What changed in this filing

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Item 1. Business

2021-09-02 compared with 2020-09-03 · 66 added, 61 removed, 239 unchanged (35% of the section changed)

3 unchanged sentences

Under this unique strategic relationship STRATTEC, WITTE and ADAC market the products of each company to global customers under the “VAST Automotive Group” brand name (as more fully described under Vehicle Access Systems Technology LLC herein).

STRATTEC products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea, China and India, and we provide full service and aftermarket support for each VAST Automotive Group partners’ products.

STRATTEC products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea, China and India, and we, along with our VAST LLC partners, provide full service and aftermarket support for each VAST Automotive Group partners’ products.

The product line that became STRATTEC was part of Briggs & Stratton Corporation’s founding business in 1908.

In 1995, STRATTEC was spun off from Briggs & Stratton through a tax-free distribution to the then-existing Briggs & Stratton shareholders and has been an independent public company for over twenty-five years.

Our history in the automotive security business spans over 110 years.

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Our largest customers are Fiat Chrysler Automobiles, General Motors Company and Ford Motor Company.

Our access control product mix varies by customer, but generally our overall sales tend to be highest in lock and key, including aftermarket produced by STRATTEC de Mexico, followed by door handles and trim components produced by ADAC-STRATTEC de Mexico, power access products produced by STRATTEC Power Access de Mexico, and latch mechanisms and ignition lock housing produced by STRATTEC de Mexico.

See Operations discussion included herein for further description.

Direct sales to various OEMs represented approximately 77% of our total sales for fiscal 2020.

Direct sales to various OEMs represented approximately 79% and 77% of our total sales for fiscal 2021 and 2020, respectively.

The remainder of our revenue is received primarily through sales to the OEM service channels, the aftermarket and Tier 1 automotive supplier customers, and sales of certain products to non-automotive commercial customers.

4 unchanged sentences

While some exporting is done to Tier 1 and automotive assembly plants in Europe, Asia and South America, we are in the process of expanding our presence in these markets and elsewhere through the Vehicle Access Systems Technology LLC (VAST LLC) joint venture we jointly own with WITTE Automotive and ADAC Automotive.

VAST is described in more detail on pages 4, 5, and 43 through 45 in this Form 10-K.

VAST is described in more detail on pages 4, 5, 44 and 45 in this Form 10-K.

OEM service and replacement parts are sold to the OEM’s own service operations.

24 unchanged sentences

We have three owned production facilities currently in operation in Juarez, Mexico operating as STRATTEC de Mexico.

1 houses assembly operations for locksets and ignition lock housings.

2 houses our key finishing and plastic injection molding operations, as well as containing dedicated space for the assembly operations of ADAC-STRATTEC de Mexico.

1 houses key finishing and assembly operations for locksets and ignition lock housings.

2 houses our key molding and plastic injection molding operations for door handles and components, as well as containing dedicated space for the assembly operations of ADAC-STRATTEC de Mexico.

3 houses both latch and power access assembly operations for STRATTEC Power Access de Mexico.

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This was an important step which gives STRATTEC a one-third interest in VAST China’s activities in the important growing Chinese/Asian market for manufacturing and assembly of painted door handles, locksets and latch products.

VAST China currently operates out of two manufacturing facilities in Taicang and Fuzhou, China and is in the process of constructing a third manufacturing facility in Jingzhou, China, which became operational during the fourth quarter of our fiscal 2020 to support new growth in the China market.

In March, 2014, VAST LLC purchased the remaining 49 percent interest of its local partner in Brazil, which had annual net sales of approximately $1.4 million and $724,000 during fiscal years 2020 and 2019, respectively.

VAST China currently operates out of two manufacturing facilities in Taicang and Jingzhou, China.

The Fuzhou, China facility closed during our fiscal 2021, and the land and building are currently for sale.

In March, 2014, VAST LLC purchased the remaining 49 percent interest of its local partner in Brazil, which had annual net sales of approximately $1.5 million and $1.4 million during fiscal years 2021 and 2020, respectively.

On April 30, 2015 VAST LLC executed a purchase agreement to become a 50:50 Joint Venture partner with Minda Management Services Limited, an affiliate of both Minda Corporation Limited and Spark Minda, Ashok Minda Group of New Delhi, India (collectively, “Minda”).

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Minda-VAST financial results are accounted for on the equity method of accounting by VAST LLC.

For further VAST LLC financial information, see “Equity (Loss) Earnings of Joint Ventures” included in Notes to Financial Statements under Item 8 in this Form 10-K.

For further VAST LLC financial information, see “Equity Earnings (Loss) of Joint Ventures” included in Notes to Financial Statements under Item 8 in this Form 10-K.

VAST is the embodiment of STRATTEC’s, WITTE’s and ADAC’s globalization strategy.

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Financial results for SPA are consolidated in STRATTEC’s financial statements.

For fiscal year 2020, SPA was unprofitable due to the COVID-19 pandemic (COVID-19) and represented $63.8 million of our net sales.

For fiscal year 2021, SPA was profitable and represented $95.2 million of our consolidated net sales.

STRATTEC Advanced Logic LLC

During the fourth quarter of fiscal year 2013, we formed a new joint venture with Actuator Systems LLC called NextLock LLC, which was subsequently renamed STRATTEC Advanced Logic LLC.

STRATTEC owned 51% of this joint venture and its financial results were accounted for on the equity method of accounting.

The purpose of this joint venture was to assemble and sell the next generation of biometric security products based upon the residential and commercial designs of Actuator Systems.

This joint venture had minimal sales activity in both fiscal 2020 and 2019.

During fiscal 2018, we, along with our joint venture partner, reduced operating the business of STRATTEC Advanced Logic LLC to selling only RTS commercial biometric locks.

STRATTEC Advanced Logic LLC was dissolved during the fourth quarter of fiscal 2020.

For fiscal year 2020, SPA was unprofitable due to the COVID-19 pandemic (COVID-19) and represented $63.8 million of our net sales.

Seasonal Nature of the Business

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PASSENGER CARS

Chevrolet Corvette

Aston Martin DB 11*

Chevrolet Malibu

Lincoln Continental

Chevrolet Bolt EV

Aston Martin DBX *

Chevrolet Onix *

Chevrolet Camaro

Aston Martin Rapide *

Chevrolet Sonic *

Chevrolet Corvette

Maserati Ghibli *

Aston Martin Vanquish*

Chevrolet Spin *

Chevrolet Malibu

Maserati MC *

Aston Martin Vantage *

Chevrolet Onix *

Maserati Quattroporte *

Buick Excelle *

Dodge Challenger

Buick LaCrosse *

Dodge Charger

Dodge Challenger

Buick Regal *

Dodge Charger

Open Insignia *

Cadillac ATS *

Tesla Model S

Cadillac CT6*

Tesla Model X

Cadillac XTS *

Tesla Model 3

Chevrolet Bolt EV

Volkswagen Jetta

Chevrolet Camaro

Cadillac CT6*

Cadillac Lyriq

LIGHT TRUCKS, VANS AND SPORT UTILITY VEHICLES

Chrysler Voyager

Dodge Durango

Buick Enclave

Dodge Grand Caravan

Honda Odyssey

Buick Encore*

Jeep Cherokee

Buick Envision*

Ford Bronco Sport

Brightdrop EV600

Honda Odyssey

Buick Enclave

Hyundai Starex *

Cadillac Escalade &

Jeep Gladiator

Cadillac Escalade ESV

Jeep Grand Cherokee

Ford Expedition

Jeep Wrangler/Wrangler

Jeep Cherokee

Ford Explorer

Chevrolet Blazer

Ford F-Series Pickup

Chevrolet Colorado *

Jeep Gladiator

Ford F-Series Super Duty

Lincoln Avaitor

Jeep Grand Cherokee

Chevrolet Blazer

Jeep Wrangler/Wrangler

Chevrolet Colorado *

Ford F-150 Lightning

Chevrolet Equinox

Lincoln Corsair

Ford Maverick Pickup

Chevrolet Express Van

Ford Mustang Mach-E

Lincoln Nautilus

Lincoln Avaitor

Chevrolet Silverado &

Lincoln Navigator

Ford Ranger Pickup

Lincoln Corsair

Silverado HD Pickup

Ford Transit Connect *

Maserati Levante *

Lincoln Nautilus

Chevrolet Suburban

Lincoln Navigator

Chevrolet Tahoe

Ram 1500 Pickup

Maserati Levante *

Chevrolet Tracker *

Ram 1500 Classic Pickup

GMC Hummer EV

Chevrolet Trail Blazer *

Ram Heavy Duty Lineup

Ram 1500 Pickup

Chevrolet Trax *

GMC Sierra & Sierra HD

Volkswagen Tiguan

Ram 1500 Classic Pickup

Chevrolet Traverse

Volkswagen Tiguan

Chrysler Pacifica

Chrysler Voyager

GMC Yukon and Yukon XL

8 unchanged sentences

Sources and Availability of Raw Materials

Our primary raw materials are high-grade zinc, brass, nickel silver, steel, aluminum and plastic resins.

Our primary raw materials are high-grade zinc, brass, nickel silver, steel, aluminum, plastic resins and semiconductor chips and other electronics.

These materials are generally available from a number of suppliers, but we have chosen to concentrate our sourcing with one primary vendor for each commodity.

12 unchanged sentences

A very significant portion of our annual sales are to General Motors Company, Ford Motor Company, and Fiat Chrysler Automobiles.

These three customers accounted for approximately 62 percent our net sales in 2020 and 60 percent of our net sales in 2019.

These three customers accounted for approximately 62 percent of our net sales in both 2021 and in 2020.

Further information regarding sales to our largest customers is set forth under the caption “Risk Factors - Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share” and “Risk Factors – Production Slowdowns by Customers” included under Item 1A of this Form 10-K and “Notes to Financial Statements-Sales and Receivable Concentration” included in Notes to Financial Statements under Item 8 in this Form 10-K.

49 unchanged sentences

However, risk of environmental liability and charges associated with maintaining compliance with environmental laws is inherent in the nature of our business and there is no assurance that material liabilities or charges could not arise.

At June 28, 2020, we had approximately 3,831 full-time employees, of which approximately 200 or 5.2 percent were represented by a labor union, which accounts for all production employees at our Milwaukee facility.

The current contract with the unionized employees is effective through September 17, 2021.

During June 2001, there was a 16-day strike by the represented employees at our Milwaukee facility.

Further information regarding the strike, work stoppages and other labor matters are discussed under “Risk Factors - Disruptions Due to Work Stoppages and Other labor Matters” under Item 1A in this Form 10-K.

Human Capital

At June 27, 2021, we had approximately 3,752 associates worldwide, of which approximately 494 were employed in the United States and approximately 3,258 were employed outside of the United States.

Approximately 204 or 5.4 percent were represented by a collective bargaining agreement, all of whom are our production associates at our Milwaukee, Wisconsin facility.

In recent years, we have not experienced any significant work slowdowns, stoppages or other labor disruptions.

The current contract with the unionized associates is effective through September 17, 2021.

We are guided by our “Values and Beliefs” mission statement that focuses on Empowerment, Communication, Citizenship, Enterprise, Change and Consensus.

We remain committed to areas of work place safety, product quality and customer satisfaction.

Successful execution of our mission is dependent on attracting, developing and retaining key associates and members of our management team, as well as providing competitive pay and benefits.

In response to the COVID-19 pandemic, STRATTEC has generally maintained its headcount as we accommodated our operations to the virus environment.

We have taken what we believe to be appropriate measures to ensure the health and safety of our associates and permitted remote working.

Social Responsibility

We are committed to conducting business and making decisions honestly, fairly and within the law, and are guided by our “Values and Beliefs” mission statement.

We are dedicated to earning and keeping the trust and confidence of our shareholders, customers and associates as well as the communities where we do business.

Our “Code of Business Ethics” provides guidelines and a framework for conducting business in an ethical manner.

These beliefs go beyond STRATTEC and are expected of our suppliers as detailed in our “Supplier Code of Conduct.” We have adopted policies that seek to eliminate human trafficking, slavery, child labor etc.

from our global supply chain.

In addition, we annually comply and file a Form SD with the Securities and Exchange Commission regarding “Conflict Minerals Disclosure and Report” as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The purpose of this report is to help prevent products used to finance or benefit armed groups in the covered countries of this filing.

Our commitment to our environment is documented in our “Environmental Management System,” which provides for continuous improvement of our efforts toward preventing pollution, complying with relevant environmental legislation and regulations and complying with customer-based environmental regulations.

In addition, we maintain our own IATF 16949:2016 and ISO 14001 annual certifications, which are globally recognized quality standards for the automotive industry.

Available Information

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business