QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2026
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-25150
STRATTEC SECURITY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Wisconsin
39-1804239
(State of Incorporation)
(I.R.S. Employer Identification No.)
3333 West Good Hope Road, Milwaukee, WI53209
(Address of Principal Executive Offices)
(414) 247-3333
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of exchange on which registered
Common stock, $.01 par value
STRT
The Nasdaq Global Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
☐
Smaller Reporting Company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Common stock, par value $0.01 per share:4,029,566 shares outstanding as of October 23, 2026 (which number includes all restricted shares previously awarded that have not vested as of such date).
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
Three Months Ended
September 27, 2026
September 28, 2025
Net sales
$
147,197
$
152,399
Cost of goods sold
122,882
126,064
Gross profit
24,315
26,335
Selling, administrative and engineering expenses
17,892
15,888
Income from operations
6,423
10,447
Interest income
989
877
Interest expense
(37
)
(156
)
Other expense, net
(183
)
(275
)
Income before income taxes and non-controlling interest
7,192
10,893
Income tax expense
1,881
2,356
Net income
5,311
8,537
Net income attributable to non-controlling interest
478
8
Net income attributable to Strattec
$
4,833
$
8,529
Earnings per share attributable to Strattec
Basic
$
1.22
$
2.10
Diluted
$
1.19
$
2.07
Weighted average shares outstanding:
Basic
3,970
4,054
Diluted
4,053
4,127
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements
3
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
Three Months Ended
September 27, 2026
September 28, 2025
Net income
$
5,311
$
8,537
Other comprehensive income (loss), net of tax:
Currency translation adjustments
(356
)
1,013
Pension and postretirement funded status adjustment, net of tax
20
32
Total other comprehensive income (loss), net of tax
(336
)
1,045
Comprehensive income
4,975
9,582
Comprehensive income attributable to non-controlling interest
351
393
Comprehensive income attributable to Strattec
$
4,624
$
9,189
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements
4
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(in thousands, except share amounts and per share amounts)
September 27, 2026
June 28, 2026
ASSETS
Current Assets:
Cash and cash equivalents
$
111,766
$
108,243
Receivables, net
95,117
99,109
Inventories:
Finished products
10,851
11,775
Work in process
11,712
11,905
Purchased materials
42,340
40,630
Inventories, net
64,903
64,310
Pre-production costs
5,072
6,489
Value-added tax recoverable
9,827
10,069
Income tax recoverable
1,145
2,243
Other current assets
5,106
5,810
Total current assets
292,936
296,273
Noncurrent Assets:
Property, plant and equipment:
Land and improvements
6,873
6,915
Buildings and improvements
43,279
42,969
Machinery and equipment
225,932
225,548
Total property, plant and equipment
276,084
275,432
Less: accumulated depreciation
208,763
205,587
Property, plant and equipment, net
67,321
69,845
Deferred income taxes
16,143
16,080
Other noncurrent assets
5,143
5,281
Total Assets
$
381,543
$
387,479
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
55,113
$
54,973
Accrued payroll and benefits
15,001
20,773
Value-added tax payable
7,667
7,429
Income tax payable
324
197
Warranty reserve
5,677
6,673
Other current liabilities
13,143
12,186
Total current liabilities
96,925
102,231
Noncurrent Liabilities:
Post-employment benefits
12,800
13,350
Other noncurrent liabilities
6,760
6,401
Total Liabilities
116,485
121,982
Shareholders' Equity:
Common stock, authorized 18,000,000 shares, $.01 par value, 7,738,324 issued shares at September 27, 2026, and 7,704,994 issued shares at June 28, 2026
77
77
Capital in excess of par value
107,766
107,138
Retained earnings
294,728
289,895
Accumulated other comprehensive loss
(14,352
)
(14,143
)
Less: treasury stock, at cost (3,807,746 shares at September 27, 2026, and 3,727,322 shares at June 28, 2026)
(150,363
)
(144,321
)
Total Strattec shareholders’ equity
237,856
238,646
Non-controlling interest
27,202
26,851
Total Shareholders' Equity
265,058
265,497
Total Liabilities and Shareholders' Equity
$
381,543
$
387,479
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements
5
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(in thousands)
Three Months Ended
September 27, 2026
September 28, 2025
OPERATING ACTIVITIES:
Net income
$
5,311
$
8,537
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
3,492
3,785
Foreign currency transaction (gain) loss
(194
)
671
Unrealized loss (gain) on peso contracts
1,425
(293
)
Stock-based compensation expense
618
669
Other, net
272
316
Change in operating assets and liabilities:
Receivables
3,934
(574
)
Inventories
(593
)
3,109
Prepaids and other assets
2,239
3,804
Accounts payable
170
(4,817
)
Accrued liabilities
(5,909
)
(3,880
)
Net cash provided by operating activities
10,765
11,327
INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(1,185
)
(1,529
)
Net cash used in investing activities
(1,185
)
(1,529
)
FINANCING ACTIVITIES:
Repayments under credit facilities
—
(3,000
)
Payment for taxes withheld from stock-based awards
(1,039
)
(919
)
Repurchases of common stock under share repurchase program
(4,973
)
—
Employee stock purchases
15
16
Net cash used in financing activities
(5,997
)
(3,903
)
Foreign currency impact on cash
(60
)
(1
)
NET INCREASE IN CASH AND CASH EQUIVALENTS
3,523
5,894
CASH AND CASH EQUIVALENTS:
Beginning of period
108,243
84,579
End of period
$
111,766
$
90,473
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes, net
$
466
$
582
Interest
—
$
123
Non-cash investing activities:
Change in capital expenditures in accounts payable
$
20
$
13
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements
6
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(in thousands)
Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Loss
Treasury Stock
Non-Controlling Interest
Total Shareholders’ Equity
Balance -- June 28, 2026
$
77
$
107,138
$
289,895
$
(14,143
)
$
(144,321
)
$
26,851
$
265,497
Net income
—
—
4,833
—
—
478
5,311
Currency translation adjustments
—
—
—
(229
)
—
(127
)
(356
)
Pension and postretirement funded status adjustment, net of tax
—
—
—
20
—
—
20
Stock-based compensation
—
618
—
—
—
—
618
Shares withheld for taxes on stock-based awards
—
—
—
—
(1,039
)
—
(1,039
)
Share issuances
—
10
—
—
5
—
15
Repurchase of common stock under share repurchase program
—
—
—
—
(5,008
)
—
(5,008
)
Balance -- September 27, 2026
$
77
$
107,766
$
294,728
$
(14,352
)
$
(150,363
)
$
27,202
$
265,058
Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Loss
Treasury Stock
Non-Controlling Interest
Total Shareholders’ Equity
Balance -- June 29, 2025
$
76
$
103,784
$
269,297
$
(16,113
)
$
(135,452
)
$
24,839
$
246,431
Net income
—
—
8,529
—
—
8
8,537
Currency translation adjustments
—
—
—
628
—
385
1,013
Pension and postretirement funded status adjustment, net of tax
—
—
—
32
—
—
32
Stock-based compensation
—
669
—
—
—
—
669
Shares withheld for taxes on stock-based awards
—
—
—
—
(919
)
—
(919
)
Share issuances
—
11
—
—
5
—
16
Balance -- September 28, 2025
$
76
$
104,464
$
277,826
$
(15,453
)
$
(136,366
)
$
25,232
$
255,779
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements
7
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Strattec Security Corporation (the "Company" or “Strattec”), headquartered in Milwaukee, Wisconsin, is a leading global manufacturer and provider of highly engineered advanced automotive access and security products and solutions. Products include power access solutions, locks & locksets, keys & fobs, engineered latches, vehicle start systems, door handles, and other vehicle access products. Power access solutions provide the motion control for power liftgates, sliding power doors, and power tailgates. While the Company serves major automotive OEMs globally, the majority of sales are to the three largest automobile original equipment manufacturers (“OEMs”) in North America.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed consolidated balance sheet data as of June 28, 2026, was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes in the Annual Report.
In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for the three months ended September 27, 2026, are not necessarily indicative of the results that may be expected for the entire fiscal year ending June 27, 2027. The condensed consolidated financial statements include the results of all wholly owned subsidiaries, as well as the results of a majority owned joint venture.
NOTE 2. RECENTLY ISSUED ACCOUNTING STANDARDS
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion) included in certain expense captions presented on the face of the income statement. The ASU is effective for fiscal years beginning after December 15, 2026, (fiscal 2028) and for interim periods beginning after December 15, 2027 (fiscal 2029). The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
NOTE 3. WARRANTY
The Company generally offers its customers an assurance warranty on products sold, although warranty periods may vary by product type and application. The Company has a warranty reserve related to known and potential exposure to warranty claims in the event products fail to perform as expected and in the event the Company may be required to participate in the repair costs incurred by customers for such products. The estimation of the warranty reserve involves judgment and assumptions and is based on an analysis of historical warranty data as well as current trends and information. Changes in the warranty reserve were as follows (in thousands):
Three Months Ended
September 27, 2026
September 28, 2025
Balance, beginning of period
$
6,673
$
8,900
Provision charged to expense
4
960
Payments, net of recoveries
(1,000
)
(12
)
Balance, end of period
$
5,677
$
9,848
8
NOTE 4. CREDIT FACILITIES
The Company has a revolving credit agreement with BMO Harris N.A. ("Amended and Restated Credit Agreement"), which provides for a $40 million revolving line of credit maturing October 2028. The facility bears interest at varying rates based on the bank's prime rate or SOFR plus 1.50%. As of September 27, 2026, the Company had no borrowings outstanding under the facility. The credit facility is secured by U.S. cash balances, accounts receivable, inventory, and fixed assets located in the U.S. and contains a restrictive financial covenant that requires a minimum net worth level.
The Company's joint venture, ADAC-Strattec LLC, has a revolving credit agreement with BMO Harris N.A. ("Amended and Restated JV Credit Facility"), which provides for a $10 million asset-based revolving line of credit, subject to a borrowing base, maturing October 2028. As of September 27, 2026, the Company had no borrowings outstanding under the facility. The facility bears interest at varying rates based on the bank's prime rate plus 1.00% or SOFR plus 1.75%. The credit facility is secured by substantially all of the joint venture's assets and contains restrictive financial covenants that require a minimum net worth level and a minimum fixed charge coverage ratio.
The Company and the joint venture were in compliance with all financial covenants as of September 27, 2026.
NOTE 5. DERIVATIVE INSTRUMENTS
A significant portion of the Company's manufacturing costs are incurred in Mexican pesos, which causes earnings and cash flows to fluctuate with changes in the U.S. dollar/Mexican peso exchange rate. The Company enters into contracts with a creditworthy counterparty that provide for monthly Mexican peso forward currency contracts for a portion of peso denominated operating costs. The aggregate notional amounts of outstanding foreign currency forward contracts were $103.5 million and $92.3 million at September 27, 2026, and June 28, 2026, respectively. The fair values of derivative instruments not designated as hedging instruments recorded in our consolidated balance sheets were as follows (in thousands):
Balance Sheet Classification
September 27, 2026
June 28, 2026
Other Current Assets
$
1,434
$
2,361
Other Current Liabilities
$
(463
)
$
(264
)
Other Noncurrent Liabilities
$
(430
)
$
(132
)
NOTE 6. INCOME TAXES
The Company's income tax expense and effective tax rate for the three-month periods ended September 27, 2026, and September 28, 2025, were as follows (in thousands and percentage of Income before income taxes and non-controlling interest):
Three Months Ended
September 27, 2026
September 28, 2025
Income before income taxes and non-controlling interest
$
7,192
$
10,893
Income tax expense
$
1,881
$
2,356
Effective tax rate
26.2
%
21.6
%
The Company is subject to income taxes in the United States and foreign jurisdictions, primarily Mexico. The Company's income tax positions are based on interpretations of income tax laws and rulings in each of the jurisdictions in which the Company operates. Interim income tax expense is determined based on an estimate of the overall annual effective income tax rate which can vary due to the relationship of foreign and domestic earnings, state taxes and available deductions, credits, and discrete items. The effective tax rate for the three months ended September 27, 2026, is higher than the U.S. federal statutory rate of 21% as a result of profits generated in foreign jurisdictions (Mexico) which has a higher statutory income tax rate and a $0.4 million increase in reserves for uncertain tax positions.
9
NOTE 7. EARNINGS PER SHARE
A reconciliation of the components of the basic and diluted per-share computations follows (in thousands, except per share amounts):
Three Months Ended
September 27, 2026
September 28, 2025
Net income attributable to Strattec
$
4,833
$
8,529
Basic weighted-average shares outstanding
3,970
4,054
Effect of dilutive securities - employee stock compensation plan
83
73
Diluted weighted-average shares outstanding
4,053
4,127
Earnings per share attributable to Strattec
Basic
$
1.22
$
2.10
Diluted
$
1.19
$
2.07
NOTE 8. STOCK-BASED COMPENSATION
The Company has granted service-based restricted stock awards ("RSAs") and performance stock units ("PSUs") to employees and non-employee directors under existing stock incentive plans. The number of shares of the Company's common stock authorized under the current 2024 Equity Incentive Plan is 550,000. As of September 27, 2026, there were 299,860shares available for future awards. During the quarter, the Company granted 15,605 PSUs that are subject to performance and market conditions, including the Company’s relative total shareholder return, with grant-date fair value determined using a Monte Carlo simulation model. As of September 27, 2026, there was $2.1 million of unrecognized compensation cost related to nonvested PSUs and $4.2 million of unrecognized compensation cost related to nonvested RSAs, which will be expensed over the remaining vesting period of approximately 2 years. As of September 28, 2025, there was $1.7 million of unrecognized compensation cost related to non-vested PSUs and $3.8 million of unrecognized compensation cost related to nonvested RSAs.
A summary of restricted stock award and performance stock unit activity was as follows:
RSAs
PSUs
Weighted Average
Weighted Average
Grant Date
Grant Date
Shares
Fair Value
Shares
Fair Value
Nonvested balance, June 28, 2026
90,402
$
48.28
35,533
$
54.35
Granted
33,738
69.18
15,605
74.98
Vested
(33,330
)
43.27
—
—
Forfeited
(375
)
33.27
—
—
Nonvested balance, September 27, 2026
90,435
$
57.81
51,138
$
60.64
NOTE 9. OTHER EXPENSE, NET
The following table summarizes the components of other expense, net included in the accompanying consolidated statements of income (in thousands):
10
Three Months Ended
September 27, 2026
September 28, 2025
Foreign currency transaction gain (loss)
$
194
$
(671
)
Realized gain (loss) on peso forward contracts, net
1,261
950
Unrealized gain (loss) on peso forward contracts, net
(1,425
)
293
Non-service pension and postemployment cost
(263
)
(1,007
)
Other
50
160
$
(183
)
$
(275
)
NOTE 10. ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT
The following tables summarize the changes in accumulated other comprehensive loss (“AOCL”) by component (in thousands):
Three Months Ended
September 27, 2026
September 28, 2025
Foreign currency translation adjustments:
Balance, beginning of period
$
13,757
$
15,421
Other comprehensive loss (income) before reclassifications
356
(1,013
)
Other comprehensive income attributable to non-controlling interest
(127
)
(385
)
Balance, end of period
13,986
14,793
Retirement and postretirement benefit plans:
Balance, beginning of period
$
386
$
692
Amortizations in net periodic benefit cost
(20
)
(32
)
Balance, end of period
366
660
Accumulated other comprehensive loss, end of period
$
14,352
$
15,453
NOTE 11. RELATED PARTY
The Company owns 51% of a joint venture, which was formed in fiscal 2007 to support customers with painted door handles and exterior trim products from operations in Mexico. The following tables summarize the related party transactions that arise as a result of the joint venture operating agreement (in thousands):
Three Months Ended
September 27, 2026
September 28, 2025
Management fee expense
$
2,393
$
2,737
Net sales to joint venture partner
$
1,622
$
1,750
September 27, 2026
June 28, 2026
Accounts receivable from joint venture partner
$
700
$
677
Accounts payable to joint venture partner
$
1,673
$
3,552
NOTE 12. SEGMENT INFORMATION
The Company's Chief Operating Decision Maker ("CODM") is the Chief Executive Officer. The CODM assesses the performance and makes capital and resource allocation decisions based on net income attributable to Strattec.
11
The CODM considers the impact of significant segment expenses on this measure to assess profitability and guide strategic decision making including entering into significant contracts, expanding into new markets or launching new products, making significant capital expenditures, hiring and terminating key personnel, and approving operating budgets.
Net sales and significant segment expenses are as follows (in thousands):
Three Months Ended
September 27, 2026
September 28, 2025
Net sales
$
147,197
$
152,399
Significant expenses:
Direct material costs
80,936
83,888
Labor and overhead costs
41,946
42,176
Selling costs
2,317
2,820
Administrative costs
9,498
6,071
Engineering costs
6,077
6,997
Interest income
(989
)
(877
)
Interest expense
37
156
Other expense, net
183
275
Income tax expense
1,881
2,356
Net income
5,311
8,537
Net income attributable to non-controlling interest
478
8
Net income attributable to Strattec
$
4,833
$
8,529
Sales by product line were as follows (in thousands):
Three Months Ended
September 27, 2026
September 28, 2025
Power access solutions
$
33,864
$
38,124
Door handles & exterior trim
38,090
38,645
Keys & locksets
29,792
29,330
Latches
19,091
19,729
User interface controls
12,953
12,846
Aftermarket and service
10,054
10,757
Other
3,353
2,968
$
147,197
$
152,399
Sales to and receivables from customers that individually accounted for 10% or more of the Company's total net sales were as follows (in thousands and percent of total):
12
Three Months Ended
September 27, 2026
September 28, 2025
Net Sales
%
Net Sales
%
General Motors Company
$
41,455
28%
$
41,778
27%
Ford Motor Company
31,931
22%
33,859
22%
Stellantis
20,520
14%
22,792
15%
$
93,906
64%
$
98,429
64%
September 27, 2026
June 28, 2026
Receivables
%
Receivables
%
General Motors Company
$
25,866
27%
$
24,144
24%
Ford Motor Company
18,398
19%
18,355
19%
Stellantis
14,165
15%
17,087
17%
$
58,429
61%
$
59,586
60%
NOTE 13. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is party to various legal actions, administrative proceedings, and claims arising in the ordinary course of business, including matters related to alleged product defects and warranties, contract disputes, intellectual property, and employment issues. The Company recognizes accruals for such matters in accordance with U.S. GAAP when a loss is probable and reasonably estimable. While the outcome of these matters cannot be predicted with certainty, based on currently available information, management does not believe the ultimate resolution of these proceedings, individually or in the aggregate, will have a material adverse effect on the Company's financial position, results of operations, or cash flows.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements
In this Quarterly Report on Form 10-Q for Strattec Security Corporation ("Strattec," "the Company," "we," "us," or "our"), statements that are not reported financial results or other historic information are "forward-looking statements." These forward-looking statements relate to, among other things, the Company's future financial position, business strategy, targets, projected sales, costs, income, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations. The use of words such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "project," "plan," or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements by their nature address matters that are, to different degrees, uncertain and are subject to risks, assumptions, and other factors, some of which are beyond the Company's control, that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
The Company’s operations and financial performance are subject to certain risks and uncertainties, including:
•
An uncertain economic environment and inflationary conditions coupled with the cyclical nature of the automotive industry may adversely affect global production and demand for our products;
•
macroeconomic and geopolitical conditions, including regional conflicts, could adversely affect our business, results of operations, and financial condition;
•
changes in tariffs or international trade policies could adversely affect our results, particularly with respect to goods imported into the United States or produced under U.S. trade agreements such as the USMCA;
•
delays, restrictions impacting the import of goods, and components stemming from changes in policies implemented by the U.S. Government related to U.S.-Mexico border crossings could have a negative effect on our business;
•
our relatively smaller scale compared to many automotive suppliers may limit our ability to compete effectively and could adversely affect our business, financial condition, and results of operations;
•
a significant portion of our net sales is derived from a limited number of customers and vehicle programs, and the loss, cancellation, delay, or reduction of key customer relationships or vehicle programs could materially adversely affect our business, financial condition, and results of operations;
•
we operate in a highly competitive market with potential increased competition from Chinese automotive suppliers and rapidly evolving technological developments within our sphere of product offerings;
•
our ability to manage changes in the costs of operations, warranty claims, or adverse business and operational issues could be affected by a material global supply chain and logistics disruption;
•
future shortages in the supply of semiconductor chips and other matters adversely impacting the timing, availability, and costs of material component parts and raw materials for the production of our products could adversely affect our business, results of operations, and financial condition;
•
labor cost inflation or unionization efforts in Mexico, coupled with a shortage of skilled laborers in the United States, could increase our manufacturing expenses and impact production efficiency;
•
work stoppages within our operations or at the location of our key customers as a result of labor disputes could adversely impact our business, results of operations, and financial condition;
•
an increase in the volume and scope of product returns, warranty claims, or customer cost reimbursement actions could adversely impact our business, results of operations, and financial condition;
•
our ability to identify, evaluate, negotiate business development activities on acceptable terms or at all, the costs incurred in pursuing such transactions, and the Company’s ability to integrate any acquired business and realize the anticipated benefits;
•
interruptions to our information security management systems and cybersecurity incidents could adversely affect our business, results of operations, and financial condition; and
•
other matters including, but not limited to, the factors listed in the “Risk Factors” in Part I, Item 1A included in the Company’s Annual Report on Form 10-K for the year ended June 28, 2026 filed with the SEC on August 28, 2026 (the "Annual Report").
Shareholders, potential investors, and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-Q and the Company undertakes no obligation to update such forward-looking statements.
The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, the consolidated condensed financial statements and related notes thereto included elsewhere in this Report and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended June 28, 2026.
14
Business Overview
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.
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 increasing productivity and efficiencies in our manufacturing operations through automation and lean manufacturing. 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 to 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. It also allows for strategic acquisitions to diversify our customers and geographies, increase the scale of our operations, and enhance our product offerings.
Current Business Update
The North American automotive market remained challenging during the first quarter of fiscal 2027, reflecting lower vehicle production volumes and continued economic and trade uncertainty. Industry data indicates that North American automotive production volumes declined 3.8% compared with the prior-year period. Our net sales for the first quarter of fiscal 2027 were $147.2 million, a decrease of 3.4% compared with the prior-year period, generally consistent with the decline in industry production volumes. For the fiscal year, we continue to expect North American light vehicle production to decline approximately 2%, with production volumes of our primary customers expected to decline nearly 5%. Given the reduced level of new product launches and the long-cycle nature of our business, we are working closely with customers to create future organic growth through increased content on existing vehicle platforms, new platform awards and expansion of our customer base. Our near-term focus is on improving profitability on lower revenue. During the first quarter of fiscal 2027, we continued to take actions to improve our cost structure, including implementation of an additional restructuring program, as well as initiatives to improve supply chain performance. Our supply chain continues to be affected by elevated freight and commodity costs, industry-wide semiconductor shortages, and supplier quality and delivery challenges.
Our balance sheet remains an important strategic asset and provides flexibility to invest in our transformation and organic growth initiatives, return capital to shareholders and pursue strategic growth opportunities. Cash provided by operating activities was $10.8 million during the first quarter, and cash and cash equivalents were $111.8 million at September 27, 2026, with no borrowings outstanding under our revolving credit facilities. During the quarter, we repurchased $5.0 million of common stock under our share repurchase program and incurred costs related to business development activities intended to diversify our customer base and geographic reach, increase the scale of our operations, and enhance our product portfolio. We intend to maintain a disciplined approach to capital allocation as we invest in operational improvements and organic growth and evaluate opportunities to enhance long-term shareholder value.
15
Analysis of Results of Operations
Three months ended September 27, 2026, (first quarter fiscal 2027) compared with the three months ended September 28, 2025 (first quarter fiscal 2026)
The Company's consolidated results of operations were as follows (in thousands):
Three Months Ended
Change
September 27, 2026
September 28, 2025
$
%
Net sales
$
147,197
$
152,399
$
(5,202
)
-3
%
Direct material costs
80,936
83,888
(2,952
)
-4
%
Labor and overhead costs
41,946
42,176
(230
)
-1
%
Cost of goods sold
122,882
126,064
(3,182
)
-3
%
Gross profit
24,315
26,335
(2,020
)
-8
%
Gross margin
16.5
%
17.3
%
-80
bp
Selling, administrative and engineering expenses
17,892
15,888
2,004
13
%
Income from operations
6,423
10,447
(4,024
)
-39
%
Operating margin
4.4
%
6.9
%
-250
bp
Interest income
989
877
112
13
%
Interest expense
(37
)
(156
)
119
-76
%
Other expense, net
(183
)
(275
)
92
-33
%
Income before income taxes and non-controlling interest
7,192
10,893
(3,701
)
-34
%
Income tax expense
1,881
2,356
(475
)
-20
%
Net income
5,311
8,537
(3,226
)
-38
%
Net income attributable to non-controlling interest
478
8
470
N/M
Net income attributable to Strattec
$
4,833
$
8,529
$
(3,696
)
-43
%
Earnings per share attributable to Strattec:
Basic
$
1.22
$
2.10
$
(0.88
)
-42
%
Diluted
$
1.19
$
2.07
$
(0.87
)
-42
%
First quarter fiscal 2027 net sales totaled $147.2 million, a decrease of $5.2 million, or 3.4%, compared with the prior-year first quarter. The decrease primarily reflected a $6.2 million decrease in customer production volumes, partially offset by $1.0 million of net pricing benefit.
Gross profit was $24.3 million in the first quarter of fiscal 2027, compared with $26.3 million in the prior-year period. Gross margin was 16.5% of net sales, compared with 17.3% in the prior-year period. The decrease in gross profit primarily reflected the impact of lower production volumes and $1.4 million of unfavorable foreign currency effects, partially offset by favorable pricing.
Selling, administrative and engineering expenses were $17.9 million, or 12.2% of net sales, for the first quarter of fiscal 2027, compared with $15.9 million, or 10.4% of net sales, in the prior-year period. The $2.0 million increase was the result of $2.4 million of business development costs and $0.8 million of additional investments in talent and consultants, which were partially offset by $1.2 million of incremental engineering recoveries, compared with the prior year.
Interest income increased $0.1 million due to higher average cash and cash equivalent balances. Interest expense decreased $0.1 million due to the repayment of all borrowings under our revolving credit facilities in fiscal 2026.
Other expense, net was $0.2 million in the first quarter of fiscal 2027 and $0.3 million in the prior-year period.
The effective income tax rate was 26.2% and 21.6% for the first quarter of fiscal 2027 and 2026, 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, non-deductible items and discrete income tax benefits associated with share-based payments. The effective tax rate for the first quarter of fiscal 2027 included a $0.4 million increase to reserves for uncertain tax positions.
As a result of the factors described above, net income attributable to Strattec was $4.8 million, or $1.19 per diluted share, in the first quarter of fiscal 2027, compared with $8.5 million, or $2.07 per diluted share, in the prior-year period.
16
Liquidity and Capital Resources
At September 27, 2026, we had $111.8 million of cash and cash equivalents, of which $3.8 million was held by our foreign subsidiaries and $108.0 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):
Three Months Ended
September 27, 2026
September 28, 2025
Cash provided by operating activities
$
10.8
$
11.3
Cash used in investing activities
(1.2
)
(1.5
)
Cash used in financing activities
(6.0
)
(3.9
)
Effect of exchange rate changes on cash
(0.1
)
-
Net increase in cash and cash equivalents
$
3.5
$
5.9
Cash provided by operating activities was $10.8 million for the first quarter of fiscal 2027, compared with $11.3 million in the prior-year period. Capital expenditures, primarily to support customer programs, were $1.2 million during the first quarter of fiscal 2027 compared with $1.5 million in the prior-year period. Operating cash flow funded $5.0 million of common-stock repurchases, and $1.0 million of taxes paid in connection with vested share-based awards. Prior-year financing cash flows included $3.0 million of repayments under credit facilities and $0.9 million of taxes paid in connection with vested share-based awards.
At September 27, 2026, no borrowings were outstanding under the $40.0 million Strattec Credit Facility or the $10.0 million joint venture revolving credit agreement. The Company was in compliance with all covenants under its credit facilities at September 27, 2026.
We believe that the revolving credit lines, combined with our existing cash and anticipated operating cash flows, will be adequate to meet operating and capital expenditure funding requirements. In the short term, cash generated from operations will be reinvested in our business to fund our transformational efforts, organic and strategic growth initiatives, and opportunistically repurchase shares.
Primary Working Capital Management
We use primary working capital as a percentage of sales (PWC %) as a key metric of working capital management. We define this metric as the sum of net accounts receivable and net inventory less accounts payable, divided by the past three months sales annualized. The following table shows a comparison of primary working capital (in millions):
September 27, 2026
PWC %
June 28, 2026
PWC %
Accounts Receivable, net
$
95.1
16%
$
99.1
16%
Inventory, net
$
64.9
11%
$
64.3
11%
Accounts payable
$
(55.1
)
(9%)
$
(55.0
)
(9%)
Net primary working capital
$
104.9
18%
$
108.4
18%
17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company’s market risk exposures from those described under Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2026.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective at reaching a level of reasonable assurance. It should be noted that in designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have designed our disclosure controls and procedures to reach a level of reasonable assurance of achieving the desired control objectives.
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the normal course of business, we may be involved in various legal proceedings from time to time. We do not believe we are currently involved in any claim or action the ultimate disposition of which would have a material adverse effect on our financial statements.
ITEM 1A. RISK FACTORS
An investment in our Common Stock involves risks. Before making an investment decision, you should carefully consider all of the information in this Quarterly Report, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Condensed Consolidated Financial Statements and related notes. In addition, you should carefully consider the risks and uncertainties described in the section entitled “Risk Factors” in our Annual Report. If any of the identified risks are realized, our business, financial condition and operating results could be materially and adversely affected. In that case, the trading price of our Common Stock may decline. In addition, other risks of which we are currently unaware, or which we currently do not view as material, could have a material adverse effect on our business, financial condition and operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On May 28, 2026, the Board of Directors authorized a new share repurchase program under which the Company may repurchase up to $40.0 million of its outstanding common stock. In connection with the authorization of the new program, we terminated our previous share repurchase program. The new share repurchase program has no fixed expiration date, does not obligate us to acquire any specific amount of common stock, and may be modified, suspended or terminated at any time at the discretion of the Board of Directors. The following table provides information with respect to the purchases by the Company of Common Stock under this authorization during the three months ended September 27, 2026 (in millions, except share and per share amounts):
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Programs
Maximum Approx. Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
6/29/2026 - 7/26/2026
-
$
-
-
$
40.0
7/27/2026 - 8/30/2026
21,652
$
72.88
21,652
$
38.4
8/31/2026 - 9/27/2026
46,252
$
73.41
46,252
$
35.0
67,904
$
73.24
67,904
$
35.0
19
ITEM 5. OTHER INFORMATION
During the period ended September 27, 2026, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS
Exhibit
If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
This certification is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
101
Inline XBRL documents (the Inline XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.