of fiscal 2027, management expects tariff concerns, logistics constraints, China-U.S. political tensions and supply-chain issues to continue encouraging contract manufacturing activity in North America and Vietnam. Management also cited an increase in active customer quotes. No formal fiscal 2027 revenue or earnings guidance was provided.
- Customer concentration and the absence of long-term volume commitments expose revenue, margins, inventory and receivables to order reductions, delays, cancellations and customer insolvency.
- Tariffs and changing trade policies affecting Mexico, China and other sourcing locations could increase costs, reduce demand or require operational changes. The timing and recovery of certain IEEPA tariff refunds remain uncertain.
- Credit availability and covenant compliance are significant liquidity risks. Failure to meet covenants or refinance obligations could result in higher costs, restricted borrowing or acceleration of debt.
- Foreign-exchange exposure remains significant. The company hedges part of its Mexican peso expenses with forward contracts but does not currently hedge comparable exposures in China or Vietnam.
- The company previously experienced a material cybersecurity incident that affected financial condition and results of operations and involved exfiltration of personally identifiable information. Future incidents could disrupt operations and generate additional costs, claims or regulatory action.
- The company settled SEC books-and-records and internal-controls charges in April 2026 relating to previously disclosed inquiries. The settlement required cease-and-desist undertakings, but no civil penalty or other payment by the company.
- Management reported effective disclosure controls and internal control over financial reporting at June 27, 2026. The independent auditor audited the financial statements but was not engaged to provide an opinion on internal-control effectiveness.
Most important facts for investors to verify
- Whether new program awards, including the data-processing OEM contract and Arkansas and Vietnam expansions, convert into sustained revenue, utilization and positive operating cash flow.
- Actual borrowing availability, covenant headroom and refinancing prospects, particularly given low cash balances and the Mexican covenant noncompliance.
- The collectability of receivables and contract assets, customer financial condition, inventory recovery commitments and the possibility of further credit-loss or inventory charges.
- The magnitude and timing of restructuring costs and remaining obligations associated with the China wind-down and Mexico restructuring.
- Whether the $29.5 million deferred-tax valuation allowance can be reduced in a future period; the filing states that reversal is not currently expected.
- Exposure to tariffs, trade-policy changes, supply-chain disruptions, interest rates and foreign-currency movements.
- The effectiveness of cybersecurity remediation and internal-control improvements following the prior cyber incident, historical restatement issues and the SEC settlement.