STRATTEC SECURITY CORP
For the period ended Mar 30, 2025. Filed May 9, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 30, 2025 · Filed May 9, 2025
STRT$61.96+2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-12-29; filed 2025-02-07.
0000950170-25-015878
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-30; filed 2025-05-09.
0000950170-25-067538
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 47 previous paragraphs and 50 current paragraphs.
12 unchanged; 28 reworded; 8 added; 7 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The United States government has recently announced additional 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. 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. We ship approximately 65% of our sales (majority of which are USMCA compliant) to customer production sites in the United States, with the balance shipped to other countries. 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. Prior to any mitigation efforts, we estimate that the annual impact of the incremental tariffs is a $9-$12 million increase in our cost of goods sold. Mitigation actions include, but are not limited to, changes in our global supply chain, pass through of costs to customers and changes in our logistics processes. However, our inability to enact these, and other mitigation actions, may have a material adverse impact on sales, earnings and liquidity (refer to Part II, Item 1A. Risk Factors in this Form 10-Q).
Current report
Third quarter fiscal 2025 net sales were $144.1 million, an increase of $3.3 million (2.3%) compared to the prior year third quarter. Net sales increased due to $2.5 million of price increases, favorable mix of $2.2 million and net new program launches of $1.6 million, which more than offset $3.0 million in lower sales volumes on existing platforms. Net sales to our customers in the third quarter were as follows (in millions):
Current report
Ford Motor Company net sales grew 6% due to increased shipments and both increased content per platform and higher value content related to power tailgate and related latch products.
Current report
Stellantis net sales increased 14% primarily due to new key and lockset content on the Dodge Ram Heavy Duty truck platform.
Current report
Tier 1 customer sales decreased 6% due to reduced shipments of door handle products.
Current report
Material costs decreased $1.1 million year-over-year on lower production levels and favorable product mix. Labor and overhead costs decreased $4.0 million year-over-year reflecting a $4.4 million benefit from changes in foreign currency exchange rates and a $1.1 million net reduction in manufacturing labor costs from lower headcount and related fringe benefit costs. Favorable changes in foreign currency exchange rates and lower labor costs more than offset the $1.3 million impact of merit and government mandated minimum wages increases in our Mexico operations and the $0.8 million increase in tariffs resulting from recent changes in U.S. regulations.
Current report
Engineering, selling and administrative expenses were $16.0 million in the third quarter of fiscal 2025, compared to $12.7 million in the prior year period. Increased expenses included $1.1 million of business transformation and restructuring costs, $1.2 million of incremental equity compensation and annual bonus expense and higher third party engineering spend of $0.4 million reflecting the timing of development projects.
Current report
Despite higher accounts receivable on increased sales, a $6.1 million reduction in inventory levels and a $16.7 million increase in accounts payable drove the improvement in PWC% to 19% at the end of the third quarter of fiscal 2025.
Removed paragraphs (7)
Previous report
Second quarter fiscal 2025 net sales were $129.9 million, an increase of $11.4 million (9.6%) compared to the prior year second quarter. Net sales growth was broad based across most of our product portfolio and was driven by net new program launches ($6.0 million) and favorable mix. In addition, net sales on existing platforms increased $7.3 million as a result of customers building inventory levels, the prior year second quarter reflecting increased customer plant shutdowns and slightly higher production volumes. These volume increases more than offset a year-over-year reduction in pricing. The reduction in pricing is a result of the prior year second quarter including $3.9 million of one-time retroactive pricing recoveries, which was partially offset by current quarter margin accretive pricing of $0.6 million. Net sales to our customers in the second quarter were as follows (in millions):
Previous report
Ford Motor Company net sales grew 18% due to increased volume of key & lockset products and new power end gate and latch product launches on F-Series and Super Duty trucks.
Previous report
Stellantis net sales declined 11% a result of reduced demand for key & lockset products in response to dealer inventory levels and customer demand, partially offset by increased sales for power access solutions for the Chrysler Pacifica minivan.
Previous report
Net sales to all other customers increased due to new product programs and increased volume.
Previous report
Material costs increased $6.9 million year-over-year on higher production levels and $0.7 million of additional costs associated with excess and obsolete inventory. Labor and overhead costs increased $0.9 million year-over-year, the net result of higher conversion costs, partially offset by a $3.5 million benefit from changes in foreign currency exchange rates associated with our Mexican operations. Incremental conversion costs were driven by higher sales volumes, a $1.4 million increase in government mandated Mexico labor costs and provisions for annual bonus expense of $0.6 million (no provision in the prior year), offset by an $0.8 million reduction in depreciation expense.
Previous report
Engineering, selling and administrative expenses were $15.0 million in the second quarter of fiscal 2025, compared to $13.4 million in the prior year period. Increased expenses are associated with continued investments in the business, including business transformation costs of $0.2 million, $0.3 million of incremental equity compensation expense, an annual bonus provision of $0.8 million (no provision in the prior year) and a $0.3 million restructuring charge associated with the elimination of the third shift of our Milwaukee operations. These cost increases were partially offset by lower third party engineering spend of $0.8 million based on the timing of development projects. Both the current year and prior year second quarter include non-recurring executive transition costs of $1.2 million and $1.0 million, respectively.
Previous report
Net sales to all other customers increased due to new product programs and increased volume.
Reworded paragraphs (28)
Previous wording
In conjunction with a change in leadership in 2024, we are in the process of developing a strategy to strengthen the Company’s profitability and deliver sustainable sales growth. We expect to improve our business with upgraded systems and processes and a focus on productivity and efficiencies in our manufacturing operations. We are reviewing our product portfolio, focusing on improving our working capital velocity and standardizing/modernizing our support functions. We believe this optimized cost structure will allow us to capitalize on our technical engineering expertise, market leading positions and strong customer relationships to generate innovative solutions and predictable sales growth with new and existing customers.
Current wording
In conjunction with a change in leadership in 2024, we are in the process of developing a strategy to strengthen the Company’s profitability and deliver sustainable sales growth. We expect to improve our business with upgraded systems and processes and a focus on productivity and efficiencies in our manufacturing operations. We are reviewing our product portfolio, focusing on improving our working capital management and modernizing our support functions. We believe this optimized cost structure will allow us to capitalize on our technical engineering expertise, market leading positions and strong customer relationships to generate innovative solutions and predictable sales growth with new and existing customers.
Previous wording
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 geopolitical climate. These macro conditions, coupled with changes in production volumes by OEMs in response to new vehicle consumer demand impact our sales levels. It is expected that the North American automotive industry will grow modestly over the next several years. Despite short term softening of North American light vehicle production, we have delivered 6% sales growth over the first six months of fiscal 2025 as a result of new program launches and increased volumes on the platforms we serve. Although supply chain conditions have steadily improved and certain inflationary pressures have moderated, in the current year we continue to see material cost increases for certain commodities and electronics and higher logistics costs. In addition, a majority of our operations are in Mexico and therefore our financial results are impacted by labor inflation (government mandated increase in minimum wages) and we have exposure to changes in foreign currency exchange rates. We strive to mitigate the impact of these cost increases through supply chain and manufacturing efficiencies, strategic pricing and peso forward contracts. During the balance of fiscal 2025, we are focused on executing various initiatives to improve our cost structure, driving cash flow through improved asset and working capital utilization and securing new platforms to solidify future sales growth.
Current wording
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. 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 6-8%, with a recovery in fiscal 2027 and 2028. 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. Despite short term market softening, we have delivered 5% year-to-date sales growth, the result of new program launches, pricing actions and increased volumes on the platforms we serve.
Previous wording
Three months ended December 29, 2024 (second quarter fiscal 2025) compared with the three months ended December 31, 2023 (second quarter fiscal 2024)
Current wording
Three months ended March 30, 2025 (third quarter fiscal 2025) compared with the three months ended March 31, 2024 (third quarter fiscal 2024)
Previous wording
General Motors Company net sales increased 9% due to increased demand across all product categories driven by production volumes for full size SUVs and trucks, as well as the launch of a door handle program for the Equinox platform.
Current wording
General Motors Company net sales decreased 4% due to reduced shipments across all product categories, partially offset by the launch of a door handle program for the Equinox platform.
Previous wording
Hyundai Motor Group net sales increased 21% due to higher demand for power access solutions (on the Kia Carnival platform) to meet an increase in vehicle production builds.
Current wording
Hyundai Motor Group net sales increased 5% due to higher demand and inventory destocking in the prior year for power access products on the Hyundai Staria platform.
Previous wording
Second quarter fiscal 2025 gross profit was $17.2 million, compared to $13.5 million in the comparable prior year period. Despite favorable one-time pricing recoveries, net of supplier pass through requirements in the prior year, gross profit margin improved year-over-year from 11.4% to 13.2% as a result of the strengthening of the US dollar and improved leverage of our fixed cost structure on higher sales volumes.
Current wording
Third quarter fiscal 2025 gross profit was $23.1 million, compared to $14.7 million in the comparable prior year period. Gross profit margin improved year-over-year from 10.4% to 16.0% as a result of the strengthening of the US dollar, pricing actions, favorable product mix and improved leverage of our fixed cost structure.
Previous wording
Interest expense relates to outstanding borrowings under our joint venture credit facility and increased to $0.3 million in the second quarter from $0.2 million in the prior year due to increased interest rates.
Current wording
Interest expense relates to outstanding borrowings under our joint venture credit facility and was $0.2 million in the current and prior year quarter.
Previous wording
Investment income increased to $0.4 million in the second quarter from $0.1 million in the prior year reflecting increased levels of cash and cash equivalents, which are invested in overnight money market funds.
Current wording
Investment income increased to $0.5 million in the third quarter from $0.1 million in the prior year reflecting increased levels of cash and cash equivalents, which are invested in overnight money market funds.
Previous wording
Other expense, net was $0.5 million in the second quarter compared to other income, net of $1.1 million in the prior year. The change was primarily due to changes in foreign currency exchange rates and gains or losses on peso forward contracts.
Current wording
Other expense, net was $0.02 million in the third quarter compared to $0.2 million in the prior year. The reduction was primarily due to changes in foreign currency exchange rates and gains or losses on peso forward contracts.
Previous wording
The effective income tax rate was 27.0% and 24.0% for the first half of fiscal 2025 and 2024, respectively. The effective tax rate for both periods exceeds the U.S. federal statutory rate primarily because of the foreign rate differential, state income taxes, limitations on the utilization of foreign tax credits, non-deductible items and discrete items.
Current wording
The effective income tax rate was 22.4% and 32.7% for the third quarter of fiscal 2025 and 2024, respectively. The effective tax rate for the third quarter of fiscal 2024 was impacted by a shift in our global earnings mix. The effective tax rate for both periods exceeds the U.S. federal statutory rate primarily because of the foreign rate differential, state income taxes, limitations on the utilization of foreign tax credits, non-deductible items and discrete items.
Previous wording
Six months ended December 29, 2024 compared with the six months ended December 31, 2023
Current wording
Nine months ended March 30, 2025 compared with the nine months ended March 31, 2024
Previous wording
Net sales in the first half of fiscal 2025 were $269.0 million, an increase of $15.1 million (5.9%) compared to the prior year period. Net sales growth was driven by $15.4 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 $6.1 million. Sales increases more than offset a year-over-year reduction in pricing. The reduction in pricing is a result of the prior year period including $9.5 million of one-time retroactive pricing recoveries, which was partially offset by current year margin accretive pricing. Net sales to our customers in the first half of fiscal 2025 were as follows (in millions):
Current wording
Net sales in the nine months of fiscal 2025 were $413.1 million, an increase of $18.4 million, or 4.7% compared to the prior year period. Net sales growth was driven by $17.0 million of net new program launches as well as favorable mix. Additionally, higher production volumes on certain existing platforms and customer inventory builds increased sales by $3.0 million. Higher sales and $6.1 million of accretive pricing more than offset the benefit from the prior year period which had $9.9 million of one-time retroactive pricing recoveries. Net sales to our customers in the first nine months of fiscal 2025 were as follows (in millions):
Previous wording
General Motors Company net sales increased 6% primarily due to overall volume increases for full size SUVs and pickups as well as new door handle volume for the Equinox EV, which impact was partially offset by several lockset programs ending.
Current wording
General Motors Company net sales increased 2% primarily due to overall volume increases for full size SUVs and pickups as well as new door handle volume for the Equinox EV, which were partially offset by several key and lockset programs ending.
Previous wording
Ford Motor Company net sales grew 19% mostly due to increased volumes and new tailgate and power end gate content on the Ford F-Series and Super Duty trucks.
Current wording
Ford Motor Company net sales grew 14% mostly due to increased volumes and new tailgate and power end gate content on the Ford F-Series and Super Duty trucks.
Previous wording
Stellantis net sales declined 40% due to the combination of lower vehicle production volumes for several programs we supply, the end of several passenger car programs and reduced content on the Dodge Ram pickup.
Current wording
Stellantis net sales declined 23% due to the combination of lower vehicle production volumes for several programs and the end of several passenger car programs, partially offset by new content on the Dodge Ram Heavy Duty truck platform.
Previous wording
Hyundai Motor Group net sales increased 44% due to higher demand for power door products and an increase in inventory builds.
Current wording
Hyundai Motor Group net sales increased 29% due to higher demand for power sliding door products and an increase in OEM inventory levels.
Previous wording
Gross profit was $36.1 million in the first half of fiscal 2025, compared to $32.2 million in the comparable prior year period. Despite favorable one-time pricing recoveries (net of supplier pass through requirements) in the prior year, gross profit margin improved year-over-year from 12.7% to 13.4% as a result of the strengthening of the US dollar and improved leverage of our fixed cost structure on higher sales volumes.
Current wording
Gross profit was $59.2 million in the first nine months of fiscal 2025, compared to $46.9 million in the comparable prior year period. Despite favorable one-time pricing recoveries in the prior year, gross profit margin improved year-over-year from 11.9% to 14.3% as a result of the strengthening of the US dollar, pricing actions and improved leverage of our fixed cost structure on higher sales volumes.
Previous wording
Material costs increased $10.0 million year-over-year on higher production levels. Labor and overhead costs increased $1.2 million year-over-year. Excluding the $6.2 million benefit from changes in foreign currency exchange rates, conversion costs increased $7.4 million due to higher sales volumes, a $2.8 million increase in Mexico labor costs and provisions for annual bonus expense of $1.3 million, offset by a $1.5 million reduction in depreciation expense.
Current wording
Material costs increased $8.9 million year-over-year on higher production levels. Labor and overhead costs decreased $2.8 million year-over-year. Excluding the $10.6 million benefit from changes in foreign currency exchange rates, conversion costs increased $7.8 million due to higher sales volumes, a $3.1 million increase in Mexico labor costs, $1.2 million in increased tariff costs and increased provisions for annual bonus expense of $1.4 million, offset by a $1.8 million reduction in depreciation expense.
Previous wording
Engineering, selling and administrative expenses were $28.9 million in the first half of fiscal 2025, compared to $26.1 million in the prior year period. Increased expenses are associated with continued investments in the business, including additional executive transition costs of $1.1 million, an annual bonus provision of $1.7 million (no provision in the prior year) and a $0.3 million restructuring charge. These cost increases were partially offset by lower third party engineering spend of $1.0 million.
Current wording
Engineering, selling and administrative expenses were $44.9 million in the first nine months of fiscal 2025, compared to $38.8 million in the prior year period. Increased expenses include additional executive transition costs of $1.1 million, $0.6 million of incremental equity compensation expense, increased annual bonus provision of $2.3 million and $1.1 million of restructuring charges. These cost increases were partially offset by lower third party engineering spend of $0.6 million.
Previous wording
Interest expense relates to outstanding borrowings under our joint venture credit facility and increased to $0.6 million in the current year period from $0.4 million in the prior year due to increased interest rates.
Current wording
Interest expense relates to outstanding borrowings under our joint venture credit facility and was $0.8 million and $0.7 million in the current year period and prior year period, respectively.
Previous wording
Investment income increased to $0.8 million in the first half of fiscal 2025 from $0.2 million in the prior year reflecting increased levels of cash and cash equivalents, which are invested in overnight money market funds.
Current wording
Investment income increased to $1.3 million in the current year period from $0.3 million in the prior year period reflecting increased levels of cash and cash equivalents, which are invested in overnight money market funds.
Previous wording
Other expense, net was $0.4 million in the current year period compared to other income, net of $1.0 million in the prior year. The change was primarily due to changes in foreign currency exchange rates and gains or losses on peso forward contracts.
Current wording
Other expense, net was $0.4 million in the current year period compared to other income, net of $0.8 million in the prior year. The change was primarily due to changes in foreign currency exchange rates and gains or losses on peso forward contracts.
Previous wording
The effective income tax rate was 22.5% and 25.3% for the second quarter of fiscal 2025 and 2024, respectively. The effective tax rate for both periods exceeds the U.S. federal statutory rate primarily because of the foreign rate differential, state income taxes, limitations on the utilization of foreign tax credits, non-deductible items and discrete items.
Current wording
The effective income tax rate was 24.6% and 25.7% for the current year and prior year period, respectively. The effective tax rate for both periods exceeds the U.S. federal statutory rate primarily because of the foreign rate differential, state income taxes, limitations on the utilization of foreign tax credits, non-deductible items and discrete items.
Previous wording
At December 29, 2024, we had $42.6 million of cash and cash equivalents, of which $2.5 million was held by our foreign subsidiaries and $40.1 million was held domestically. Excess cash is held in money market funds. The following table summarizes our cash flows provided by (used in) operating, investing and financing activities (in millions):
Current wording
At March 30, 2025, we had $62.1 million of cash and cash equivalents, of which $2.0 million was held by our foreign subsidiaries and $60.1 million was held domestically. Excess cash is held in money market funds. The following table summarizes our cash flows provided by (used in) operating, investing and financing activities (in millions):
Previous wording
Cash flow from operations was $20.8 million for the first half of fiscal 2025, compared to a use of cash from operations in the prior year period. 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.
Current wording
Cash flow from operations was $41.5 million for the nine months of fiscal 2025, compared to a use of cash from operations in the prior year period. Fiscal 2025 year-to-date cash flow from operations is the result of cash earnings and a $17.5 million reduction in working capital, including reduced purchasing and inventory levels on higher sales, recovery of pre-production costs and extended payment terms with our suppliers.
Previous wording
Net cash used in investing activities was $3.0 million during the first half of fiscal 2025 compared to $2.4 million in the prior year period. Capital expenditures to support new product programs and the upgrade and replacement of existing equipment were $3.0 million in the current year period compared to $4.4 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.
Current wording
Net cash used in investing activities was $4.2 million during the first nine months of fiscal 2025 compared to $4.1 million in the prior year period. Capital expenditures to support new customer programs upgrades to our IT hardware and network environment and replacement and automation of manufacturing equipment were $4.2 million in the current year period compared to $6.1 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.
Previous wording
Net cash provided by financing activities resulted from purchases of common stock under our employee stock purchase plan. During the first half of fiscal 2025, we borrowed and repaid amounts under the joint venture revolving credit agreement for short term cash requirements.
Current wording
Net cash provided by financing activities resulted from the sale of common stock under our employee stock purchase plan. In addition, during the first nine months of fiscal 2025, we borrowed and repaid amounts under the joint venture revolving credit agreement for short term cash requirements.
Previous wording
At December 29, 2024, there were no borrowings outstanding under the $40 million STRATTEC revolving credit agreement and $13.0 million outstanding under the $20 million joint venture revolving credit agreement. The Company was in compliance with all covenants under its credit facilities at December 29, 2024. We believe that the revolving credit line, combined with our existing cash on hand and anticipated operating cash flows, will be adequate to meet operating, debt service and capital expenditure funding requirements for the foreseeable future.
Current wording
At March 30, 2025, there were no borrowings outstanding under the $40.0 million STRATTEC revolving credit agreement and $13.0 million outstanding under the $20.0 million joint venture revolving credit agreement. The Company was in compliance with all covenants under its credit facilities at March 30, 2025. We believe that the revolving credit line, combined with our existing cash and anticipated operating cash flows will be adequate to meet operating, debt service and capital expenditure funding requirements for the foreseeable future.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Given 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. 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 the elimination of a shift in our Milwaukee operations and a restructuring of our Mexico operations. The restructuring activities are expected to generate approximately $5 million of annual cost reductions.
Current report — wording carried from elsewhere
During the balance of fiscal 2025, we are focused on mitigating the impact of the additional tariffs, executing new initiatives to improve our cost structure, driving cash flow through improved asset and working capital utilization and securing new platforms to solidify future sales growth.