STRATTEC SECURITY CORP
For the period ended Dec 28, 2025. Filed Feb 6, 2026.
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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.
Dec 28, 2025 · Filed Feb 6, 2026
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 2025-09-28; filed 2025-10-31.
0001193125-25-260138
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-12-28; filed 2026-02-06.
0001193125-26-040760
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 24 previous paragraphs and 31 current paragraphs.
11 unchanged; 10 reworded; 6 added; 3 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 3 previous and 4 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 (6)
Current report
Three months ended December 28, 2025 (second quarter fiscal 2026) compared with the three months ended December 29, 2024 (second quarter fiscal 2025)
Current report
Six months ended December 28, 2025 compared with the six months ended December 29, 2024
Current report
Year-to-date gross profit was $49.1 million, compared with $36.1 million in the comparable prior year period. Despite unfavorable changes in foreign currency exchange rates of $2.1 million and incremental tariff costs of $1.9 million, gross profit margin improved year-over-year from 13.4% to 16.9%, a 350 basis point improvement. Material costs increased $9.7 million on higher production levels while labor and overhead costs decreased $1.8 million. Lower year-over-year conversion costs on higher sales reflect our focused efforts to manage our cost structure, which includes a $3.0 million labor cost benefit from completed restructuring actions. Annual merit increases of $2.3 million and incremental freight & logistics costs of $0.4 million (due to supply chain disruptions) were offset by reduced aftermarket royalty costs on reduced demand and a $0.5 million lower provision for annual bonuses.
Current report
Selling, administrative, and engineering expenses were 11.6% of sales for the six months ended December 28, 2025, compared with 10.7% in the prior year period. Year-to-date expenses were $33.7 million, a $4.9 million increase year-over-year. The increase in costs reflects efforts to improve our cost structure including one-time restructuring and voluntary retirement costs of $1.3 million ($0.3 million in the prior year period) and $1.0 million of business transformation costs ($0.2 million in the prior year period). Higher incentive compensation cost of $0.7 million and $1.6 million associated with headcount additions were partially offset by reduced executive transition costs of $1.6 million.
Current report
The effective income tax rate was 22.2% and 27.0% for the year-to-date period of fiscal 2026 and 2025, respectively. The higher effective tax rate in the prior year period was impacted by the foreign tax rate differential and a limitation on the utilization of our foreign tax credits on non-deductible items.
Current report
Primary working capital levels at December 28, 2025 were consistent with the beginning of the fiscal year, as we increased inventory levels $7.2 million to improve customer deliveries, which was offset by reduced accounts receivable of $12.9 million on sequentially lower sales and a $6.3 million reduction in accounts payable due to timing of inventory purchases and payments.
Removed paragraphs (3)
Previous report
Three months ended September 28, 2025 (first quarter fiscal 2026) compared with the three months ended September 29, 2024 (first quarter fiscal 2025)
Previous 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.
Previous 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%.
Reworded paragraphs (10)
Previous wording
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 wording
Second quarter fiscal 2026 net sales totaled $137.5 million, representing an increase of $7.6 million, or 6%, compared with the prior year second quarter. The year-over-year increase in net sales was primarily driven by $4.4 million of pricing (including $1.4 million of customer recoveries for tariffs), $3.0 million of favorable mix and content per vehicle and $2.4 million in net new program launches, partially offset by $2.3 million lower market demand.
Previous wording
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 wording
Gross profit was $22.7 million in the second quarter of fiscal 2026, compared with $17.2 million in the comparable prior year period. Gross profit margin improved year-over-year from 13.2% to 16.5%, a 330 basis point improvement, as a result of enhanced leverage of our fixed cost structure from increased production volumes combined with a $3.0 million benefit from pricing. Improved year-over-year conversion costs reflect $2.3 million in labor cost savings (including benefits from previously completed restructuring actions) and $0.5 million lower royalty expense on reduced aftermarket demand. Offsetting headwinds included unfavorable changes in foreign currency exchange rates of $1.6 million, $1.2 million of higher Mexico labor costs and incremental tariff costs of $0.9 million.
Previous wording
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 wording
Selling, administrative, and engineering expenses were 13.0% of sales for the three months ended December 28, 2025, compared with 11.6% in the prior year period. Fiscal 2026 second quarter expenses were $17.9 million, a $2.8 million increase year-over-year. The current year quarter included a $1.7 million charge related to a voluntary retirement program while the prior year included a $0.2 million restructuring charge. Additional costs in the current quarter were the result of investments in the business including incremental employee costs of $0.7 million, timing of outside service spend and $0.7 million of business transformation costs. The second quarter last year also included $1.1 million of executive transition costs, compared to $0.1 million in the current year.
Previous 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.
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 $0.2 million, the result of the continued paydown of amounts outstanding under revolving credit agreements.
Previous wording
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 wording
Other income (expense) was $1.7 million of income in the current period compared to $0.5 million of expense in the prior year. Changes in other income (expense), reflect foreign currency transaction gains and losses, changes in the fair value of peso forward contracts and non-service post-employment costs.
Previous wording
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 wording
The effective income tax rate was 23.1% and 22.4% for the second quarter of fiscal 2026 and 2025, respectively. The effective tax rate for each period presented differs from the U.S. federal statutory rate of 21% primarily due to the accrual of foreign income taxes, which are generally higher than 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.
Previous 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):
Current wording
At December 28, 2025, we had $99.0 million of cash and cash equivalents, of which $3.6 million was held by our foreign subsidiaries. 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 $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 wording
Cash flow from operations was $25.2 million, and increase of $4.4 million compared with the prior year. Cash provided by operating activities for the year-to-date period of fiscal 2026 reflects cash earnings against flat operating assets and liabilities. Year-to-date cash flow from operations in both periods reflects the payment of annual short-term incentive compensation earned in the prior year and a replenishment of our inventory balance partially offset by the collection of receivables. Cash used in investing activities, which includes capital expenditures to support customer programs and modernization of equipment was $3.9 million year-to-date compared with $3.0 million in the prior year period. Current year net cash used in financing activities resulted from the repayment of $5.5 million under the joint venture revolving credit agreement during fiscal 2026 and the payment of $1.3 million for taxes withheld related to the vesting of share-based awards.
Previous 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.
Current wording
At December 28, 2025, no borrowings were outstanding under the $40.0 million Amended & Restated Credit Agreement and $2.5 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 December 28, 2025.
Previous wording
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.
Current wording
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 in both the short term and beyond.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
The Company's consolidated results of operations were as follows (in thousands):
Current report — wording carried from elsewhere
Year-to-date net sales totaled $289.9 million, representing an increase of $21.0 million, or 8%, in the comparable prior year period. The year-over-year increase in net sales was primarily driven by $8.3 million of pricing (including $1.9 million of customer recoveries for tariffs), $5.6 million of higher demand, $4.4 million in net new program launches and $2.6 million of favorable mix and content per vehicle.
Current report — wording carried from elsewhere
Interest income increased $1.0 million due to increased levels of cash and cash equivalents, which are invested in overnight money market funds. Interest expense decreased $0.3 million, the result of the repayment of amounts outstanding under revolving credit agreements.
Current report — wording carried from elsewhere
Other income (expense) was $1.4 million of income in the current period compared to $0.4 million of expense in the prior year. Changes in other income (expense), reflect foreign currency transaction gains and losses, changes in the fair value of peso forward contracts and non-service post-employment costs.