Strattec Security Corp: Form 10-K for the period ended Jun 29, 2025

Overview

Strattec, which has a history serving the automotive industry for over 100 years, was incorporated as a stand-alone company in 1995. Our Milwaukee, Wisconsin headquarters oversees operations in the United States and Mexico for a global customer base. Since the Company’s inception, we have partnered with our customers to design and manufacture highly engineered products and solutions creating a broad range of innovative automotive access products. While primarily focused on key North American automotive original equipment manufacturers (“OEM”), we also provide our products globally to customers in both OEM and aftermarket channels. We believe that our engineering expertise, ability to deliver customized solutions and our quality and delivery performance are key advantages that differentiate the Company from its competitors and allow us to be a premier partner to our customers.

Products

As automotive vehicle security and safety demands continue to strengthen, our product portfolio is well positioned to meet our customers’ evolving needs. Our product offerings primarily relate to security and authorization solutions, as well as vehicle access systems.

Security and authorization products include mechanical and electronically enhanced locks and keys, fobs, passive entry passive start systems, digital key, steering column and instrument panel ignition lock housings and related solutions. We established our leading market position with North American automotive customers initially with our legacy mechanical locks and keys. Our flexible and responsive service and our deep relationships with our customers have allowed us to deliver these products both directly to our OEM customers and through our differentiated service in the aftermarket channel.

Our vehicle access product portfolio was derived from an acquisition in fiscal 2009 and includes power sliding doors, power tailgates and lift gate systems, as well as power deck lid systems. The products included in these highly-engineered systems include drivetrain mechanisms, complex latching mechanisms and electronic control units. These system offerings work together to provide our customers optimal performance through a deep understanding of mechanical, electrical and software architectures.

We have leveraged our know-how between our lock and key products and our vehicle access solutions to also develop user-interface control products, which include steering wheel switches, controllers, e-shifters and paddle switches.

We also provide door handles through our joint venture. These products leverage our deep manufacturing knowledge and understanding of automotive requirements to deliver high quality components, bringing together world-class injection mold and assembly capability with high quality paint processes.

All of our products are safety critical, powertrain agnostic and are applicable for internal combustion, plug-in/hybrid or electric vehicles. Applications we serve require robust engineering partnership during the vehicle design cycle, which is typically three to five years ahead of start of production. Our engineering team works closely with our customers during the design phase to ensure our products meet specific vehicle platform requirements. Once our products are designed into an application, we are well positioned as the incumbent supplier for the life of the vehicle due to the high degree of customization and vehicle platform certification. We believe this is one of the reasons our products are rarely changed during a platform lifecycle which, in the case of the North American automotive industry, typically lasts five to seven years.

Across our product lines, we have built strong platform and system competencies, including software development. This approach enables us to leverage our software and component technical capabilities to move with speed and agility and provide better package flexibility for easier integration into a variety of platforms for our customers. For example, we have elevated our key fob business with our digital key product which leverages our system and software capability to meet increasing security, software and packaging architecture needs. Our power access solutions products are designed from a core platform approach that allows us to leverage carry-over components within a system to move faster through the design phase and provide optimal package flexibility while meeting increasing vehicle safety and security needs.

We believe we are at the forefront of emerging technology, collaborating with OEM product development and purchasing groups to provide cost-effective innovative solutions to the challenges facing our customers.

Customers

We are a direct supplier to automotive and light truck OEMs, as well as other transportation industry OEMs. Our product mix varies by customer, with most customers sourcing multiple product categories from us.

Direct sales to various OEMs (including Tier 1 suppliers) represented approximately 90% of our total sales for both fiscal 2025 and 2024. The remainder of our sales are to the OEM service channels, the aftermarket and sales of certain products to non-automotive customers.

A significant portion of our annual sales are to General Motors Company, Ford Motor Company, and Stellantis. The products sold to these customers are model specific, fitting only certain defined applications. As such, we are highly dependent on these customers' ability to produce and sell vehicles which utilize our products.

Sales to our customers are coordinated through direct sales personnel and supported by our program managers, application engineers and other product engineering personnel. In addition, we distribute our components and security products to the automotive aftermarket through authorized wholesale distributors, as well as other marketers and users of component parts. Our sales are generally based upon purchase orders issued by the OEMs and updated for volume adjustments through production releases. As such, we do not have a firm and definitive backlog of orders. Once awarded to supply products for a particular platform, we typically support those products for the life of the vehicle, which is normally five to seven years, though this term is not guaranteed. When we are the incumbent supplier for a given platform, we believe we have a competitive advantage in winning the replacement platform, although, future awards are not guaranteed.

Product Engineering Focus

Our product engineering activities, including research and development, are an essential part of our efforts to develop new or improved innovative products. Our product engineering, including the development of customized customer solutions, is accomplished in both the United States and Mexico. The development of new products, or enhancements to existing products, are the result of collaboration with customers. Our engineers and program managers follow a formalized product development process to streamline development and identify market requirements. Our advanced design and engineering capabilities contribute to the development of innovative and highly engineered products, maintain our technological leadership and enhance our ability to provide customers with unique customized solutions and products. We specialize in system, mechanical, electrical and software engineering and have advanced modeling and testing capabilities that allow us to meet the design and timing requirements from our customers.

Patents, Tradename and Other Intellectual Property

The development of new or improved technologies is critical to the execution of our business strategy. Currently-owned patents and patents obtained for new or improved technologies form an important basis for the Company's success and underpin the success of our research and development efforts. We have a policy of seeking patents on new products and improvements when appropriate.

We also rely upon trade secret protection for our confidential and proprietary information. We maintain confidentiality agreements with our customers and key executives. In addition, we enter into confidentiality agreements with select suppliers, consultants and employees as appropriate to evaluate new products or business relationships relevant to our success.

Intellectual property is of considerable importance to the manufacturing, marketing and sale of our products. However, we do not consider any single patent, trademark or other intellectual property to be material to our business as a whole, except for the Strattec tradename.

Operations

Substantially all of our products are manufactured at the facilities we own in the United States and Mexico. Many of the components used in our products are manufactured in our facility in Milwaukee, Wisconsin, which specializes in die casting, stamping and plating operations. We also operate in three production facilities in Juarez, Mexico. These facilities assemble finished products and have plastic injection molding capabilities, as well as printed circuit board manufacturing capability. Finally, our operations in our Leon, Mexico facility include plastic injection molding operations, a custom paint system and assembly operations.

Seasonal Nature of the Business

Our principal operations are directly related to the automotive industry. Consequently, we have historically experienced seasonal fluctuations to the extent that automotive vehicle production slows, such as in the summer months when many customer plants close for model year changeovers and in December when many customer plants close for the holidays. Fluctuation has also occurred, in recent years when global light vehicle production, inventory and consumer demand all experienced extreme dislocations from historic norms due to the global COVID-19 pandemic. Post-pandemic, global light vehicle production has continued to be negatively impacted by widespread supply chain disruptions, limiting new vehicle manufacturing. Seasonality of production has normalized since 2023, however total production volume has remained below pre-pandemic levels.

Served Customer Vehicles

Our product solutions can be found on over 90 different customer vehicles, including electric (EV), plug-in/hybrid, and internal combustion engine platforms. Key vehicle platforms include, but are not limited to, the following:

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Raw Material Costs and Availability

We source materials and components from a network of global suppliers. Our primary raw materials are high-grade zinc, brass, nickel silver, steel, aluminum, plastic resins, semiconductor chips and other electronics. These materials are generally available from a number of suppliers and are subject to price fluctuations. We believe our sources for raw materials are reliable and adequate for our needs. In the normal course of business, we do not carry substantial inventories of these raw materials in excess of levels reasonably required to meet our near-term production requirements.

Competition

We compete with domestic and foreign competitors based on product design, engineering support, quality, delivery and price. While the number of direct competitors in our product markets is currently relatively small, automotive OEMs actively encourage competition between potential suppliers. We compete for business principally based on of quality, technical support, program management, innovation and aftermarket support.

Our competitors include Aisin, Alpha-Tech, Brose, Continental, Edscha, Gecom, Honda Lock, Huf North America, Inteva, JNS Auto Parts, Kiekert, Magna, Marquardt, MinbeaMitsumi, Mitsuba, Novares, Ohi, PHA Automotive, Shin Chang, Stabilus, Tokai-Rika, Ushin, and Valeo.

Human Capital Management

Our employees, coupled with our ability to attract, retain and develop talent, are critical to our business strategy and success. Our human capital strategy is focused on developing a creative and open working environment and developing the right skill sets to advance our culture and unlock innovation and growth. We also strive to develop talent for critical roles and leadership positions, reward and support associates through competitive compensation and benefits, and promote the health and safety of our employees. At June 29, 2025, we had 2,848 associates including 417 in the United States, 2,425 in Mexico and 6 in other countries. We have two facilities with union representation, which covers 9.4% of our employees, including our Milwaukee, Wisconsin location (contract expires November 1, 2025) and Leon, Mexico location (contract expires April 8, 2026). In recent years, we have not experienced any significant work slowdowns, stoppages or other labor disruptions.

Executive Officers of Registrant

Our executive officers as of June 29, 2025, together with their ages, positions, and business experience are below:

Jennifer Slater has served as our President and Chief Executive Officer, and as a Director, since July 2024. Prior to joining Strattec, Ms. Slater was Executive Vice President and General Manager, Performance Sensing, of Sensata Technologies, Inc. (NYSE: ST), a global industrial technology company, from April 2024 through June 2024. She also held the position of Senior Vice President, Automotive & Aftermarket, at Sensata from April 2023 to April 2024; and Vice President and General Manager of Sensata's Heavy Duty and Off-Road business from September 2022 through March 2023. Prior to her time with Sensata, Ms Slater held the position of Group Vice President and General Manager, Global OE and Products, at Clarios, LLC from 2019 to September 2022. Ms. Slater serves as a director of Valvoline Inc. (NYSE: VVV), a retail automotive services company; she was first elected in July 2022.

Matthew Pauli has served as our Senior Vice President, Chief Financial Officer since November 2024. With over 25 years of financial expertise, he previously served as Chief Financial Officer of CentroMotion, a global manufacturer of highly engineered products serving the transportation and other industrial markets. Earlier in his career, Mr. Pauli held senior finance roles at Enerpac (NYSE: EPAC), including Corporate Controller/Chief Accounting Officer, and VP of Finance after starting his career at Ernst & Young.

Rolando Guillot has served as our Chief Operating Officer since March 2023. Prior to that he was Senior Vice President - Operations since 2016. Mr. Guillot joined Strattec in September 1996 and will be retiring in September 2025.

Richard Messina has served as our Senior Vice President - Global Engineering since January 2020 and Chief Technology Officer since May 2023. Prior to that, Mr. Messina served as our Vice President - Global Sales and Access Control Products from 2013 until 2023. Mr. Messina began his career with Strattec in August 2008 and has held various management positions overseeing engineering and product development. Prior to joining Strattec, Mr. Messina was a Chief Engineer for Delphi Corporation.

Chey Varto has served as our Senior Vice President, Chief Commercial Officer since November 2024. She previously served as Chief Commercial Officer at Vayan Group, a leading provider of quality assurance solutions for automotive OEMs. Prior to that, she held leadership roles at Clarios, JD Norman Industries, and GST AutoLeather. She began her career at Lear Corporation where she advanced through roles of increasing responsibility.

Available Information

We maintain our corporate website at www.strattec.com (http://www.strattec.com) and make available, free of charge, our Code of Business Ethics, and reports that we file with the Securities and Exchange Commission. We are not including all the information contained on or made available through our website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

Investors and readers should carefully consider each of the risks, assumptions, uncertainties and other factors described below and elsewhere in this Annual Report, as well as any amendments or updates reflected in subsequent filings with the Securities and Exchange Commission. We believe these risks, assumptions, uncertainties and other factors, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results and could materially and adversely affect our business operations, results of operations, financial condition and liquidity.

Business Risks

Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share

In fiscal 2025, our three largest customers, General Motors Company, Ford Motor Company and Stellantis, accounted for 29%, 23% and 12%, respectively, of our annual sales, compared to 30%, 21% and 14%, respectively, in fiscal 2024. The contracts with these customers provide for meeting the customer’s requirements for a particular vehicle model with our products. The contracts do not specify a quantity of parts to be supplied over the life of the vehicle, which averages approximately four to five years. Components for certain customer models may also be “market tested” annually. Therefore, the loss of any one of these customers, the early cancellation or breach by either party of a contract for a specific vehicle model, a reduction in vehicle content, the early cancellation of a specific vehicle model, technological changes or a significant reduction in demand for certain models could occur, and if so, could have a material adverse effect on our existing and future revenue, operating results, financial condition and cash flows.

We also make investments in machinery and equipment used exclusively to manufacture products for specific customer programs. This machinery and equipment is capitalized and depreciated over the expected useful life of each respective asset. Therefore, the loss of any one of our major customers, the loss of specific vehicle models or the early cancellation of a vehicle model could result in impairment in the value of these assets.

Production Slowdowns by Customers

Our business depends on, and is directly affected by, the global automobile industry. Our major customers and many of their suppliers can be significantly impacted by unfavorable global economic and industry conditions. In the past, many of our major customers have instituted production cuts and shuttered plants in light of these unfavorable conditions which adversely impacts demand for our products during these slowdowns and shutdowns. While production has increased and plants have reopened after these events, any additional economic slowdowns, global conflicts, pandemics or part supply shortages could bring about new production cuts which could have a material adverse effect on our revenue, operating results, financial condition and cash flows. Furthermore, uncertain economic conditions and inflation may contribute to a reduction in consumer demand, which may reduce vehicle production over at least the next several quarters. We cannot be certain of the severity and length of the continued volatility in the global automotive market, and the extent of the adverse effect that such volatility could have on our results of operations, financial condition, and business in the long term.

Cross-border Trade Issues and Tariffs

Our operations are impacted by international or cross-border trade dynamics, particularly the import and export of products and goods into and out of the United States. The shipping of goods across national borders is often more expensive and complicated than domestic shipping. Customs and duty procedures and reviews, including duty-free thresholds in various key markets, the application of tariffs, and security-related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit and create shipping uncertainties. The imposition of non-tariff barriers, including localized content rules and government procurement restrictions, may further limit our ability to operate efficiently across borders.

We manufacture our products in Mexico and rely on a global supply chain to provide raw materials and components that we need to manufacture our products. Our business benefits from certain free trade agreements, such as the United States-Mexico-Canada Agreement ("USMCA"). However, recent shifts in trade policy have resulted in new or higher tariffs on goods imported from numerous countries, and some countries have imposed retaliatory tariffs on imports from the United States, which has created meaningful uncertainty. These changes may result in significantly increased production costs, pricing volatility and administrative complexity in determining country-of-origin compliance for automotive components.

In addition to potential increases in customs duties and tariffs in the United States and other countries, the USMCA is subject to renewal in 2026. There can be no assurance that the USMCA will be renewed or, if renewed, any newly negotiated terms in the USMCA will not adversely affect our business. Also, China presents unique risks to U.S. automotive manufacturers due to the strain in U.S.-China relations and the level of integration with key components in our global supply chain. It remains unclear what additional actions the current U.S. administration may take with respect to trade issues involving China and other countries.

Changes in U.S. trade relations with foreign countries involved in our business, including but not limited to Mexico, Canada, China, and European countries, could have a material effect on global economic conditions and significantly decrease global trade, which could adversely impact our production costs, purchased material costs, ability to compete, customer demand, short-term vehicle production levels and relationships with suppliers and customers. The ultimate impact of changes to tariffs and trade barriers will depend on a number of factors that are not yet known or are subject to change, including the timing, amount, scope and nature of any tariffs and trade barriers that are implemented.

Highly Competitive Automotive Supply Industry

The automotive component supply industry is highly competitive. New business is typically awarded to the supplier offering the most favorable combination of technological innovation, quality, delivery and price. There can be no assurance that we will be able to compete successfully with the products of our competitors. Our competitors' efforts to grow market share could exert downward pressure on our product pricing and margins. Vertical integration by competitors and customers, as well as within our supply chain, could complicate and impact sourcing decisions by our customers and adversely affect our sales. Some of our competitors may have larger customer bases and significantly greater financial, technical, and marketing resources than we do. These factors may allow our competitors to respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive aftermarket products. Increased competition could put additional pressure on us to reduce prices or take other actions, which may have an adverse effect on our business, sales, financial condition and results of operations. We may also lose significant customers or lines of business to competitors.

Cyclicality and Seasonality in the Automotive Market

Historically, our operating results have fluctuated by quarter based on the ebbs and flows of automotive vehicle production levels. The automotive market is cyclical and is dependent on consumer spending, on the availability of consumer credit, interest rates, fuel prices, consumer preference and confidence, and to a certain extent, on customer sales incentives. Economic factors adversely affecting consumer demand for automobiles and automotive production, could adversely impact our financial results.

Market Acceptance of New or Enhanced Products

The growth of the Company's business will be dependent on the demand for innovative products. In order to increase sales in current markets and gain entry into new markets, the Company must innovate to maintain and improve existing products while successfully developing and introducing distinctive new and enhanced products that anticipate changing customer and consumer preferences and capitalize upon emerging software technologies, including hybrid and electric vehicle advances. We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by our customers. New model development generally begins two to five years prior to the marketing of such new models. The failure to obtain new business on new vehicle models or to retain or increase business on redesigned existing models could result in reduced net sales. In addition, we may incur significant product development expenses in preparing to meet anticipated customer requirements which may not be recovered.

Joint Ventures

Certain of our operations are conducted through a joint venture with ADAC Automotive. With respect to our joint venture, we may share ownership and management responsibilities with a partner that may not share our goals and objectives. Operating a joint venture requires us to manage the business pursuant to the terms of the agreement that we entered into in fiscal 2007 with our partner, which may require additional organizational formalities, as well as the sharing of information and decision making. Additional risks associated with joint ventures include one or more partners failing to satisfy contractual obligations, the ability to enforce such obligations, conflicts arising between us and our partner, a change in the ownership of any of our partners and a reduced ability to control compliance with applicable rules and regulations. Additionally, our ability to sell our interest in a joint venture may be subject to contractual and other limitations. Accordingly, any such occurrence could adversely affect our financial condition, operating results and cash flows.

Operational Risks

Shortages, Increases in Costs, or Other Restrictions on the Availability of Raw Materials or Components Supply

If any of our customers experience a material supply shortage, either directly or as a result of supply shortages at another supplier, that customer may halt or limit the purchase of our products. Similarly, if we or one of our own suppliers experiences a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source. Such disruptions may arise due to any number of issues including catastrophic events such as natural disasters, global pandemics, war, rapid increases in demand, or unforeseen economic challenges like prolonged inflation or elevated interest rates. These shortages could impact our ability to meet production schedules for key products and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

During recent fiscal years, we have experienced higher costs on raw materials and purchased components, as well as freight costs. The continuation or renewal of these cost increases could have a material adverse effect on our future revenue, financial results, financial condition and cash flows.

In order to manage and reduce the costs of purchased goods and services, we have been rationalizing and consolidating our supply base. As a result, there is greater dependence on fewer sources of supply for certain components and materials used in our products. We consider the production capacities and financial condition of suppliers in our selection process, and expect them to meet our delivery requirements. However, there can be no assurance that strong demand, capacity limitations, shortages of raw materials, labor disputes or other problems will not result in any shortages, cost increases, or other restrictions on the availability of raw materials or components supplied to us.

Foreign Operations

We operate manufacturing operations in Mexico. As these operations continue to expand, their success will depend, in part, on our ability to anticipate and effectively manage certain risks inherent in international operations, including: enforcing agreements and collecting receivables through certain foreign legal systems, payment cycles of foreign customers, compliance with foreign tax laws, general economic and political conditions in these countries and compliance with foreign laws and regulations.

Cyber Vulnerability

In the ordinary course of business, we collect and store sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information of our customers and employees, in our internal data centers, cloud services and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Cybersecurity attacks are becoming more sophisticated and include, but are not limited to, malicious software attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, corruption or destruction of data and other manipulation or improper use of systems or networks. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligence. Despite our security measures, our information technology and infrastructure, as well as that of our partners, customers and suppliers, may be vulnerable to malicious attacks, breaches or system failures due to employee error, malfeasance or other disruptions, including as a result of rollouts of new systems. Any such breach or operation failure would compromise our networks or that of our business partners, customers or suppliers, and the information stored could be accessed, publicly disclosed, lost or stolen, cause transaction processing errors, processing inefficiencies, delays or cancellation of customer orders, the loss of customers, impediments to the manufacturing or shipment of products, or other business disruptions. Such access or other loss of information could result in legal claims or proceedings, regulatory fines or penalties, disruption in our operations, damage to our reputation, loss of confidence in our products and services, increased costs, or the loss of assets, any of which could have a negative impact on our business, results of operations, financial condition and cash flows.

In addition, as security threats, cybersecurity, data privacy and protection laws and regulations continue to evolve and increase in terms of sophistication, we may be required to or choose to invest additional resources in the security of our systems. Any such increased level of investment could adversely affect our financial condition or results of operations.

Qualified Personnel

Our business success depends, to a significant degree, on attracting and retaining qualified personnel. Our ability to sustain and grow our business requires us to hire, retain, develop and motivate a highly skilled and diverse management team and workforce. These types of employees are in high demand and often have competing employment opportunities. The labor market for skilled employees is highly competitive and we may lose key employees or be forced to increase their compensation to retain these types of employees. Failure to ensure that we have the leadership capacity with the necessary skill set and experience could impede our ability to deliver our growth objectives and execute our strategic plan. Organizational and reporting changes resulting from any future leadership transition or corporate initiatives could result in increased turnover. Additionally, any unplanned turnover or inability to attract and retain key employees could have a negative effect on our results of operations, including by significantly increasing our recruitment, training and other related employee costs. Moreover, the loss of key personnel, or the failure to attract qualified personnel, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Disruptions Due to Work Stoppages and Other Labor Matters

Our major customers and many of their suppliers have unionized workforces. Work stoppages or slowdowns experienced by our customers or their suppliers could result in slowdowns or closures of assembly plants where our products are included in assembled vehicles. A material work stoppage experienced by one or more of our customers or suppliers could have an adverse effect on our business and financial results.

In addition, all production associates at our Milwaukee facility are unionized. The current contract with our Milwaukee unionized associates is effective through November 1, 2025. We also have unionized associates at our Leon, Mexico facility. The current contract with our Leon unionized associates is effective through April 8, 2026. We may encounter labor disruption and we may also encounter unionization efforts in our other plants or other types of labor conflicts, any of which could have an adverse effect on our business, financial results, financial condition and cash flows.

Climate Change and Environmental, Social, and Governance (ESG) Matters

Natural disasters or extreme weather conditions resulting from global climate change could lead us, our customers or our suppliers to experience disruptions in operations or disruptions in the availability of key components, which could lead to a material adverse impact on our results of operations, financial condition and cash flows. We could also experience adverse impacts to our financial condition due to volatility in the cost or availability of capital, difficulty obtaining new business or entering into new supplier relationships, a possible loss of market share on our current product portfolio, fines and penalties or difficulty attracting and retaining a skilled workforce.

Further, various stakeholders, including customers, suppliers, lenders, regulators, investors and those in the workforce, are increasing their expectations for businesses to do more to combat global climate change and its impact, and to conduct their operations in an environmentally sustainable manner with appropriate oversight by senior leadership. A failure to respond to the expectations and initiatives of our stakeholders could result in damage to our reputation and relationships with various stakeholders.

In addition to the increased stakeholder focus on climate change, customer, investor, and employee expectations in sustainability have been rapidly evolving and increasing. The enhanced stakeholder focus on sustainability requires continuous monitoring of various and evolving regulations and standards and their associated requirements. Our failure, or that of our supply base, to adequately meet stakeholder expectations may result in, among other things, the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent that could adversely affect our business, financial condition or results of operations.

Financial Risks

Financial Distress of Automotive Supply Base

Unfavorable global, economic or industry conditions could result in the financial distress of the automotive supply base. Severe distress could lead to automotive suppliers filing for bankruptcy protection or ceasing operations. Such conditions may require us to provide financial assistance or other measures to ensure uninterrupted production. These conditions could have a material adverse effect on our existing and future revenues, financial results, financial condition and cash flows.

Cost Reduction

There is continuing pressure from our major customers to reduce the prices we charge for our products. This requires us to continually generate cost reductions, including reductions in the cost of components purchased from outside suppliers. If we are unable to generate sufficient production cost savings in the future to offset pre-programmed price reductions or additional price reduction demands, our gross margin and profitability will be adversely affected.

Currency Exchange Rate Fluctuations

We have manufacturing operations in Mexico, and as a result, a portion of our manufacturing costs are incurred in Mexican pesos. Therefore, fluctuations in the U.S. dollar/Mexican peso exchange rate may have a material effect on our profitability, cash flows and financial position and may significantly affect the comparability of our results between financial periods. Any depreciation in the value of the U.S. dollar in relation to the value of the Mexican peso will adversely affect the cost of our Mexican operations when translated into U.S. dollars.

Program Volume and Pricing Fluctuations

We incur costs and make capital expenditures for new program awards based upon certain estimates of production volumes over the anticipated program life for certain vehicles. While we attempt to establish the price of our products to account for variations in production volumes, if the actual production of certain vehicle models is significantly less than planned, our net sales and net income may be adversely affected. We cannot predict our customers’ demands for the products we supply either in the aggregate or for particular reporting periods.

Existing Indebtedness and Ability to Access Capital Markets

From time to time we have relied on our existing credit facilities to provide us with adequate working capital to operate our business and fund our capital expenditures, including any expansion initiatives. Escalation of any global inflationary pressures on our operating results may impact our ability to satisfy our lending covenants in the short term. Additionally, we cannot provide assurance that we will be able to refinance, extend the maturity of, or otherwise amend the terms of our existing credit facilities, or that any refinancing, extension, or amendment will be on terms favorable to us or even on commercially reasonable terms. If our lenders reduce or terminate our access to amounts under our credit facilities, we may not have sufficient capital to fund our working capital needs and/or we may need to secure additional capital or financing to fund our working capital requirements or to repay outstanding debt under our credit facilities. Moreover, new credit facilities resulting from any refinancing of our existing facilities could have a significantly higher rate of interest and greater borrowing costs than our existing facilities. We can make no assurance that we will be successful in ensuring our availability of amounts under our credit facilities or in connection with raising additional capital and that any amount, if raised, will be sufficient to meet our cash flow requirements. If we are not able to maintain our borrowing availability under our credit facilities it may have a negative impact on our business, results of operations, financial condition and cash flows.

Legal and Regulatory Risks

Intellectual Property

We own intellectual property, including patents, trademarks, copyrights, and trade secrets, that are of importance to our business, in the aggregate. Our intellectual property plays an important role in maintaining our competitive position in the markets we serve. We may directly or through a supplied component utilize intellectual property in its products that requires a license from a third-party. While we believe that such licenses generally can be obtained by us, or supplier if a supplied component, we may not be able to obtain the necessary licenses on commercially acceptable terms or at all. Failure by us or our suppliers to obtain the right to use third-party intellectual property could preclude us from selling certain products, and developments or assertions by or against us relating to intellectual property rights, could have materially adverse effects on our business, operating results, financial condition, and cash flow.

Environmental, Safety and Other Regulations

We are subject to federal, state, local and foreign laws and other legal requirements related to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations. These laws include, among others, the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended). We believe that our existing environmental management system is adequate for current and anticipated operations.

An environmental liability was established in 1995 for estimated costs to remediate an environmental matter impacting a portion of our Milwaukee facility. The contamination occurred in 1985 and, after initial remediation, is being monitored in accordance with federal, state and local requirements. Failure to comply with environmental regulations could result in fines, penalties, and legal liabilities, as well as damage to our reputation. Additionally, changes in environmental laws and regulations or in the enforcement of existing laws and regulations could result in increased compliance costs in excess of our existing liability or additional operating restrictions, which could adversely affect our business, financial condition, and results of operations.

Income Taxes

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. We are also subject to ongoing tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly subjective. Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes. Failure to comply with these tax laws and regulations could result in significant penalties, fines, and interest charges. Additionally, changes in tax legislation or tax rates, including changes in the interpretation or enforcement of existing tax laws, could adversely affect our financial condition and results of operations.

Warranty Claims

We are exposed to warranty claims in the event that our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. We are engaged in ongoing discussions with our customers regarding warranty information and potential claims. The results of these discussions could result in additional warranty costs in future periods. Depending on the nature of and the volume of vehicles involved in the potential warranty claims, these costs could be material to our financial statements. As additional information becomes available, actual warranty results may differ from recorded reserves or we may need to record additional warranty provisions. If our customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a material adverse impact on our results of operations, financial condition and cash flows.

Other Legal Proceedings

We are involved in various legal and regulatory proceedings and claims that, from time to time, may be significant. These are typically claims that arise in the normal course of business, including, without limitation, commercial or contractual disputes, including disputes with our customers, suppliers or competitors, intellectual property matters, personal injury claims, environmental matters, tax matters, employment matters and antitrust matters. No assurances can be given that such proceedings and claims will not adversely affect our financial condition, operating results and cash flows.

Other Risks

Pandemics, Epidemics and Infectious Disease Outbreaks

Pandemics or disease outbreaks have disrupted, and may continue to disrupt, the global economy. Because we and our suppliers manufacture products in facilities around the world, we may be vulnerable to an outbreak of infectious disease in the regions in which we, or our customers or suppliers, operate. The effects of infectious disease outbreaks have included and may continue to include disruptions or restrictions on our ability to travel, our ability to manufacture our affected products and our ability to ship these affected products to customers as well as disruptions that have and may continue to affect our key customers and suppliers, including those in these regions or other affected regions of the world, including in the United States, Mexico, China and neighboring countries. Current and future disruption of our ability to manufacture or distribute our products or of the ability of our customers to take orders of our products or our suppliers to deliver key raw materials on a timely basis could have a material adverse effect on our sales levels, pricing for raw materials and components and our operating results. In addition, future outbreaks of contagious diseases in the human population could result in a widespread health crisis that adversely affects the economies and financial markets of many countries (including those where we operate or where our products are ultimately used), resulting in an economic downturn that could affect demand for our products and impact our operating results.

Geopolitical Instability

We are currently operating in a period of geopolitical instability, which has significantly contributed to economic uncertainty, capital market disruption and supply chain interruptions in the U.S. and global markets. While the length and impact of the ongoing global conflicts are unpredictable, they could lead to further market disruptions, including supply chain interruptions and significant volatility in commodity prices, and in credit and capital markets. The ongoing conflicts have led to sanctions and other penalties being levied by the U.S., the EU, and other countries. Additional potential sanctions and penalties have also been proposed. These global conflicts, as well as future geopolitical conflicts, could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially further disrupting the supply chain for necessary components and raw materials used by us or our customers in producing product. Any of the foregoing factors could have a material adverse effect on our business, operating results, financial condition and cash flows.

Governance

The Company conducts regular assessments of cybersecurity risks both internally and with third party assistance Information Technology Director reports on the results of these assessments and corresponding recommendations to the full Board of Directors at least annually. We use the National Institute of Standards and Technology ("NIST") framework to regularly assess the threat landscape and support a cybersecurity strategy based on prevention, detection and mitigation. In general, the Company seeks to address cybersecurity risks through a cross-functional approach that is focused on preserving confidentiality, managing data security and availability and effectively responding to cybersecurity incidents when they occur. Management's philosophy on cybersecurity is to be vigilant in protecting the Company through investments in tools and employee awareness to aid in the prevention, detection and mitigation of cyber threats, while recognizing that not all threats are preventable.

The Company's Information Technology Director and Chief Financial Officer, along with cybersecurity personnel on their respective teams, are responsible for developing cybersecurity programs, as may be required by applicable law or regulation. Our cybersecurity personnel have the appropriate expertise in IT and cybersecurity, which generally has been gained from a combination of education, including relevant degrees and/or certifications, and prior work experience.

Risk Management and Strategy

Among other best practices, we use multi-factor authentication wherever possible for external access to systems, assess and update current versions of security solutions, perform annual cybersecurity training and email phishing campaigns for employees, use third parties to perform external penetration testing, and maintain disaster recovery and incident response plans. We employ a combination of methods to monitor for new or developing cybersecurity risks. Incidents, if any, are escalated to management and the Board according to our incident response policy. Through these processes, we did not identify risks from current or past cybersecurity incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents.

We have five manufacturing plants, one warehouse, and two sales offices. We believe these facilities are well maintained and in good operating condition and are sufficient to meet our current needs. These facilities are described as follows:

** Leased unit within a complex.

In the normal course of business we may be involved in various legal proceedings. We do not believe we are currently involved in any claim, action or proceeding of which the ultimate disposition would have a material adverse effect on our financial condition, results of operations or cash flows.

The following Management's Discussion and Analysis should be read in conjunction with the accompanying audited consolidated financial statements and notes.

Business Overview

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.

Current Business Update

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.

Market Demand

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.

Trade Environment & Tariffs

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.

Global Conditions

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.

Business Transformation

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.

Analysis of Results of Operations

Year ended June 29, 2025 (fiscal 2025) compared with the year ended June 30, 2024 (fiscal 2024)

The Company's consolidated results of operations for the years ended June 29, 2025 and June 30, 2024 were as follows:

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.

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.

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.

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.

Interest income increased $1.5 million due to increased levels of cash and cash equivalents, which are invested in overnight money market funds.

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.

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.

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.

Liquidity and Capital Resources

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):

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.

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 (dollars in millions):

Cash Requirements and Contractual Obligations

Future Capital Expenditures

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.

Stock Repurchase Program

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.

Credit Facilities

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.

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.

Income Taxes

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.

Other Cash Requirements

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.

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".

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with U.S. GAAP. This requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. The following estimates are considered by management to be the most critical in understanding judgments involved in the preparation of our consolidated financial statements and uncertainties that could impact our results of operations, financial position and cash flow.

Revenue Recognition

We enter into contracts with our customers generally at the beginning of a vehicle's lifecycle. Typically, these contracts do not provide for a specified quantity of products, but once entered into, we are often expected to fulfill our customers' purchasing requirements for the life of the vehicle. These contracts may be terminated by our customers at any time. Historically, terminations of these contracts have been infrequent.

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.

Warranty

We have a warranty reserve recorded related to our exposure to warranty claims in the event our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty reserve balance involves judgment and estimates. Our reserve estimate is based on an analysis of historical warranty data as well as current trends and information. Actual warranty costs might differ from estimates due to the level of actual claims varying from our historical claims experience and estimates and final negotiations and settlements reached with our customers. Therefore, future actual claims experience could result in changes in our estimates of the required reserve. Sensitivity of potential warranty claims is dependent on the respective customer platform, volumes, production years and product content.

Income Tax

Judgment is required to determine the annual effective income tax rate, deferred tax assets and liabilities, reserves for unrecognized tax benefits and any valuation allowances recorded against net deferred tax assets. Our effective income tax rate is based on annual income, statutory tax rates, tax planning opportunities available in the various jurisdictions in which we operate and other adjustments. Tax regulations require items to be included in our tax returns at different times than these same items are reflected in our consolidated financial statements.

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.

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.

Post-employment Benefits

We have post-employment liabilities, including a supplemental executive retirement plan, termination indemnity plans and seniority premium obligations that are developed from actuarial valuations. These valuations include key assumptions regarding discount rates, expected return on plan assets and rate of compensation increases. We consider current market conditions in selecting these assumptions. While the Company believes that these assumptions are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the Company’s liability or future expense.

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, are 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 are 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.

Management’s Annual Report on Internal Controls over Financial Reporting

Our management is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements and notes included in this annual report have been prepared in conformity with accounting principles generally accepted in the United States of America and necessarily include some amounts that are based on management’s best estimates and judgments.

We, as management of Strattec Security Corporation, are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

The Audit Committee of the Company’s Board of Directors, consisting entirely of independent directors, meets regularly with management and the independent registered public accounting firm, and reviews audit plans and results, as well as management’s actions taken in discharging responsibilities for accounting, financial reporting, and internal control. Deloitte & Touche LLP, independent registered public accounting firm, has direct and confidential access to the Audit Committee at all times to discuss the results of their audits.

Management assessed the Company's system of internal control over financial reporting as of June 29, 2025, in relation to criteria for effective internal control over financial reporting as described in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management concluded that, as of June 29, 2025, its system of internal control over financial reporting was effective and met the criteria of the Internal Control – Integrated Framework (2013). Deloitte & Touche LLP, independent registered public accounting firm, has issued an attestation report on the Company's internal control over financial reporting, which is included herein.

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