STRATTEC SECURITY CORP
For the period ended Jun 28, 2026. Filed Aug 28, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Aug 28, 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-K
Period ended 2025-06-29; filed 2025-08-25.
0000950170-25-111218
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-06-28; filed 2026-08-28.
0001193125-26-374333
Item 7. 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 54 previous paragraphs and 61 current paragraphs.
23 unchanged; 12 reworded; 26 added; 19 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 3 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 (26)
Current report
Strattec is a global automotive access company that designs and delivers safe, secure, and highly engineered access solutions for the automotive and mobility industries. Built on generations of access and security engineering expertise, Strattec partners closely with OEMs to create differentiated, system‑level access experiences for end consumers. Strattec’s portfolio spans the access journey from Permission, enabling secure vehicle entry through advanced mechanical and electronic systems; to Motion, delivering effortless, reliable powered access that enhances everyday usability; and through to Hold, providing precision‑engineered latching solutions that give drivers confidence through proven strength, safety, and durability trusted by OEMs worldwide. As access becomes increasingly intelligent, connected, and central to vehicle experience, Strattec’s strategy is to expand its market share, further diversify its customers and geographic reach while becoming the most trusted access partner to drive long‑term growth across global automotive and mobility markets. While the Company serves major automotive OEMs globally, the majority of sales are to the three largest automobile original equipment manufacturers in North America.
Current report
Fiscal 2026 Financial Highlights
Current report
Grew net sales 3% to $579.4 million driven by pricing and volume increases
Current report
Expanded gross margin 150 basis points to 16.5%
Current report
Delivered a 10% increase in net income to $20.6 million, or $5.00 per diluted share
Current report
Generated $46.3 million of cash flow from operations driven by cash earnings and working capital management
Current report
Returned $7.4 million of capital to shareholders through the repurchase of over 2% of our outstanding common stock
Current report
During fiscal 2026, we continued executing on our multi-year business transformation. We made significant progress on organizational restructuring actions, operational improvements and investments in business processes and technology. We reduced total headcount by approximately 7% during the year while maintaining support for customer programs and key growth initiatives. Operationally, we continued implementing initiatives designed to improve efficiency and cost competitiveness, including manufacturing automation, freight optimization and supply chain resiliency projects. These efforts contributed to improved gross profit margin despite foreign exchange headwinds and fluctuating customer production schedules. We also advanced several foundational process and technology initiatives intended to strengthen decision-making, improve data visibility, and increase organizational effectiveness.
Current report
Commercially, we continued efforts to strengthen customer engagement, improve quoting and program management processes, refine our product portfolio and pursue opportunities to win new business from both existing and prospective customers. The automotive industry is characterized by long product development and customer sourcing cycles. New vehicle programs are typically awarded several years before the start of production, requiring suppliers to invest significant engineering, validation, tooling and program management resources well in advance of realizing sales. Customer relationships are often developed over an extended period, and it may take five to seven years or longer to establish new OEM relationships, demonstrate technical capabilities, earn customer trust and secure meaningful production awards. As a result, we are actively working to be included on vehicle platforms scheduled for production in model years 2030 and beyond. We are also working to expand our reach to a broader customer set than we have addressed historically. Our strategic initiatives are aimed at building a more predictable business that can generate consistent cash flow across industry cycles.
Current report
We believe these transformational initiatives, combined with ongoing investments in organizational capabilities, will better position the Company to respond in a changing automotive market.
Current report
Capital Allocation
Current report
Over the past two years we have driven significant cash flow from operations which has resulted in the repayment of all existing debt and continued strengthening of our balance sheet. We are committed to a disciplined capital allocation approach, designed to maximize long-term shareholder value while maintaining financial flexibility through industry cycles. Our first priority is to maintain a strong balance sheet and sufficient liquidity to support working capital requirements and capital expenditures, and allow us to navigate potential market volatility. Given the cyclical nature of the automotive industry and ongoing macroeconomic uncertainty, we believe maintaining a strong balance sheet enhances our ability to invest through economic cycles and respond to changing customer and market conditions. Our second priority is investing in the business to support long-term growth and operational improvement. These investments include customer program launches, product development, manufacturing automation, cost reduction initiatives, information technology investments, and other strategic initiatives intended to improve our competitiveness and margins. Third, we evaluate opportunities to return excess capital to shareholders. Subject to market conditions and investment opportunities we may repurchase shares on an opportunistic basis and to offset dilution associated with equity compensation programs. We also allocate capital to pursue strategic acquisition opportunities that enhance our capabilities, expand customer relationships, increase scale, improve margins, or otherwise support our long-term strategic objectives.
Current report
Market & Macro Environment
Current report
The North American automotive market continues to experience uncertainty driven by evolving trade policies, foreign exchange fluctuations, changing vehicle affordability dynamics, shifting OEM production schedules and emerging Chinese OEMs. Industry production levels remained below historical peak levels during fiscal 2026, and third-party forecasts indicate a modest (2% to 3%) decline in North American light vehicle production in fiscal 2027, while our primary customers are expected to decline 5% to 6% over the next year. Recent production forecasts have been impacted by tariff-related uncertainty, consumer demand trends, and a reduced number of scheduled vehicle launches by certain OEMs. Several of our largest customers, including Ford, General Motors, and Stellantis, continue to operate in a highly competitive environment characterized by declining market share positions, ongoing electrification strategy adjustments, and efforts to optimize vehicle inventories and production schedules. Industry participants remain focused on balancing production with retail demand following the inventory rebuilding experienced after the COVID-19 supply disruptions.
Current report
The global trade environment also remains dynamic. During fiscal 2026, the United States implemented and modified tariffs on certain imported goods, while other countries introduced reciprocal measures and trade restrictions. In addition, the ongoing review of the United States‑Mexico‑Canada Agreement ("USMCA") and potential future changes to regional content requirements, rules of origin, and tariff treatment have contributed to uncertainty across the North American automotive supply chain. These developments have required us to evaluate sourcing strategies, localization opportunities, and supply chain resiliency initiatives.
Current report
Foreign currency movements, particularly fluctuations in the Mexican peso relative to the U.S. dollar, remain an important factor affecting our operating results. Because a significant portion of the Company's manufacturing operations are located in Mexico, peso appreciation increases labor and manufacturing costs when translated into U.S. dollars. During fiscal 2026, changes in foreign exchange rates affected both operating costs and the mark-to-market valuation of the Company's foreign currency hedging program. The Company continues to utilize forward currency contracts to reduce a portion of its exposure to Mexican peso fluctuations.
Current report
While macroeconomic uncertainty, fluctuating OEM production volumes, tariffs, and foreign exchange volatility remain challenges, we believe the actions taken during fiscal 2026 have improved profitability and enhanced cash generation. As we enter fiscal 2027, we remain focused on continuing to advance our strategic priorities, executing the business transformation, strengthening operational performance, and delivering long-term value for shareholders.
Current report
The following discussion is a comparison between fiscal 2026 and fiscal 2025 results. For a discussion of our results of operations comparing fiscal 2025 to fiscal 2024, refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June 29, 2025, which was filed with the SEC on August 25, 2025 and is available on our website.
Current report
Net sales in fiscal 2026 totaled $579.4 million, an increase of $14.3 million, or 3%, compared with fiscal 2025 net sales of $565.1 million. The year-over-year increase was driven by $11.0 million of pricing, including $2.6 million of U.S. tariff surcharges and price increases, and $3.3 million of additional volume. Sales volumes reflected a $9.5 million increase on existing platforms and $3.3 million of net new program launches, which were partially offset by $9.5 million in reduced sales associated with customer cancelled electric vehicle ("EV") programs compared to the prior‑year.
Current report
Material costs increased $3.3 million primarily due to higher sales volumes, while labor and overhead costs increased $0.2 million. Increased conversion costs were due to higher sales volumes and a $6.5 million headwind from changes in foreign currency exchange rates. These increases were partially offset by $5.4 million in savings from previously completed restructuring actions and $1.7 million lower provisions for annual bonuses.
Current report
Gross profit was $95.4 million in fiscal 2026, compared with $84.5 million in the comparable prior-year period. Despite unfavorable changes in foreign currency exchange rates, gross margin improved year-over-year from 15.0% to 16.5%, a 150 basis point improvement, reflecting our focused efforts to manage our cost structure, incremental production volumes and pricing actions.
Current report
Selling, administrative, and engineering expenses were 11.9% of sales in fiscal 2026, compared with 10.9% in the prior-year period. Total Selling, administrative, and engineering expenses were $68.8 million in fiscal 2026, an increase of $7.0 million year-over-year. The increase in costs reflects $3.3 million associated with investments in additional talent, $3.3 million of incremental business transformation costs and $1.3 million of incremental restructuring and voluntary retirement costs related to efforts to improve our cost structure. These increases were partially offset by reduced executive transition costs of $1.4 million and $1.2 million of lower provisions for annual bonuses.
Current report
Other income, net increased from $0.8 million in fiscal 2025 to $3.3 million in fiscal 2026. The increase in Other income, net was primarily due to $4.9 million realized gains on peso forward contracts, partially offset by $1.6 million foreign currency transaction losses and $0.8 million non-service pension and postemployment costs.
Current report
Fiscal 2026 net income attributable to Strattec was $20.6 million, a 10% increase compared with $18.7 million in fiscal 2025. Incremental production volumes, coupled with pricing and restructuring actions drove improved profitability, despite headwinds from changes in foreign currency exchange rates and continued investments in the business. Earnings per diluted share were $5.00 in fiscal 2026, compared with $4.58 in the prior year.
Current report
On May 28, 2026, the Board of Directors authorized a new share repurchase program under which we may repurchase up to $40.0 million of its outstanding common stock. The authorization has no fixed expiration date and does not obligate us to acquire any specific amount of common stock. During the fourth quarter of fiscal 2026 and prior to termination of our previous repurchase authorization, we repurchased 110,269 shares of common stock for $7.4 million. As of June 28, 2026, no shares had been repurchased under the new authorization and the full $40.0 million remained available for repurchase. Repurchases under the program, if any, are expected to be funded through cash generated from operations and existing cash balances.
Current report
We have a revolving credit facility with BMO Harris Bank N.A., which provides for a $40 million revolving line of credit maturing October 2028. The Company's joint venture also has a revolving credit agreement with BMO Harris Bank N.A., which provides for a $10 million asset-based revolving line of credit, subject to a borrowing base, maturing October 2028.
Removed paragraphs (19)
Previous report
Strattec Security Corporation is a leading global manufacturer and provider of highly engineered advanced automotive access and security products and solutions. 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.
Previous report
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). 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.
Previous report
Market Demand
Previous report
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. We delivered 5% sales growth in fiscal 2025, the result of new program launches, pricing actions and increased volumes on the platforms we serve. 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. 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.
Previous report
Trade Environment & Tariffs
Previous report
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. 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. 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. 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 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. We will continue to pursue commercial recoveries in an effort to fully offset the cost increase.
Previous report
Global Conditions
Previous report
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. 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.
Previous report
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. 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. 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.
Previous report
Material costs increased $13.7 million on higher production levels while labor and overhead costs declined $5.5 million. 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. 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.
Previous report
Gross profit was $84.5 million in fiscal 2025, compared to $65.5 million in the comparable prior year period. 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.
Previous report
Selling, administrative, and engineering expenses increased $14.1 million year-over-year. 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 related costs. 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.
Previous report
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.
Previous report
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.
Previous report
Our Board of Directors authorized a stock repurchase program on October 16, 1996, to buy back outstanding shares of our common stock. Shares authorized for buyback under the program totaled 3,839,395 at June 29, 2025. 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. Additional repurchases may occur from time to time and are expected to be funded by cash flow from operations and current cash balances.
Previous report
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. Availability under the ADAC-Strattec Credit Facility is reduced to $18 million on August 1, 2025.
Previous report
Other Cash Requirements
Previous report
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.
Previous report
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".
Reworded paragraphs (12)
Previous wording
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 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.
Current wording
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 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. 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. The strength of our balance sheet also supports continued investments in process modernization, automation and new product innovation, as well as the flexibility needed to navigate through industry cycles.
Previous wording
The Company's consolidated results of operations for the years ended June 29, 2025 and June 30, 2024 were as follows:
Current wording
The Company's consolidated results of operations for the years ended June 28, 2026 and June 29, 2025 were as follows (in thousands):
Previous wording
Interest income increased $1.5 million due to increased levels of cash and cash equivalents, which are invested in overnight money market funds.
Current wording
Interest income increased $1.5 million due to increased levels of cash and cash equivalents, which are invested in overnight money market funds, while interest expense decreased $0.6 million, the result of debt repayments.
Previous wording
The effective income tax rate was 23.2% and 18.7% for fiscal 2025 and 2024, respectively. 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. 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.
Current wording
The effective income tax rate was 34.4% and 23.2% for fiscal 2026 and 2025, respectively. 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 tax credits and non-deductible items. Additionally, the fiscal 2026 effective tax rate was impacted by a $1.0 million increase to valuation allowances and a $2.9 million increase to reserves for uncertain tax positions. See Note 6, “Income Taxes,” for additional information.
Previous wording
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. The following table summarizes our cash flows provided by (used in) operating, investing and financing activities (in millions):
Current wording
At June 28, 2026, we had $108.2 million of cash and cash equivalents, of which $3.8 million was held by our foreign subsidiaries. The following table summarizes our cash flows provided by (used in) operating, investing and financing activities (in millions):
Previous wording
Cash flow from operations improved to $71.7 million, from $12.3 million in the prior year. 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. 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. Net cash used in financing activities resulted from the repayment of $5 million under our joint venture revolving credit agreement during fiscal 2025.
Current wording
Fiscal 2026 cash flow from operations increased our balance sheet cash position, allowed us to repay all outstanding bank debt, repurchase common stock and continue to invest in the business. Cash flow from operations was $46.3 million compared with $71.7 million in the prior year. Current year cash from operations reflects improved cash earnings, while the prior year benefited from a significant reduction in primary working capital and the recovery of pre-production costs. Net cash used in investing activities was $5.4 million during fiscal 2026 compared with $7.2 million in the prior-year period. Capital expenditures to support new product programs and the upgrade and replacement of existing equipment were $7.3 million which was partially offset by $1.9 million of proceeds from the sale of property, plant and equipment. Current year cash used in financing activities resulted from the repayment of $8.0 million under our joint venture revolving credit agreement, $7.4 million repurchases of our common stock and the payment of $1.4 million for taxes withheld for the vesting of share-based awards.
Previous wording
We anticipate capital expenditures will be approximately $13 million in fiscal 2026 in support of requirements for new product programs and the upgrade and replacement of existing equipment.
Current wording
We anticipate capital expenditures will be approximately $12.0 million in fiscal 2027 in support of requirements for new product programs and the upgrade and replacement of existing equipment.
Previous wording
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. Any balance drawn on these facilities and the related interest payment obligations are expected to be funded by cash flow from operations and current cash balances.
Current wording
There were no outstanding borrowings and no interest due on either facility as of June 28, 2026. The repayment of any balance drawn on these facilities and the related interest payment obligations are expected to be funded by cash flow from operations and current cash balances. For further information related to our credit facilities, see Note 3, "Credit Facilities," for additional information.
Previous wording
We may be required to make cash outlays related to our unrecognized tax benefits, including interest and penalties. As of June 29, 2025, we had unrecognized tax benefits, including interest and penalties, of $1.9 million. However, due to the uncertainty of the timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities. For further information related to our unrecognized tax benefits, see Note 6, "Income Taxes," for additional information.
Current wording
We may be required to make cash outlays related to our unrecognized tax benefits, including interest and penalties. As of June 28, 2026, we had unrecognized tax benefits, including interest and penalties, of $4.7 million. However, due to the uncertainty of the timing of future cash flows associated with our unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities. For further information related to our unrecognized tax benefits, see Note 6, "Income Taxes," for additional information.
Previous wording
Throughout a vehicle's lifecycle, we receive purchase orders from our customers, which provide the commercial terms for a sale transaction. Revenue is typically recognized at a point in time based on the transaction price and the quantity of parts shipped to the customer. Discrete price adjustments may occur during the vehicle production period in order for the Company to remain competitive with market prices or based on changes in product specifications or based on changes in significant input costs for the products. In the event the Company concludes that a portion of the revenue for a given product may vary from the purchase order, the Company records consideration at the most likely amount to which the Company expects to be entitled based on historical experience and input from customer negotiations.
Current wording
Throughout a vehicle's lifecycle, we receive purchase orders from our customers, which provide the commercial terms for a sale transaction. Revenue is typically recognized at a point in time based on the transaction price and the quantity of parts shipped to the customer. Discrete price adjustments may occur during the vehicle production period in order for us to remain competitive with market prices or based on changes in product specifications or based on changes in significant input costs for the products. In the event the Company concludes that a portion of the revenue for a given product may vary from the purchase order, we record consideration at the most likely amount to which we expect to be entitled based on historical experience and input from customer negotiations.
Previous wording
As a result, these differences and the interplay in tax laws between jurisdictions may cause the Company's estimates of income tax liabilities to differ from actual payments or assessments. Some of these differences are permanent, such as expenses that are not tax deductible, while others are temporary differences, such as amortization and depreciation expenses. Temporary differences create deferred tax assets and liabilities, which are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not large enough to utilize the entire deduction or credit. Relevant factors in determining the realizability of deferred tax assets include future taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of the various tax attributes. At June 29, 2025 and June 30, 2024, the valuation allowance related to deferred tax assets was $3.9 million and $2.6 million, respectively.
Current wording
As a result, these differences and the interplay in tax laws between jurisdictions may cause our estimates of income tax liabilities to differ from actual payments or assessments. Some of these differences are permanent, such as expenses that are not tax deductible, while others are temporary differences, such as amortization and depreciation expenses. Temporary differences create deferred tax assets and liabilities, which are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not large enough to utilize the entire deduction or credit. Relevant factors in determining the realizability of deferred tax assets include future taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of the various tax attributes.
Previous wording
While the Company has support for the positions it takes on tax returns, taxing authorities may assert different interpretations of laws and facts and may challenge cross-jurisdictional transactions. We assess our income tax positions and record tax liabilities for all years subject to examination based upon management’s evaluation of the facts and circumstances and information available at the reporting dates. For those tax positions which do not meet the more-likely-than-not threshold regarding the ultimate realization of the related tax benefit, no tax benefit has been recorded in the financial statements. As of June 29, 2025 and June 30, 2024, our liability for unrecognized tax benefits was $1.9 million and $1.6 million, respectively.
Current wording
While we have support for the positions taken on tax returns, taxing authorities may assert different interpretations of laws and facts and may challenge cross-jurisdictional transactions. We assess our income tax positions and record tax liabilities for all years subject to examination based upon management’s evaluation of the facts and circumstances and information available at the reporting dates. For those tax positions which do not meet the more-likely-than-not threshold regarding the ultimate realization of the related tax benefit, no tax benefit has been recorded in the financial statements.