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What changed in STRATTEC SECURITY CORP's 10-K — 2024 vs 2025

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

+162 added−210 removedSource: 10-K (2025-08-25) vs 10-K (2024-09-05)

Top changes in STRATTEC SECURITY CORP's 2025 10-K

162 paragraphs added · 210 removed · 70 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

48 edited+35 added−56 removed17 unchanged
Biggest changeR ISK FACTORS We recognize we are subject to the following risk factors based on our operations and the nature of the automotive industry in which we operate: BUSINESS RISKS Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share – Sales to General Motors Company, Ford Motor Company and Stellantis represented approximately 66 percent of our annual net sales (based on fiscal 2024 results) and, accordingly, these customers account for a significant percentage of our outstanding accounts receivable.
Biggest changeBusiness Risks Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share In fiscal 2025, our three largest customers, General Motors Company, Ford Motor Company and Stellantis, accounted for 29%, 23% and 12%, respectively, of our annual sales, compared to 30%, 21% and 14%, respectively, in fiscal 2024.
In addition, as security threats and cybersecurity and data privacy and protection laws and regulations continue to evolve and increase in terms of sophistication, we may be required to or choose to invest additional resources in the security of our systems. Any such increased level of investment could adversely affect our financial condition or results of operations.
In addition, as security threats, cybersecurity, data privacy and protection laws and regulations continue to evolve and increase in terms of sophistication, we may be required to or choose to invest additional resources in the security of our systems. Any such increased level of investment could adversely affect our financial condition or results of operations.
We could also experience adverse impacts to our financial condition due to volatility in the cost or availability of capital, difficultly obtaining new business or entering into new supplier relationships, a possible loss of market share on our current product portfolio, fines and penalties or difficulty attracting and retaining a skilled workforce.
We could also experience adverse impacts to our financial condition due to volatility in the cost or availability of capital, difficulty obtaining new business or entering into new supplier relationships, a possible loss of market share on our current product portfolio, fines and penalties or difficulty attracting and retaining a skilled workforce.
LEGAL AND REGULATORY RISKS Environmental, Safety and Other Regulations – We are subject to federal, state, local and foreign laws and other legal requirements related to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations.
Environmental, Safety and Other Regulations We are subject to federal, state, local and foreign laws and other legal requirements related to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations.
In addition, the worsening of COVID-19 and future outbreaks of contagious diseases in the human population could result in a widespread health crisis that adversely affects the economies and financial markets of many countries (including those where we operate or where our products are ultimately used), resulting in an economic downturn that could affect demand for our products and impact our operating results.
In addition, future outbreaks of contagious diseases in the human population could result in a widespread health crisis that adversely affects the economies and financial markets of many countries (including those where we operate or where our products are ultimately used), resulting in an economic downturn that could affect demand for our products and impact our operating results.
We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by our major customers. New model development generally begins two to five years prior to the marketing of such new models to the public.
We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by our customers. New model development generally begins two to five years prior to the marketing of such new models.
While we attempt to establish the price of our products for variances in production volumes, if the actual production of certain vehicle models is significantly less than planned, our net sales and net income may be adversely affected. We cannot predict our customers’ demands for the products we supply either in the aggregate or for particular reporting periods.
While we attempt to establish the price of our products to account for variations in production volumes, if the actual production of certain vehicle models is significantly less than planned, our net sales and net income may be adversely affected. We cannot predict our customers’ demands for the products we supply either in the aggregate or for particular reporting periods.
The results of these discussions could result in additional warranty charges/claims in future periods. Depending on the nature of and the volume of vehicles involved in the potential warranty claims, these charges could be material to our financial statements.
The results of these discussions could result in additional warranty costs in future periods. Depending on the nature of and the volume of vehicles involved in the potential warranty claims, these costs could be material to our financial statements.
Moreover, the loss of key personnel, or the failure to attract qualified personnel, could have a material adverse effect on our business, results of operations, financial condition and cash flows. Disruptions Due to Work Stoppages and Other Labor Matters – Our major customers and many of their suppliers have unionized work forces.
Moreover, the loss of key personnel, or the failure to attract qualified personnel, could have a material adverse effect on our business, results of operations, financial condition and cash flows. 10 Disruptions Due to Work Stoppages and Other Labor Matters Our major customers and many of their suppliers have unionized workforces.
Investments in Customer Program Specific Assets – We make investments in machinery and equipment used exclusively to manufacture products for specific customer programs. This machinery and equipment is capitalized and depreciated over the expected useful life of each respective asset.
We also make investments in machinery and equipment used exclusively to manufacture products for specific customer programs. This machinery and equipment is capitalized and depreciated over the expected useful life of each respective asset.
Although we have cybersecurity insurance in place, such access or other loss of information could result in legal claims or proceedings, regulatory fines or penalties, disruption in our operations, damage to our reputation, loss of confidence in our products and services, increased costs, or the loss of assets, any of which could have a negative impact on our business, results of operations, financial condition and cash flows.
Such access or other loss of information could result in legal claims or proceedings, regulatory fines or penalties, disruption in our operations, damage to our reputation, loss of confidence in our products and services, increased costs, or the loss of assets, any of which could have a negative impact on our business, results of operations, financial condition and cash flows.
While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes.
While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. We are also subject to ongoing tax audits.
Therefore, the loss of any one of these customers, the loss of a contract for a specific vehicle model, a reduction in vehicle content, the early cancellation of a specific vehicle model, technological changes or a significant reduction in demand for certain key models could occur, and if so, could have a material adverse effect on our existing and future revenues, operating results, financial condition and cash flows.
Therefore, the loss of any one of these customers, the early cancellation or breach by either party of a contract for a specific vehicle model, a reduction in vehicle content, the early cancellation of a specific vehicle model, technological changes or a significant reduction in demand for certain models could occur, and if so, could have a material adverse effect on our existing and future revenue, operating results, financial condition and cash flows.
The effects of COVID-19 and other contagious diseases have included and may continue to include disruptions or restrictions on our ability to travel, our ability to manufacture our affected products and our ability to ship these affected products to customers as well as disruptions that have and may continue to affect our key customers and suppliers, including those in these regions or other affected regions of the world, including in the United States, Mexico, China and neighboring countries.
The effects of infectious disease outbreaks have included and may continue to include disruptions or restrictions on our ability to travel, our ability to manufacture our affected products and our ability to ship these affected products to customers as well as disruptions that have and may continue to affect our key customers and suppliers, including those in these regions or other affected regions of the world, including in the United States, Mexico, China and neighboring countries.
Further, various stakeholders, including customers, suppliers, lenders, regulators and those in the workforce, are increasing their expectations of companies to do their part to combat global climate change and its impact, and to conduct their operations in an environmentally sustainable manner with appropriate oversight by senior leadership.
Further, various stakeholders, including customers, suppliers, lenders, regulators, investors and those in the workforce, are increasing their expectations for businesses to do more to combat global climate change and its impact, and to conduct their operations in an environmentally sustainable manner with appropriate oversight by senior leadership.
Our ability to sustain and grow our business requires us to hire, retain, develop and motivate a highly skilled and diverse management team and workforce. These types of employees are in high demand and often have competing employment opportunities.
Qualified Personnel Our business success depends, to a significant degree, on attracting and retaining qualified personnel. Our ability to sustain and grow our business requires us to hire, retain, develop and motivate a highly skilled and diverse management team and workforce. These types of employees are in high demand and often have competing employment opportunities.
The contracts with these customers provide for supplying the customer’s requirements for a particular model. The contracts do not specify a specific quantity of parts. The contracts typically cover the life of a model, which averages approximately four to five years. Components for certain customer models may also be “market tested” annually.
The contracts with these customers provide for meeting the customer’s requirements for a particular vehicle model with our products. The contracts do not specify a quantity of parts to be supplied over the life of the vehicle, which averages approximately four to five years. Components for certain customer models may also be “market tested” annually.
Cross-border Trade Issues or Tariffs – Our business is impacted by international or cross-border trade, including the import and export of products and goods into and out of the United States and trade tensions among nations. The shipping of goods across national borders is often more expensive and complicated than domestic shipping.
Cross-border Trade Issues and Tariffs Our operations are impacted by international or cross-border trade dynamics, particularly the import and export of products and goods into and out of the United States. The shipping of goods across national borders is often more expensive and complicated than domestic shipping.
Russian military actions and the resulting sanctions, as well as future geopolitical conflicts, could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially further disrupting the supply chain for necessary components and raw materials used by us or our customers in producing 15 product.
Additional potential sanctions and penalties have also been proposed. These global conflicts, as well as future geopolitical conflicts, could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially further disrupting the supply chain for necessary components and raw materials used by us or our customers in producing product.
RISK RELATED TO GEOPOLITICAL INSTABILITY We are currently operating in a period of geopolitical instability resulting from the ongoing military conflict between Russia and the Ukraine, which has significantly contributed to economic uncertainty, capital market disruption and supply chain interruptions in the U.S. and global markets.
Geopolitical Instability We are currently operating in a period of geopolitical instability, which has significantly contributed to economic uncertainty, capital market disruption and supply chain interruptions in the U.S. and global markets.
We have manufacturing operations in Mexico, and as a result, a portion of our manufacturing costs are incurred in Mexican pesos. Therefore, fluctuations in the U.S. dollar/Mexican peso exchange rate may have a material effect on our profitability, cash flows, financial position, and may significantly affect the comparability of our results between financial periods.
Therefore, fluctuations in the U.S. dollar/Mexican peso exchange rate may have a material effect on our profitability, cash flows and financial position and may significantly affect the comparability of our results between financial periods.
If any of our customers experience a material supply shortage, either directly or as a result of supply shortages at another supplier, that customer may halt or limit the purchase of our products.
Operational Risks Shortages, Increases in Costs, or Other Restrictions on the Availability of Raw Materials or Components Supply If any of our customers experience a material supply shortage, either directly or as a result of supply shortages at another supplier, that customer may halt or limit the purchase of our products.
The current contract with our Leon unionized associates is effective through April 8, 2025. We may encounter further labor disruption and we may also encounter unionization efforts in our other plants or other types of labor conflicts, any of which could have an adverse effect on our business, financial results, financial condition and cash flows.
We may encounter labor disruption and we may also encounter unionization efforts in our other plants or other types of labor conflicts, any of which could have an adverse effect on our business, financial results, financial condition and cash flows.
Customs and duty procedures and reviews, including duty-free thresholds in various key markets, the application of tariffs, and security related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit and create shipping uncertainties.
Customs and duty procedures and reviews, including duty-free thresholds in various key markets, the application of tariffs, and security-related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit and create shipping uncertainties. The imposition of non-tariff barriers, including localized content rules and government procurement restrictions, may further limit our ability to operate efficiently across borders.
If we are unable to generate sufficient production cost savings in the future to offset pre-programmed price reductions or additional price reduction demands, our gross margin and profitability will be adversely affected. Currency Exchange Rate Fluctuations – Our sales are denominated in U.S. dollars.
If we are unable to generate sufficient production cost savings in the future to offset pre-programmed price reductions or additional price reduction demands, our gross margin and profitability will be adversely affected. Currency Exchange Rate Fluctuations We have manufacturing operations in Mexico, and as a result, a portion of our manufacturing costs are incurred in Mexican pesos.
These laws include, among others, the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended). We have an environmental management system that is ISO-14001 certified.
These laws include, among others, the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended). We believe that our existing environmental management system is adequate for current and anticipated operations.
Although we have product recall insurance in place, if our customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a material adverse impact on our results of operations, financial condition and cash flows.
As additional information becomes available, actual warranty results may differ from recorded reserves or we may need to record additional warranty provisions. If our customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a material adverse impact on our results of operations, financial condition and cash flows.
Cost Reduction – There is continuing pressure from our major customers to reduce the prices we charge for our products. This requires us to generate cost reductions, including reductions in the cost of components purchased from outside suppliers.
These conditions could have a material adverse effect on our existing and future revenues, financial results, financial condition and cash flows. Cost Reduction There is continuing pressure from our major customers to reduce the prices we charge for our products. This requires us to continually generate cost reductions, including reductions in the cost of components purchased from outside suppliers.
Credit Facilities – Historically, from time to time we have relied on our existing credit facilities to provide us with adequate working capital to operate our business and fund our capital expenditures, including our expansion initiatives. Escalation of any global inflationary pressures on our operating results may impact our ability to satisfy our lending covenants in the short term.
Existing Indebtedness and Ability to Access Capital Markets From time to time we have relied on our existing credit facilities to provide us with adequate working capital to operate our business and fund our capital expenditures, including any expansion initiatives.
Therefore, the loss of any one of our major customers, the loss of specific vehicle models or the early cancellation of a vehicle model could result in impairment in the value of these assets which may have a material adverse effect on our financial results and financial condition.
Therefore, the loss of any one of our major customers, the loss of specific vehicle models or the early cancellation of a vehicle model could result in impairment in the value of these assets. Production Slowdowns by Customers Our business depends on, and is directly affected by, the global automobile industry.
While production subsequently increased after the cuts made in 2009 and again in 2021 when plants reopened following the COVID-19 closures, the current Ukraine conflict and semiconductor chip shortage, any additional economic slowdowns, pandemics or part supply shortages could bring about new production cuts which could have a material adverse effect on our existing and future revenues, operating results, financial condition and cash flows.
While production has increased and plants have reopened after these events, any additional economic slowdowns, global conflicts, pandemics or part supply shortages could bring about new production cuts which could have a material adverse effect on our revenue, operating results, financial condition and cash flows.
A failure to respond to the expectations and initiatives of our stakeholders could result in damage to our reputation and relationships with various stakeholders.
A failure to respond to the expectations and initiatives of our stakeholders could result in damage to our reputation and relationships with various stakeholders. In addition to the increased stakeholder focus on climate change, customer, investor, and employee expectations in sustainability have been rapidly evolving and increasing.
A material work stoppage experienced by one or more of our customers could have an adverse effect on our business and our financial results. In addition, all production associates at our Milwaukee facility are unionized.
Work stoppages or slowdowns experienced by our customers or their suppliers could result in slowdowns or closures of assembly plants where our products are included in assembled vehicles. A material work stoppage experienced by one or more of our customers or suppliers could have an adverse effect on our business and financial results.
Similarly, if we or one of our own suppliers experience a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source. Such production interruptions could impede a ramp-up in vehicle production and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Similarly, if we or one of our own suppliers experiences a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source.
We consider the production capacities and financial condition of suppliers in our selection process, and expect that they will meet our delivery requirements. However, there can be no assurance that strong demand, capacity limitations, shortages of raw materials, labor disputes or other problems will not result in any shortages or delays in the supply of components to us.
However, there can be no assurance that strong demand, capacity limitations, shortages of raw materials, labor disputes or other problems will not result in any shortages, cost increases, or other restrictions on the availability of raw materials or components supplied to us. Foreign Operations We operate manufacturing operations in Mexico.
In addition to the increased stakeholder focus on climate change, customer, investor, and employee expectations in ESG have been rapidly evolving and increasing. The enhanced stakeholder focus on ESG requires the continuous monitoring of various and evolving regulations and standards and their associated requirements.
The enhanced stakeholder focus on sustainability requires continuous monitoring of various and evolving regulations and standards and their associated requirements.
Because we and our suppliers manufacture products in facilities around the world, we have been and may continue to be vulnerable to an outbreak of COVID-19 (or the resurgence of such an outbreak) or other contagious diseases in those regions as well as in the United States.
Because we and our suppliers manufacture products in facilities around the world, we may be vulnerable to an outbreak of infectious disease in the regions in which we, or our customers or suppliers, operate.
As a result, there is greater dependence on fewer sources of supply for certain components and materials used in our products, which could increase the possibility of a supply shortage of any particular component.
As a result, there is greater dependence on fewer sources of supply for certain components and materials used in our products. We consider the production capacities and financial condition of suppliers in our selection process, and expect them to meet our delivery requirements.
Any depreciation in the value of the U.S. dollar in relation to the value of the Mexican peso will adversely affect the cost of our Mexican operations when translated into U.S. dollars.
Any depreciation in the value of the U.S. dollar in relation to the value of the Mexican peso will adversely affect the cost of our Mexican operations when translated into U.S. dollars. 11 Program Volume and Pricing Fluctuations We incur costs and make capital expenditures for new program awards based upon certain estimates of production volumes over the anticipated program life for certain vehicles.
On February 24, 2022, a full-scale military invasion of the Ukraine by Russian troops began. While the length and impact of the ongoing conflict is unpredictable, the Ukraine conflict could lead to market disruptions, including supply chain interruptions and significant volatility in commodity prices, and in credit and capital markets.
While the length and impact of the ongoing global conflicts are unpredictable, they could lead to further market disruptions, including supply chain interruptions and significant volatility in commodity prices, and in credit and capital markets. The ongoing conflicts have led to sanctions and other penalties being levied by the U.S., the EU, and other countries.
Cyclicality and Seasonality in the Automotive Market – The automotive market is cyclical and is dependent on consumer spending, on the availability of consumer credit and to a certain extent, on customer sales incentives. Economic factors adversely affecting consumer demand for automobiles and automotive production, such as rising fuel costs, could adversely impact our net sales and net income.
Cyclicality and Seasonality in the Automotive Market Historically, our operating results have fluctuated by quarter based on the ebbs and flows of automotive vehicle production levels. The automotive market is cyclical and is dependent on consumer spending, on the availability of consumer credit, interest rates, fuel prices, consumer preference and confidence, and to a certain extent, on customer sales incentives.
A sixteen-day strike by these associates in June 2001 resulted in increased costs as all salaried associates worked with additional outside resources to produce the components necessary to meet customer requirements. The current contract with our Milwaukee unionized associates is effective through November 1, 2025. We also have unionized associates at our Leon, Mexico facility.
In addition, all production associates at our Milwaukee facility are unionized. The current contract with our Milwaukee unionized associates is effective through November 1, 2025. We also have unionized associates at our Leon, Mexico facility. The current contract with our Leon unionized associates is effective through April 8, 2026.
Any of the foregoing factors could have a material adverse effect on our business, operating results, financial condition and cash flows. GENERAL RISK FACTOR In addition to the specific risks above, we, our customers, and our suppliers may be adversely affected by changing economic conditions throughout the world.
Any of the foregoing factors could have a material adverse effect on our business, operating results, financial condition and cash flows. 13 ITEM 1B. UNRESOLV ED STAFF COMMENTS None.
This could be caused by a number of factors, including a lack of production line capacity or manpower, working capital constraints or adverse conditions in banking and capital markets. In order to manage and reduce the costs of purchased goods and services, we and others within our industry have been rationalizing and consolidating our supply base.
The continuation or renewal of these cost increases could have a material adverse effect on our future revenue, financial results, financial condition and cash flows. In order to manage and reduce the costs of purchased goods and services, we have been rationalizing and consolidating our supply base.
In addition, as a result of relatively long lead times for many of our components, it may be difficult in the short-term for us to obtain new sales to replace any unexpected decline in the sale of existing products. Finally, we may incur significant product development expense in preparing to meet anticipated customer requirements which may not be recovered.
The failure to obtain new business on new vehicle models or to retain or increase business on redesigned existing models could result in reduced net sales. In addition, we may incur significant product development expenses in preparing to meet anticipated customer requirements which may not be recovered.
Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes against us. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.
These audits can involve complex issues, which may require an extended period of time to resolve and can be highly subjective. Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes. Failure to comply with these tax laws and regulations could result in significant penalties, 12 fines, and interest charges.
The site was contaminated from a former above-ground solvent storage tank, located on the east side of the facility. The contamination occurred in 1985 and is being monitored in accordance with federal, state and local requirements.
An environmental liability was established in 1995 for estimated costs to remediate an environmental matter impacting a portion of our Milwaukee facility. The contamination occurred in 1985 and, after initial remediation, is being monitored in accordance with federal, state and local requirements.
RISK RELATED TO INFECTIOUS DISEASE OUTBREAKS, SUCH AS COVID-19 Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, the global economy.
No assurances can be given that such proceedings and claims will not adversely affect our financial condition, operating results and cash flows. Other Risks Pandemics, Epidemics and Infectious Disease Outbreaks Pandemics or disease outbreaks have disrupted, and may continue to disrupt, the global economy.
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Our major customers also have significant under-funded legacy liabilities related to pension and postretirement health care obligations.
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ITEM 1A. R ISK FACTORS Investors and readers should carefully consider each of the risks, assumptions, uncertainties and other factors described below and elsewhere in this Annual Report, as well as any amendments or updates reflected in subsequent filings with the Securities and Exchange Commission.
Removed
The loss in our major customers’ North American automotive market share to the New Domestic automotive manufacturers (primarily the Japanese and Korean automotive manufacturers) and/or a significant decline in the overall market demand for new vehicles may ultimately result in severe financial difficulty for these customers, including bankruptcy.
Added
We believe these risks, assumptions, uncertainties and other factors, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results and could materially and adversely affect our business operations, results of operations, financial condition and liquidity.
Removed
If our major customers cannot fund their operations, we may incur significant write-offs of accounts receivable and inventory, incur impairment charges or require restructuring actions.
Added
Our major customers and many of their suppliers can be significantly impacted by unfavorable global economic and industry conditions. In the past, many of our major customers have instituted production cuts and shuttered plants in light of these unfavorable conditions which adversely impacts demand for our products during these slowdowns and shutdowns.
Removed
Production Slowdowns by Customers – Our major customers and many of their suppliers were significantly impacted by the Great Recession of 2008/2009, by the COVID-19 pandemic in 2020, by supply chain issues resulting from the conflict in the Ukraine, and by a semiconductor chip shortage in 2021 and 2022.
Added
Furthermore, uncertain economic conditions and inflation may contribute to a reduction in consumer demand, which may reduce vehicle production over at least the next several quarters.
Removed
Many of our major customers instituted production cuts during our fiscal 2009 and 2010 due to the Great Recession and shuttered plants. Similarly, during 2020, 2021 and 2022 in response to the effects of the COVID-19 pandemic, the Ukraine conflict and the semiconductor chip shortage, many of our major customers again instituted production cuts and shuttered plants.
Added
We cannot be certain of the severity and length of the continued volatility in the global automotive market, and the extent of the adverse effect that such volatility could have on our results of operations, financial condition, and business in the long term.
Removed
Further, uncertainties stemming from changes in U.S. trade policies in particular with European countries and China, tariffs and the reaction of other countries thereto, could have an adverse effect on our business and may adversely impact our results of operations, financial condition and cash flows or reduce profitability on certain of our products. 10 Highly Competitive Automotive Supply Industry – The automotive component supply industry is highly competitive.
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We manufacture our products in Mexico and rely on a global supply chain to provide raw materials and components that we need to manufacture our products. Our business benefits from certain free trade agreements, such as the United States-Mexico-Canada Agreement ("USMCA").
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Some of our competitors are companies, or divisions or subsidiaries of companies, that are larger than STRATTEC and have greater financial, global and technology capabilities. Our products may not be able to compete successfully with the products of these other companies, which could result in loss of customers and, as a result, decreased sales and profitability.
Added
However, recent shifts in trade policy have resulted in new or higher tariffs on goods imported from numerous countries, and some countries have imposed retaliatory tariffs on imports from the United States, which has created meaningful uncertainty. These changes may result in significantly increased production costs, pricing volatility and administrative complexity in determining country-of-origin compliance for automotive components.
Removed
Some of our major customers have previously announced that they will be reducing their supply base. This could potentially result in the loss of these customers and consolidation within the supply base. The loss of any of our major customers could have a material adverse effect on our existing and future revenues, results of operations, financial condition and cash flows.
Added
In addition to potential increases in customs duties and tariffs in the United States and other countries, the USMCA is subject to renewal in 2026. There can be no assurance that the USMCA will be renewed or, if renewed, any newly negotiated terms in the USMCA will not adversely affect our business.
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In addition, our competitive position in the North American automotive component supply industry could be adversely affected in the event that we are unsuccessful in making strategic investments, acquisitions or alliances or in establishing joint ventures that would enable us to expand globally.
Added
Also, China presents unique risks to U.S. automotive manufacturers due to the strain in U.S.-China 8 relations and the level of integration with key components in our global supply chain. It remains unclear what additional actions the current U.S. administration may take with respect to trade issues involving China and other countries.
Removed
The failure to obtain new business on new models or to retain or increase business on redesigned existing models could adversely affect our business and financial results.
Added
Changes in U.S. trade relations with foreign countries involved in our business, including but not limited to Mexico, Canada, China, and European countries, could have a material effect on global economic conditions and significantly decrease global trade, which could adversely impact our production costs, purchased material costs, ability to compete, customer demand, short-term vehicle production levels and relationships with suppliers and customers.
Removed
We typically experience decreased sales and operating income during the first fiscal quarter of each year due to the impact of scheduled customer plant shut-downs in July and new model changeovers during that period.
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The ultimate impact of changes to tariffs and trade barriers will depend on a number of factors that are not yet known or are subject to change, including the timing, amount, scope and nature of any tariffs and trade barriers that are implemented. Highly Competitive Automotive Supply Industry The automotive component supply industry is highly competitive.
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OPERATIONAL RISKS Shortage of Raw Materials or Components Supply – In the event of catastrophic acts of nature such as fires, tsunamis, hurricanes, earthquakes and global pandemics and wars, a rapid increase in production demands or other unforeseen economic events such has prolonged periods of inflation, either we or our customers or other suppliers may experience supply shortages of raw materials or components.
Added
New business is typically awarded to the supplier offering the most favorable combination of technological innovation, quality, delivery and price. There can be no assurance that we will be able to compete successfully with the products of our competitors. Our competitors' efforts to grow market share could exert downward pressure on our product pricing and margins.
Removed
Because of the COVID-19 pandemic and the Ukraine conflict, we have experienced supply chain disruptions in particular with semiconductor chip shortages that impact our OEM customers’ ability to finish assembly of new vehicles and which have adversely impacted orders for our products and, accordingly, our results of operations and cash flows.
Added
Vertical integration by competitors and customers, as well as within our supply chain, could complicate and impact sourcing decisions by our customers and adversely affect our sales. Some of our competitors may have larger customer bases and significantly greater financial, technical, and marketing resources than we do.
Removed
The continuation or renewal of these impacts could have a material adverse effect on our future revenues, financial results, financial condition and cash flows. Sources of and Fluctuations in Market Prices of Raw Materials – Our primary raw materials are high-grade zinc, brass, nickel silver, aluminum, steel and plastic resins, which are typically sourced from a limited number of suppliers.
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These factors may allow our competitors to respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive aftermarket products.
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We believe our sources of raw materials are reliable and adequate for our needs.
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Increased competition could put additional pressure on us to reduce prices or take other actions, which may have an adverse effect on our business, sales, financial condition and results of operations. We may also lose significant customers or lines of business to competitors.
Removed
However, the development of future sourcing issues related to using existing or alternative raw materials and the global availability of these materials as well as significant fluctuations in the market prices of these materials may have an adverse effect on our results of operations, financial condition and cash flows if the increased raw material costs cannot be recovered from our customers.
Added
Economic factors adversely affecting consumer demand for automobiles and automotive production, could adversely impact our financial results. Market Acceptance of New or Enhanced Products The growth of the Company's business will be dependent on the demand for innovative products.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+5 added−2 removed0 unchanged
Biggest changeITEM 1C. CYBERSECURITY We take cybersecurity threats seriously, including regular assessment of cybersecurity risks both internally and with third party assistance and updates to the Board of Directors at least annually. We use the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) as the basis for the information security management system.
Biggest changeITEM 1C. CYBERSECURITY Governance The Company conducts regular assessments of cybersecurity risks both internally and with third party assistance Information Technology Director reports on the results of these assessments and corresponding recommendations to the full Board of Directors at least annually .
Among other best practices, we use multi-factor authentication wherever possible for external access to systems, assess and update current versions of security solutions, perform regular cybersecurity training and email phishing campaigns for employees, use third parties to perform external penetration testing, and maintain disaster recovery and incident response plans, which include retainer contracts for third party cybersecurity response specialists.
Risk Management and Strategy Among other best practices, we use multi-factor authentication wherever possible for external access to systems, assess and update current versions of security solutions, perform annual cybersecurity training and email phishing campaigns for employees, use third parties to perform external penetration testing, and maintain disaster recovery and incident response plans.
Our cybersecurity personnel have the appropriate expertise in IT and cybersecurity, which generally has been gained from a combination of education, including relevant degrees and/or certifications, and prior work experience. Our cybersecurity personnel, along with third parties, monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents as part of the cybersecurity programs described above.
Our cybersecurity personnel have the appropriate expertise in IT and cybersecurity, which generally has been gained from a combination of education, including relevant degrees and/or certifications, and prior work experience.
Incidents, if any, are escalated to management and the Board according to our incident response policy. There have been no material cybersecurity incidents in the periods presented.
We employ a combination of methods to monitor for new or developing cybersecurity risks. Incidents, if any, are escalated to management and the Board according to our incident response policy.
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As we implement new technologies, the NIST CSF is used as the guiding framework.
Added
We use the National Institute of Standards and Technology ("NIST") framework to regularly assess the threat landscape and support a cybersecurity strategy based on prevention, detection and mitigation.
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We employ a combination of methods to monitor for new or developing cybersecurity risks. The Board regularly receives reports and training from management and third parties on cybersecurity matters. Management is responsible for developing cybersecurity programs, as may be required by applicable law or regulation.
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In general, the Company seeks to address cybersecurity risks through a cross-functional approach that is focused on preserving confidentiality, managing data security and availability and effectively responding to cybersecurity incidents when they occur.
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Management's philosophy on cybersecurity is to be vigilant in protecting the Company through investments in tools and employee awareness to aid in the prevention, detection and mitigation of cyber threats, while recognizing that not all threats are preventable.
Added
The Company's Information Technology Director and Chief Financial Officer, along with cybersecurity personnel on their respective teams, are responsible for developing cybersecurity programs, as may be required by applicable law or regulation.
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Through these processes, we did not identify risks from current or past cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOwned or Leased Milwaukee, Wisconsin Headquarters and General Offices; Component Parts Manufacturing 345,123 Owned Juarez, Chihuahua Mexico Subsidiary Offices and Assembly 169,926 Owned Juarez, Chihuahua Mexico Subsidiary Offices and Assembly 77,527 Owned Juarez, Chihuahua Mexico Subsidiary Offices, Key Finishing, Injection Molding and Assembly Operations 114,841 Owned Leon, Mexico Subsidiary Offices, Door Handle Injecting Molding, Painting and Assembly 130,532 Owned El Paso, Texas Finished Goods and Service Parts Distribution Warehouse 114,715 Leased ** Auburn Hills, Michigan Sales and Engineering Office for Detroit Customer Area 62,736 Owned ** Leased unit within a complex. 16
Biggest changeOwned or Leased Milwaukee, Wisconsin Corporate headquarters and manufacturing 345,123 Owned Juarez, Chihuahua Mexico Manufacturing 169,926 Owned Juarez, Chihuahua Mexico Manufacturing 77,527 Owned Juarez, Chihuahua Mexico Manufacturing 114,841 Owned Leon, Mexico Manufacturing 130,532 Owned El Paso, Texas Distribution warehouse 114,715 Leased ** Auburn Hills, Michigan Sales and engineering 62,736 Owned Seoul, South Korea Sales and engineering 2,859 Leased ** ** Leased unit within a complex.
ITEM 2. P ROPERTIES We have five manufacturing plants, one warehouse, and one sales office. These facilities are described as follows: Location Type Sq. Ft.
ITEM 2. P ROPERTIES We have five manufacturing plants, one warehouse, and two sales offices. We believe these facilities are well maintained and in good operating condition and are sufficient to meet our current needs. These facilities are described as follows: Location Type Sq. Ft.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. L EGAL PROCEEDINGS In the normal course of business we may be involved in various legal proceedings from time to time. We do not believe we are currently involved in any claim, action or proceeding the ultimate disposition of which would have a material adverse effect on our financial statements. ITEM 4.
Biggest changeITEM 3. L EGAL PROCEEDINGS In the normal course of business we may be involved in various legal proceedings. We do not believe we are currently involved in any claim, action or proceeding of which the ultimate disposition would have a material adverse effect on our financial condition, results of operations or cash flows. 14 ITEM 4.
MINE SAF ETY DISCLOSURES None. 17 PART II
MINE SAF ETY DISCLOSURES Not applicable. 15 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NASDAQ Global Market under the symbol “STRT.” Registered shareholders of record at June 30, 2024, were 800.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NASDAQ Global Market under the symbol “STRT.” Registered shareholders of record at June 29, 2025, were 756.
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The Company’s Board of Directors authorized a stock repurchase program on October 16, 1996, and the program was publicly announced on October 17, 1996. Since inception of the stock repurchase program, the Board of Directors has periodically increased the number of shares authorized for repurchase under the program.
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The number of stockholders of record is based upon the actual number of holders registered on this date and does not include holders of common stock in “street name” by brokers or other entities on behalf of stockholders. ITEM 6. [RESERVED] 16
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At June 30, 2024, the number of shares of the Company’s common stock authorized for repurchase under the program totaled 3,839,395. The program currently authorizes the repurchase of the Company’s common stock from time to time, directly or through brokers or agents, and has no expiration date.
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Over the life of the repurchase program through June 30, 2024, a total of 3,655,322 shares have been repurchased at a cost of approximately $136.4 million. No shares were repurchased during the fiscal year ended June 30, 2024. ITEM 6. [RESERVED] 18

Item 7. Management's Discussion & Analysis

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

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Biggest changeCash Flow Analysis Years Ended June 30, 2024 July 2, 2023 Cash Flows from (millions of dollars): Operating Activities $ 12.3 $ 10.1 Investing Activities (7.8 ) 8.9 Financing Activities — (7.4 ) $ 4.5 $ 11.6 Cash flow from operating activities increased $2.2 million between years as the impact of increased profitability between years, as previously discussed, was offset by a net increase in working capital.
Biggest changeThe following table summarizes our cash flows provided by (used in) operating, investing and financing activities (in millions): Years Ended June 29, 2025 June 30, 2024 Cash flows from: Operating activities $ 71.7 $ 12.3 Investing activities (7.2 ) (7.8 ) Financing activities (4.9 ) — Effect of exchange rate changes on cash (0.4 ) 0.3 Net increase in cash and cash equivalents $ 59.2 $ 4.8 Cash flow from operations improved to $71.7 million, from $12.3 million in the prior year.
Warranty Reserve – We have a warranty reserve recorded related to our exposure to warranty claims in the event our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty reserve balance involves judgment and estimates.
Warranty We have a warranty reserve recorded related to our exposure to warranty claims in the event our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty reserve balance involves judgment and estimates.
Our reserve estimate is based on an analysis of historical warranty data as well as current trends and information. Actual warranty costs might differ from estimates due to the level of actual claims varying from our claims experience and estimates and final negotiations and settlements reached with our customers.
Our reserve estimate is based on an analysis of historical warranty data as well as current trends and information. Actual warranty costs might differ from estimates due to the level of actual claims varying from our historical claims experience and estimates and final negotiations and settlements reached with our customers.
Therefore, future actual claims experience could result in changes in our estimates of the required reserve. Sensitivity of potential warranty or product recall claims is dependent on the respective customer platform, volumes, production years and product content. We have product recall insurance once a recall claim exceeds $2.5 million with a limit of $30 million.
Therefore, future actual claims experience could result in changes in our estimates of the required reserve. Sensitivity of potential warranty claims is dependent on the respective customer platform, volumes, production years and product content.
Credit Facilities STRATTEC has a $40 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $20 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The ADAC-STRATTEC Credit Facility borrowing limit decreases to $18 million on August 1, 2025.
Credit Facilities The Company has a $40 million secured revolving credit facility (the “Strattec Credit Facility”) with BMO Harris Bank N.A., while the joint venture has a $20 million secured revolving credit facility (the “ADAC-Strattec Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by the Company.
Our 2024 effective tax rate was reduced by $1.2 million due to changes in the estimate of our 2023 foreign tax credits associated with the sale of our interest in VAST LLC.
Additionally, the 2024 effective tax rate was favorably impacted by changes in the estimate of our 2023 foreign tax credits associated with the sale of our interest in a prior joint venture.
Shares authorized for buy back under the program totaled 3,839,395 at June 30, 2024. A total of 3,655,322 shares have been repurchased over the life of the program through June 30, 2024, at a cost of approximately $136.4 million. No shares were repurchased during fiscal 2024 or 2023.
A total of 3,655,322 shares have been repurchased over the life of the program through June 29, 2025, at a cost of approximately $136.4 million or an average price of $37.32 per share. Currently, 184,073 shares remain available to be repurchased under the program. No shares were repurchased during fiscal 2025 or 2024.
Net cash used in investing activities of $7.8 million during 2024 included capital expenditures of $9.8 million in support of requirements for new product programs and the upgrade and replacement of existing equipment partially offset by additional proceeds from the sale of our interest in VAST LLC of $2.0.
Capital expenditures to support new product programs and the upgrade and replacement of existing equipment were $7.2 million in the current year period compared to $9.8 million in the prior year period. The prior year also included $2.0 million in proceeds received from the sale of our interest in a previous joint venture.
The payment, which is expected to be made during our fiscal 2025, is expected to total approximately $1.9 million. We anticipate payments of approximately $4.5 million to associates in connection with our incentive bonus plan during the first quarter of our fiscal 2025 related to bonuses earned in our fiscal 2024.
For further information related to our unrecognized tax benefits, see Note 6, "Income Taxes," for additional information. Other Cash Requirements We anticipate payments of $10.0 million to associates in connection with our incentive bonus plan during the first quarter of fiscal 2026 related to bonuses earned in fiscal 2025.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Discussion and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s accompanying Financial Statements and Notes thereto included in this Form 10-K. Unless otherwise indicated, all references to years or quarters refer to fiscal years or fiscal quarters of STRATTEC.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis should be read in conjunction with the accompanying audited consolidated financial statements and notes. Business Overview Strattec Security Corporation is a leading global manufacturer and provider of highly engineered advanced automotive access and security products and solutions.
We also have an operating lease for our El Paso, Texas finished goods and service parts distribution warehouse, which has a term in excess of one year. We also have purchase commitments related to zinc and other purchased parts.
We have an operating lease for our El Paso, Texas distribution warehouse, which has a term in excess of one year. Refer to required future payments under the lease in Note 5, "Leases". Critical Accounting Estimates We prepare our consolidated financial statements in conformity with U.S. GAAP.
Additional repurchases may occur from time to time and are expected to continue to be funded by cash flow from operations and current cash balances. 24 Other Cash Requirements In connection with the June 30, 2023 sale of our interest in VAST LLC to WITTE Automotive, we will be required to pay nonresident capital gain tax in China.
Additional repurchases may occur from time to time and are expected to be funded by cash flow from operations and current cash balances.
There were no outstanding borrowings under the STRATTEC Credit Facility as of June 30, 2024 or July 2, 2023. The average outstanding borrowings and weighted average interest rate on the STRATTEC Credit Facility loans were approximately $33,000 and 8.5 percent, respectively, during 2024.
Availability under the ADAC-Strattec Credit Facility is reduced to $18 million on August 1, 2025. There were no outstanding borrowings and no interest due on the Strattec Credit Facility and $8 million drawn on the ADAC-Strattec Credit Facility as of June 29, 2025.
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Executive Overview Historically, traditional domestic automotive OEMs (General Motors, Ford and Stellantis) have comprised a majority of our total net sales. During the past two decades, these customers have lost North American market share to New Domestic automotive manufacturers (primarily Japanese and Korean automotive manufacturers).
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Products include locks & locksets, vehicle start systems, engineered latches, power access solutions, door handles, keys & fobs and other vehicle access products. While the Company serves major automotive OEMs globally, the majority of sales are to the three largest automobile original equipment manufacturers in North America.
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In addition, our financial performance depends in large part on conditions in the North American automotive industry, which in turn, are largely dependent upon the U.S. economy. During fiscal years 2024 and 2023, the traditional domestic automotive OEMs represented 66 percent of our total net sales.
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Current Business Update Our financial results for fiscal 2025 represented a significant improvement over prior year and included $565.1 million in sales (+5.1% increase year-over-year) and $18.7 million in net income attributable to Strattec (or $4.58 per share compared to $4.07 per share in the prior year).
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Fiscal 2024 net sales were $537.8 million compared to $492.9 million in fiscal 2023. $32.7 million of the $44.9 million net sales increase was driven by net price increases to our major OEM customers.
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Cash flow from operations also increased year-over-year from $12.2 million in fiscal 2024 to $71.7 million in fiscal 2025. As we look forward and navigate macroeconomic challenges and fluctuating OEM production volumes, our operational discipline, product portfolio refinement, and cost control measures position us to continue to drive long-term shareholder value.
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When excluding this pricing effect, underlying sales increased by $12.2 million, up 2.5% over the prior year, largely reflecting the launch of new customer programs in the latter half of the fiscal year.
Added
Market Demand Volatility in the North American automotive industry is driven by supply chain disruptions, global inflation, thinning labor availability, rising global commodity costs and a changing global trade and geopolitical climate. These macro conditions, coupled with changes in production volumes by OEMs in response to new vehicle consumer demand, impact our sales and profitability levels.
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The $32.7 million of aforementioned net price increase was composed of $9.7 million one-time retroactive pricing that is not expected to recur, and $23.0 million in ongoing increases in current part prices to our customers.
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We delivered 5% sales growth in fiscal 2025, the result of new program launches, pricing actions and increased volumes on the platforms we serve.
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In addition, we settled negotiations with certain key suppliers and paid $5.7 million in higher prices during the year, of which $1.7 million relates to one-time retroactive pricing with the remaining $4.0 million attributable to higher supplier prices on an ongoing basis.
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However, based on recent third party industry projections, it is expected that North American light vehicle production will be flat over the next several years with fiscal 2026 OEM production levels forecasted to be down approximately 5-6%, with a recovery in fiscal 2027 and 2028.
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The net margin result of both customer and supplier changes in price represented a $27.0 million net margin improvement in fiscal 2024, comprised of $8.0 million of nonrecurring one-time pricing and $19.0 million of ongoing pricing.
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Lower near term North American light vehicle production estimates, which are subject to change, are a result of recent tariff uncertainties and related demand impacts, coupled with a lower number of scheduled new platform launches by our addressable customers.
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These net margin improvements surpassed the higher end of our target ranges of $6.0 million and $15.0 million for one-time and ongoing net pricing respectively, which were provided in the fiscal 2024 Outlook in our 2023 Form 10-K. During fiscal 2024, our cost of sales performance proved challenging.
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Trade Environment & Tariffs In the second half of fiscal 2025 the United States government announced broad tariffs on goods imported into the U.S. from numerous countries, with certain exemptions such as USMCA-compliant imports. In response, multiple nations have countered with reciprocal tariffs and other actions.
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Despite favorability in our raw materials costs, which recovered from elevated levels in fiscal 2023, and improved efficiency of our Mexican operations through a salaried staff reduction in the first quarter and production efficiencies implemented throughout the year, our overall cost of sales performance deteriorated.
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Since that time, reciprocal tariffs have continued to evolve and the fact pattern remains uncertain. Like other automotive suppliers, we source raw materials and components from a global supply chain with final assembly for our products completed in our Mexico operations.
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Factors driving higher costs in our manufacturing operations were primarily: • a weakened U.S. dollar against the Mexican peso, raising the cost of our Mexican operations • higher Mexican labor wages due to government-mandated minimum wage increases • higher shipping costs primarily due to expedited shipments related to the launch of new product programs Sales, engineering and administrative expenses decreased in fiscal 2024, primarily due to historically high engineering cost reimbursements from our customers, offset by expenses related to the company bonus plan and the transition of our Chief Executive Officer position.
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We ship approximately 65% of our sales (the majority of which are USMCA compliant) to customer production sites in the United States, with the balance shipped to other countries.
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Our improved operating performance enabled us to achieve net income attributable to STRATTEC of $16.3 million in fiscal 2024 compared with a net loss attributable to STRATTEC of $6.7 million in fiscal 2023. Based on July 2024 projections from our third-party forecasting service, S&P Global, North American light vehicle production is forecasted to grow modestly between 2024 and 2028.
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We continue to monitor the dynamic global trade environment and are taking actions to mitigate the cost impact of additional tariffs and understand any associated changes in customer demand and production build schedules.
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Model year 2024 preliminary North American vehicle build was 15.8 million. S&P Global currently expects 2025 model year vehicle build to remain at 15.8 million vehicles, growing to 16.2 million vehicles in 2026 and then to 16.4 million vehicles for 2027 and 2028.
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Prior to mitigation efforts, we estimate that the annual impact of the recently enacted tariffs as of August 2025 is a $5 -$7 million increase in our cost of goods sold. We have already mitigated a majority of the cost increase through changes in our global supply chain, pass through of costs to customers and changes in our logistics processes.
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The North American vehicle build forecasts for our primary customers (Ford, General Motors and Stellantis) project a modest decline from 6.7 million vehicles in 2024 to 6.5 million vehicles in 2025 and then an increase to 6.9 million vehicles in model year 2026, stabilizing at that level for model years 2027 and 2028.
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We will continue to pursue commercial recoveries in an effort to fully offset the cost increase. Global Conditions Due to our operations in Mexico, our financial results are impacted by labor inflation, the result of government mandated minimum wages, and we have exposure to changes in foreign currency exchange rates.
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In an effort to increase our sales, we will continue pursuing opportunities to expand our offerings with existing and new customers.
Added
We strive to mitigate the impact of these cost increases through supply chain and manufacturing efficiencies, strategic pricing and peso forward contracts. During fiscal 2025 we have taken actions to improve our cost structure, including a restructuring of our Milwaukee and Mexico operations. The restructuring activities are expected to generate approximately $5 million of annual cost reductions.
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These forecasts are subject to variability based upon a number of factors, including the overall North American economy, current employment levels, availability and cost of consumer credit, home equity values, fuel prices, changes in customer vehicle and option preferences, product quality issues, including those related to recall and product warranty coverage issues, and other key factors that we believe could determine whether consumers can or will purchase new vehicles or particular brands. 19 Results of Operations 2024 Compared to 2023 Years Ended June 30, 2024 July 2, 2023 Net Sales (millions of dollars) $ 537.8 $ 492.9 Net Sales to each of our customers or customer groups in the current year and prior year were as follows (millions of dollars): Years Ended June 30, 2024 July 2, 2023 General Motors Company $ 163.1 $ 150.3 Ford Motor Company 114.9 96.6 Stellantis 77.7 78.1 Tier 1 Customers 77.5 73.3 Commercial and Other OEM Customers 58.9 56.3 Hyundai / Kia 45.7 38.3 Total $ 537.8 $ 492.9 The year-over-year sales increase of $44.9 million reflects net price increases from our major OEM customers of $32.7 million of which $23.0 million is attributable to ongoing increases in current part prices and $9.7 million relates to one-time retroactive price increases for parts shipped in the prior year for which the net price increase was agreed to during the current year.
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Business Transformation Our strategic priority is to execute on a business transformation to strengthen the Company’s profitability and deliver sustainable sales growth. We expect to improve our business with upgraded systems and processes, modernization of our support functions and a focus 17 on productivity and efficiencies in our manufacturing operations.
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In addition to the net price increases, the following items specifically impacted sales to the noted customer groups between years: - Sales to General Motors Company were favorably impacted by new door handle business supplied on the Chevrolet Equinox EV. - Sales to Ford Motor Company were positively impacted by added power end gate content we supply on the F-Series Super Duty Pickup and by new tailgate latch content supplied on the F-Series Pickups. - Sales to Stellantis were negatively impacted by reduced customer vehicle production volumes as well as reduced content we supply for the Dodge Ram Pickup and several passenger car programs ending. - Sales to Tier 1 Customers improved in the current year compared to the prior year due to new door hardware content on the F-Series Super Duty Pickup, which is sold to a Tier 1 customer. - Sales to Commercial and Other OEM Customers, which are comprised of aftermarket products and vehicle access control products, such as latches, fobs, driver controls and door handles, were positively impacted by sales for new business awarded from Aston Martin. - Sales to Hyundai / Kia were positively impacted by an overall increase in customer vehicle production volumes between years.
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We believe this will result in an optimized cost structure and consistent cash generation through improved working capital velocity and efficient asset utilization. In the short term, cash generated from our operations will be reinvested in our business to fund our transformational efforts and growth initiatives.
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Cost of goods sold in the current year and prior year were as follows (millions of dollars): Years Ended June 30, 2024 July 2, 2023 Millions of Dollars Percent of Net Sales Millions of Dollars Percent of Net Sales Direct Material Costs $ 301.7 56.1 % $ 295.6 60.0 % Labor and Overhead Costs 170.6 31.7 % 155.2 31.5 % Total Cost of Goods Sold $ 472.3 $ 450.8 Prior year reclassifications have been made for consistency with current year presentation.
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To drive organic growth, we will leverage our technical engineering expertise, market-leading positions and strong customer relationships to generate innovative solutions and capture more content on current platforms, win new platforms with current customers, gain new customers both domestically and abroad and build opportunities in the broader transportation industry.
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Total cost of goods sold increased $21.5 million between years. The year-over-year increase in direct material costs of $6.1 million was the result of increases in sales volumes and content we supply, as discussed above, and $5.7 million of negotiated material price increases paid to key suppliers.
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Analysis of Results of Operations Year ended June 29, 2025 (fiscal 2025) compared with the year ended June 30, 2024 (fiscal 2024) The Company's consolidated results of operations for the years ended June 29, 2025 and June 30, 2024 were as follows: Years Ended Change June 29, 2025 June 30, 2024 $ % Net sales $ 565,066 $ 537,766 $ 27,300 5 % Direct material costs 315,320 301,660 13,660 5 % Labor and overhead costs 165,169 170,638 (5,469 ) (3 %) Cost of goods sold 480,489 472,298 8,191 2 % Gross profit 84,577 65,468 19,109 29 % Gross margin 15.0 % 12.2 % 280 bp Selling, administrative and engineering expenses 61,793 47,654 14,139 30 % Income from operations 22,784 17,814 4,970 28 % Operating margin 4.0 % 3.3 % 70 bp Interest income 2,039 572 1,467 256 % Interest expense (1,007 ) (900 ) (107 ) 12 % Other income, net 820 2,717 (1,897 ) (70 %) Income before income taxes and non-controlling interest 24,636 20,203 4,433 22 % Income tax expense 5,717 3,775 1,942 51 % Net income 18,919 16,428 2,491 15 % Net income attributable to non-controlling interest 234 115 119 103 % Net income attributable to Strattec 18,685 16,313 2,372 15 % Earnings per share attributable to Strattec: Basic $ 4.64 $ 4.10 $ 0.53 13 % Diluted $ 4.58 $ 4.07 $ 0.51 12 % Net sales in fiscal 2025 totaled $565.1 million, representing an increase of $27.3 million, or 5%, compared to fiscal 2024 net sales of $537.8 million.
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Price increases paid to suppliers attributed to ongoing operations totaled $4.0 million while the remaining $1.7 million related to one-time retroactive price increases. The impact of content and material price increases was partially offset by reduced zinc costs of approximately $3.1 million in the current year as compared to the prior year.
Added
The year-over-year increase was driven by $15.9 million of net new program launches as well as favorable mix. Additionally, higher production volumes on existing platforms and customer inventory builds increased sales by $13.9 million. Sales growth was broad based across most product categories. Sales volume increases more than offset a year-over-year reduction in pricing of $2.6 million.
Removed
The year-over-year increase in labor and overhead costs of $15.4 million was impacted by the following: Cost Increases: - The U.S. dollar value of our Mexican operations was negatively impacted by approximately $8.5 million in the current year as compared to the prior year due to an unfavorable Mexican peso to U.S. dollar exchange rate between years.
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The reduction in pricing is a result of the prior year period including $9.7 million of one-time retroactive pricing recoveries, which was partially offset by current year margin accretive pricing. Material costs increased $13.7 million on higher production levels while labor and overhead costs declined $5.5 million.
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The 20 average U.S. dollar / Mexican peso exchange rate decreased to approximately 17.13 pesos to the dollar for the year from approximately 18.98 pesos to the dollar in the prior year. - Mexico wages and benefits increased $6.6 million in the current year as compared to the prior year as a result of annual wage increases, including January 1, 2024 and January 1, 2023 government mandated minimum wage increases. - Freight costs increased $4.1 million between years due to an increase in shipments from foreign vendors, a change in shipping terms with a major supplier that occurred in June 2023, and an increase in expedited shipments. - The current year includes expense provisions of $2.7 million under our incentive bonus plan.
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Reduced conversion costs reflect a $13.6 million benefit from changes in foreign currency exchange rates a $1.4 million reduction in depreciation expense, $1.5 million of incremental tooling gains and a $1.4 million benefit from completed restructuring actions in the second half of fiscal 2025.
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The prior year includes no bonus expense. - The current year includes severance costs of $220,000 related to a realignment of our Mexican workforce.
Added
These benefits were partially offset by incremental conversion costs due to higher sales volumes, a $6.2 million increase in Mexico labor costs, $2.5 million of tariff costs and additional provisions for annual bonus expense of $1.6 million. Gross profit was $84.5 million in fiscal 2025, compared to $65.5 million in the comparable prior year period.
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Cost Decreases: - Mexico wages and benefits decreased by $1.5 million due to a September 1, 2023 salaried staff reduction in Mexico and current year production efficiencies that controlled headcount and hours worked. - Royalty costs paid on sales of certain aftermarket products decreased $0.9 million in the year as compared to the prior year due to lower volumes in these aftermarket products.
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Gross profit margin improved year-over-year from 12.2% to 15.0% as a result of the strengthening of the U.S. dollar, improved leverage of our fixed cost structure on higher sales volumes and the benefits of pricing and restructuring actions. Selling, administrative, and engineering expenses increased $14.1 million year-over-year.
Removed
The net unfavorable impact of specific labor and overhead costs noted above was partially offset by more favorable absorption of our fixed overhead costs in the current year as compared to the prior year due to higher production volumes driven by an increase in finished goods inventory during the year and increased sales volumes.
Added
The prior year included a one-time $4.8 million recovery of engineering, design and development costs. Increased costs in the current year were the result of continued investments in the business, a $5.2 million increase in incremental incentive compensation and $1.0 million in business transformation 18 related costs.
Removed
Years Ended June 30, 2024 July 2, 2023 Gross Profit (millions of dollars) $ 65.5 $ 42.2 Gross Profit as a percentage of net sales 12.2 % 8.6 % Gross profit margin improvement between years was driven by pricing relief achieved during the current year as discussed above.
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Both fiscal years included non-recurring executive transition expenses related to leadership changes, totaling $2.1 million in fiscal 2025 and $1.1 million in fiscal 2024. Interest income increased $1.5 million due to increased levels of cash and cash equivalents, which are invested in overnight money market funds.
Removed
The impact of one-time retroactive pricing in the current year increased the gross profit margin percentage by 1.3 percentage points.
Added
Other income, net decreased from $2.7 million in fiscal 2024 to $0.8 million in fiscal 2025, the result of changes in foreign currency exchange rates and increased non-service post-employment costs. The effective income tax rate was 23.2% and 18.7% for fiscal 2025 and 2024, respectively.
Removed
Additionally, favorable impacts of ongoing customer price increases, reduced zinc costs, favorable absorption, production efficiencies in Mexico and reduced royalty costs were partially offset by an unfavorable U.S. dollar to Mexican peso exchange rate, wage increases in Mexico, and increased freight, bonus, and severance costs, all as discussed above.
Added
The effective rate for both periods differs from the statutory rate because of the foreign rate differential, state income taxes, research and development tax credits, limitations on the utilization of foreign tax credits and non-deductible items.
Removed
Engineering, Selling and Administrative Expenses in the current year and prior year were as follows: Years Ended June 30, 2024 July 2, 2023 Expenses (millions of dollars) $ 47.7 $ 48.2 Expenses as a percentage of net sales 8.9 % 9.8 % Engineering, selling and administrative expenses were impacted by the following: Cost Decrease: - Current year costs decreased $3.2 million in comparison to the prior year due to an increase in customer billings for the reimbursement of engineering development costs.
Added
Fiscal 2025 net income attributable to Strattec increased $2.4 million, or 15% from fiscal 2024, driven primarily by net sales growth and gross margin enhancement, partially offset by higher selling, administrative and engineering expenses due to investments in the business, incentive compensation costs and prior year favorable recoveries on engineering, design and development costs.
Removed
Cost Increase: - The current year includes one-time charges of $1.0 million associated with the transition of our Chief Executive Officer position. - The current year includes expense provisions of $1.9 million under our incentive bonus plan. The prior year includes no bonus expense.
Added
Liquidity and Capital Resources At June 29, 2025, we had $84.6 million of cash and cash equivalents, of which $4.8 million was held by our foreign subsidiaries and $79.8 million was held domestically. Excess cash is held in money market funds.
Removed
Income from operations in the current year was $17.8 million compared to loss from operations of $6.1 million in the prior year.
Added
The increase in cash provided by operating activities was due to reduced purchasing levels on higher sales, collection of accounts receivable and the recovery of pre-production costs. Net cash used in investing activities was $7.2 million during fiscal 2025 compared to $7.8 million in the prior year period.
Removed
This change between years was the result of an increase in sales in the current year as compared to the prior year along with a reduction in engineering, selling and administrative expenses partially offset by an increase in cost of goods sold, all as discussed above. Effective June 30, 2023, STRATTEC sold its one-third interest in VAST LLC to WITTE.
Added
Net cash used in financing activities resulted from the repayment of $5 million under our joint venture revolving credit agreement during fiscal 2025. Primary Working Capital Management We use primary working capital as a percentage of sales (PWC %) as a key metric of working capital management.
Removed
Refer to the discussion of the Equity Restructuring Agreement within Joint Ventures and Majority Owned Subsidiaries included in the Notes to Financial Statements within this Form 10-K for additional information regarding the sale. The equity loss of joint ventures was $331,000 in the current year compared to equity earnings of joint ventures of $1.6 million in the prior year.
Added
We define this metric as the sum of net accounts receivable and net inventory less accounts payable, divided by the past three months sales annualized.
Removed
The current year loss was the result of additional professional fees incurred related to the sale of STRATTEC's investment in VAST LLC. The $331,000 loss is an adjustment to the gain on sale of VAST LLC, which was recorded in the prior year. Our adjusted loss to date on the sale of VAST LLC totals $221,000.
Added
The following table shows a comparison of primary working capital (dollars in millions): June 29, 2025 PWC % June 30, 2024 PWC % Accounts receivable, net $ 102 17 % $ 99 17 % Inventory, net 65 11 % 82 14 % Accounts payable (66 ) (11 %) (55 ) (10 %) Net primary working capital $ 101 17 % $ 126 22 % Cash Requirements and Contractual Obligations Future Capital Expenditures We anticipate capital expenditures will be approximately $13 million in fiscal 2026 in support of requirements for new product programs 19 and the upgrade and replacement of existing equipment.
Removed
Prior year equity earnings includes STRATTEC's one-third of a loss on disposal of VAST LLC's investment in Brazil of $531,000 and a gain on sale of STRATTEC's one-third share of VAST LLC of $110,000. 21 Included in other income (expense), net in the current year and prior year were the following items (thousands of dollars): Years Ended June 30, 2024 July 2, 2023 Foreign currency transaction gain (loss) $ 2,153 $ (2,935 ) Rabbi Trust Assets gain 211 202 Realized and unrealized gain on Mexican peso forward contracts, net 885 1,022 Pension and postretirement plans cost (395 ) (722 ) Other 194 255 $ 3,048 $ (2,178 ) - Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets and liabilities held by our Mexican subsidiaries. - The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan.

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