STRATTEC SECURITY CORP
For the period ended Sep 28, 2025. Filed Oct 31, 2025.
View on SEC.govAbout this filing
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.
Sep 28, 2025 · Filed Oct 31, 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 2025-03-30; filed 2025-05-09.
0000950170-25-067538
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-28; filed 2025-10-31.
0001193125-25-260138
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 50 previous paragraphs and 24 current paragraphs.
5 unchanged; 8 reworded; 10 added; 35 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 6 previous and 3 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 (10)
Current report
OPERATIONS
Current report
The Company's consolidated results of operations were as follows (in thousands):
Current report
First quarter fiscal 2026 net sales totaled $152.4 million, representing an increase of $13.3 million, or 10%, compared with the prior year first quarter. The year-over-year increase in net sales was primarily driven by $4.3 million of higher demand, $3.9 million of pricing, $3.0 million of favorable mix and content per vehicle and $2.1 million in net new program launches. Sales growth was primarily in our power access solutions, door handles & exterior trim and keys & locksets product lines.
Current report
Gross profit was $26.3 million in the first quarter fiscal 2026, compared with $18.9 million in the comparable prior year period. Gross profit margin improved year-over-year from 13.6% to 17.3%, a 370 basis point improvement, as a result of enhanced leverage of our fixed cost structure from higher volume combined with restructuring actions completed in the prior year as well as the benefits of pricing. Material costs increased $5.8 million on higher production levels while labor and overhead costs increased $0.1 million. Relatively flat year-over-year conversion costs reflect $1.6 million in labor cost savings (including benefits from previously completed restructuring actions), $0.5 million lower provision for annual bonuses and a gain on customer tooling programs. Offsetting headwinds included incremental tariff costs of $0.8 million, $1.1 million of higher Mexico labor costs and unfavorable changes in foreign currency exchange rates of $0.5 million.
Current report
Selling, administrative, and engineering expenses were 10.4% of sales for the three months ended September 28, 2025, compared with 10.0% in the prior year period. Fiscal 2026 first quarter expenses were $15.9 million, a $2.0 million increase year-over-year. Additional costs in the current quarter were the result of timing of outside service spend, a $0.5 million increase in equity compensation costs and continued investments in the business, including $0.9 million of incremental employee costs and $0.4 million of business transformation costs. The first quarter last year also included $0.9 million of executive transition costs, compared to $0.1 million in the current year.
Current report
Changes in Other (expense) income, reflect foreign currency transaction gains and losses, changes in the fair value of peso forward contracts and non-service post-employment costs. In the first quarter of fiscal 2026, non-service post-employment costs included a $0.6 million charge related to restructuring actions in our Mexico operations.
Current report
The effective income tax rate was 21.6% and 28.6% for the first quarter of fiscal 2026 and 2025, respectively. The effective tax rate for the three month period ended September 28, 2025 was consistent with the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally higher the U.S. federal statutory rate, partially offset by the recognition of U.S. research and development tax credits and discrete income tax benefits associated with share-based payments. The effective tax rate for the three months ended September 29, 2024 was higher than the US federal statutory rate as a result of profits generated in foreign jurisdictions (Mexico) which has a higher statutory income tax rate.
Current report
Cash flow from operations was $11.3 million, consistent with the prior year. Cash provided by operating activities for the first quarter of fiscal 2026 reflects cash earnings, partially offset by a $2.3 million increase in operating assets and liabilities. First quarter cash flow from operations in both periods reflects the payment of annual short-term incentive compensation earned in the prior year. Cash used in investing activities, which includes capital expenditures to support customer programs and modernization of equipment was $1.5 million during the first quarter of fiscal 2026 compared with $2.1 million in the prior year period. Net cash used in financing activities resulted from the repayment of $3.0 million under the joint venture revolving credit agreement during fiscal 2026 and the payment of $0.9 million for taxes withheld related to the vesting of share-based awards.
Current report
On October 27, 2025, the Company entered into a new revolving credit agreement BMO Harris N.A (“Amended & Restated Credit Agreement”), to replace the existing $40 million Strattec Credit Facility that was set to mature in August 2026. The Amended & Restated Credit Agreement provides for a $40 million revolving line of credit which matures October 2028. The refinancing was undertaken to extend the maturity profile. The new facility bears interest at a rate based on SOFR plus an applicable margin of 1.50%. The previous Strattec Credit Facility was terminated upon the closing of the new agreement. The ADAC-Strattec Credit Facility matures in August 2026.
Current report
Primary working capital as a percentage of net sales was 17% in the first quarter of both fiscal 2026 and fiscal 2025. Despite a $3.1 million reduction in inventory levels and flat accounts receivable as a percentage of net sales, reduced accounts payable on decreased purchases resulted in consistent PWC%.
Removed paragraphs (35)
Previous report
MANAGEMENT’S DISCUSSION AND ANALYSIS
Previous report
With a history spanning over 110 years, STRATTEC has consistently been at the forefront of innovation in vehicle security, transitioning from mechanical to integrated electro-mechanical systems. Our largest customers are three leading automotive OEMs in North America, but we also provide products to other OEMs around the world. Our offering is comprised of products primarily related to vehicle power access, security and authorization and select user interface controls. Vehicle and power access solutions include power sliding doors, tailgates and lift gate systems, as well as power deck lid systems. We also design and manufacture highly-engineered latches and door handles. Security and authorization products are comprised of mechanical and electronically enhanced locks and keys, fobs, passive entry passive start systems, steering column and instrument panel ignition lock housings and related solutions. We established our leading market position within North American automotive customers initially with our legacy mechanical locks and keys. We built upon that reputation with our engineering expertise in security and vehicle access, our flexible and responsive service and our deep relationships with our customers.
Previous report
Current Business Update
Previous 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).
Previous report
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.
Previous 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):
Previous report
Meaningful drivers of the change in net sales for key customers are as follows:
Previous report
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 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.
Previous report
Stellantis net sales increased 14% primarily due to new key and lockset content on the Dodge Ram Heavy Duty truck platform.
Previous report
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 report
Tier 1 customer sales decreased 6% due to reduced shipments of door handle products.
Previous report
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 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.
Previous 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.
Previous report
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 report
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 report
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 report
Nine months ended March 30, 2025 compared with the nine months ended March 31, 2024
Previous report
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 report
Meaningful drivers of the change in net sales for key customers are as follows:
Previous report
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 report
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 report
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 report
Hyundai Motor Group net sales increased 29% due to higher demand for power sliding door products and an increase in OEM inventory levels.
Previous report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 report
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 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.
Reworded paragraphs (8)
Previous wording
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current wording
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Previous wording
The following Management’s Discussion and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s accompanying Condensed Consolidated Financial Statements and Notes thereto and its Annual Report. Unless otherwise indicated, all references to quarters and years refer to fiscal quarters and fiscal years.
Current wording
The following Management's Discussion and Analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes.
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 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.
Current wording
Our strategic priority is to execute 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 on productivity and efficiencies in our manufacturing operations. 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. 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.
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 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.
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. Lower near term North American light vehicle production estimates, which are subject to change, are a result of recent industry-wide supply chain disruptions, tariff uncertainties, and availability of raw materials including rare earth minerals. As we look forward and navigate these macroeconomic challenges and fluctuating OEM production volumes, we are focused on executing new initiatives to improve our cost structure, continuing to mitigate the impact of incremental tariff costs, driving cash flow through improved working capital utilization and securing new platforms to solidify future sales growth.
Previous wording
Three months ended March 30, 2025 (third quarter fiscal 2025) compared with the three months ended March 31, 2024 (third quarter fiscal 2024)
Current wording
Three months ended September 28, 2025 (first quarter fiscal 2026) compared with the three months ended September 29, 2024 (first quarter fiscal 2025)
Previous 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.
Current wording
Interest income increased $0.5 million due to increased levels of cash and cash equivalents, which are invested in overnight money market funds. Interest expense decreased $0.1 million, the result of the continued paydown of amounts outstanding under revolving credit agreements.
Previous 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):
Current wording
At September 28, 2025, we had $90.5 million of cash and cash equivalents, of which $3.4 million was held by our foreign subsidiaries and $87.1 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
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.
Current wording
At September 28, 2025, no borrowings were outstanding under the $40.0 million Strattec Credit Facility and $5.0 million was outstanding under the $18.0 million joint venture revolving credit agreement. The Company was in compliance with all covenants under its credit facilities at September 28, 2025.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
We believe that the revolving credit lines, 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 previous paragraphs (2)
Previous report — wording carried 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.
Previous report — wording carried elsewhere
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.