What changed in this filing

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Item 1. Business

2022-09-08 compared with 2021-09-02 · 81 added, 60 removed, 245 unchanged (37% of the section changed)

5 unchanged sentences

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-six years.

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

8 unchanged sentences

We have developed and are continuing to develop access control products, including trunk latches, lift gate latches, tailgate latches, hood latches, side door latches and related hardware.

With our acquisition of Delphi Corporation’s Power Products Group in fiscal 2009, we are now supplying power access devices for sliding side doors, tailgates, lift gates and trunk lids.

With our acquisition of Delphi Corporation’s Power Products Group in fiscal 2009, we have been supplying and continue to supply various power access devices for sliding side doors, tailgates, lift gates and trunk lids to our automotive industry customers.

Through a joint venture formed with ADAC Automotive during fiscal 2007, we also supply painted and non-painted door handles and components and related vehicle access hardware.

7 unchanged sentences

We are a direct supplier to OEM automotive and light truck manufacturers as well as other transportation-related manufacturers.

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 components produced by STRATTEC de Mexico.

Our largest customers are Stellantis (formerly 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 door handles and trim components produced by ADAC-STRATTEC de Mexico, followed by lock and key, including aftermarket produced by STRATTEC de Mexico, power access products produced by STRATTEC Power Access de Mexico, and latch mechanisms and ignition lock housing components produced by STRATTEC de Mexico.

See Operations discussion included herein for further description.

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

Direct sales to various OEMs represented approximately 79% of our total sales for both fiscal 2022 and 2021.

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.

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To bring the proper focus to the relationships with our major customers, we have six customer-focused teams, each with a Director of Sales, one or two Engineering Program Managers and various Customer Application Engineers.

In addition to customer teams for General Motors, Ford and Fiat Chrysler, we currently have teams for New Domestic Vehicle Manufacturers (primarily the Japanese and Korean automotive manufactures), Driver Control/Ignition Lock Housing customers, Tier 1 customers, and Service and Aftermarket customers.

In addition to customer teams for General Motors, Ford and Stellantis (formerly Fiat Chrysler), we currently have teams for New Domestic Vehicle Manufacturers (primarily the Japanese and Korean automotive manufactures), User Interface Controls (formerly Driver Control/Ignition Lock Housing) customers, Tier 1 customers, and Service and Aftermarket customers.

Sales and engineering for ADAC-STRATTEC LLC (described in greater detail below) are supported by our partner in this joint venture, ADAC Automotive.

4 unchanged sentences

We currently have six engineering groups:

Locks and Keys, Aftermarket, Latches, Power Access Devices, Driver Control/Ignition Lock Housings and Electrical.

Locks and Keys, Aftermarket, Latches, Power Access Devices, User Interface Controls (formerly Driver Control/Ignition Lock Housings) and Wireless Systems (formerly Electrical).

Each group has a Product Business Manager, an Engineering Manager and a complement of skilled engineers who design and develop products for specific applications.

26 unchanged sentences

VAST China is now wholly owned by VAST LLC and had annual net sales of approximately $190.4 million and $209.0 million during fiscal 2022 and 2021, respectively.

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.

This gave STRATTEC a one-third interest in VAST China’s activities in the 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 Jingzhou, China.

7 unchanged sentences

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

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.

For further VAST LLC financial information, see “Equity Earnings 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.

We are developing VAST as a global brand with which we are jointly pursuing business with identified global customers.

Those identified customers are General Motors, Ford, Fiat/Chrysler, Volkswagen, Honda, Volvo, Renault/Nissan and Hyundai/Kia.

Collectively as a group, we are developing VAST as a global brand with which we are jointly pursuing business with identified global customers.

Those identified customers are General Motors, Ford, Stellantis (formerly Fiat Chrysler), Volkswagen, BMW, Daimler, Honda, Volvo, Renault/Nissan and Hyundai/Kia.

To manage our customer relationships and coordinate global ventures and activities, we have established a VAST Management Group led by a President.

The Management Group includes three Vice Presidents, one each from WITTE, STRATTEC and ADAC.

With the focus provided by this Management Group, VAST is able to manage global programs with a single point of contact for customers, with the added advantage of providing regional support from the partners’ operating entities.

With the focus provided by this Management Group, VAST is able to manage global programs, in accordance with STRATTEC and our partners’ globalization strategy, with a single point of contact for customers, with the added advantage of providing regional support from the partners’ operating entities.

Combined with VAST LLC’s ventures in China and Brazil, and sales/engineering offices in Japan and Korea, this structure establishes our global footprint.

9 unchanged sentences

STRATTEC owns 51% of this joint venture and its financial results are consolidated into STRATTEC’s financial statements.

In our fiscal years ending 2021 and 2020, ASdM was profitable and represented $126.2 million and $98.2 million, respectively, of our consolidated net sales.

In our fiscal year ending 2022, ASdM was near break-even due to rising material costs that could not be passed on to customers through higher customer purchase prices.

In our fiscal 2021, ASdM was profitable.

ASdM represented $111.8 million and $126.2 million of our consolidated net sales in our fiscal 2022 and 2021, respectively.

STRATTEC de Mexico Plant No.

4 unchanged sentences

SPA in turn owns 100 percent of a Mexican subsidiary, STRATTEC POWER ACCESS de Mexico.

The purpose of this subsidiary is to produce power access devices for sliding side doors, lift gates and trunk lids.

The purpose of this subsidiary is to produce power access devices for sliding side doors, tailgates, lift gates, trunk lids and other related products.

STRATTEC POWER ACCESS de Mexico currently operates out of defined space in STRATTEC de Mexico Plant No.

1 unchanged sentence

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

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

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

In our fiscal years ending 2022 and 2021, SPA was profitable and represented $95.7 million and $95.2 million, respectively, of our consolidated net sales.

Seasonal Nature of the Business

6 unchanged sentences

This results in our first fiscal quarter sales and operating results typically being our weakest, with the remaining quarters being more consistent.

As described elsewhere herein under Management's Discussion and Analysis of Financial Condition and Results of Operation – Executive Overview, adverse business and operational issues resulting from the semiconductor chip supply shortages, the Coronavirus (COVID-19) pandemic and the conflict in the Ukraine have adversely impacted the timing, availability and cost of certain material component parts and raw materials for the production of our products and the products of our customers.

These events have temporarily disrupted our normal seasonal sales patterns during fiscal 2022 and 2021.

2023 Vehicles

2 unchanged sentences

PASSENGER CARS

Cadillac CT6*

Aston Martin DB 11*

Cadillac Lyriq (EV)

Aston Martin DBS *

Chevrolet Bolt (EV)

1 unchanged sentence

Chevrolet Camaro

Aston Martin Rapide *

Chevrolet Corvette

Maserati Ghibli *

Aston Martin Vanquish*

Chevrolet Malibu

Chevrolet Corvette

Maserati MC20 *

Aston Martin Vantage *

Chevrolet Onix *

Chevrolet Malibu

Maserati Quattroporte *

1 unchanged sentence

Buick LaCrosse *

Dodge Challenger

Cruise Origin (EV)

Opel Insignia *

Buick Regal *

Dodge Charger

Open Insignia *

Cadillac ATS *

Dodge Challenger

Volkswagen Jetta

Cadillac ATS *

Dodge Charger

Cadillac CT5 *

Cadillac Lyriq

LIGHT TRUCKS, VANS AND SPORT UTILITY VEHICLES

Chevrolet Traverse

GMC Yukon and Yukon XL

Chrysler Pacifica (PH option)

Chrysler Voyager

Brightdrop EV600 (EV)

Dodge Durango

Ford Bronco Sport

Brightdrop EV600

Honda Odyssey

Buick Enclave

Hyundai Starex *

Dodge Hornet (PH option)

Hyundai Staria *

Buick Encore GX *

Ford Bronco Sport

Jeep Cherokee

Buick Envision *

Jeep Commander *

Ford Escape (PH option)

Cadillac Escalade &

Ford Expedition

Jeep Cherokee

Jeep Gladiator

Ford Explorer

Jeep Grand Cherokee

Ford F-Series Pickup

Jeep Gladiator

Jeep Wrangler/Wrangler

Ford F-Series Super Duty

Jeep Grand Cherokee

Unlimited (PH option)

Chevrolet Blazer

Jeep Wrangler/Wrangler

Ford F-150 Lightning (EV)

Kia Carnival *

Chevrolet Colorado *

Ford F-150 Lightning

Chevrolet Equinox

Ford Maverick Pickup

Lincoln Aviator (PH option)

Chevrolet Equinox

Ford Mustang Mach-E (EV)

Lincoln Corsair (PH option)

Chevrolet Express Van

Ford Mustang Mach-E

Lincoln Avaitor

Chevrolet Silverado &

Ford Ranger Pickup

Lincoln Corsair

Silverado HD Pickup

Ford Transit Connect *

Lincoln Nautilus

Chevrolet Suburban

Chevrolet S-10 *

Ford Transit Connect *

Lincoln Navigator

Chevrolet Tahoe

Chevrolet Silverado &

Maserati Levante *

Chevrolet Tracker *

Silverado HD Pickup

Ram 1500 Pickup

Chevrolet Suburban

GMC Hummer (EV)

Ram 1500 Classic Pickup

Chevrolet Tahoe

Volkswagen Tiguan (PH option)

Chevrolet Tracker *

GMC Sierra & Sierra HD

Volvo Polestar 3 (EV)

Chevrolet Trail Blazer *

Ram 1500 Pickup

Volvo XC90 (PH option)

Chevrolet Trax *

GMC Sierra & Sierra HD

Ram 1500 Classic Pickup

Chevrolet Traverse

Volkswagen Tiguan

Chrysler Pacifica

Chrysler Voyager

GMC Yukon and Yukon XL

* Vehicles produced outside of North America, or both in and outside North America.

EV – Electric Vehicle

PH – Plug-In Hybrid

Emerging Technologies

9 unchanged sentences

We believe our sources for raw materials are very reliable and adequate for our needs.

We have not experienced any significant long term supply problems in our operations and do not anticipate any significant supply problems in the foreseeable future.

See further discussion under “Risk Factors-Sources of and Fluctuations in Market Prices of Raw Materials” included under Item 1A of this Form 10-K.

We have not experienced any significant long term supply problems in our operations.

However, the impacts of the Coronavirus and geopolitical instability have adversely impacted the supply of certain semiconductor chips and related electronics components which has adversely impacted our, and our customers’, ability to build product and fulfill orders.

See further discussion under “Risk Related to Coronavirus and Other Health Epidemics,” “Risk Related to Geopolitical Instability,” and “Risk Factors-Sources of and Fluctuations in Market Prices of Raw Materials” included under Item 1A of this Form 10-K.

Patents, Trademarks and Other Intellectual Property

7 unchanged sentences

Dependence Upon Significant Customers

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 of our net sales in both 2021 and in 2020.

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

These three customers accounted for approximately 65 percent and 62 percent of our net sales in 2022 and in 2021, respectively.

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.

1 unchanged sentence

Consequently, we are highly dependent on our major customers for their business, and on these customers' ability to produce and sell vehicles which utilize our products.

We have enjoyed good relationships with General Motors Company, Fiat Chrysler Automobiles, Ford Motor Company and other customers in the past, and expect to continue to do so in the future.

We have enjoyed good relationships with General Motors Company, Stellantis, Ford Motor Company and other customers in the past, and expect to continue to do so in the future.

However, a significant change in the purchasing practices of, or a significant loss of volume from, one or more of these customers could have a detrimental effect on our financial performance.

46 unchanged sentences

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.

At July 3, 2022, we had approximately 3,373 associates worldwide, of which approximately 488 were employed in the United States and approximately 2,885 were employed outside of the United States.

Approximately 180 or 5.3 percent were represented by a collective bargaining agreement at our Milwaukee, Wisconsin facility, all of whom are our production associates.

Approximately 104 or 3.1 percent were represented by a collective bargaining agreement at our Leon, Mexico 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.

The current contract with our Milwaukee unionized associates is effective through November 1, 2025.

The current contract with our Leon unionized associates is effective through April 12, 2023.

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

13 unchanged sentences

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

STRATTEC’s major initiatives in this area consist of energy improvement initiatives, primarily related to solar in Milwaukee, WI, Auburn Hills, MI, and Juarez, Mexico, and moves to more energy efficient production capital equipment in Milwaukee, WI to reduce carbon emissions.

Available Information

We maintain our corporate website at www.strattec.com and make available, free of charge, through this website our code of business ethics, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements for annual shareholder meetings and amendments to those reports that we file with, or furnish to, the Securities and Exchange Commission (the "Commission") as soon as reasonably practicable after we electronically file such material with, or furnish it to, the 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.

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.

However, this report includes (or incorporates by reference) all material information about STRATTEC that is included on our website which is otherwise required to be included in this report.

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