KEY TRONIC CORP 8-K

What Happened

• Key Tronic Corporation (KTCC) announced on December 19, 2025 that it committed to a plan to stop manufacturing at its China-based facility and refocus that location on sourcing and procurement to support its global operations. The company will shift manufacturing demand to other facilities (including expanded capacity in Vietnam) and does not expect material adverse revenue impacts.
• The China change is expected to be completed by the company’s fourth fiscal quarter of 2026 and is projected to save about $1.2 million per quarter after completion. The company expects to pay approximately $1.1 million in severance-related cash expenses and $0.2 million in payments related to previously accrued compensation. It also expects $4.8 million to $5.8 million of non-cash charges (inventory, fixed assets, deferred taxes, and other asset write-offs).
• Separately, Key Tronic disclosed that restructuring at its Juarez, Mexico facility (to focus on higher-volume manufacturing) will result in additional severance charges of about $2.5 million to $3.5 million to be recognized in its second fiscal quarter, and that restructuring is expected to yield about $2.1 million in quarterly savings going forward.

Key Details

• Date of China plan commitment: December 19, 2025; expected completion by Q4 2026.
• Expected China-related cash severance and accrued compensation: ~$1.3 million total ($1.1M severance + $0.2M accrued comp).
• Expected China-related non-cash charges: $4.8M–$5.8M (inventory, fixed assets, deferred taxes, other write-offs).
• Mexico-related additional severance charges: $2.5M–$3.5M (recognized in second fiscal quarter); expected ongoing savings: ~$2.1M per quarter.

Why It Matters

• Near-term financial impact: Investors should expect one-time charges (cash and non-cash) in upcoming quarters that will reduce reported earnings in the short term. The filing quantifies those charges for China and Mexico, so the approximate magnitude of near-term hits is known.
• Ongoing cost savings: Once changes are implemented, management projects recurring quarterly savings (~$1.2M from China changes and ~$2.1M from Mexico restructuring), which could help margins over time if realized.
• Execution and timing risk: The company explicitly warns these are forward-looking estimates and actual charges, timing, or savings could differ; investors should watch upcoming quarterly reports for the actual charge recognition and for confirmation that revenue and capacity transitions proceed as planned.