分组1 - Strattec Security reported quarterly earnings of $2.22 per share, exceeding the Zacks Consensus Estimate of $1.48 per share, and showing a significant increase from $0.92 per share a year ago, resulting in an earnings surprise of +50.00% [1] - The company achieved revenues of $152.4 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 5.14% and increasing from $139.05 million year-over-year [2] - Strattec Security has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2] 分组2 - The stock has gained approximately 59.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 17.2% [3] - The company's earnings outlook is crucial for future stock performance, with current consensus EPS estimates of $0.99 for the upcoming quarter and $4.25 for the current fiscal year [7] - The Zacks Industry Rank places the Automotive - Original Equipment sector in the top 30% of over 250 Zacks industries, indicating a favorable environment for Strattec Security [8]

Financial Performance - Strattec reported net sales of $152.4 million for Q1 FY 2026, an increase of $13.3 million, or 10% compared to the prior year[5]. - Net income attributable to Strattec was $8.5 million, or $2.07 per diluted share, compared to $3.7 million, or $0.92 per diluted share, in the prior-year period[9][20]. - Adjusted EBITDA for the quarter was $15.6 million, representing 10.2% of sales, compared to $9.9 million and 7.1% in the prior-year period[9][20]. - Net income for the three months ended September 28, 2025, was $8,537,000, a significant increase from $3,748,000 for the same period in 2024, representing a growth of 128.5%[22]. - The total net sales for fiscal 2025 were $565,060,000, with a projected increase to $152,390,000 for fiscal 2026[23]. - Strattec reported a net income attributable to the company of $3.703 million for the first quarter of fiscal 2026, compared to $1.319 million in the same quarter last year, reflecting a significant increase[24]. - Adjusted net income attributable to Strattec was $1.16 per share (Non-GAAP), up from $0.65 per share in the previous year, indicating a growth of 78.5%[24]. - The diluted earnings per share (GAAP) for the quarter was $0.92, compared to $0.32 in the same quarter last year, representing a 187.5% increase[24]. - The total revenue for the quarter was $4.709 million, compared to $2.640 million in the same quarter last year, marking an increase of 78.3%[24]. Cash and Assets - Cash generated from operations was $11.3 million, consistent with the first quarter of FY 2025[10]. - The company had $90.5 million in cash and cash equivalents at the end of the quarter, an increase from $84.6 million at the end of Q4 FY 2025[11]. - Total current assets as of September 28, 2025, were $290,125,000, slightly up from $290,063,000 as of June 29, 2025[21]. - Cash and cash equivalents increased to $90,473,000 at the end of the period, compared to $84,579,000 at the beginning, marking a rise of 6.7%[22]. - The total shareholders' equity increased to $255,779,000 as of September 28, 2025, compared to $246,431,000 as of June 29, 2025, representing a growth of about 3.8%[21]. Expenses and Liabilities - Selling, administrative, and engineering expenses increased to $15.9 million, or 10.4% of sales, compared to $13.9 million, or 10.0% of sales, in the prior-year period[7][20]. - Total liabilities decreased to $134,278,000 as of September 28, 2025, down from $145,023,000 as of June 29, 2025, indicating a reduction of approximately 7.4%[21]. - The company incurred restructuring and similar charges amounting to $265,000, which impacted overall profitability[24]. - Executive transition costs totaled $1.224 million, reflecting ongoing changes in leadership[24]. - Business transformation costs were reported at $74,000, indicating investment in operational improvements[24]. Operational Initiatives - Strattec implemented a restructuring action in Mexico expected to deliver $1 million in annualized savings[3][4]. - The company is focused on business transformation and developing highly engineered products to secure content on future vehicle platforms[3]. - The company continues to focus on operational improvements and strategic investments to enhance future performance[24]. Financing Activities - Strattec entered into a new revolving credit agreement extending maturity to October 2028, replacing the existing $40 million facility[12]. Inventory Management - Inventories decreased to $61,592,000 as of September 28, 2025, from $64,701,000 as of June 29, 2025, reflecting a decline of approximately 4.9%[21]. Foreign Currency Impact - The company had a foreign currency transaction loss of $671,000 for the three months ended September 28, 2025, compared to a gain of $1,005,000 in the same period last year[22].

Core Insights - Strattec Security Corp. has entered the top 10th percentile of U.S.-listed stocks in terms of momentum, indicating strong performance relative to peers [1][2] - The company's momentum score increased from 89.28 to 91.48, reflecting a significant gain and positioning it among leading stocks like AMD and Nvidia [2] - Despite generating 80-90% of revenue from major automakers, Strattec has remained under the radar, but its growth, quality, and value rankings are in the top quartiles [3][4] Momentum Ranking - Momentum is defined as a measure of a stock's relative price strength, volatility patterns, and trend persistence across multiple timeframes, suggesting that Strattec may be poised for a breakout [3] - The stock combines defensive fundamentals with strong technical momentum, although it has shown weak price trends in the short and medium term [4] Market Performance - Strattec's shares were down 4.82% in premarket trading, with a year-to-date decline of 12.28% and a 15.27% drop over the year, contrasting with the S&P 500's gains of 17.42% YTD [5] - The broader market indices, including the S&P 500, Dow Jones, and Nasdaq 100, experienced mixed performance, with slight declines in some cases [6]

Core Insights - Strattec Security Corp. has entered the top 10th percentile of U.S.-listed stocks in terms of momentum, indicating strong price performance [1][2] - The company's momentum score increased from 89.28 to 91.48, reflecting a significant gain and placing it among elite momentum performers [2][3] - Despite generating 80-90% of its revenue from major automakers, Strattec has remained under the radar, but its growth, quality, and value rankings are in the top quartiles [3][4] Performance Metrics - Strattec's momentum score has risen by 2.2 points over the week, signaling potential for a sustained breakout [2][3] - The company has a growth ranking of 86.51, quality ranking of 78.39, and value ranking of 88.48, indicating strong defensive fundamentals combined with technical momentum [4] - However, the stock has underperformed the market, with a year-to-date decline of 12.28% compared to the S&P 500's increase of 17.42% [5]

Core Insights - The article emphasizes the focus on growth and momentum stocks that are reasonably priced and expected to outperform the market in the long term [1] - It highlights a significant investment opportunity, noting that the S&P 500 increased by 367% and the Nasdaq by 685% from March 2009 to 2019, indicating a strong recovery and growth potential in the market [1] Investment Strategy - The investment strategy involves long-term investment in quality stocks, with the use of options to enhance returns [1] - The article suggests that investors should consider high-quality growth stocks to maximize their investment returns [1]

Core Viewpoint - Strattec Security Corporation (NASDAQ: STRT) has been identified as a top quant-rated stock, with a previous recommendation to buy the stock based on its performance and ratings [1]. Group 1 - The company was reviewed on July 12, and the analysis supported the quant rating, indicating a positive outlook for the stock [1]. - The analyst holds a beneficial long position in STRT shares, which may influence the perspective presented in the analysis [1].

Group 1 - Strattec Security Corporation (NASDAQ: STRT) was reviewed on July 12 and was identified as a top quant-rated stock [1] - The analysis at that time supported the quant rating and indicated that the stock was a buy [1] - The company has a beneficial long position in its shares through stock ownership, options, or other derivatives [1]

Summary of Strattec Security (STRT) FY Conference Call - August 26, 2025 Company Overview - **Company Name**: Strattec Security (STRT) - **Industry**: Automotive parts manufacturing - **Headquarters**: Milwaukee, Wisconsin - **Public Company Since**: 1995 - **Key Customers**: Ford, General Motors, Stellantis [3][27] Core Business and Product Portfolio - **Product Range**: Includes power access products (power lift gates, tailgates, power sliding doors), lock and key systems, and key fobs [2][3] - **Powertrain Agnostic**: Products are designed for both electric vehicles and internal combustion engines, allowing for a balanced product offering amid industry transformation [3] Transformation and Operational Improvements - **Transformation Status**: The company is in the early stages of transformation, focusing on team alignment and operational excellence [4][11] - **Team Enhancements**: A refreshed executive team has been established, including new roles such as Chief Commercial Officer and Chief People Officer [5][7] - **Cost Structure**: Achieved $8 million in annual pricing improvements and reduced headcount by 15% without impacting customer service [6][11] - **Modernization Efforts**: Focus on updating outdated processes, systems, and tools to ensure sustainable business growth [6][40] Financial Performance - **Revenue Growth**: Achieved $152 million in sales for Q4, a 6% year-over-year increase, with 60% of the increase driven by volume and 40% by pricing [14][15] - **Gross Profit Margin**: Finished Q4 with a gross profit margin of 16.7%, with a full-year margin of 15% [15][19] - **Adjusted Net Income**: Generated $21 million in adjusted net income for FY 2025, equating to $5.38 per share [19] - **Cash Flow**: Generated $71 million in cash flow from operations, driven by cash earnings and a reduction in working capital [20][23] Future Outlook - **2026 Projections**: Expected revenues to be flat or modestly down, with a projected 6% decline in North American automotive production volumes [21][22] - **Margin Improvement Focus**: Continued emphasis on improving margins and cash generation, with long-term gross profit targets of 18% to 20% [22][34] - **M&A Considerations**: M&A will be considered for long-term growth, but the focus remains on stabilizing the business first [47] Strategic Opportunities - **Geographic Expansion**: Plans to explore opportunities outside traditional North American customers and into other transportation markets [27] - **Hedging Against Currency Volatility**: Engaging in hedging activities to mitigate risks associated with peso fluctuations, with approximately $60 million of spend in pesos [31] Key Takeaways - **Transformation Journey**: The company is in the early innings of a significant transformation, with a strong focus on operational efficiencies and modernization [24] - **Leadership and Talent**: A new leadership team is in place to drive growth and operational improvements [24] - **Strong Financial Position**: The company maintains a strong balance sheet with $84 million in cash and only $8 million in debt, providing a solid foundation for future initiatives [19][20]

PART I [Business](index=4&type=section&id=ITEM%201.%20Business) STRATTEC is a global manufacturer of highly engineered automotive access and security products with over 100 years of industry experience - STRATTEC has over **100 years** of history in the automotive industry, incorporated as a stand-alone company in **1995**[15](index=15&type=chunk) - The company's product portfolio includes security and authorization solutions (mechanical/electronic locks, keys, fobs, passive entry/start, digital key), vehicle access systems (power sliding doors, tailgates, liftgate systems), and user-interface control products (steering wheel switches, e-shifters)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - All products are safety-critical, powertrain agnostic (applicable to ICE, hybrid, EV), and require robust engineering partnership during the **3-5 year** vehicle design cycle[21](index=21&type=chunk) - Direct sales to OEMs (including Tier 1 suppliers) represented approximately **90%** of total sales for both fiscal **2025** and **2024**[24](index=24&type=chunk) - Significant portion of annual sales are to General Motors Company (**29%** in FY25, **30%** in FY24), Ford Motor Company (**23%** in FY25, **21%** in FY24), and Stellantis (**12%** in FY25, **14%** in FY24)[25](index=25&type=chunk)[47](index=47&type=chunk) - Manufacturing operations are primarily in the United States (Milwaukee, WI) and Mexico (Juarez and Leon facilities), specializing in die casting, stamping, plating, plastic injection molding, and assembly[31](index=31&type=chunk) - The company competes based on product design, engineering support, quality, delivery, and price, with key competitors including Aisin, Brose, Continental, Magna, and Valeo[36](index=36&type=chunk)[37](index=37&type=chunk) - As of June 29, 2025, STRATTEC had **2,848** employees globally (**417** in US, **2,425** in Mexico, **6** in other countries), with **9.4%** unionized[38](index=38&type=chunk) [Risk Factors](index=10&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces various risks that could materially affect its business, operations, financial condition, and liquidity - Top three customers (GM, Ford, Stellantis) accounted for **64%** of annual sales in fiscal **2025** (**29%**, **23%**, **12%** respectively) and **66%** in fiscal **2024** (**30%**, **21%**, **14%** respectively), posing a significant customer concentration risk[47](index=47&type=chunk)[225](index=225&type=chunk) - The business is highly dependent on the global automobile industry, making it vulnerable to production slowdowns, economic downturns, global conflicts, pandemics, and part supply shortages[49](index=49&type=chunk) - Operations are impacted by international trade dynamics, tariffs (e.g., recently announced broad tariffs on goods imported into the U.S.), and the potential non-renewal or adverse changes to trade agreements like USMCA[50](index=50&type=chunk)[51](index=51&type=chunk)[55](index=55&type=chunk) - The automotive component supply industry is highly competitive, with pressure on pricing and margins from competitors and customers[56](index=56&type=chunk) - Supply chain disruptions, increases in raw material costs (zinc, brass, nickel silver, steel, aluminum, plastic resins, semiconductor chips), and labor cost inflation (especially in Mexico) are ongoing operational risks[13](index=13&type=chunk)[35](index=35&type=chunk)[60](index=60&type=chunk)[63](index=63&type=chunk)[103](index=103&type=chunk) - Cybersecurity incidents, including sophisticated attacks leveraging AI, pose risks to sensitive data, critical systems, and business operations, potentially leading to financial and reputational damage[13](index=13&type=chunk)[66](index=66&type=chunk) - Fluctuations in the U.S. dollar/Mexican peso exchange rate can materially affect profitability and cash flows due to manufacturing operations in Mexico[76](index=76&type=chunk)[103](index=103&type=chunk) - The company is exposed to warranty claims if products fail, with potential for material costs depending on the nature and volume of claims[84](index=84&type=chunk)[127](index=127&type=chunk) [Unresolved Staff Comments](index=21&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[88](index=88&type=chunk) [Cybersecurity](index=21&type=section&id=ITEM%201C.%20Cybersecurity) STRATTEC maintains a robust cybersecurity governance framework, conducting regular internal and third-party risk assessments - The company conducts regular cybersecurity risk assessments internally and with third-party assistance[89](index=89&type=chunk) - The Information Technology Director reports on assessment results and recommendations to the Board of Directors at least annually[89](index=89&type=chunk) - Cybersecurity strategy is based on the NIST framework, focusing on prevention, detection, and mitigation, with a cross-functional approach to preserve confidentiality, manage data security, and respond to incidents[89](index=89&type=chunk) - Key risk management practices include multi-factor authentication, updated security solutions, annual employee training, email phishing campaigns, external penetration testing, and disaster recovery/incident response plans[91](index=91&type=chunk) - No cybersecurity incidents have materially affected or are reasonably likely to materially affect the business strategy, results of operations, or financial condition[91](index=91&type=chunk) [Properties](index=21&type=section&id=ITEM%202.%20Properties) STRATTEC operates five manufacturing plants, one warehouse, and two sales offices, believed to be well-maintained and sufficient Company Facilities as of June 29, 2025 | Location | Type | Sq. Ft. | Owned or Leased | | :-------------------- | :--------------------------------- | :-------- | :-------------- | | Milwaukee, Wisconsin | Corporate headquarters and manufacturing | 345,123 | Owned | | Juarez, Chihuahua Mexico | Manufacturing | 169,926 | Owned | | Juarez, Chihuahua Mexico | Manufacturing | 77,527 | Owned | | Juarez, Chihuahua Mexico | Manufacturing | 114,841 | Owned | | Leon, Mexico | Manufacturing | 130,532 | Owned | | El Paso, Texas | Distribution warehouse | 114,715 | Leased | | Auburn Hills, Michigan | Sales and engineering | 62,736 | Owned | | Seoul, South Korea | Sales and engineering | 2,859 | Leased | [Legal Proceedings](index=21&type=section&id=ITEM%203.%20Legal%20Proceedings) The company is involved in various legal proceedings but does not anticipate a material adverse effect on its financial condition - The company is involved in various legal proceedings and claims incidental to its business, but none are expected to have a material adverse effect on financial condition, results of operations, or cash flows[93](index=93&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Mine Safety Disclosures are not applicable to the company[94](index=94&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=24&type=section&id=ITEM%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) STRATTEC's common stock trades on NASDAQ, with 756 shareholders and 184,073 shares remaining for repurchase - Common stock is traded on the NASDAQ Global Market under the symbol "**STRT**"[4](index=4&type=chunk) - As of June 29, 2025, there were **756** registered shareholders[96](index=96&type=chunk) - **184,073** shares remain available for repurchase under the stock repurchase program, but no shares were repurchased in fiscal **2025** or **2024**[118](index=118&type=chunk)[211](index=211&type=chunk) [RESERVED](index=24&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) STRATTEC's fiscal 2025 saw significant financial improvement, with sales and net income growth from new programs and operational efficiencies Key Financial Highlights (Fiscal 2025 vs. 2024) | Metric | FY2025 ($M) | FY2024 ($M) | Change ($M) | Change (%) | | :-------------------------------------- | :---------- | :---------- | :---------- | :--------- | | Net sales | 565.1 | 537.8 | 27.3 | 5% | | Net income attributable to Strattec | 18.7 | 16.3 | 2.4 | 15% | | Diluted EPS | 4.58 | 4.07 | 0.51 | 12% | | Cash flow from operations | 71.7 | 12.2 | 59.5 | 488% | | Gross profit | 84.6 | 65.5 | 19.1 | 29% | | Gross margin | 15.0% | 12.2% | 2.8 pp | 23% | | Income from operations | 22.8 | 17.8 | 5.0 | 28% | | Operating margin | 4.0% | 3.3% | 0.7 pp | 21% | | Selling, administrative and engineering expenses | 61.8 | 47.7 | 14.1 | 30% | - Sales growth in fiscal **2025** was driven by **$15.9 million** from net new program launches and favorable mix, plus **$13.9 million** from higher production volumes and customer inventory builds, partially offset by a **$2.6 million** reduction in pricing[106](index=106&type=chunk) - Gross margin improvement was attributed to a stronger U.S. dollar, improved leverage of fixed cost structure on higher sales, and benefits from pricing and restructuring actions[108](index=108&type=chunk) - Selling, administrative, and engineering expenses increased by **$14.1 million**, partly due to a prior-year one-time recovery of **$4.8 million** in engineering costs, increased incentive compensation (**$5.2 million**), and business transformation costs (**$1.0 million**)[109](index=109&type=chunk) - North American light vehicle production is forecasted to be flat over the next several years, with a projected **5-6%** decline in fiscal **2026** due to tariff uncertainties and fewer new platform launches[101](index=101&type=chunk) - The company estimates an annual impact of **$5-$7 million** increase in cost of goods sold from recently enacted tariffs, with a majority already mitigated through supply chain changes, cost pass-throughs, and logistics process changes[102](index=102&type=chunk) - Restructuring activities in Milwaukee and Mexico operations are expected to generate approximately **$5 million** in annual cost reductions[103](index=103&type=chunk) - Cash flow from operations significantly improved to **$71.7 million** in fiscal **2025** from **$12.3 million** in fiscal **2024**, driven by reduced purchasing levels, accounts receivable collection, and pre-production cost recovery[114](index=114&type=chunk) Primary Working Capital Management (FY2025 vs. FY2024) | Metric | June 29, 2025 ($M) | PWC % | June 30, 2024 ($M) | PWC % | | :-------------------------- | :----------------- | :---- | :----------------- | :---- | | Accounts receivable, net | 102 | 17% | 99 | 17% | | Inventory, net | 65 | 11% | 82 | 14% | | Accounts payable | (66) | (11%) | (55) | (10%) | | Net primary working capital | 101 | 17% | 126 | 22% | - Anticipated capital expenditures for fiscal **2026** are approximately **$13 million** for new product programs and equipment upgrades[116](index=116&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=33&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is marked as not applicable, providing no specific market risk disclosures beyond other sections - This item is not applicable[132](index=132&type=chunk) [Financial Statements and Supplementary Data](index=34&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements with an unqualified opinion, noting a critical audit matter for warranty reserves - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements for fiscal years ended June 29, 2025, and June 30, 2024[133](index=133&type=chunk) - Deloitte & Touche LLP also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of June 29, 2025[134](index=134&type=chunk)[146](index=146&type=chunk) - A critical audit matter was identified concerning the specific warranty reserve, highlighting the significant management judgment and auditor effort required to evaluate future warranty costs[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) Consolidated Statements of Income (in thousands) | Metric | June 29, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Net sales | $565,066 | $537,766 | | Cost of goods sold | 480,489 | 472,298 | | Gross profit | 84,577 | 65,468 | | Selling, administrative and engineering expenses | 61,793 | 47,654 | | Income from operations | 22,784 | 17,814 | | Interest income | 2,039 | 572 | | Interest expense | (1,007) | (900) | | Other income, net | 820 | 2,717 | | Income before income taxes and non-controlling interest | 24,636 | 20,203 | | Income tax expense | 5,717 | 3,775 | | Net income | 18,919 | 16,428 | | Net income attributable to non-controlling interest | 234 | 115 | | Net income attributable to Strattec | $18,685 | $16,313 | | Basic EPS | $4.64 | $4.10 | | Diluted EPS | $4.58 | $4.07 | Consolidated Balance Sheets (in thousands) | Asset/Liability/Equity | June 29, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | **ASSETS** | | | | Cash and cash equivalents | $84,579 | $25,410 | | Receivables, net | 102,061 | 99,297 | | Inventories, net | 64,701 | 81,649 | | Total current assets | 290,063 | 253,814 | | Property, plant and equipment, net | 77,410 | 86,184 | | Total Assets | $391,454 | $364,289 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Accounts payable | $65,824 | $54,911 | | Total current liabilities | 119,350 | 118,288 | | Borrowings under credit facilities | 8,000 | 13,000 | | Total Liabilities | $145,023 | $138,674 | | Total Strattec shareholders' equity | 221,592 | 200,545 | | Total Shareholders' Equity | 246,431 | 225,615 | | Total Liabilities and Shareholders' Equity | $391,454 | $364,289 | Consolidated Statements of Cash Flows (in thousands) | Activity | June 29, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Net cash provided by operating activities | $71,677 | $12,265 | | Net cash used in investing activities | (7,156) | (7,788) | | Net cash (used in) provided by financing activities | (4,939) | 72 | | Net increase in cash and cash equivalents | $59,169 | $4,839 | | Cash and cash equivalents, end of year | $84,579 | $25,410 | [NOTE 1. ORGANIZATION AND NATURE OF BUSINESS](index=45&type=section&id=NOTE%201.%20ORGANIZATION%20AND%20NATURE%20OF%20BUSINESS) STRATTEC is a global provider of automotive security and access solutions, primarily serving major North American OEMs - STRATTEC is a leading global provider of advanced automotive security, access, and user interface solutions[163](index=163&type=chunk) - The majority of sales are to the three largest North American automotive OEMs[163](index=163&type=chunk) [NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=45&type=section&id=NOTE%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines STRATTEC's significant accounting policies, including consolidation, estimates, and recently issued accounting standards - Financial statements are prepared in accordance with U.S. GAAP, with the fiscal year ending on the Sunday nearest June 30[164](index=164&type=chunk) - Recently adopted ASU 2023-07 (Improvements to Reportable Segment Disclosures) requires disclosure of significant segment expenses and CODM information[166](index=166&type=chunk) - New ASUs on Income Tax Disclosures (ASU 2023-09, effective FY2026) and Expense Disaggregation Disclosures (ASU 2024-03, effective FY2028) are being evaluated for impact[167](index=167&type=chunk)[168](index=168&type=chunk) - Inventories are stated at the lower of cost or market using the FIFO method, with excess and obsolete inventory reserves recorded based on historical and estimated future demand[171](index=171&type=chunk)[172](index=172&type=chunk) - The excess and obsolete reserve balance increased to **$11.2 million** at June 29, 2025, from **$7.8 million** at June 30, 2024[172](index=172&type=chunk) - Research and development expenditures were **$21.7 million** in fiscal **2025** and **$14.8 million** in fiscal **2024**, expensed as incurred[180](index=180&type=chunk) - The company uses currency forward contracts to minimize earnings volatility from Mexican peso/U.S. dollar exchange rate changes, not for trading or speculative purposes[182](index=182&type=chunk) Warranty Reserve Changes (in thousands) | Metric | June 29, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Balance, beginning of period | $10,695 | $9,725 | | Provision charged to expense | (376) | 2,608 | | Payments | (1,419) | (1,638) | | Balance, end of period | $8,900 | $10,695 | - A valuation allowance for deferred tax assets was **$3.9 million** at June 29, 2025, and **$2.6 million** at June 30, 2024[129](index=129&type=chunk) - The liability for unrecognized tax benefits was **$1.9 million** at June 29, 2025, and **$1.6 million** at June 30, 2024[130](index=130&type=chunk) [NOTE 3. CREDIT FACILITIES](index=51&type=section&id=NOTE%203.%20CREDIT%20FACILITIES) STRATTEC has a $40 million secured revolving credit facility and guarantees a $20 million facility for its joint venture, both expiring in 2026 - STRATTEC has a **$40 million** secured revolving credit facility (Strattec Credit Facility) and guarantees a **$20 million** secured revolving credit facility for its joint venture (ADAC-Strattec Credit Facility)[119](index=119&type=chunk)[193](index=193&type=chunk) - Availability under the ADAC-Strattec Credit Facility will reduce to **$18 million** on August 1, 2025[119](index=119&type=chunk)[193](index=193&type=chunk) - Both credit facilities expire on August 1, 2026, and are secured by U.S. cash balances, accounts receivable, inventory, and fixed assets[193](index=193&type=chunk) Outstanding Borrowings Under Credit Facilities (in thousands) | Credit Facility | June 29, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Strattec Credit Facility | $0 | $0 | | ADAC-Strattec Credit Facility | $8,000 | $13,000 | Average Outstanding Borrowings and Weighted Average Interest Rate (in thousands, except percentages) | Credit Facility | FY2025 Average Outstanding Borrowings | FY2025 Weighted Average Interest Rate | FY2024 Average Outstanding Borrowings | FY2024 Weighted Average Interest Rate | | :-------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Strattec Credit Facility | $0 | 0% | $33 | 8.5% | | ADAC-Strattec Credit Facility | $12,654 | 7.9% | $13,000 | 6.8% | - The company was in compliance with all financial covenants as of June 29, 2025[194](index=194&type=chunk) [NOTE 4. DERIVATIVE INSTRUMENTS](index=51&type=section&id=NOTE%204.%20DERIVATIVE%20INSTRUMENTS) STRATTEC uses monthly Mexican peso currency forward contracts to hedge operating costs and minimize earnings volatility - The company uses monthly Mexican peso currency forward contracts to hedge a portion of peso-denominated operating costs[196](index=196&type=chunk) - These contracts are not designated as accounting hedges; changes in fair value are recognized in Other income, net[182](index=182&type=chunk) Outstanding Forward Contracts as of June 29, 2025 (in thousands) | Effective Dates | Notional Amount | Average Forward Contractual Exchange Rate | Fair Market Value | | :------------------------ | :-------------- | :---------------------------------------- | :---------------- | | July 7, 2025 - June 15, 2026 | $31,959 | 20.64 | $2,314 | [NOTE 5. LEASES](index=51&type=section&id=NOTE%205.%20LEASES) STRATTEC has one operating lease for its El Paso distribution warehouse, with a weighted average remaining term of 3.5 years - The company has one operating lease for its El Paso, Texas distribution warehouse[197](index=197&type=chunk) Operating Lease Expense (in thousands) | Metric | June 29, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Operating lease expense | $951 | $989 | Operating Lease Metrics | Metric | June 29, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------ | | Weighted average remaining lease term (years) | 3.5 | 4.5 | | Weighted average discount rate | 6.2% | 6.2% | Future Minimum Lease Payments (in thousands) | Fiscal Year | Amount | | :---------- | :----- | | 2026 | $988 | | 227 | $1,037 | | 2028 | $1,089 | | 2029 | $558 | | Thereafter | $0 | | Total future minimum lease payments | $3,672 | | Less: imputed interest | ($386) | | Total lease obligations | $3,286 | [NOTE 6. INCOME TAXES](index=52&type=section&id=NOTE%206.%20INCOME%20TAXES) STRATTEC's income tax expense increased to $5.7 million in fiscal 2025, with an effective tax rate of 23.2% Income Tax Expense (in thousands) | Category | June 29, 2025 | June 30, 2024 | | :------------ | :------------ | :------------ | | Current | $7,607 | $8,486 | | Deferred | (1,890) | (4,711) | | Total | $5,717 | $3,775 | Effective Income Tax Rate Reconciliation | Factor | June 29, 2025 | June 30, 2024 | | :---------------------------- | :------------ | :------------ | | Federal statutory rate | 21.0% | 21.0% | | State taxes, net of federal tax benefit | 1.0 | 2.7 | | Foreign subsidiaries | (1.7) | 5.4 | | Valuation allowance | 4.9 | 2.6 | | Research and development tax credit | (6.0) | (8.1) | | Effective income tax rate | 23.2% | 18.7% | Components of Deferred Tax Assets and Liabilities (in thousands) | Category | June 29, 2025 | June 30, 2024 | | :---------------------------- | :------------ | :------------ | | Gross deferred tax assets | $28,697 | $25,385 | | Valuation allowance | (3,865) | (2,569) | | Net deferred tax assets | 24,832 | 22,816 | | Gross deferred tax liabilities | (5,301) | (5,223) | | Net deferred tax assets (total) | $19,531 | $17,593 | - The total liability for unrecognized tax benefits was **$1.9 million** as of June 29, 2025, and **$1.6 million** as of June 30, 2024[201](index=201&type=chunk) - The One Big Beautiful Bill Act, signed July 4, 2025, may impact the company by allowing immediate expensing of R&D costs and permanent extensions of certain 2017 Tax Cuts and Jobs Act provisions; the company is evaluating its future impact[203](index=203&type=chunk) [NOTE 7. RETIREMENT PLANS AND OTHER POST-EMPLOYMENT BENEFITS](index=54&type=section&id=NOTE%207.%20RETIREMENT%20PLANS%20AND%20OTHER%20POST-EMPLOYMENT%20BENEFITS) STRATTEC maintains a SERP, postretirement health plans, and Mexico post-employment benefits, with 401(k) contributions of $2.0 million - The Supplemental Executive Retirement Plan (SERP) had a projected benefit obligation of **$1.6 million** at June 29, 2025, down from **$2.6 million** at June 30, 2024[204](index=204&type=chunk) - Rabbi Trust assets related to the SERP were valued at **$1.6 million** at June 29, 2025[204](index=204&type=chunk) Mexico Post-employment Benefits Net Periodic Benefit Cost (in thousands) | Component | June 29, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Service cost | $1,012 | $1,027 | | Interest cost | 849 | 910 | | Return on plan assets | (118) | (113) | | Net periodic benefit cost | $1,709 | $1,665 | Mexico Post-employment Benefit Obligation and Plan Assets (in thousands) | Metric | June 29, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------ | | Benefit obligation at end of year | $11,998 | $12,296 | | Fair value of plan assets at end of year | $1,253 | $1,158 | | Funded status – accrued benefit obligations | $(10,745) | $(11,138) | - The company expects to contribute **$956,000** to its Mexico post-employment benefit plan assets in fiscal **2026**[209](index=209&type=chunk) - Contributions to the 401(k) plan for U.S. employees were **$2.0 million** in fiscal **2025**, up from **$1.9 million** in fiscal **2024**[210](index=210&type=chunk) [NOTE 8. SHAREHOLDERS' EQUITY](index=56&type=section&id=NOTE%208.%20SHAREHOLDERS'%20EQUITY) As of June 29, 2025, STRATTEC had 4,039,334 common shares outstanding, with no repurchases in fiscal 2025 or 2024 Common Stock Changes | Metric | June 29, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------ | | Outstanding at beginning of period | 3,988,794 | 3,929,046 | | Shares issued under employee stock purchase plan | 1,577 | 2,998 | | Shares issued under equity incentive plans | 48,963 | 56,750 | | Outstanding at end of period | 4,039,334 | 3,988,794 | - **184,073** shares remain available for repurchase under the stock repurchase program; no shares were repurchased in fiscal **2025** or **2024**[211](index=211&type=chunk) - **41,227** shares remain available for purchase under the Employee Stock Purchase Plan as of June 29, 2025[217](index=217&type=chunk) [NOTE 9. EARNINGS PER SHARE](index=56&type=section&id=NOTE%209.%20EARNINGS%20PER%20SHARE) STRATTEC reported basic EPS of $4.64 and diluted EPS of $4.58 for fiscal 2025, reflecting employee stock compensation Earnings Per Share Attributable to Strattec | Metric | June 29, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------ | | Net income attributable to Strattec | $18,685 | $16,313 | | Basic weighted-average shares outstanding | 4,030 | 3,975 | | Effect of dilutive securities - employee stock compensation plan | 46 | 29 | | Diluted weighted-average shares outstanding | 4,076 | 4,004 | | Basic EPS | $4.64 | $4.10 | | Diluted EPS | $4.58 | $4.07 | [NOTE 10. STOCK-BASED COMPENSATION](index=56&type=section&id=NOTE%2010.%20STOCK-BASED%20COMPENSATION) STRATTEC grants RSAs and PSUs under its 2024 Equity Incentive Plan, with $3.2 million in unrecognized compensation cost - The company grants service-based restricted stock awards (RSAs) and performance stock units (PSUs) under the **2024** Equity Incentive Plan[213](index=213&type=chunk) - As of June 29, 2025, **435,742** shares were available for future awards under the **2024** Equity Incentive Plan[214](index=214&type=chunk) Restricted Stock Award (RSA) and Performance Stock Unit (PSU) Activity | Metric | RSAs (Shares) | RSAs (Avg. Grant Date Fair Value) | PSUs (Shares) | PSUs (Avg. Grant Date Fair Value) | | :------------------------------------ | :------------ | :-------------------------------- | :------------ | :-------------------------------- | | Nonvested Balance at July 2, 2023 | 87,900 | $32.09 | - | — | | Granted | 51,675 | $22.16 | - | — | | Vested | (56,750) | $30.12 | - | — | | Forfeited | (3,500) | $29.79 | - | — | | Nonvested Balance at June 30, 2024 | 79,325 | $27.21 | - | — | | Granted | 115,302 | $39.31 | 16,878 | $39.16 | | Vested | (48,963) | $29.49 | - | — | | Forfeited | (16,525) | $31.26 | - | — | | Nonvested Balance at June 29, 2025 | 129,139 | $36.37 | 16,878 | $39.16 | - As of June 29, 2025, unrecognized compensation cost was **$567,000** for PSUs and **$2.6 million** for RSAs, to be expensed over approximately **2 years**[215](index=215&type=chunk)[216](index=216&type=chunk) [NOTE 11. OTHER INCOME, NET](index=57&type=section&id=NOTE%2011.%20OTHER%20INCOME%2C%20NET) Other income, net, decreased to $0.8 million in fiscal 2025, primarily due to foreign currency transaction losses Components of Other Income, Net (in thousands) | Component | June 29, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Foreign currency transaction (loss) gain | $(591) | $2,153 | | Rabbi Trust assets gain | 186 | 211 | | Realized and unrealized gain on Mexican peso forward contracts, net | 1,908 | 885 | | Non-service pension and postemployment expense | (1,176) | (395) | | Other | 493 | (137) | | Total Other income, net | $820 | $2,717 | [NOTE 12. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=58&type=section&id=NOTE%2012.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated other comprehensive loss increased to $16.1 million, driven by foreign currency translation adjustments Changes in Accumulated Other Comprehensive Loss (in thousands) | Component | June 29, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Balance as of beginning of period | $15,689 | $14,194 | | Other comprehensive loss (income) | 889 | 2,601 | | Other comprehensive loss attributable to non-controlling interest | 465 | 1,106 | | Balance as of end of period | $16,113 | $15,689 | - Foreign currency translation adjustments resulted in a loss of **$1.17 million** in fiscal **2025**, compared to a loss of **$2.79 million** in fiscal **2024**[155](index=155&type=chunk)[219](index=219&type=chunk) - Pension and postretirement plans contributed an income of **$281,000** in fiscal **2025**, compared to an income of **$193,000** in fiscal **2024**[155](index=155&type=chunk)[219](index=219&type=chunk) [NOTE 13. RELATED PARTY](index=58&type=section&id=NOTE%2013.%20RELATED%20PARTY) STRATTEC owns 51% of a joint venture with ADAC Automotive, supporting customers with painted door handle products - STRATTEC owns **51%** of a joint venture with ADAC Automotive, focused on painted door handle and exterior trim products[220](index=220&type=chunk) Related Party Transactions (in thousands) | Transaction | June 29, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Management fee expense | $9,893 | $9,511 | | Net sales to joint venture partner | $6,916 | $9,718 | | Accounts receivable from joint venture partner | $731 | $833 | | Accounts payable to joint venture partner | $7,413 | $1,679 | [NOTE 14. SEGMENT INFORMATION](index=59&type=section&id=NOTE%2014.%20SEGMENT%20INFORMATION) STRATTEC operates as a single reportable segment, with the CEO using consolidated net income for performance evaluation - The company operates as a single reportable segment within the automotive industry[221](index=221&type=chunk) - The Chief Executive Officer is the Chief Operating Decision Maker (CODM), using Net income attributable to Strattec to evaluate performance and allocate resources[222](index=222&type=chunk) Net Sales by Country (in thousands) | Country | June 29, 2025 | June 30, 2024 | | :------------ | :------------ | :------------ | | United States | $381,405 | $382,386 | | Mexico | $52,845 | $42,979 | | Canada | 59,717 | 57,061 | | Korea | 56,855 | 44,735 | | Other | 14,244 | 10,605 | | Total Foreign | $183,661 | $155,380 | Tangible Long-Lived Assets, Net by Country (in thousands) | Country | June 29, 2025 | June 30, 2024 | | :------------ | :------------ | :------------ | | United States | $26,186 | $28,542 | | Mexico | $53,633 | $60,726 | | Canada | $20 | $9 | | Korea | $9 | $155 | | Other | $504 | $553 | | Total Foreign | $54,166 | $61,443 | Sales by Product Group (in thousands and percent of total net sales) | Product Group | June 29, 2025 Net Sales | June 29, 2025 % | June 30, 2024 Net Sales | June 30, 2024 % | | :------------------------ | :---------------------- | :-------------- | :---------------------- | :-------------- | | Power access solutions | $138,402 | 24% | $126,680 | 24% | | Door handles & exterior trim | $140,554 | 25% | $135,355 | 25% | | Keys & locksets | $99,788 | 18% | $106,374 | 20% | | Latches | $75,359 | 13% | $67,844 | 13% | | User interface controls | $53,405 | 9% | $47,637 | 9% | | Aftermarket and service | $46,703 | 8% | $42,732 | 8% | | Other | $10,855 | 2% | $11,144 | 2% | | Total | $565,066 | 100% | $537,766 | 100% | Sales to and Receivables from Major Customers (in thousands and percent of total) | Customer | June 29, 2025 Net Sales | June 29, 2025 % | June 30, 2024 Net Sales | June 30, 2024 % | June 29, 2025 Receivables | June 29, 2025 % | June 30, 2024 Receivables | June 30, 2024 % | | :------------------- | :---------------------- | :-------------- | :---------------------- | :-------------- | :------------------------ | :-------------- | :------------------------ | :-------------- | | General Motors Company | $165,701 | 29% | $163,097 | 30% | $26,581 | 26% | $28,645 | 29% | | Ford Motor Company | $129,193 | 23% | $114,937 | 21% | $19,916 | 20% | $24,832 | 25% | | Stellantis | $65,821 | 12% | $77,665 | 14% | $14,812 | 15% | $12,213 | 12% | | Total | $360,715 | 64% | $355,699 | 66% | $61,309 | 60% | $65,690 | 66% | [NOTE 15. COMMITMENTS AND CONTINGENCIES](index=60&type=section&id=NOTE%2015.%20COMMITMENTS%20AND%20CONTINGENCIES) The company does not anticipate material adverse impacts from legal actions and maintains a $1.4 million environmental reserve - The company does not anticipate any materially adverse impact on its financial statements from current legal actions and claims[226](index=226&type=chunk) - An environmental reserve of **$1.4 million** is maintained for a **1985** solvent spill at the Milwaukee facility, considered adequate as of June 29, 2025[227](index=227&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=61&type=section&id=ITEM%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure were reported[229](index=229&type=chunk) [Controls and Procedures](index=61&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of June 29, 2025 - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 29, 2025[230](index=230&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[231](index=231&type=chunk) - Management assessed the company's internal control over financial reporting as effective as of June 29, 2025, based on the COSO framework[235](index=235&type=chunk) - Deloitte & Touche LLP issued an attestation report on the effectiveness of the company's internal control over financial reporting[235](index=235&type=chunk) [Other Information](index=63&type=section&id=ITEM%209B.%20Other%20Information) This item is marked as not applicable, indicating no other information is required to be disclosed - This item is not applicable[236](index=236&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=63&type=section&id=ITEM%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is marked as not applicable, indicating no foreign jurisdictions prevent inspections of the company's operations - This item is not applicable[237](index=237&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=64&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement - Information is incorporated by reference from the Proxy Statement for the annual meeting on October 15, 2025[7](index=7&type=chunk)[240](index=240&type=chunk) - The Audit Committee comprises five outside independent directors: Matteo Anversa (Chairman), Frederic Jack Liebau, Jr., Bruce Lisman, Thomas W. Florsheim, Jr., and Tina Chang[241](index=241&type=chunk) - The company has adopted a Code of Business Ethics applicable to its principal executive and senior financial officers, available on its website[242](index=242&type=chunk) - An Insider Trading Policy is applicable to all directors, officers, and employees, as well as the company itself, to promote compliance with insider trading laws[243](index=243&type=chunk) [Executive Compensation](index=64&type=section&id=ITEM%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the company's Proxy Statement - Information on executive compensation is incorporated by reference from the Proxy Statement[244](index=244&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=64&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Details on security ownership and related stockholder matters are incorporated by reference from the company's Proxy Statement - Information on security ownership and related stockholder matters is incorporated by reference from the Proxy Statement[245](index=245&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=64&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement[246](index=246&type=chunk) [Principal Accounting Fees and Services](index=64&type=section&id=ITEM%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the Proxy Statement[247](index=247&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=65&type=section&id=ITEM%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules filed as part of the Form 10-K, many incorporated by reference - Includes the Report of Independent Registered Public Accounting Firm and consolidated financial statements for fiscal years ended June 29, 2025, and June 30, 2024[251](index=251&type=chunk) - Lists various exhibits, including amended and restated articles of incorporation, credit agreements, and stock incentive plans, many of which are incorporated by reference from prior SEC filings[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) [FORM 10-K Summary](index=71&type=section&id=ITEM%2016.%20FORM%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - No Form 10-K Summary is provided[258](index=258&type=chunk) [Signatures](index=72&type=section&id=Signatures) The report is duly signed by the President and CEO, CFO, and other directors, certifying its submission to the SEC - The report is signed by Jennifer L. Slater (President and CEO) and Matthew P. Pauli (Senior VP, CFO), along with other directors[260](index=260&type=chunk)[261](index=261&type=chunk) - Signatures are dated August 25, 2025, for executive officers and August 19, 2025, for directors[261](index=261&type=chunk)

Financial Data and Key Metrics Changes - The company reported a revenue growth of 6% in the fourth quarter and 5% for the fiscal year [7] - Cash generated from operations was $30 million for the quarter and $71 million for the fiscal year, indicating strong cash generation [7][18] - Gross margin expanded by 370 basis points to 16.7% in the fourth quarter and improved by 280 basis points for the year [12][14] - Adjusted EBITDA margin for the fourth quarter was 8.5%, with a year-over-year expansion of 220 basis points to 7.7% [7][16] Business Line Data and Key Metrics Changes - The company is focusing on digital key and power access products to expand its customer base and drive growth [10] - The gross profit for the fourth quarter increased to $25.4 million, driven by strategic pricing actions and higher production volumes [12] Market Data and Key Metrics Changes - North American automotive production is projected to decline by about 5% to 6% in fiscal year 2026, with softness expected in the second half [20] - The company anticipates that its sales will generally follow North American OEM production volumes [20] Company Strategy and Development Direction - The company aims to create shareholder value through transformation actions and operational improvements [8] - Future growth will focus on leveraging product expertise and expanding into new customer segments, particularly in transportation and heavy vehicles [10][30] - The company is committed to maintaining a healthy balance sheet to weather market uncertainties and invest in growth [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing transformation process, indicating that significant changes have been made but more long-term efforts are required [26] - The company expects to continue generating solid cash from operations but at a more normalized rate moving forward [21] - Management highlighted the importance of pricing actions and operational improvements to achieve long-term gross margins in the 18% to 20% range [21] Other Important Information - The company reduced headcount by 15% and simplified operations as part of its transformation efforts [6] - Capital expenditures for the year totaled $7.2 million, focusing on new product programs and IT infrastructure upgrades [19] Q&A Session Summary Question: How far along is the transformation process? - Management indicated that they are still in the early stages of transformation, having addressed many low-hanging fruits in the past fiscal year [26] Question: Is the company considering exiting or divesting product lines? - Management mentioned that they are refocusing efforts on products with more growth potential, such as power access products and digital key fobs, while still supporting existing customers [28] Question: What is the expected sustainable range for gross margin in fiscal 2026? - Management expects gross margins to be impacted by pricing actions and labor inflation, with a target of maintaining margins around 15% [31] Question: How much cash is the company willing to hold given uncertain times? - Management expressed comfort with their current cash position, emphasizing the importance of liquidity for focusing on business transformation [39] Question: What are the expectations for free cash flow in the future? - Management indicated that free cash flow is expected to return to more normalized levels, estimating around $20 million to $30 million per year [58]