10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

☒     Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of  1934

For the fiscal year ended July 3, 2022.

☐     Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-25150

STRATTEC SECURITY CORPORATION

(Exact name of registrant as specified in its charter)

Wisconsin	39-1804239
(State of Incorporation)	(I.R.S. Employer Identification No.)

3333 West Good Hope Road, Milwaukee, WI 53209

(Address of principal executive offices)

(414) 247-3333

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, $.01 par value	STRT	The NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐Yes  ☒No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐Yes  ☒No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes  ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒Yes  ☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller Reporting Company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      ☐Yes   ☒No

The aggregate market value of the voting Common Stock held by non-affiliates of the registrant as of December 23, 2021 (the last business day of the Registrant’s most recently completed second quarter), was approximately $139,321,000 (based upon the last reported sale price of the Common Stock at December 23, 2021 on the NASDAQ Global Market). Shares of common stock held by any executive officer or director of the registrant have been excluded from this computation because such persons may be deemed to be affiliates. This determination of affiliate status is not a conclusive determination for other purposes.

On August 5, 2022, there were outstanding 3,961,999 shares of the Registrant’s $.01 par value Common Stock (which includes any unvested restricted shares previously awarded).

Documents Incorporated by Reference

Document	Part of the Form 10-K into which incorporated
Portions of the Proxy Statement dated September 8, 2022, for the Annual Meeting of Shareholders to be held on October 11, 2022.	III

STRATTEC SECURITY CORPORATION

ANNUAL REPORT IN FORM 10-K

July 3, 2022

		Page
PART I		2
Item 1.	BUSINESS	2
Item 1A.	RISK FACTORS	11
Item 1B.	UNRESOLVED STAFF COMMENTS	16
Item 2.	PROPERTIES	17
Item 3.	LEGAL PROCEEDINGS	17
Item 4.	MINE SAFETY DISCLOSURES	17
PART II		18
Item 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	18
Item 6.	[RESERVED]	18
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	27
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	53
Item 9A.	CONTROLS AND PROCEDURES	53
Item 9B.	OTHER INFORMATION	56
Item 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	56
PART III		57
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	57
Item 11.	EXECUTIVE COMPENSATION	57
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	57
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	57
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	57
PART IV		58
Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	58
ITEM 16.	FORM 10-K SUMMARY	59
SIGNATURES		60

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

A number of the matters and subject areas discussed in this Form 10-K as well as in portions of the Company’s Proxy Statement, dated September 8, 2022, which is incorporated herein by reference, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “would,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will” and “could,” or the negative of these terms or words of similar meaning.  These statements include expected future financial results, product offerings, global expansion, liquidity needs, financing ability, planned capital expenditures, management’s or the Company’s expectations and beliefs, and similar matters discussed, or otherwise incorporated herein by reference, in this Form 10-K.  The discussions of such matters and subject areas are qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from the Company’s actual future experience.  

The Company’s business, operations and financial performance are subject to certain risks and uncertainties, which could result in material differences in actual results from the Company’s current expectations. These risks and uncertainties include, but are not limited to, general economic conditions, in particular relating to the automotive industry, consumer demand for the Company’s and its customers’ products, competitive and technological developments, customer purchasing actions, changes in warranty provisions and customer product recall policies, work stoppages at the Company or at the location of its key customers as a result of labor disputes, foreign currency fluctuations, uncertainties stemming from U.S. trade policies, tariffs and reactions to same from foreign countries, the volume and scope of product returns or customer cost reimbursement actions, changes in the costs of operations, warranty claims, adverse business and operational issues resulting from the global supply chain and logistics disruption, the semiconductor chip supply shortages and the Coronavirus (COVID-19) pandemic, matters adversely impacting the timing, availability and cost of material component parts and raw materials for the production of our products and the products of our customers, or the continuation or worsening thereof and other matters described under “Risk Factors” in Part I, Item 1A of this report.

Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.  The forward-looking statements made herein are only made as of the date of this Form 10-K and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this Form 10-K.

1

PART I

ITEM 1. BUSINESS

Basic Business

STRATTEC SECURITY CORPORATION designs, develops, manufactures and markets automotive access control products including mechanical locks and keys, electronically enhanced locks and keys, passive entry passive start systems (PEPS), steering column and instrument panel ignition lock housings, latches, power sliding side door systems, power tailgate systems, power lift gate systems, power deck lid systems, door handles and related products for primarily North American automotive customers. We also supply global automotive manufacturers through a unique strategic relationship with WITTE Automotive (“WITTE”) of Velbert, Germany and ADAC Plastics Inc., doing business as ADAC Automotive (“ADAC”), of Grand Rapids, Michigan called VAST Automotive Group (“VAST”). 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, along with our VAST LLC partners, provide full service and aftermarket support for each VAST Automotive Group partners’ products.

History

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-seven years.

Our history in the automotive security business spans over 110 years. STRATTEC has been the world’s largest producer of automotive locks and keys since the late 1920s, and we currently maintain a significant share of the North American markets for these products.

Products

Our traditional products are lock sets (locks and keys) for cars and light trucks. Typically, two keys are provided with each vehicle lockset.  Most of the vehicles we currently supply are using keys with sophisticated radio frequency identification technology for additional theft prevention. Keys with remote entry devices integrated into a single unit and bladeless electronic keys as well as turn-key passive entry passive start systems (PEPS) have been added to our product line and are gaining in popularity.

Ignition lock housings represent another access control product for us. These housings are the mating part for our ignition locks and typically are part of the steering column structure, although there are instrument panel-mounted versions for certain vehicle applications. These housings are either die cast from zinc or injection molded plastic and may include electronic components for theft deterrent systems.  

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 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.

In recent years, more and more vehicle access systems have moved from purely mechanical components to integrated electro-mechanical systems. STRATTEC has been at the forefront of this new technology, working with Original Equipment Manufacturers’ (OEMs) product development and purchasing groups to provide cost-effective, innovative solutions to the challenges facing our customers.

STRATTEC’s customer-focused structure and formalized product development process helps us identify and meet customer needs in the shortest time possible. From concept and design, through implementation and into the aftermarket, STRATTEC delivers products that provide the optimum value solution to security and access control requirements. We have a comprehensive Products & Solutions portfolio that can be viewed on our website at www.strattec.com (see “Available Information” below for additional information).

To maintain a strong focus on each of these access control products, we have Product Business Managers who oversee the product’s entire life cycle, including product concept, application, manufacturing, warranty analysis, service/aftermarket, and financial/commercial issues. The Product Business Managers work closely with our sales organization, our engineering group, and our manufacturing operations to ensure their products are receiving the right amount of quality attention so that their value to STRATTEC and the market place is enhanced.

2

Markets

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

Sales to our major automotive customers, both OEM and Tier 1, are coordinated through direct sales personnel located in our Detroit-area office. Sales are also facilitated through daily interaction between our Program Managers, Application Engineers and other product engineering personnel. Sales to other OEM customers are accomplished through a combination of our sales personnel located in Detroit and personnel in our Milwaukee headquarters office.

The majority of our OEM products are sold in North America. 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, 43, 44 and 45 in this Form 10-K.

OEM service and replacement parts are sold to the OEM’s own service operations. In addition, we distribute our components and security products to the automotive aftermarket through approximately 50 authorized wholesale distributors, as well as other marketers and users of component parts, including export customers. Increasingly, our products find their way into the retail channel, specifically the hardware store channel. Our ability to provide a full line of keys to that channel has been accomplished through the introduction of the STRATTEC “XL” key line. This extension to our product line includes keys that we currently do not supply on an OEM basis, including keys for Toyota, Honda and other popular domestic and import vehicles. This extended line of keys enables automotive repair specialists to satisfy consumer needs for repair or replacement parts. Our aftermarket activities are serviced through a warehousing operation in El Paso, Texas.

Customer Sales Focus

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 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.  

Each Sales Director is responsible for the overall relationship between STRATTEC and a specific customer group.  Program Managers are responsible for coordinating cross functional activities while managing new product programs for their customers.

Product Engineering Focus

To best serve our customers’ product needs, STRATTEC’s engineering resources are organized into groups which focus on specific access control applications. We currently have six engineering groups:  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. In doing this, each engineering group works closely with both the customer and product teams, Engineering Program Managers, and Application Engineers.

Underlying this organization is a formalized product development process to identify and meet customer needs in the shortest possible time. By following this streamlined development system, we shorten product lead times, tighten our response to market changes and provide our customers with the optimum value solution to their security/access control requirements. STRATTEC is also IATF 16949:2016 and ISO 14001 certified. This means we embrace the philosophy that quality should exist not only in the finished product, but in every step of our processes as well.

3

Operations

A significant number of the components that go into our products are manufactured at our headquarters in Milwaukee, Wisconsin. This facility produces zinc die cast components, stampings and milled key blades. We have three owned production facilities currently in operation in Juarez, Mexico operating as STRATTEC de Mexico. Plant No. 1 houses key finishing and assembly operations for locksets and ignition lock housings. Plant No. 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. Plant No. 3 houses both latch and power access assembly operations for STRATTEC Power Access de Mexico. Plant No. 4 is in Leon, Mexico and houses our custom paint system for door handles and assembly for ADAC-STRATTEC de Mexico and is owned by the ADAC-STRATTEC de Mexico joint venture.

Vehicle Access Systems Technology LLC

In fiscal 2001, we entered into a formal alliance with WITTE-Velbert GmbH, an automotive supplier based in Germany which designs, develops, manufactures and markets automotive access control products for European-based customers. This alliance consisted of two initiatives. The first was a set of legal agreements which allowed STRATTEC to manufacture and market WITTE’s core products in North America, and WITTE to manufacture and market STRATTEC’s core products in Europe. The second initiative was a 50:50 joint venture, WITTE-STRATTEC LLC, to invest in operations with local partners in strategic markets outside of Europe and North America.

In February of 2006, we announced the expansion of this alliance and related joint venture with the addition of a third partner, ADAC Plastics, Inc.  ADAC, of Grand Rapids, Michigan, adds North American expertise in door handles, a part of WITTE’s core product line that STRATTEC did not support, and an expertise in color-matched painting of these components.

With the expansion of the alliance, we can offer a full range of access control related products available on a global basis to support customer programs. To identify this powerful combination of independent companies focused on working together, we renamed the joint venture Vehicle Access Systems Technology LLC (VAST LLC). We now refer to the combination of the alliance structure and joint venture as “VAST Automotive Group” (VAST). WITTE is now called WITTE Automotive, and ADAC is now doing business as ADAC Automotive. We have adopted a common graphic image in which we share a logo mark and colors, and a specific VAST logo used on the partners’ printed and electronic presentation materials. What is now VAST made investments with a local partner in Brazil in September, 2001, and local partners in China in March, 2002. However, during fiscal 2010, VAST LLC purchased the remaining 40 percent interest of its local partners in the China venture. 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 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. 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 $1.3 million and $1.5 million during fiscal years 2022 and 2021, 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”). As part of this transaction, VAST acquired a fifty percent equity interest in the former Minda-Valeo Security Systems joint venture entity, based in Pune, India. This joint venture entity was renamed Minda-VAST Access Systems (“Minda-VAST”). Minda-VAST has operations in Pune and Delhi and had annual sales of approximately $29.4 million and $23.8 million during fiscal years 2022 and 2021, respectively. Minda is a leading manufacturer of security & access products and handles, for both OEMs and the aftermarket in India. 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 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. 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, 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.

4

5

STRATTEC de MEXICO

We have formed STRATTEC de Mexico as a wholly owned subsidiary of STRATTEC to own and operate three production facilities in Juarez, Mexico. At these three facilities we house our assembly operations for locksets and ignition lock housings, our key finishing and plastic injection molding operations, our assembly operations for ADAC-STRATTEC de Mexico noted below and our latch and power access assembly operations for STRATTEC POWER ACCESS de Mexico noted below.

ADAC-STRATTEC LLC and ADAC-STRATTEC de MEXICO

During fiscal 2007, we formed a new entity with ADAC Automotive called ADAC-STRATTEC LLC including a wholly owned Mexican subsidiary ADAC-STRATTEC de Mexico (collectively, ASdM). The purpose of this joint venture is to produce certain ADAC and STRATTEC products utilizing ADAC’s plastic molding injection expertise and STRATTEC’s assembly capability. ASdM currently operates out of defined space in STRATTEC de Mexico Plant No. 2 located in Juarez, Mexico. Products from this joint venture include non-painted door handle components and exterior trim components for OEM customers producing in North America. STRATTEC owns 51% of this joint venture and its financial results are consolidated into STRATTEC’s financial statements. 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 is in Leon, Mexico and houses our custom paint system for door handles and assembly for ADAC-STRATTEC de Mexico.

STRATTEC POWER ACCESS LLC and STRATTEC POWER ACCESS de MEXICO

During fiscal year 2009, we formed a new subsidiary with WITTE Automotive called STRATTEC POWER ACCESS LLC (SPA) to acquire the North American business of the Delphi Power Products Group.  WITTE is a 20 percent minority owner. 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, 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. 3 located in Juarez, Mexico. Financial results for SPA are consolidated in STRATTEC’s financial statements. 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

The manufacturing of components used in automobiles is driven by the normal peaks and valleys associated with the automotive industry. Typically, the months of July and August are relatively slow as summer vacation shutdowns and model year changeovers occur at the automotive assembly plants. September volumes increase rapidly as each new model year begins. This volume strength continues through October and into early November. As the holiday and winter seasons approach, the demand for automobiles slows, as does production.  March usually brings a major sales and production increase, which then continues through most of June. 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.

6

Vehicle List

2023 Vehicles

We are proud to be associated with many of the quality vehicles produced in North America and elsewhere.  

The following cars and light trucks are equipped with STRATTEC components during our 2023 fiscal year:

PASSENGER CARS
Acura NSX	Cadillac CT6*	Ford GT
Aston Martin DB 11*	Cadillac Lyriq (EV)	Ford Mustang
Aston Martin DBS *	Chevrolet Bolt (EV)	Honda Accord
Aston Martin DBX *	Chevrolet Camaro	Maserati Ghibli *
Aston Martin Vanquish*	Chevrolet Corvette	Maserati MC20 *
Aston Martin Vantage *	Chevrolet Malibu	Maserati Quattroporte *
Buick Excelle *	Chrysler 300	Opel Astra *
Buick LaCrosse *	Cruise Origin (EV)	Opel Insignia *
Buick Regal *	Dodge Challenger	Volkswagen Jetta
Cadillac ATS *	Dodge Charger
Cadillac CT5 *	Ford Focus *
LIGHT TRUCKS, VANS AND SPORT UTILITY VEHICLES
Acura MDX	Chevrolet Traverse	GMC Yukon and Yukon XL
Acura RDX	Chrysler Pacifica (PH option)	Honda CRV
Audi Q5	Chrysler Voyager	Honda RDX
Brightdrop EV600 (EV)	Dodge Durango	Honda Odyssey
Buick Enclave	Dodge Hornet (PH option)	Hyundai Staria *
Buick Encore GX *	Ford Bronco Sport	Jeep Cherokee
Buick Envision *	Ford Edge	Jeep Commander *
BMW X7	Ford Escape (PH option)	Jeep Compass
Cadillac Escalade &	Ford Expedition	Jeep Gladiator
Escalade ESV	Ford Explorer	Jeep Grand Cherokee
Cadillac XT4	Ford F-Series Pickup	Jeep Wrangler/Wrangler
Cadillac XT5	Ford F-Series Super Duty	Unlimited (PH option)
Cadillac XT6	Pickup	Kia Sedona *
Chevrolet Blazer	Ford F-150 Lightning (EV)	Kia Carnival *
Chevrolet Colorado *	Ford Maverick Pickup	Lincoln Aviator (PH option)
Chevrolet Equinox	Ford Mustang Mach-E (EV)	Lincoln Corsair (PH option)
Chevrolet Express Van	Ford Ranger Pickup	Lincoln Nautilus
Chevrolet S-10 *	Ford Transit Connect *	Lincoln Navigator
Chevrolet Silverado &	GMC Acadia	Maserati Levante *
Silverado HD Pickup	GMC Canyon *	Ram 1500 Pickup
Chevrolet Suburban	GMC Hummer (EV)	Ram 1500 Classic Pickup
Chevrolet Tahoe	GMC Savana	Volkswagen Tiguan (PH option)
Chevrolet Tracker *	GMC Sierra & Sierra HD	Volvo Polestar 3 (EV)
Chevrolet Trail Blazer *	Pickup	Volvo XC90 (PH option)
Chevrolet Trax *	GMC Terrain

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

EV – Electric Vehicle

PH – Plug-In Hybrid

7

Emerging Technologies

Automotive vehicle access systems, which are both theft deterrent and consumer friendly, are trending toward electro-mechanical and connected devices.  Electronic companies are developing user identification systems such as bio-systems, card holder (transmitter) systems, etc., while mechanical locks, keys, housings, and latches are evolving to accommodate electronics. We believe we are positioning ourselves as a vehicle access control supplier by building our product, engineering and manufacturing expertise in the required electro-mechanical products, which include vehicle access latches, keys with remote entry electronic systems, ignition interface systems with passive start and Phone as a Key (PaaK) capabilities. In both 2018 and 2019, we were awarded the Automotive News Pace Award for Excellence and Innovation for our Invis-A-Rise^TM Power Liftgate and Invis-A-Rise^TM Power Tailgate products. As the automotive industry continues developing various levels of autonomous vehicles, we believe that we are well positioned to continue the development and incorporation of power sliding doors, power tailgates and other consumer convenience features into these types of vehicles.

These technologies benefit us by increasing our potential customer base as a Tier 2 supplier while maintaining our Tier 1 status on some product lines and by adding additional product line availability.

Sources and Availability of Raw Materials

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. 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. 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

We believe that the success of our business will not only result from the technical competence, creativity and marketing abilities of our employees but also from the protection of our intellectual property through patents, trademarks and copyrights. As part of our ongoing research, development and manufacturing activities, we have a policy of seeking patents on new products, processes and improvements when appropriate.

Although, in the aggregate, the intellectual property discussed herein are of considerable importance to the manufacturing and marketing of many of our access control products, we do not consider any single patent or trademark or group of related patents or trademarks to be material to our business as a whole, except for the STRATTEC and STRATTEC with logo trademarks.

We also rely upon trade secret protection for our confidential and proprietary information. We maintain confidentiality agreements with our key executives. In addition, we enter into confidentiality agreements with selected suppliers, consultants and employees as appropriate to evaluate new products or business relationships pertinent to our success. However, there can be no assurance that others will not independently obtain similar information and techniques or otherwise gain access to our trade secrets or that we can effectively protect our trade secrets.

Dependence Upon Significant Customers

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.  

The products sold to these customers are model specific, fitting only certain defined applications. 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, 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. We cannot provide any assurance that any lost sales volume could be replaced despite our historical relationships with our customers.

8

Sales and Marketing; Backlog

We provide our customers with engineered access control products including locksets, fobs, push button passive entry passive start ignition systems, steering column lock housings, electromechanical latches, power sliding door systems, power tailgate systems, power liftgate systems, power decklids, painted and non-painted door handles, door handle components and trim and other access products which are unique to specific vehicles. Any given vehicle will typically take 1 to 3 years of development and engineering design time prior to being offered to the public. The access control products are designed concurrently with the vehicle. Therefore, commitment to STRATTEC as the production source for such products and components occurs 1 to 3 years prior to the start of production for such components. We employ an engineering staff that assists in providing design and technical solutions to our customers. We believe that our engineering expertise is a competitive advantage and contributes toward our strong market position in our industry. For example, we regularly provide innovative design proposals for our product offerings to our customers that we believe will improve customer access, vehicle security system quality, theft deterrence and system cost.

The typical process used by automotive manufacturers in selecting a supplier for access control products is to offer the business opportunity to us and several of our competitors. Each competitor will pursue the opportunity, doing its best to provide the customer with the most attractive proposal. Price pressure is strong during this process but once an agreement is reached, a commitment is made for each year of the product program. Typically, price reductions resulting from productivity improvement by STRATTEC over the life of the product program are included in the contract and are estimated in evaluating each of these opportunities. A blanket purchase order, a contract indicating a specified part will be supplied at a specified price during a defined time period, is issued by customers for each model year. Production quantity releases or quantity commitments are made to that purchase order for weekly deliveries to the customer. As a consequence and because we are a "Just-in-Time" supplier to the automotive industry, we do not maintain a backlog of orders in the classic sense for future production and shipment and, accordingly, we are unable to provide a meaningful backlog comparison from year to year.

Competition

We compete with domestic and foreign-based competitors on the basis of custom product design, engineering support, quality, delivery and price. While the number of direct competitors in our product markets is currently relatively small, the automotive manufacturers actively encourage competition between potential suppliers. We have a large share of the North American market for our access control products because of our ability to provide optimal value, which is a beneficial combination of price, quality, technical support, program management, innovation and aftermarket support. In order to reduce access control product production costs while still offering a wide range of technical support, we utilize assembly operations and certain light manufacturing operations in Mexico, which results in lower labor costs as compared to the United States.

As locks and keys become more sophisticated and involve additional electronics, competitors with specific electronic expertise may emerge to challenge us. To address this, we have in recent years strengthened our electrical engineering knowledge and service. We are also working with several electronics suppliers to jointly develop and supply these advanced products.

Our lockset, steering column lock housing, latches and power access competitors include Huf North America, Ushin, Valeo, Tokai-Rika, Alpha-Tech, Honda Lock, Shin Chang, Magna, Edscha, Stabilus, Aisin, Brose, Mitsuba, Ohi, Kiekert, Inteva, Novares and Gecom. For additional information related to competition, see the information set forth under “Risk Factors-Highly Competitive Automotive Supply Industry” included under Item 1A of this Form 10-K.

Research and Development

We engage in research and development activities pertinent to automotive access control. A major area of focus for research is the expanding role of vehicle access via electronic interlocks and modes of communicating authorization data between consumers and vehicles. Development activities include new products, applications and product performance improvements. In addition, specialized data collection equipment is developed to facilitate increased product development efficiency and continuous quality improvements. For fiscal years 2022 and 2021, we incurred approximately $12.2 million and $10.8 million, respectively, on research and development. We believe that, historically, we have committed sufficient resources to research and development and we intend to continue to invest in the future as required to support additional product programs associated with both existing and new customers. Patents are pursued and will continue to be pursued as appropriate to protect our interests resulting from these activities.

Customer Tooling

We incur costs related to tooling used in component production and assembly.  Some of these costs are reimbursed by customers who then own the tools involved.  See the information set forth under “Organization and Summary of Significant Accounting Policies-Customer Tooling in Progress” included in Notes to Financial Statements under Item 8 in this Form 10-K.

9

Environmental Compliance

As is the case with other manufacturers, we are subject to Federal, state, local and foreign laws and other legal requirements relating to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations. These laws include the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended), the Clean Water Act of 1990 (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended). We have an environmental management system that is ISO-14001 certified.  We believe that our existing environmental management system is adequate and we have no current plans for substantial capital expenditures in the environmental area.    

As discussed in “Commitments and Contingencies” under Notes to Financial Statement under Item 8 in this Form 10-K, a site at our Milwaukee facility is contaminated by a solvent spill from a former above-ground solvent storage tank located on the east side of the facility, which spill occurred in 1985. We continue to monitor this situation.

We do not currently anticipate any materially adverse impact on our financial statements or competitive position as a result of compliance with Federal, state, local and foreign environmental laws or other legal requirements. 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.  

Human Capital

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 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. 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. 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

10

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.

ITEM 1A.  RISK FACTORS

We recognize we are subject to the following risk factors based on our operations and the nature of the automotive industry in which we operate:

RISK RELATED TO CORONAVIRUS AND OTHER HEALTH EPIDEMICS

The Coronavirus (COVID-19) pandemic adversely affected, and may continue to adversely affect, our operations and supply chains, in particular related to the sourcing of semiconductor chips, and we have experienced and may continue to experience reductions in demand for certain of our products and services as a result of the pandemic and this supply chain disruption. Because we manufacture our products in facilities around the world, including in Mexico and through our joint venture partners in Europe, China and India, we have been and may continue to be vulnerable to an outbreak of COVID-19 (or the resurgence of such an outbreak) or other contagious diseases in those regions as well as in the United States. The effects of COVID-19 and other contagious diseases 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 has had and could continue to have a material adverse effect on our sales levels, pricing for raw materials and components and our operating results. In addition, the COVID-19 outbreak (or a worsening of this outbreak) and future outbreaks of contagious diseases in the human population has resulted in and could continue to 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 has and could continue to affect demand for our products and impact our operating results.

We have been adhering to guidelines and mandates from governmental and health organizations in the territories that we have locations and production facilities, and have implemented various risk mitigation plans to reduce the risk of spreading COVID-19. To that end, we have encouraged working remotely where applicable, adopted social distancing where appropriate, implemented travel restrictions, and we are taking actions to ensure that locations and facilities are cleaned and sanitized regularly. All of these actions may impact our operations and profitability. Further, we have complied with and may be required to comply with additional foreign, national, state or local governmental authority recommendations, guidelines, and/or mandates, which have resulted in and may result in additional temporary reduction in or suspension in work at certain of our locations and production facilities. All of these additional actions have and may continue to adversely impact our operating results, financial condition and cash flows.

RISK RELATED TO GEOPOLITICAL INSTABILITY

We are currently operating in a period of geopolitical instability resulting from the ongoing military conflict between Russia and the Ukraine, which has significantly contributed to economic uncertainty, capital market disruption and supply chain interruptions in the U.S. and global markets. On February 24, 2022, a full-scale military invasion of the Ukraine by Russian troops began. While the length and impact of the ongoing conflict is unpredictable, the Ukraine conflict could lead to market disruptions, including supply chain interruptions and significant volatility in commodity prices, and in credit and capital markets. The conflict in the Ukraine has led to sanctions and other penalties being levied against Russia by the U.S., the EU, and other countries. Additional potential sanctions and penalties have also been proposed. Russian military actions and the resulting sanctions, 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.

BUSINESS RISKS

Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share – Sales to General Motors Company, Ford Motor Company and Stellantis (formerly Fiat Chrysler Automobiles) represented approximately 65 percent of our annual net sales (based on fiscal 2022 results) and, accordingly, these customers account for a significant percentage of our outstanding accounts receivable. The contracts with these customers provide for supplying the customer’s requirements for a particular model. The contracts do not specify a specific quantity of parts. The contracts typically cover the life of a model, 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 loss 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 key models could occur, and if so, could have a material adverse effect on our existing and future revenues, operating results, financial condition and cash flows.

11

Our major customers also have significant under-funded legacy liabilities related to pension and postretirement health care obligations. The loss in our major customers’ North American automotive market share to the New Domestic automotive manufacturers (primarily the Japanese and Korean automotive manufacturers) and/or a significant decline in the overall market demand for new vehicles may ultimately result in severe financial difficulty for these customers, including bankruptcy. If our major customers cannot fund their operations, we may incur significant write-offs of accounts receivable, incur impairment charges or require restructuring actions.  

Production Slowdowns by Customers – Our major customers and many of their suppliers were significantly impacted by the Great Recession of 2008/2009, by the COVID-19 pandemic in 2020, by supply chain issues resulting from the recent conflict in the Ukraine, and by a semiconductor chip shortage in 2021 and 2022. Many of our major customers instituted production cuts during our fiscal 2009 and 2010 due to the Great Recession and shuttered plants. Similarly during 2020, 2021 and 2022 in response to the effects of the COVID-19 pandemic, the Ukraine conflict and the semiconductor chip shortage many of our major customers again instituted production cuts and shuttered plants. While production subsequently increased after the cuts made in 2009 and again in 2021 when plants reopened following the COVID-19 closures, the current Ukraine conflict, semiconductor chip shortage and additional economic slowdowns, pandemics or part supply shortages could bring about new production cuts which could have a material adverse effect on our existing and future revenues, operating results, financial condition and cash flows.

Cross-border Trade Issues or Tariffs – Our business is impacted by international or cross-border trade, including the import and export of products and goods into and out of the United States and trade tensions among nations.  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.  Further, uncertainties stemming from changes in U.S. trade policies in particular with European countries and China, tariffs and the reaction of other countries thereto, could have an adverse effect on our business and may adversely impact our results of operations, financial condition and cash flows or reduce profitability on certain of our products.

Highly Competitive Automotive Supply Industry – The automotive component supply industry is highly competitive. Some of our competitors are companies, or divisions or subsidiaries of companies, that are larger than STRATTEC and have greater financial, global and technology capabilities. Our products may not be able to compete successfully with the products of these other companies, which could result in loss of customers and, as a result, decreased sales and profitability. Some of our major customers have previously announced that they will be reducing their supply base. This could potentially result in the loss of these customers and consolidation within the supply base. The loss of any of our major customers could have a material adverse effect on our existing and future revenues, results of operations, financial condition and cash flows.

In addition, our competitive position in the North American automotive component supply industry could be adversely affected in the event that we are unsuccessful in making strategic investments, acquisitions or alliances or in establishing joint ventures that would enable us to expand globally, in particular, with the VAST Automotive Group and their ability to fund and service global vehicle platforms. We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by our major customers. New model development generally begins two to five years prior to the marketing of such new models to the public. The failure to obtain new business on new models or to retain or increase business on redesigned existing models could adversely affect our business and financial results. In addition, as a result of relatively long lead times for many of our components, it may be difficult in the short-term for us to obtain new sales to replace any unexpected decline in the sale of existing products. Finally, we may incur significant product development expense in preparing to meet anticipated customer requirements which may not be recovered.

Cyclicality and Seasonality in the Automotive Market – The automotive market is cyclical and is dependent on consumer spending, on the availability of consumer credit and to a certain extent, on customer sales incentives. Economic factors adversely affecting consumer demand for automobiles and automotive production, such as rising fuel costs, could adversely impact our net sales and net income. We typically experience decreased sales and operating income during the first fiscal quarter of each year due to the impact of scheduled customer plant shut-downs in July and new model changeovers during that period.

OPERATIONAL RISKS

Shortage of Raw Materials or Components Supply – In the event of catastrophic acts of nature such as fires, tsunamis, hurricanes, earthquakes and global pandemics and wars or a rapid increase in production demands, either we or our customers or other suppliers may experience supply shortages of raw materials or components. This could be caused by a number of factors, including a lack of production line capacity or manpower or working capital constraints. In order to manage and reduce the costs of purchased goods and services, we and others within our industry 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, which could increase the possibility of a supply shortage of any particular component. 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 experience a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source. Such production interruptions could impede a ramp-up in vehicle production and could have a material adverse effect on our business, results of operations, financial condition and cash flows.  

12

We consider the production capacities and financial condition of suppliers in our selection process, and expect that they will 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 or delays in the supply of components to us.

Because of the COVID-19 pandemic and the recent Ukraine conflict, we have experienced supply chain disruptions in fiscal 2021 and fiscal 2022 in particular with semiconductor chip shortages that impact our OEM customers’ ability to finish assembly of new vehicles and which have adversely impacted orders for our products and, accordingly, our results of operations and cash flows. These shortages will most likely continue into our fiscal 2023.

Sources of and Fluctuations in Market Prices of Raw Materials – Our primary raw materials are high-grade zinc, brass, nickel silver, aluminum, steel and plastic resins. These materials are generally available from a limited number of suppliers, but we have chosen to concentrate our sourcing with one primary vendor for each commodity or purchased component. We believe our sources of raw materials are reliable and adequate for our needs. However, the development of future sourcing issues related to using existing or alternative raw materials and the global availability of these materials as well as significant fluctuations in the market prices of these materials may have an adverse effect on our results of operations, financial condition and cash flows if the increased raw material costs cannot be recovered from our customers. During fiscal 2021 and 2022, we experienced higher raw material costs on the items listed above including freight costs on both raw material and purchased components.

Given the significant financial impact on us relating to changes in the cost of our primary raw materials, commencing with fiscal 2008 and thereafter, we began quoting quarterly material price adjustments for changes in our zinc costs in our negotiations with our customers. Our success in obtaining these quarterly price adjustments in our customer contracts is dependent on separate negotiations with each customer. It is not a standard practice for our customers to include such price adjustments in their contracts. We have been successful in obtaining quarterly price adjustments in some of our customer contracts. However, we have not been successful in obtaining the adjustments with all of our customers.

Foreign Operations – We own and operate manufacturing operations in Mexico. As discussed below under “Investment in Joint Ventures and Majority Owned Subsidiaries” included in Notes to Financial Statements under Item 8 in this Form 10-K, we also have joint venture and majority owned investments in Mexico, Brazil, China and India. As these operations continue to expand, their success will depend, in part, on our and our partners’ 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. The success of these joint venture operations may be impacted by our partners’ ability to influence business decisions and therefore the operating results of the joint ventures could be adversely impacted. These influences, as well as conflicts or disagreements with our joint venture partners, could negatively impact the operations, financial results, financial condition and cash flows of our joint venture investments, which could have an adverse impact on our financial results, financial condition and cash flows. In addition, failure of our partners to be able to continue to fund their portion of the joint venture operations could have a material adverse effect on the financial condition and financial results of our joint venture investments, which could have a material adverse effect on our financial results. The joint venture investments in China generated losses in 2012 and 2013 due to relocation costs associated with moves to a new facility and start-up costs associated with a new product line. These relocation costs and start-up costs have been financed internally and externally by VAST China. Additionally, our VAST LLC joint ventures in Brazil and India continue to report losses or breakeven results due to the weak automotive build in those regions. The impact of any future planned capital expenditures or future expansion by VAST LLC in China, Brazil and India, may result in the need for additional future capital contributions to fund the operations of these joint venture investments.

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. 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. Although we have cybersecurity insurance in place, 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 and cybersecurity and 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

13

results of operations. We have programs in place to address and mitigate cybersecurity risks. These programs include regular monitoring of outside threats, continuous update of software to mitigate risk, education of employees to the risks of external threats, and simplification of infrastructure to minimize servers. Although we believe the foregoing programs are reasonable actions to mitigate cybersecurity risks, the failure of these programs to adequately protect against these risks could have a negative impact on our business, results of operations, financial condition and cash flows.

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 work forces. Work stoppages or slow-downs experienced by our customers or their suppliers could result in slow-downs or closures of assembly plants where our products are included in assembled vehicles. For example, strikes by a critical supplier called by the United Auto Workers led to extended shut-downs of most of General Motors’ North American assembly plants in February 2008 and September 2019. A material work stoppage experienced by one or more of our customers could have an adverse effect on our business and our financial results. In addition, all production associates at our Milwaukee facility are unionized. A sixteen-day strike by these associates in June 2001 resulted in increased costs as all salaried associates worked with additional outside resources to produce the components necessary to meet customer requirements. 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 12, 2023. We may encounter further 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. Labor contracts between General Motors Company, Ford Motor Company and Stellantis (formerly Fiat Chrysler Automobiles) and their unionized associates under the United Auto Workers union expire in September 2023. In addition, their respective labor agreements with the Canadian auto workers union expire in Fall 2023. Labor disruptions encountered by our customers during the contract period could have an adverse effect on our business and our financial results.

FINANCIAL RISKS

Financial Distress of Automotive Supply Base – During the Great Recession, which impacted calendar years 2009 and 2010, deteriorating automotive industry conditions adversely affected STRATTEC and our supply base. Lower production levels at our major customers, volatility in certain raw material and energy costs and the global credit market crisis resulted in severe financial distress among many companies within the automotive supply base. During the above time frame, several automotive suppliers filed for bankruptcy protection or ceased operations. The potential continuation or renewal of financial distress within the supply base (whether from COVID-19, the Ukraine conflict, the ongoing supply chain and logistics disruptions or otherwise) and our suppliers’ inability to obtain credit from lending institutions could lead to commercial disputes and possible supply chain interruptions. In addition, the potential for future adverse industry conditions (including from COVID-19, the Ukraine conflict or otherwise) may require us to provide financial assistance or other measures to ensure uninterrupted production. The continuation or renewal of these industry 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 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 – Our sales are denominated in U.S. dollars. 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, 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. Similarly, any appreciation in the value of the U.S. dollar in relation to the value of the Mexican peso will decrease the cost of our Mexican operations when translated into U.S. dollars.  

14

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 for variances 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.

Investments in Customer Program Specific Assets – We 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 which may have a material adverse effect on our financial results and financial condition.

Credit Facilities – Historically, 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 our expansion initiatives.  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 and/or raise additional capital when needed, we may be forced to sharply curtail our efforts to manufacture and promote the sale of our products or to curtail our operations.

There can be no assurance that the financial terms or covenants of any new credit facility will be the same or as favorable as those under our existing facilities. Additionally, our ability to complete a refinancing of our existing credit facilities prior to their respective maturities is subject to a number of conditions beyond our control. For example, if a disruption in the financial markets were to occur at the time that we intended to refinance our credit facilities, we might be restricted in our ability to access the credit lines. The restrictive covenants in any such new credit facility may limit our ability to engage in acts that may be in our best long term interests.  A breach of any of these types of restrictive covenants in our credit facilities could result in a default under these facilities.  If a default occurs, the lenders under our credit facilities may elect to declare all outstanding borrowings, together with accrued interest, to be immediately due and payable, to terminate any commitments they have to provide further borrowings and to exercise any other rights they have under the facilities or applicable law.

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. Our largest customers have recently extended and/or expanded their warranty protection for their vehicles. Other automotive OEMs have similarly extended and/or expanded their warranty programs. 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 charges/claims in future periods. Depending on the nature of and the volume of vehicles involved in the potential warranty claims, these charges could be material to our financial statements. The extended and/or expanded warranty trend may also result in higher cost recovery claims by OEMs from suppliers whose products incur a higher rate of warranty claims above an OEM derived nominal level. Prior to fiscal 2010, we had experienced relatively low warranty charges from our customers due to our commercial arrangements and improvements in the quality, reliability and durability of our products. Due to our largest customers’ extension and/or expansion of their warranty protection programs and demands for higher warranty cost sharing arrangements from their suppliers in their terms and conditions of purchase, including from STRATTEC, we increased our provision to cover warranty exposures since fiscal year 2010. In 2015 and 2018, our increased warranty provision was the result of various known or expected customer warranty issues outstanding and estimated future warranty costs to be incurred as of June 2015 and June 2018, respectively, for which amounts were reasonably estimable. As additional information becomes available, actual results may differ from recorded estimates or we may need to record additional warranty provisions, similar to as in 2015 and 2018. Although we have product recall insurance in place, 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.

LEGAL AND REGULATORY RISKS

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 have an environmental management system that is ISO-14001 certified. We believe that our existing environmental management system is adequate for current and anticipated operations and we have no current plans for substantial capital expenditures in the environmental area. An environmental reserve was established in 1995 for estimated costs to remediate a site at our Milwaukee facility. The site was

15

contaminated from a former above-ground solvent storage tank, located on the east side of the facility. The contamination occurred in 1985 and is being monitored in accordance with Federal, state and local requirements. We do not currently anticipate any material adverse impact on our results of operations, financial condition or competitive position as a result of compliance with Federal, state, local and foreign environmental laws or other related legal requirements. However, risk of environmental liability and changes associated with maintaining compliance with environmental laws is inherent in the nature of our business and there is no assurance that material liabilities or changes could not arise.

Compliance Related to Regulations Related to Conflict Minerals – We are required to disclose the use of tin, tantalum, tungsten and gold (collectively, “conflict minerals”) mined from the Democratic Republic of the Congo and adjoining countries (the “covered countries”) if a conflict mineral(s) is necessary to the functionality of a product manufactured, or contracted to be manufactured, by us. We may determine, as part of our compliance efforts, that certain products or components we obtain from our suppliers could contain conflict minerals. If we are unable to conclude that all our products are free from conflict minerals originating from covered countries, this could have a negative impact on both our existing and future business, reputation and/or results of operations. We may also encounter challenges to satisfy customers who require that our products be certified as conflict free, which could place us at a competitive disadvantage if we are unable to substantiate such a claim. Compliance with these rules could also affect the sourcing and availability of some of the minerals used in the manufacture of products or components we obtain from our suppliers, including our ability to obtain products or components in sufficient quantities and/or at competitive prices to sell to our customers.

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. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of these laws are issued or applied. 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 against us. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.

GENERAL RISK FACTOR

In addition to the specific risks above, we, our customers, and our suppliers may be adversely affected by changing economic conditions throughout the world. These conditions may result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending. We, our customers, and our suppliers and the economy as a whole also may be affected by future world or local events outside of our control, such as tariffs and other trade protection measures put in place by the United States or other countries, acts of terrorism, developments in the war on terrorism, civil unrest, conflicts in international situations, weather events, natural disasters, outbreaks of infectious diseases, such as the COVID-19 pandemic, and government or political related developments or issues, including changes in tax laws and regulations. These factors could have a material adverse impact on our results of operations, financial condition, and cash flows. Additionally, political and social turmoil, international conflicts (such as the Ukraine conflict) and terrorist acts may put pressure on global economic conditions that may adversely impact our operating results. Unstable political, social or economic conditions may make it difficult for us, our customers and our suppliers to accurately forecast and plan future business activities. If such conditions arise or persist, they could have a material adverse impact on our results of operations, financial condition and cash flows.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

16

ITEM 2. PROPERTIES

We have five manufacturing plants, one warehouse, and one sales office. These facilities are described as follows:

Location	Type	Sq. Ft.		Owned or Leased
Milwaukee, Wisconsin	Headquarters and General Offices; Component Parts Manufacturing		345,123	Owned
Juarez, Chihuahua Mexico	Subsidiary Offices and Assembly		169,488	Owned
Juarez, Chihuahua Mexico	Subsidiary Offices and Assembly		69,900	Owned
Juarez, Chihuahua Mexico	Subsidiary Offices, Key Finishing, Injection Molding and Assembly Operations		114,877	Owned
Leon, Mexico	Subsidiary Offices, Door Handle Injecting Molding, Painting and Assembly		129,887	Owned
El Paso, Texas	Finished Goods and Service Parts Distribution Warehouse		114,715	Leased**
Auburn Hills, Michigan	Sales and Engineering Office for Detroit Customer Area		62,736	Owned

** Leased unit within a complex.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

None.

17

PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Market under the symbol “STRT.”

Registered shareholders of record at July 3, 2022, were 850.

The Company’s Board of Directors authorized a stock repurchase program on October 16, 1996, and the program was publicly announced on October 17, 1996.  Since inception of the stock repurchase program, the Board of Directors has periodically increased the number of shares authorized for repurchase under the program.  At July 3, 2022, the number of shares of the Company’s common stock authorized for repurchase under the program totaled 3,839,395.  The program currently authorizes the repurchase of the Company’s common stock from time to time, directly or through brokers or agents, and has no expiration date.  Over the life of the repurchase program through July 3, 2022, a total of 3,655,322 shares have been repurchased at a cost of approximately $136.4 million.  No shares were repurchased during the year ended July 3, 2022.

ITEM 6.   [RESERVED]

18

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Discussion and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s accompanying Financial Statements and Notes thereto included in this Form 10-K. Unless otherwise indicated, all references to years or quarters refer to fiscal years or fiscal quarters of STRATTEC.

Executive Overview

Historically, a significant portion of our total net sales have been to domestic automotive OEMs (General Motors, Ford and Stellantis (formerly Fiat Chrysler)). During the past two decades these customers lost North American market share to the New Domestic automotive manufacturers (primarily the Japanese and Korean automotive manufacturers). In addition to our dependence on our customers’ maintaining their market share, our financial performance depends in large part on conditions in the overall automotive industry, which in turn, are dependent upon the U.S. and global economies. During fiscal years 2022 and 2021, the above domestic automotive OEMs together represented each year 65 percent and 62 percent, respectively, of our total net sales.

During fiscal years 2022 and 2021, we experienced stronger sales demand for our components from our major North American customers noted above as it relates to light trucks and both sport utility and car based utility vehicles in comparison to passenger cars, which was likely influenced by customer preferences and gas prices. If gas prices continue to rise over the next several years, this consumer buying trend may not continue, which is approximately 80 percent light trucks and sport utility vehicles in comparison to 20 percent passenger car vehicle purchases today. During the last 3-5 years our major customers General Motors, Ford and Stellantis eliminated passenger car production on several models in North America as a strategy to improve their overall profitability going forward. Additionally, several of our significant customers have announced plans to increase production volumes for their models of Electric Vehicles.  As these customers start migrating over to Electric Vehicles we believe a significant amount of our current and future product content will continue to be purchased by our key customers and will be adopted in this changeover (refer to vehicle list included at page 7 in this Form 10-K).

Fiscal 2022 net sales were $452 million compared to $485 million in 2021. Both the fiscal 2022 and 2021 net sales were negatively impacted by the global semiconductor chip shortage which caused our OEM customers to temporarily shut down their assembly plants and which ultimately reduced our net sales and profitability during each of these years. In addition, we see these supply chain shortages continuing into fiscal year 2023. Net income attributable to STRATTEC for fiscal 2022 was $7.0 million and the Net income attributable to STRATTEC in fiscal 2021 was $22.5 million. In addition, during fiscal years 2022 and 2021 the Company produced additional finished goods inventory in anticipation of our OEM customers coming out of the temporary shutdowns from the impact of the COVID-19 pandemic and other supply chain shortages to fill their dealer pipelines which are at historic low levels. Also impacting profitability in fiscal year 2022 were increased costs for purchased raw materials relating to zinc, steel, nickel silver, brass, aluminum and plastic resins.  In most cases we were not able to pass along all these increased costs to our customers through pricing increases. Another factor impacting our profitability is our U.S. Dollar and Mexican Peso exchange rate that affects our operations in Mexico. In the case of the Mexican Peso, the Company does have certain hedging strategies to offset the impact of the exchange rate effects on profitability. Finally, on each of January 1, 2022 and 2021, the Mexican Government mandated minimum wage increases of 22% and 15%, respectively which also negatively impacted our overall profitability.

As we look out into the future, the July 2022 projections from our third-party forecasting service indicate that North American light vehicle production will show a significant increase in demand in vehicle production build for the next four years from our original 2022 forecast which was originally set lower due to the expected lingering effects of the COVID-19 pandemic and the ongoing global semiconductor chip shortage. By model year, based on these projections we are expecting a 2022 vehicle build of 13.4 million vehicles, 15.8 million vehicles for 2023, 16.8 million vehicles for 2024, 16.8 million vehicles for 2025 and 16.5 million vehicles for 2026. These vehicle production estimates going forward were significantly increased due to the impact of COVID-19 that lowered vehicle production in late fiscal 2020 and the global semiconductor chip shortage in late fiscal 2021 and 2022 which also continues to negatively impact vehicle production levels. As part of this third party projection, the Ford Motor Company, General Motors and Stellantis are expected to experience increased vehicle production volumes in their production levels during this time period.  Of course, all of these forecasts are subject to variability based on what happens in the overall North American and global economies, especially as it relates to the world wide status of the global semiconductor chip and other supply chain shortages and the lingering impacts of the  COVID-19 pandemic that may shut down our customers' assembly facilities and further disrupt supply chains in the foreseeable future, potential tariff enactment by the United States Government or other foreign countries, the current levels of employment, availability of consumer credit, home equity values, fluctuating fuel prices, changes in customer vehicle and option preferences, product quality issues, including related to recall and product warranty coverage issues, and other key factors that we believe could determine whether consumers can or will purchase new vehicles or particular brands.

19

Focus and Strategy Going Forward

STRATTEC’s long-term strategy is focused on maximizing long-term shareholder value by driving profitable growth. Our management believes productivity improvements and cost reductions are critical to our competitiveness, while enhancing the value we deliver to our customers. In order to accomplish this, we have been pursuing, and we intend to continue to pursue over the foreseeable future, the following objectives as summarized below:

- Streamline and standardize processes to increase productivity and improve the quality of our products

- Maintain a disciplined and flexible cost structure to leverage scale and optimize asset utilization and procurement

- Maintain our strong financial position by deploying capital spending targeted for growth and productivity improvement

- Leverage the “VAST Automotive Group Brand” with customer relationships to generate organic growth for STRATTEC from global programs

- Offer our customers innovative products and technologies, in particular electronics capabilities, along with cost savings solutions to meet their changing demands

- Explore and execute targeted mergers and acquisitions or other joint venture opportunities with a disciplined due diligence approach and critical financial analysis to drive shareholder value

We use several key performance indicators to gauge progress toward achieving these objectives. These indicators include net sales growth, operating margin improvement, return on capital employed and cash flow from operations.

Results of Operations

2022 Compared to 2021

	Years Ended
	July 3, 2022		June 27, 2021
Net Sales (millions of dollars)	$	452.3	$	485.3

Net Sales to each of our customers or customer groups in the current year and prior year were as follows (millions of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
General Motors Company	$	130.2	$	146.5
Stellantis (Formerly Fiat Chrysler Automobiles)		83.3		85.6
Ford Motor Company		79.7		67.7
Tier 1 Customers		59.3		66.8
Commercial and Other OEM Customers		65.0		77.0
Hyundai / Kia		34.8		41.7
Total	$	452.3	$	485.3

Current year sales were adversely impacted by the global semiconductor chip shortage that temporarily closed several of our customers’ assembly plants, caused production schedule reductions for all of our customers and, as a result, reduced orders for our products and our net sales to all customer groups (other than Ford Motor Company as noted below) in the current year period as compared to the prior year period. Our 2022 fiscal year was 53 weeks while our 2021 fiscal year was 52 weeks. The impact of the additional week of sales during the current year partially offset the reduction in net sales resulting from the semiconductor chip shortage and increased current year sales by approximately $7.4 million. The following items further impacted sales to the noted customer groups between periods:

- Sales to Ford Motor Company were positively impacted in the current year due to higher product content, and in particular for the new power tailgate program on the F-150 pickup trucks. The favorable impact of this higher product content more than offset the volume reduction in the current year resulting from the global semiconductor chip shortage.

- Sales to Stellantis were positively impacted in the current year due to increased sales of the Chrysler Pacifica.

- Commercial and Other OEM Customers, along with Tier 1 Customers, primarily represent purchasers of vehicle access control products, such as latches, key fobs, driver controls, steering column locks and door handles, that we have developed in recent years to complement our historic core business of locks and keys. Sales to Commercial and Other OEM Customers were negatively impacted in the current year by a reduction in sales related to door handle and power access products sold to Volkswagen and Honda of America Manufacturing. Sales to Tier 1 Customers in the current year period were negatively impacted by lower sales volumes on our driver control steering column lock products.

- Hyundai / Kia sales were negatively impacted in the current year due to lower levels of production on their Kia Carnival, formerly the Kia Sedona and Hyundai Starex minivans, for which we supply primarily power sliding door components.

20

	Years Ended
	July 3, 2022					June 27, 2021
	Millions of Dollars		Percent of Cost of Goods Sold			Millions of Dollars		Percent of Cost of Goods Sold
Direct Material Costs	$	260.8		65.8	%	$	268.6		66.1	%
Labor and Overhead Costs		135.4		34.2	%		138.0		33.9	%
Total Cost of Goods Sold	$	396.2				$	406.6

The direct material cost decrease was due to reduced sales volumes between years, as discussed above, which more than offset an increase in direct material costs in the current year as compared to the prior resulting from higher raw material and purchased component costs. In the current year period as compared to the prior year period, our direct material costs decreased as a percent of cost of goods sold while our labor and overhead costs increased as a percent of cost of goods sold. This shift was due to our material costs varying with the sales volume reduction between years while our labor and overhead cost reduction, as discussed below, did not keep pace with the sales reduction between years.

Labor and overhead costs decreased between years. The variable portion of our labor and overhead costs decreased due to lower levels of production at our facilities in the current year as compared to the prior year and production efficiencies at our Milwaukee and Mexico facilities, which reduced labor and overhead costs in the current year as compared to the prior year. This impact was partially offset by less favorable absorption of our fixed overhead costs in the current year as compared to the prior year resulting from the production volume reduction between years and an additional week of expense in the current year as compared to the prior year as our fiscal 2022 was a 53 week year and our fiscal 2021 was a 52 week year. Labor and overhead costs were further impacted by the following:

-Cost Increases:

- Mexico wages and benefits increased $5.2 million in the current year as compared to the prior year period as a result of January 1, 2021 and January 1, 2022 government mandated minimum wage increases.

- The U.S. dollar value of our Mexican operations was negatively impacted by approximately $1.8 million in the current year as compared to the prior year due to an unfavorable Mexican peso to U.S. dollar exchange rate between years. The average U.S. dollar / Mexican peso exchange rate decreased to approximately 20.33 pesos to the dollar in the current year period from approximately 20.90 pesos to the dollar in the prior year period.

- Current year period costs included lump sum bonuses totaling $100,000 paid to our Milwaukee represented hourly workers upon the ratification of a new four-year labor contract, which contract is effective through November 1, 2025.

Cost Decreases:

- Expense provisions under our incentive bonus plans impacting cost of goods sold decreased $3.8 million between periods.

- The prior year period included a loss on disposal of fixed assets of $1.4 million compared to a current year quarter loss of $192,000.

	Years Ended
	July 3, 2022			June 27, 2021
Gross Profit (millions of dollars)	$	56.0		$	78.7
Gross Profit as a percentage of net sales		12.4	%		16.2	%

The decrease in gross profit dollars in the current year as compared to the prior year was attributed to the decrease in net sales between years, partially offset by the decrease in cost of goods sold as discussed above. Gross profit as a percentage of net sales decreased between years due to reduced sales, which resulted in less favorable absorption of our fixed costs, and due to increased direct material costs between periods, which negatively impacted the gross profit margin percentage by 210 basis points between years, as discussed above.

Engineering, Selling and Administrative Expenses in the current year and prior year were as follows:

	Years Ended
	July 3, 2022			June 27, 2021
Expenses (millions of dollars)	$	47.1		$	44.7
Expenses as a percentage of net sales		10.4	%		9.2	%

Engineering, selling and administrative expenses were impacted by the following:

Cost Increases:

- Prior year customer reimbursement of engineering development costs, which costs were incurred in periods prior to 2021, decreased costs $1.5 million between years, which reimbursement was agreed to in the prior year.

- Customer reimbursement of engineering development costs, in addition to the $1.5 million noted above, decreased $900,000 between years and resulted from the timing of customer reimbursement for development spending on new product programs.

21

- The prior year included temporary wage reductions for our salaried work force, which we implemented to address the impacts of the COVID-19 pandemic on our operations.

- The current year includes an additional week of expense as our fiscal 2022 was a 53 week year and our fiscal 2021 was a 52 week year.

Cost Decrease:

- Expense provisions under our incentive bonus plans impacting engineering, selling and administrative expenses decreased $2.8 million between years.

Income from operations in the current year was $8.9 million compared to income from operations of $33.9 million in the prior year. This change between years was the result of decreased sales and increased engineering, selling and administrative expenses, which were partially offset by a decrease in cost of goods sold in the current year as compared to the prior year, all as discussed above.  

Equity earnings of joint ventures during the fiscal years ending July 3, 2022 and June 27, 2021 were $181,000 and $2.6 million respectively.  Lower profitability during fiscal 2022 from our VAST LLC joint venture resulted from reduced net sales and reduced profitability in our VAST China operation between years. The reduced profitability in our VAST China operation stemmed from the current global semiconductor chip shortage described above and Chinese Government mandated temporary facility shutdowns due to COVID-19. VAST China’s profitability in the current year was also partially offset with continued startup losses related to their new plant in Jingzhou, China. Additionally, during the current year, VAST China experienced a fire at their Taicang plant. As a result, certain door handle and painting operations were subsequently transferred to their new Jingzhou facility and another supplier. The transfer of production negatively impacted VAST China’s profitability during the second half of our fiscal 2022. We currently believe a presence in the Asian market is a key component of our global strategy. We anticipate that it will contribute to our overall long-term market and financial strength as the Asian market continues to expand and as it seeks to rebound from the ongoing impacts of the COVID-19 pandemic and resulting supply chain shortages of critical electronic component parts. Due to our limited amount of business in both India and Brazil as well as the impact of COVID-19 and the global semiconductor chip shortage described above, our VAST LLC joint venture in India continues to have break-even operating results and our VAST LLC joint venture in Brazil continues to report losses.

Included in other income (expense), net in the current year and prior year were the following items (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Foreign currency transaction gain (loss)	$	237		$	(2,445	)
Rabbi Trust Assets (loss) gain		(304	)		865
Unrealized gain on Mexican peso forward contracts		384			723
Realized gain on Mexican peso forward contracts, net		361			164
Pension and postretirement plans cost		(488	)		(483	)
Other		233			11
	$	423		$	(1,165	)

- Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries.

- The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in the Trust are considered trading securities.

- We entered into the Mexican peso currency forward contracts during fiscal 2022 and 2021 to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Unrealized gains and losses on the peso forward contracts recognized as a result of mark-to-market adjustments as of July 3, 2022 may or may not be realized in future periods, depending on actual Mexican peso to U.S. dollar exchange rates experienced during the balance of the contract period.

- Pension and postretirement plan costs include net periodic benefit cost other than the service cost component.

Our effective income tax rate for 2022 was 4.5 percent compared to 14.6 percent in 2021. The reduction in our effective tax rate in 2022 as compared to 2021 was due to adjustments made to the amount of our 2021 estimated foreign tax credits and estimated tax impacts associated with our investment in VAST LLC. These true-up adjustments resulted from the filing of our 2021 U.S. income tax returns during 2022 and were attributable to actual results included in non-U.S. income tax returns, which are filed on a calendar year basis, and which differ from estimates included in our 2021 tax provision. The adjustment amounts recorded during 2022 totaled $1.0 million. Our effective tax rate for 2022 excluding these adjustments was 15.6 percent. These adjustments were not material to our previously issued financial statements. Additionally, effective July 20, 2020, the U.S. Treasury Department finalized and enacted previously proposed regulations regarding Global Intangible Low Taxed Income (GILTI) tax provisions of the Tax Cuts and Jobs Act of 2017 (TCJA). Prior to this enactment, GILTI represented a significant U.S. income tax on our foreign earnings during 2020. With the enactment of these final regulations, we became eligible for an exclusion from GILTI since we met provisions for the GILTI High-Tax exception included in the final regulations. The enactment of these new regulations and our eligibility for the GILTI High-Tax exception was retroactive to the original enactment of the GILTI tax provision, which included our fiscal 2020. As a result, we

22

recorded an income tax benefit of $675,000 during 2021. Our income tax provision for each year 2022 and 2021 was affected by the non-controlling interest portion of our pre-tax income, GILTI provisions and R&D tax credit. The non-controlling interest impacts the effective tax rate as our ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes.

Liquidity and Capital Resources

Working Capital (millions of dollars)

	July 3, 2022		June 27, 2021
Current Assets	$	188.2	$	174.9
Current Liabilities		81.5		77.6
Working Capital	$	106.7	$	97.3

Outstanding Receivable Balances from Major Customers

Our primary source of cash flow is from our major customers, which include Stellantis (formerly Fiat Chrysler Automobiles), General Motors Company and Ford Motor Company. As of the date of filing this Annual Report with the Securities and Exchange Commission, all of our customers are making payments on their outstanding accounts receivable in accordance with the payment terms included on their purchase orders. A summary of our outstanding receivable balances from our major customers as of July 3, 2022 and June 27, 2021 was as follows (millions of dollars):

	July 3, 2022		June 27, 2021
General Motors Company	$	24.6	$	22.9
Stellantis	$	12.8	$	11.9
Ford Motor Company	$	10.6	$	8.2
	$	48.0	$	43.0

Cash Balances in Mexico

We earn a portion of our operating income in Mexico. As of July 3, 2022, $2.2 million of our $8.8 million cash and cash equivalents balance was held in Mexico. These funds are available for repatriation as deemed necessary.

Cash Flow Analysis

	Years Ended
	July 3, 2022			June 27, 2021
Cash Flows from (millions of dollars):
Operating Activities	$	10.4		$	35.2
Investing Activities	$	(14.3	)	$	(9.0	)
Financing Activities	$	(1.9	)	$	(22.9	)
	$	(5.8	)	$	3.3

The decrease in cash provided by operating activities between 2021 and 2022 was due to a reduction in operating income as previously discussed. The decrease in operating income was slightly offset by a net decrease in working capital requirements between these years of $1.3 million, with the net decrease in our working capital requirements being made up of the following working capital changes (millions of dollars):

	Increase (Decrease) in Working Capital Requirements
	2022			2021			Change
Accounts Receivable	$	5.9		$	27.7		$	(21.8	)
Inventories	$	9.6		$	16.5		$	(6.9	)
Customer Tooling	$	3.3		$	1.2		$	2.1
Other Assets	$	(0.2	)	$	1.2		$	(1.4	)
Accounts Payable and Other Liabilities	$	(1.8	)	$	(28.5	)	$	26.7
	$	16.8		$	18.1		$	(1.3	)

23

- The increase in accounts receivable balances during the current year was mostly due to payments from a specific customer being made in advance of the payment term due dates in the prior year while current year payments from that customer were made according to payment term due. The increase in the accounts receivable balances in the prior year reflected reduced sales levels from the end of March 2020 through June 2020, which reduction was primarily due to our OEM customers reducing production schedules and closing their assembly plants due to the COVID-19 outbreak. As sales ramped up during our fiscal 2021, the accounts receivable balance increased accordingly.

- The change in inventory reflected an increase in inventory balances during both the current year period and the prior year period. The current year increase was due to increased raw material and purchased part costs and an intentional build-up of inventory in order to meet future customer demand associated with potential order volume increases. The prior year period increase was due to an inventory build-up as of June 2021 while our OEM customers experienced assembly plant shut-downs and reduced production schedule during late March 2021 through June 2021 due to certain part shortages.

- The change in customer tooling balances, which consisted of costs incurred for the development of tooling that will be directly reimbursed by the customer whose parts are produced from the tool, was the result of the timing of tooling development spending required to meet customer production requirements and related billings for customer reimbursements.

- The prior year change in other assets was the result of an increase in the income tax recoverable, which changes were based on the required income tax provision, the timing and amounts of Federal, state and foreign tax payments made, and the timing of the utilization of foreign tax credits and research and development tax credits.

- The prior year change in accounts payable and accrued liability balances was primarily the result of an increase in accounts payable balances and accruals under our bonus plans. Bonus accruals at June 2021 totaled $6.6 million. Bonus accruals were zero at June 2020. Accounts payable balances were significantly reduced as of June 2020 due to the impact of COVID-19 and the lower production levels stemming from that impact. Accounts payable balances increased as of June 2021 as our business had ramped-up throughout our fiscal 2021 along with business in the automotive industry in general. The current year change in accounts payable and accrued liability balances includes an increase in accounts payable balances partially offset by a reduction in accruals under our bonus plans. Accounts payable balances continued to increase during our fiscal 2022 due to increase raw material and purchased part costs and increased inventory balances. The reduction in accruals under our bonus plans resulted from a payout of the $6.6 million accrued bonus as of June 2021 during 2022. Bonus accruals were zero at June 2022. Accounts payable balances reflect the timing of purchases and payments with our vendors based on normal, established payment terms.

Net cash used by investing activities of $14.3 million during 2022 and $9.0 million during 2021 included capital expenditures of $14.2 million and $8.9 million, respectively. Capital expenditures during each year were made in support of requirements for new product programs and the upgrade and replacement of existing equipment. Net cash used by investing activities during 2022 and 2021 also included an investment in our VAST LLC joint venture of $150,000 and $100,000, respectively. The investments were made for the purpose of funding general operating expenses for Sistema de Acesso Veicular Ltda, our Brazilian joint venture.

Net cash used in financing activities of $1.9 million during 2022 included repayments of borrowings under credit facilities of $14.0 million and $1.8 million of dividend payments to non-controlling interests in our subsidiaries, partially offset by borrowings under credit facilities of $13 million and $908,000 received for the exercise of stock options under our stock incentive plan and purchases under our employee stock purchase plan. Net cash used in financing activities of $22.9 million during 2021 included repayments of borrowings under credit facilities of $23.0 million and $490,000 of dividend payments to non-controlling interests in our subsidiaries, partially offset by $604,000 received for the exercise of stock options under our stock incentive plan and purchases under our employee stock purchase plan.

Cash Requirements

Dividends

On May 13, 2020, our Board of Directors took action to temporarily suspend payment of our quarterly dividend for the foreseeable future in order to conserve cash as a result of the economic downturn caused by COVID-19. No dividends were paid to shareholders during fiscal 2022 and fiscal 2021.

VAST LLC Cash Requirements

We currently anticipate that VAST China has adequate debt facilities in place over the next fiscal year to cover the future operating and capital requirements of its business. During 2022, capital contributions totaling $450,000 were made to VAST LLC for purposes of funding operations in Brazil. STRATTEC’s portion of the capital contribution totaled $150,000. During 2021, capital contributions totaling $300,000 were made to VAST LLC for purposes of funding operations in Brazil. STRATTEC’s portion of the capital contribution totaled $100,000.  Due to economic conditions in Brazil, we anticipate Sistema de Acesso Veicular Ltda may require an additional capital contribution of approximately $300,000 collectively by all VAST LLC partners to fund operations during our fiscal year 2023. STRATTEC’s portion of these capital contributions is anticipated to be $100,000. During 2022 and 2021, VAST LLC made no capital contributions to Minda-VAST Access Systems. We currently anticipate no required future capital contributions to Minda-VAST Access Systems for fiscal year 2023.

24

Future Capital Expenditures

We anticipate capital expenditures will be approximately $13.0 million in fiscal 2023 in support of requirements for new product programs and the upgrade and replacement of existing equipment.

Stock Repurchase Program

Our Board of Directors has authorized a stock repurchase program to buy back outstanding shares of our common stock. Shares authorized for buy back under the program totaled 3,839,395 at July 3, 2022. A total of 3,655,322 shares have been repurchased over the life of the program through July 3, 2022, at a cost of approximately $136.4 million. No shares were repurchased during fiscal 2022 or 2021. Additional repurchases may occur from time to time and are expected to continue to be funded by cash flow from operations and current cash balances. At this time, we anticipate minimal or no stock repurchase activity in fiscal year 2023.

Other Cash Requirements

We have an operating lease for our El Paso, Texas finished goods and service parts distribution warehouse, which has a term in excess of one year. We also have purchase commitments related to zinc and other purchased parts. Refer to required future payments under the lease and purchase commitments in the discussion of Leases under Organization and Summary of Significant Accounting Policies and in the discussion of Commitments and Contingencies included in the Notes to Financial Statements included as part of Item 8 within this Form 10-K.

Credit Facilities

STRATTEC has a $40 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $25 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities expire August 1, 2024. Borrowings under either credit facility are secured by our U.S. cash balances, accounts receivable, inventory, and fixed assets located in the U.S. Interest on borrowings under the STRATTEC Credit Facility through May 31, 2021 was at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate. Interest on borrowings under the ADAC-STRATTEC Credit Facility through May 31, 2021 was at varying rates based, at our option, on LIBOR plus 1.25 percent or the bank’s prime rate. Effective June 1, 2021 interest on borrowings under both credit facilities were at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.25 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. As of July 3, 2022, we were in compliance with all financial covenants required by these credit facilities. There were no outstanding borrowings under the STRATTEC Credit Facility as of July 3, 2022 or June 27, 2021. The average outstanding borrowings and weighted average interest rate on the STRATTEC Credit Facility loans were approximately $332,000 and 2.0 percent, respectively, during 2022. The average outstanding borrowings and weighted average interest rate on the STRATTEC Credit Facility loans were approximately $8.8 million and 1.2 percent, respectively, during 2021. Outstanding borrowings under the ADAC-STRATTEC Credit Facility totaled $11 million at July 3, 2022 and $12 million at June 27, 2021. The average outstanding borrowings and weighted average interest rate on the ADAC-STRATTEC Credit Facility loans were approximately $14.2 million and 1.5 percent, respectively, during 2022. The average outstanding borrowings and weighted average interest rate on the ADAC-STRATTEC Credit Facility loans were approximately $14.3 million and 1.4 percent, respectively, during 2021. We believe that the credit facilities are adequate, along with existing cash flows from operations, to meet our anticipated capital expenditure, working capital, dividend, and operating expenditure requirements.

Joint Ventures and Majority Owned Subsidiaries

Refer to the discussion of Investment in Joint Ventures and Majority Owned Subsidiaries and discussion of Equity Earnings of Joint Ventures included in the Notes to Financial Statements included within this Form 10-K.

25

Critical Accounting Policies

We believe the following represents our critical accounting policies:

Liability for Uncertain Tax Positions – We are subject to income taxation in many jurisdictions around the world. Significant management judgment is required in the accounting for income tax contingencies because the outcomes are often difficult to determine. We are required to measure and recognize uncertain tax positions that we have taken or expect to take in our income tax returns. The benefit of an uncertain tax position can only be recognized in the financial statements if management concludes that it is more likely than not that the position will be sustained with the tax authorities. For a position that is likely to be sustained, the benefit recognized in the financial statements is measured at the largest amount that is greater than 50 percent likely of being realized. A reserve is established for the difference between a position taken in an income tax return and the amount recognized in the financial statements. The amount of unrecognized benefits, that if recognized, would affect the effective tax rate was $1.0 million at July 3, 2022 and $1.1 million at June 27, 2021. An increase or decrease in our assessment of the recorded amount of unrecognized benefits by 10 percent would result in an increase or decrease in the reported tax provision, before the impact of interest and penalties, of $100,000 at July 3, 2022 and $110,000 at June 27, 2021. Refer to the discussion of Income Taxes included in the Notes to Financial Statements included as part of Item 8 within this Form 10-K.

Warranty Reserve – We have a warranty liability 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 liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension or expansion of their warranty programs. Actual warranty costs might differ from estimates due to the level of actual claims varying from our 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 liability. Sensitivity of potential warranty or product recall claims is dependent on the respective customer platform, volumes, production years and product content. We have product recall insurance once a recall claim exceeds $5 million with a limit of $35 million. Refer to the discussion of Warranty Reserve under Organization and Summary of Significant Accounting Policies included in the Notes to Financial Statements included as part of Item 8 within this Form 10-K.

We believe the reserve discussed above is estimated using consistent and appropriate methods. However, changes to the assumptions could materially affect the recorded reserve amount.

New Accounting Standards

Refer to the discussion of New Accounting Standards under Organization and Summary of Significant Accounting Policies included in the Notes to Financial Statements included as part of Item 8 within this Form 10-K.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

26

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	28
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME	30
CONSOLIDATED BALANCE SHEETS	31
Consolidated Statements of shareholders' Equity	32
Consolidated Statements of Cash Flows	33
Notes to Financial Statements	34

27

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of STRATTEC SECURITY CORPORATION

Milwaukee, Wisconsin

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of STRATTEC SECURITY CORPORATION (the "Company") as of July 3, 2022 and June 27, 2021, the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for each of the two years in the period ended July 3, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 3, 2022 and June 27, 2021, and the results of its operations and its cash flows for each of the two years in the period ended July 3, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of July 3, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated September 8, 2022 expressed an unqualified opinion.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.  The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Warranty Reserve

As described in the Notes to Financial Statements, the Company records a liability for known and potential exposure to warranty claims in the event its products fail to perform as expected and in the event that it may be required to participate in the repair costs incurred by its customers for such products. At July 3, 2022, the Company’s warranty reserve was $8.1 million. The warranty reserve is estimated based on management’s analysis of historical data, current trends, known and projected claims for products sold, and the terms of specific customer warranty programs and supply agreements. The warranty reserve requires management to apply significant judgment to its estimation of the liability which requires substantial auditor judgment due to the highly subjective nature and materiality of the future estimated claims to be paid. Actual warranty costs may differ from management’s estimated costs as a result of, but not limited to, negotiations with customers, changes to assumptions of repair and/or replacement costs, and changes to trends in product performance. Such matters may require future adjustments to the liability which could be significant.

Our audit procedures related to testing the Company’s warranty reserve included the following:

a. Evaluating the design and testing of the operating effectiveness of the Company’s controls over the accounting for the warranty reserve.

28

b. Obtaining and reviewing copies of select customer agreements, including provisions related to warranty policies and recall provisions and evaluating the Company’s estimated contractual obligations in comparison to the terms of selected customer agreements.

c. Testing the completeness and accuracy of the claims to date and payments.

d. Evaluating the reasonableness of the estimated repair costs by comparing historical repair costs to estimated future repair cost for known product issues.

e. Evaluating the reasonableness of management’s judgement regarding negotiations with customers.

f. Independently developing ranges of possible outcomes based on the Company’s historical claim experience and comparing those to the warranty reserve established by the Company.

/s/ Crowe LLP

We have served as the Company's auditor since fiscal year 2021.

Oak Brook, Illinois

September 8, 2022

Firm ID: 173

29

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Years Ended
	July 3, 2022			June 27, 2021
NET SALES	$	452,265		$	485,295
Cost of goods sold		396,249			406,637
GROSS PROFIT		56,016			78,658
Engineering, selling, and administrative expenses		47,119			44,743
INCOME FROM OPERATIONS		8,897			33,915
Equity earnings of joint ventures		181			2,560
Interest expense		(221	)		(302	)
Other income (expense), net		423			(1,165	)
INCOME BEFORE BENEFIT FOR INCOME TAXES AND NON-    CONTROLLING INTEREST		9,280			35,008
Provision for income taxes		420			5,111
NET INCOME		8,860			29,897
Net income attributable to non-controlling interest		1,828			7,365
NET INCOME ATTRIBUTABLE TO STRATTEC SECURITY    CORPORATION	$	7,032		$	22,532
COMPREHENSIVE INCOME:
NET INCOME	$	8,860		$	29,897
Currency translation adjustments, net of tax		(2,306	)		7,144
Pension and postretirement plans, net of tax		178			(135	)
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME		(2,128	)		7,009
COMPREHENSIVE INCOME		6,732			36,906
Comprehensive income attributable to non-controlling interest		1,560			9,058
COMPREHENSIVE INCOME ATTRIBUTABLE TO    STRATTEC SECURITY CORPORATION	$	5,172		$	27,848
INCOME PER SHARE ATTRIBUTABLE TO STRATTEC    SECURITY CORPORATION:
Basic	$	1.82		$	5.95
Diluted	$	1.80		$	5.85
AVERAGE SHARES OUTSTANDING:
Basic		3,861			3,788
Diluted		3,910			3,852

The accompanying Notes to Financial Statements are an integral part of these Consolidated Statements of Income and Comprehensive Income.

30

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE AMOUNTS)

	July 3, 2022			June 27, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	8,774		$	14,465
Receivables, less allowance for doubtful accounts of $500 at July 3, 2022 and    June 27, 2021		75,827			69,902
Inventories, net		80,482			70,860
Customer tooling in progress, net		10,828			7,571
Income taxes recoverable		2,492			5,716
Other current assets		9,829			6,390
Total current assets		188,232			174,904
INVESTMENT IN JOINT VENTURES		26,344			27,224
DEFERRED INCOME TAXES		6,937			5,052
OTHER LONG-TERM ASSETS		5,438			6,982
PROPERTY, PLANT AND EQUIPMENT, NET		91,729			96,401
	$	318,680		$	310,563
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	43,950		$	36,727
Accrued liabilities:
Payroll and benefits		17,905			22,483
Environmental		1,390			1,390
Warranty		8,100			8,425
Other		10,130			8,547
Total current liabilities		81,475			77,572
Commitments and Contingencies – see note beginning on page 46
BORROWINGS UNDER CREDIT FACILITIES		11,000			12,000
ACCRUED PENSION OBLIGATIONS		1,259			2,334
ACCRUED POSTRETIREMENT OBLIGATIONS		463			599
OTHER LONG-TERM LIABILITIES		4,070			4,625
SHAREHOLDERS’ EQUITY:
Common stock, authorized 18,000,000 shares at July 3, 2022 and 12,000,000 shares    at June 27, 2021, $.01 par value, issued 7,481,169 shares at July 3, 2022 and    7,411,717 shares at June 27, 2021		75			74
Capital in excess of par value		101,524			99,512
Retained earnings		241,504			234,472
Accumulated other comprehensive loss		(18,657	)		(16,797	)
Less: Treasury stock at cost (3,604,466 shares at July 3, 2022 and 3,606,652 shares    at June 27, 2021)		(135,580	)		(135,615	)
Total STRATTEC SECURITY CORPORATION shareholders’ equity		188,866			181,646
Non-controlling interest		31,547			31,787
Total shareholders’ equity		220,413			213,433
	$	318,680		$	310,563

The accompanying Notes to Financial Statements are an integral part of these Consolidated Balance Sheets.

31

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Total			Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock			Non- controlling interest
BALANCE June 28, 2020	$	175,441		$	74	$	97,977	$	211,940	$	(22,113	)	$	(135,656	)	$	23,219
Net income		29,897			—		—		22,532		—			—			7,365
Currency translation adjustments		7,144			—		—		—		5,451			—			1,693
Pension and postretirement funded status    adjustment, net of tax of $42		(135	)		—		—		—		(135	)		—			—
Cash dividends paid to non-controlling interests    of subsidiaries		(490	)		—		—		—		—			—			(490	)
Stock-based compensation		972			—		972		—		—			—			—
Stock option exercises		526			—		526		—		—			—			—
Employee stock purchases		78			—		37		—		—			41			—
BALANCE June 27, 2021	$	213,433		$	74	$	99,512	$	234,472	$	(16,797	)	$	(135,615	)	$	31,787
Net income		8,860			—		—		7,032		—			—			1,828
Currency translation adjustments		(2,306	)		—		—		—		(2,038	)		—			(268	)
Pension and postretirement funded status    adjustment, net of tax of $55		178			—		—		—		178			—			—
Cash dividends paid to non-controlling interests    of subsidiaries		(1,800	)		—		—		—		—			—			(1,800	)
Stock-based compensation		1,140			—		1,140		—		—			—			—
Stock option exercises		827			1		826		—		—			—			—
Employee stock purchases		81			—		46		—		—			35			—
BALANCE July 3, 2022	$	220,413		$	75	$	101,524	$	241,504	$	(18,657	)	$	(135,580	)	$	31,547

The accompanying Notes to Financial Statements are an integral part of these Consolidated Statements of Shareholders’ Equity.

32

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	Years Ended
	July 3, 2022			June 27, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	8,860		$	29,897
Adjustments to reconcile net income to net cash provided by operating    activities:
Equity earnings of joint ventures		(181	)		(2,560	)
Depreciation		19,379			19,786
Foreign currency transaction (gain) loss		(237	)		2,445
Unrealized gain on peso forward contracts		(384	)		(723	)
Loss on disposition of property, plant and equipment		192			1,421
Deferred income taxes		(1,981	)		1,473
Stock-based compensation expense		1,140			972
Change in operating assets and liabilities:
Receivables		(5,935	)		(27,744	)
Inventories		(9,622	)		(16,460	)
Other assets		(3,074	)		(2,435	)
Accounts payable and accrued liabilities		1,794			28,540
Other, net		485			538
Net cash provided by operating activities		10,436			35,150
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in joint ventures		(150	)		(100	)
Additions to property, plant and equipment		(14,188	)		(8,929	)
Proceeds received on sale of property, plant and equipment		5			8
Net cash used in investing activities		(14,333	)		(9,021	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facilities		13,000			—
Repayments under credit facilities		(14,000	)		(23,000	)
Exercise of stock options and employee stock purchases		908			604
Dividends paid to non-controlling interests of subsidiaries		(1,800	)		(490	)
Net cash used in financing activities		(1,892	)		(22,886	)
FOREIGN CURRENCY IMPACT ON CASH		98			(552	)
NET (DECREASE) INCREASE IN CASH AND CASH    EQUIVALENTS		(5,691	)		2,691
CASH AND CASH EQUIVALENTS
Beginning of year		14,465			11,774
End of year	$	8,774		$	14,465
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (Recovered) Paid During the Period For:
Income taxes	$	(842	)	$	5,431
Interest	$	230		$	320
Non-Cash Investing Activities:
Change in capital expenditures in accounts payable	$	1,297		$	225

The accompanying Notes to Financial Statements are an integral part of these Consolidated Statements of Cash Flows.

33

NOTES TO FINANCIAL STATEMENTS

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

STRATTEC SECURITY CORPORATION designs, develops, manufactures and markets automotive access control products including mechanical locks and keys, electronically enhanced locks and keys, passive entry passive start systems (PEPS), steering column and instrument panel ignition lock housings, latches, power sliding side door systems, power tailgate systems, power lift gate systems, power deck lid systems, door handles and related products for primarily North American automotive customers. We also supply global automotive manufacturers through a unique strategic relationship with WITTE Automotive (“WITTE”) of Velbert, Germany and ADAC Automotive (“ADAC”) of Grand Rapids, Michigan. Under this 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 herein). 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 partner’s products.

The accompanying consolidated financial statements reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, STRATTEC de Mexico, and its majority owned subsidiaries, ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC. STRATTEC SECURITY CORPORATION is located in Milwaukee, Wisconsin. STRATTEC de Mexico is located in Juarez, Mexico. ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC have operations in El Paso, Texas and in Juarez and Leon, Mexico. Equity investments in Vehicle Access Systems Technology LLC (“VAST LLC”) for which we exercise significant influence but do not control and are not variable interest entities of STRATTEC, are accounted for using the equity method. VAST LLC consists primarily of four wholly owned subsidiaries in China, one wholly owned subsidiary in Brazil and one joint venture entity in India. The results of the VAST LLC foreign subsidiaries and joint venture are reported on a one-month lag basis. We have only one reporting segment.

Risks and Uncertainties:    In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. The coronavirus subsequently spread, and infections occurred in multiple countries around the world, including the United States. In March 2020, the World Health Organization recognized the COVID-19 outbreak as a pandemic based on the global spread of the disease, the severity of illnesses it causes and its effects on society. In response to the COVID-19 outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations, and in certain cases, advising or requiring individuals to limit or forego their time outside of their homes or from participating in large group gatherings. Accordingly, the COVID-19 outbreak, as well as the recent conflict in the Ukraine, has severely restricted the level of economic activity in many countries, and continues to adversely impact global economic activity, including with respect to customer purchasing actions and supply chain continuity and disruption, and in particular the supply of semiconductor chips, transponders and related components to the automotive industry.

STRATTEC’s operating performance is subject to global economic conditions, inflationary pressures and levels of consumer spending specifically within the automotive industry. During the period from late March 2020 through mid-June 2020, the majority of our OEM customer assembly plant operations were completely closed including most of the supply chain. Additionally, during most of this same period, STRATTEC’s Mexico facilities were closed as a result of the Mexican government’s shutdown of non-essential businesses. Re-opening of our OEM customer facilities and our Mexico facilities began in June 2020, and the automotive industry continued to ramp-up throughout our fiscal year ended June 27, 2021. Nonetheless, during the fourth quarter of our fiscal 2021, our net sales were negatively impacted by a global semiconductor chip shortage (especially as it relates to the automotive industry), which shortage continued into our fiscal 2022 resulting in a decrease in our net sales for 2022 as compared to 2021. Additionally, inflationary pressures resulted in increased raw material and purchased part costs as well as increased wage rates in Mexico beginning in calendar 2021. Such increases negatively impacted our operating results in 2022 as compared to 2021.

Each of the COVID-19 outbreak, the Ukraine conflict and the resulting inflationary pressures in the U.S. and global economy continue to adversely impact our operating results due mostly to the supply chain continuity and disruption issues noted above, and in particular related to the supply of semiconductor chips, transponders and related components to our customers in the automotive industry.  The extent of such impacts, including related to their duration and intensity, depends upon any continued spread of the COVID-19 outbreak, the length of the Ukraine conflict and related regulatory or operating restraints, which may be precautionary, imposed by local governments and the private sector. All of these events may continue to impact the supply chain and our operations, including impacting our customers, workforce and suppliers, any of which may continue to disrupt and limit sourcing of semiconductor chips, transponders and other critical supply chain components needed by us and our customers to meet expected production schedules.  Moreover, these events may continue to create added inflationary pressures on our operations, including related to wages and the prices of raw materials and purchased parts.  All of these foregoing matters, including their scope and duration are uncertain and cannot be predicted as to timing and cost impacts.  These changing conditions may also affect the estimates and assumptions made by our management in our financial statements. Such estimates and assumptions affect, among other things, our long-lived asset valuations, equity investment valuation, assessment of our annual effective tax rate, valuation of deferred income taxes, assessment of excess and obsolete inventory reserves, and assessment of collectability of trade receivables.

34

Significant Accounting Policies: The significant accounting policies followed in the preparation of these financial statements, as summarized in the following paragraphs, are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Principles of Consolidation and Presentation: The accompanying consolidated financial statements include the accounts of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary and its majority owned subsidiaries. Equity investments for which STRATTEC exercises significant influence but does not control and are not variable interest entities of STRATTEC are accounted for using the equity method. All significant inter-company transactions and balances have been eliminated.

New Accounting Standards: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The update revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, the update was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases. This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are planning to adopt this standard in the first quarter of our fiscal 2024. We do not expect that the adoption of this pronouncement will have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, which enhances and simplifies various aspects of income tax accounting including hybrid tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, investment ownership changes from a subsidiary to an equity method investment and vice versa, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. This accounting update is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

Fiscal Year: Our fiscal year ends on the Sunday nearest June 30. The year ended July 3, 2022 is comprised of 53 weeks. The year ended June 27, 2021 is comprised of 52 weeks.

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods presented. These estimates and assumptions could also affect the disclosure of contingencies. Actual results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents: Cash and cash equivalents include all short-term investments with an original maturity of three months or less due to the short-term nature of the instruments. Excess cash balances are placed in short-term commercial paper.

Derivative Instruments: We own and operate manufacturing operations in Mexico. As a result, a portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate. We have contracts with Bank of Montreal that provide for monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. Our objective in entering into currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges. As a result, all currency forward contracts are recognized in our accompanying consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other Income (Expense), net.

The following table quantifies the outstanding Mexican peso forward contracts as of July 3, 2022 (thousands of dollars, except with respect to the average forward contractual exchange rate):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	July 19, 2022 - June 13, 2023	$	9,000		22.42	$	627

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Consolidated Balance Sheets was as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Not designated as hedging instruments:
Other current assets:
Mexican peso forward contracts	$	627	$	243

35

The pre-tax effects of the Mexican peso forward contracts on the accompanying Consolidated Statements of Income and Comprehensive Income consisted of the following (thousands of dollars):

	Other Income (Expense), net
	Years Ended
	July 3, 2022			June 27, 2021
Not Designated as Hedging Instruments:
Realized gain	$	434		$	164
Realized (loss)	$	(73	)	$	—
Unrealized gain	$	384		$	723

Fair Value of Financial Instruments: The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facilities approximated their book value as of July 3, 2022 and June 27, 2021. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is an established fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. Level 1 – Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 – Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments. Level 3 – Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of July 3, 2022 and June 27, 2021 (thousands of dollars):

	July 3, 2022								June 27, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Rabbi Trust assets:
Stock index funds:
Small cap	$	142	$	—	$	—	$	142	$	384	$	—	$	—	$	384
Mid cap		291		—		—		291		377		—		—		377
Large cap		416		—		—		416		756		—		—		756
International		447		—		—		447		1,104		—		—		1,104
Fixed income funds		1,023		—		—		1,023		960		—		—		960
Cash and cash equivalents		—		961		—		961		—		2		—		2
Mexican peso forward contracts		—		627		—		627		—		243		—		243
Total assets at fair value	$	2,319	$	1,588	$	—	$	3,907	$	3,581	$	245	$	—	$	3,826

The Rabbi Trust assets fund our supplemental executive retirement plan. Of the July 3, 2022 $3.3 million Rabbi Trust asset balance, $863,000 was included in Other Current Assets and $2.4 million was included in Other Long-Term Assets in the accompanying Consolidated Balance Sheets. The June 27, 2021 $3.6 million Rabbi Trust asset balance was included in Other Long-Term Assets in the accompanying Balance Sheets. Refer to discussion of Mexican peso forward contracts under Derivative Instruments above. The fair value of the Mexican peso forward contracts considers the remaining term, current exchange rate and interest rate differentials between the two currencies.

Receivables: Receivables consist primarily of trade receivables due from Original Equipment Manufacturers in the automotive industry and locksmith/dealership distributors relating to our service and aftermarket sales. We evaluate the collectability of receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items, general economic conditions (including with respect to the impact of COVID-19, the Ukraine conflict and the supply chain disruptions on our customers) and the industry as a whole. The allowance for doubtful accounts totaled $500,000 at July 3, 2022 and June 27, 2021.

36

Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at net realizable value using the first-in, first-out (“FIFO”) cost method of accounting. Inventories consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Finished products	$	19,499		$	20,633
Work in process		18,263			14,707
Purchased materials		48,209			40,900
		85,971			76,240
Excess and obsolete reserve		(5,489	)		(5,380	)
Inventories, net	$	80,482		$	70,860

We record a reserve for excess and obsolete inventory based on historical and estimated future demand and market conditions. The reserve level is determined by comparing inventory levels of individual materials and parts to historical usage and estimated future sales by analyzing the age of the inventory in order to identify specific materials and parts that are unlikely to be sold. Technical obsolescence and other known factors are also considered in evaluating the reserve level. The activity related to the excess and obsolete inventory reserve was as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Amounts Written Off		Balance, End of Year
Year ended July 3, 2022	$	5,380	$	962	$	853	$	5,489
Year ended June 27, 2021	$	4,890	$	973	$	483	$	5,380

Customer Tooling in Progress: We incur costs related to tooling used in component production and assembly. Costs for development of certain tooling, which will be directly reimbursed by the customer whose parts are produced from the tool, are accumulated on the balance sheet and are then billed to the customer. The accumulated costs are billed upon formal acceptance by the customer of products produced with the individual tool. Other tooling costs are not directly reimbursed by the customer. We capitalize and amortize these other tooling costs over the life of the related product based on the fact that the related tool will be used over the life of the supply arrangement. To the extent that estimated costs exceed expected reimbursement from the customer we recognize a loss.

Property, Plant and Equipment: Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	Expected Useful Lives
Land improvements	20 years
Buildings and improvements	15 to 35 years
Machinery and equipment	3 to 15 years

Property, plant and equipment consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Land and improvements	$	6,041		$	5,963
Buildings and improvements		37,158			36,325
Machinery and equipment		235,050			228,141
		278,249			270,429
Less: accumulated depreciation		(186,520	)		(174,028	)
	$	91,729		$	96,401

Depreciation expense was as follows for the periods indicated (thousands of dollars):

Fiscal Year	Depreciation Expense
2022	$	19,379
2021	$	19,786

37

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Gross book value	$	159,909	$	154,371
Net book value	$	64,645	$	67,348

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such indicators are present, the recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is determined to not be recoverable, the impairment recognized is calculated as the excess of the carrying amount of the asset over the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less estimated costs to sell. There were no impairments recorded in the years ended July 3, 2022 or June 27, 2021.

Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income.

Leases:  Our right-of-use operating lease assets are recorded at the present value of future minimum lease payments, net of amortization. We have an operating lease for our El Paso, Texas finished goods and service parts distribution warehouse that has a current lease term through October 2023. This lease includes renewal terms that can extend the lease term for five additional years. For purposes of calculating operating lease obligations, we included the option to extend the lease as it is reasonably certain that we will exercise such option. The lease does not contain material residual value guarantees or restrictive covenants. Operating lease expense is recognized on a straight-line basis over the lease term.

As the lease does not provide an implicit rate, we used our incremental borrowing rate at lease commencement to determine the present value of our lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest we would pay to borrow over a similar term with similar payments.

The operating lease asset and obligation related to our El Paso warehouse lease included in the accompanying Consolidated Balance Sheets are presented below (thousands of dollars):

	July 3, 2022		June 27, 2021
Right-of-Use Asset Under Operating Lease:
Other Long-Term Assets	$	3,021	$	3,399
Lease Obligation Under Operating Lease:
Current Liabilities: Accrued Liabilities: Other	$	403	$	378
Other Long-Term Liabilities		2,618		3,021
	$	3,021	$	3,399

Future minimum lease payments, by our fiscal year, including options to extend that are reasonably certain to be exercised, under the non-cancelable lease are as follows as of July 3, 2022 (thousands of dollars):

2023	$	497
2024		509
2025		522
2026		535
Thereafter		1,299
Total Future Minimum Lease Payments		3,362
Less: Imputed Interest		(341	)
Total Lease Obligations	$	3,021

Cash flow information related to the operating lease is shown below (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Operating Cash Flows:
Cash Paid Related to Operating Lease Obligation	$	484	$	473

38

The weighted average remaining lease term and discount rate for the El Paso, Texas operating lease are shown below:

	July 3, 2022			June 27, 2021
Weighted Average Remaining Lease Term, (in years)		6.3			7.3
Weighted Average Discount Rate		3.3	%		3.3	%

Operating lease expense for the year ended July 3, 2022 and June 27, 2021 totaled $484,000 and $473,000, respectively.  

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted:

Fiscal Year	Percentage of Inventory Purchases			Number of Suppliers
2022		38	%		6
2021		44	%		8

We have long-term contracts or arrangements with most of our suppliers to guarantee the availability of raw materials and component parts.

Labor Concentrations: We had approximately 3,373 full-time associates. Approximately 180 or 5.3 percent of our full time associates were represented by a labor union at July 3, 2022 at our Milwaukee facility, which associates account for all production associates at our Milwaukee, WI facility. The current contract with our Milwaukee unionized associates is effective through November 1, 2025. Additionally, approximately 104 or 3.1 percent of our full time associates were represented by a labor union at our Leon, Mexico facility. The current contract with our Leon unionized associates is effective through April 12, 2023.

Revenue Recognition: We generate revenue from the production of parts sold to automotive and light-truck Original Equipment Manufacturers (“OEMs”), or Tier 1 suppliers at the direction of the OEM, under long-term supply agreements supporting new vehicle production. Such agreements also require related production of service parts subsequent to the initial vehicle production periods. Additionally, we generate revenue from the production of parts sold in aftermarket service channels and to non-automotive commercial customers.

Revenue Recognition:

Our contracts with customers under long-term supply agreements do not commit the customer to a specified quantity of parts. However, we are generally required to fulfill our customers’ purchasing requirements for the production life of the vehicle. Contracts do not become a performance obligation until we receive either a purchase order and/or customer release for a specific number of parts at a specified price. While long-term supply agreements may range from four to six years for new vehicle production and ten to fifteen subsequent years for service parts production, contracts may be terminated by customers at any time. Historically, terminations have been minimal. Contracts may also provide for annual price reductions over the production life of the vehicle, and prices are adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors.

Revenue is recognized at a point in time when control of the parts produced are transferred to the customer according to the terms of the contract, which is usually when the parts are shipped or delivered to the customer’s premises. Customers are generally invoiced upon shipment or delivery and payment generally occurs within 45 to 90 days after the shipment date. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for those products based on purchase orders, annual price reductions and ongoing price adjustments, some of which are accounted for as variable consideration. We use the most likely amount method, the single most likely outcome of the contract, to estimate the amount to which we expect to be entitled. There were no significant changes to our estimates of variable consideration during the reporting periods referenced in our accompanying financial statements and significant changes to our estimates of variable consideration are not expected in future periods.

We do not have an enforceable right to payment at any time prior to when the parts are shipped or delivered to the customer. Therefore, we recognize revenue at the point in time we satisfy a performance obligation by transferring control of a part to a customer. Amounts billed to customers related to shipping and handling costs are included in Net Sales in the accompanying Consolidated Statements of Income and Comprehensive Income. Shipping and handling costs are accounted for as fulfillment costs and are included in Cost of Goods Sold in the accompanying Consolidated Statements of Income and Comprehensive Income.

Tooling and Pre-Production Engineering Costs Related to Long-Term Supply Arrangements:

We incur pre-production engineering and tooling costs related to the products produced for our customers under long-term supply agreements. Customer reimbursements for tooling and pre-production engineering activities that are part of a long-term supply arrangement are accounted for as a reduction of cost in accordance with ASC 340, Other Assets and Deferred Costs. Pre-production costs related to long-term supply agreements with a contractual guarantee for reimbursement are included in Other Current Assets in

39

the accompanying Consolidated Balance Sheets. We expense all pre-production engineering costs for which reimbursement is not contractually guaranteed by the customer. All pre-production tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer or for which we do not have a non-cancelable right to use the tooling is also expensed when incurred.

Receivables, net:

Receivables, net include amounts billed and currently due from customers. We maintain an allowance for doubtful accounts to provide for estimated amounts of receivables not expected to be collected. We continually assess our receivables for collectability and any allowance is recorded based upon age of the outstanding receivables, historical payment experience, customer creditworthiness and general economic conditions.

Contract Balances:

We had no material contract assets or contract liabilities as of July 3, 2022 or June 27, 2021.

Product Sales and Sales and Receivable Concentration:

Refer to Product Sales and Sales and Receivable Concentration included herein for revenue by product group and revenue by customer.

Research and Development Costs: Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development expenditures were approximately $12.2 million in 2022 and $10.8 million in 2021.

Other Income (Expense), Net: Net other income (expense) included in the accompanying Consolidated Statements of Income and Comprehensive Income primarily included foreign currency transaction gains and losses, realized and unrealized gains and losses on our Mexican peso currency forward contracts, the components of net periodic benefit cost other than the service cost component related to our pension and postretirement plans and Rabbi Trust gains and losses. Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in the Trust are considered trading securities. We entered into the Mexican peso currency forward contracts during fiscal 2022 and 2021 to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Unrealized gains and losses on the peso forward contracts recognized as a result of mark-to-market adjustments as of July 3, 2022 may or may not be realized in future periods, depending on actual Mexican peso to U.S. dollar exchange rates experienced during the balance of the contract period. Pension and postretirement plan costs include the components of net periodic benefit cost other than the service cost component. The impact of these items for the periods presented was as follows (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Foreign currency transaction gain (loss)	$	237		$	(2,445	)
Rabbi Trust Assets (loss) gain		(304	)		865
Unrealized gain on Mexican peso forward contracts		384			723
Realized gain on Mexican peso forward contracts, net		361			164
Pension and postretirement plans cost		(488	)		(483	)
Other		233			11
	$	423		$	(1,165	)

Warranty Reserve: We have a warranty liability recorded related to our known and potential exposure to warranty claims in the event our products fail to perform as expected, and in the event we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension and/or expansion of their warranty programs. In recent fiscal periods, our largest customers have extended their warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers in their terms and conditions to purchase, including from STRATTEC. As additional information becomes available, actual results may differ from recorded estimates, which may require us to adjust the amount of our warranty provision. Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Payments		Balance, End of Year
Year ended July 3, 2022	$	8,425	$	265	$	590	$	8,100
Year ended June 27, 2021	$	8,500	$	373	$	448	$	8,425

40

Foreign Currency Translation: The financial statements of our foreign subsidiaries and equity investees are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the average exchange rate for each applicable period for sales, costs and expenses. Foreign currency translation adjustments are included as a component of accumulated other comprehensive loss. Foreign currency transaction gains and losses are included in other income (expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income.

Accumulated Other Comprehensive Loss (“AOCL”): The following tables summarize the changes in AOCL for the years ended July 3, 2022 and June 27, 2021 (thousands of dollars): 

	Year Ended July 3, 2022
	Foreign Currency Translation Adjustments		Retirement and Postretirement Plans			Total
Balance June 27, 2021	$	14,685	$	2,112		$	16,797
Other comprehensive loss before reclassifications		1,700		188			1,888
Income Tax		606		(43	)		563
Net other comprehensive loss before    Reclassifications		2,306		145			2,451
Reclassifications:
Actuarial losses (A)		—		(422	)		(422	)
Total reclassifications before tax		—		(422	)		(422	)
Income Tax		—		99			99
Net reclassifications		—		(323	)		(323	)
Other comprehensive loss		2,306		(178	)		2,128
Other comprehensive loss attributable
to non-controlling interest		268		—			268
Balance July 3, 2022	$	16,723	$	1,934		$	18,657

	Year Ended June 27, 2021
	Foreign Currency Translation Adjustments			Retirement and Postretirement Plans			Total
Balance June 28, 2020	$	20,136		$	1,977		$	22,113
Other comprehensive loss before reclassifications		(6,924	)		540			(6,384	)
Income Tax		(220	)		(128	)		(348	)
Net other comprehensive loss before    Reclassifications		(7,144	)		412			(6,732	)
Reclassifications:
Prior service credits (A)		—			8			8
Actuarial losses (A)		—			(369	)		(369	)
Total reclassifications before tax		—			(361	)		(361	)
Income Tax		—			84			84
Net reclassifications		—			(277	)		(277	)
Other comprehensive income		(7,144	)		135			(7,009	)
Other comprehensive income attributable
to non-controlling interest		(1,693	)		—			(1,693	)
Balance June 27, 2021	$	14,685		$	2,112		$	16,797

(A) Amounts reclassified are included in the computation of net periodic benefit cost, which is included in Other Income (Expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income. See Retirement Plans and Postretirement Costs note to these Notes to Financial Statements below.

41

Stock-Based Compensation: We maintain an omnibus stock incentive plan. This plan provides for the granting of stock options, shares of restricted stock and stock appreciation rights. The Board of Directors has designated 2 million shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of July 3, 2022 were 177,959. Awards that expire or are cancelled without delivery of shares become available for re-issuance under the plan. We issue new shares of common stock to satisfy stock option exercises.

Nonqualified and incentive stock options and shares of restricted stock have been granted to our officers, outside directors and specified associates under the stock incentive plan. Stock options granted under the plan may not be issued with an exercise price less than the fair market value of the common stock on the date the option is granted. Stock options become exercisable as determined at the date of grant by the Compensation Committee of our Board of Directors. The options expire 10 years after the grant date unless an earlier expiration date is set at the time of grant. The options vest 1 to 4 years after the date of grant. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of our Board of Directors at the time the shares are granted and have a minimum vesting period of one year from the date of grant. Restricted shares granted have voting rights, regardless of whether the shares are vested or unvested, but only have the right to receive cash dividends after such shares become vested. Restricted stock grants issued vest 1 to 3 years after the date of grant.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules. The expected volatility is determined based on our historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based primarily on historical data. The fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant. The resulting compensation cost is amortized on a straight-line basis over the vesting period. We record stock based compensation only for those awards that are expected to vest.

All compensation cost related to stock options granted under the plan has been recognized as of July 3, 2022. Unrecognized compensation cost as of July 3, 2022 related to restricted stock granted under the plan was as follows (thousands of dollars):

	Compensation Cost		Weighted Average Period over which Cost is to be Recognized (in years)
Restricted stock granted	$	1,374		1.0

Unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.

Cash received from stock option exercises and the related income tax benefit were as follows (thousands of dollars):

Fiscal Year	Cash Received from Stock Option Exercises		Income Tax Benefit
2022	$	827	$	74
2021	$	526	$	130

The intrinsic value of stock options exercised and the fair value of options vested were as follows (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Intrinsic value of options exercised	$	451	$	555
Fair value of stock options vested	$	—	$	—

No options were granted during the fiscal years ended July 3, 2022 or June 27, 2021.

42

The range of options outstanding as of July 3, 2022 was as follows:

	Number of Options Outstanding and Exercisable		Weighted Average Exercise Price Outstanding and Exercisable		Weighted Average Remaining Contractual Life Outstanding (In Years)
$25.64		4,251	$	25.64	0.13
$38.71		27,911	$	38.71	1.13
$79.73		9,010	$	79.73	2.13
		41,172	$	46.34

Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We recognize the benefit of an income tax position only if it is more likely than not (greater than 50 percent) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties on uncertain tax positions are classified in the (Benefit) Provision for Income Taxes in the accompanying Consolidated Statements of Income and Comprehensive Income.

INVESTMENT IN JOINT VENTURES AND MAJORITY OWNED SUBSIDIARIES

We participate in certain Alliance Agreements with WITTE Automotive (“WITTE”) and ADAC Automotive (“ADAC”). WITTE, of Velbert, Germany, is a privately held automotive supplier. WITTE designs, manufactures and markets automotive components, including locks and keys, hood latches, rear compartment latches, seat back latches, door handles and specialty fasteners. WITTE’s primary market for these products has been Europe. ADAC, of Grand Rapids, Michigan, is a privately held automotive supplier and manufactures engineered products, including door handles and other automotive trim parts, utilizing plastic injection molding, automated painting and various assembly processes.

The Alliance Agreements include a set of cross-licensing agreements for the manufacture, distribution and sale of WITTE products by STRATTEC and ADAC in North America, and the manufacture, distribution and sale of STRATTEC and ADAC products by WITTE in Europe. Additionally, a joint venture company, Vehicle Access Systems Technology LLC (“VAST LLC”), in which WITTE, STRATTEC and ADAC each hold a one-third equity interest, exists to seek opportunities to manufacture and sell each company’s products in areas of the world outside of North America and Europe. As a result of these relationships, the entities involved purchase products from each other on an as needed basis to use as components in end products assembled and sold in their respective home markets. STRATTEC currently purchases such component parts from WITTE. These purchases totaled $918,000 in 2022 and $874,000 in 2021. STRATTEC also pays WITTE a royalty related to certain latch product sales. Such royalties incurred totaled $889,000 in 2022 and $1.1 million in 2021. The outstanding payable balance to WITTE was $459,000 and $427,000 as of July 3, 2022 and June 27, 2021, respectively.

VAST LLC has investments in Sistema de Acesso Veicular Ltda, VAST China (Taicang), VAST Jingzhou Co. Ltd., VAST Shanghai Co., VAST Fuzhou and Minda-VAST Access Systems. The operations under VAST Fuzhou closed during our fiscal 2021, and the land and building owned by VAST Fuzhou are currently for sale. Sistema de Acesso Veicular Ltda is located in Brazil and services customers in South America. VAST China (Taicang), VAST Jingzhou Co. Ltd, and VAST Shanghai Co. (collectively known as VAST China), provide a base of operations to service each VAST partner’s automotive customers in the Asian market. Minda-VAST Access Systems is based in Pune, India and is a 50:50 joint venture between VAST LLC and Minda Management Services Limited, an affiliate of both Minda Corporation Limited and Spark Minda, Ashok Minda Group of New Delhi, India (collectively “Minda”). Minda and its affiliates cater to the needs of all major car, motorcycle, commercial vehicle, tractor and off-road vehicle manufacturers in India. They are a leading manufacturer in the Indian marketplace of security & access products, handles, automotive safety, restraint systems, driver information and telematics systems for both OEMs and the aftermarket. VAST LLC also maintains branch offices in South Korea and Japan in support of customer sales and engineering requirements.

43

VAST LLC investments are accounted for using the equity method of accounting. Results of the VAST LLC foreign subsidiaries and joint venture are reported on a one-month lag basis. The activities of the VAST LLC foreign subsidiaries and joint ventures resulted in equity earnings of joint ventures to STRATTEC of approximately $181,000 during 2022 and $2.6 million during 2021. During 2022, capital contributions totaling $450,000 were made to VAST LLC for purposes of funding operations in Brazil. STRATTEC’s portion of the capital contribution totaled $150,000. During 2021, capital contributions totaling $300,000 were made to VAST LLC for purposes of funding operations in Brazil. STRATTEC’s portion of the capital contributions totaled $100,000.

ADAC-STRATTEC LLC, a Delaware limited liability company, was formed in fiscal year 2007 to support injection molding and door handle assembly operations in Mexico. ADAC-STRATTEC LLC was 51 percent owned by STRATTEC and 49 percent owned by ADAC for all periods presented in this report. An additional Mexican entity, ADAC-STRATTEC de Mexico, is wholly owned by ADAC-STRATTEC LLC. ADAC-STRATTEC LLC’s financial results are consolidated with the financial results of STRATTEC and resulted in increased net sales and decreased net income to STRATTEC of approximately $111.8 million and $100,000, respectively, in 2022 and increased net sales and increased net income to STRATTEC of approximately $126.2 million and $4.1 million, respectively, in 2021. ADAC Charges ADAC-STRATTEC LLC an engineering, research and design fee as well as a sales fee. Such fees are calculated as a percentage of ADAC-STRATTEC LLC net sales, are included in the consolidated results of STRATTEC, and totaled $7.8 million in 2022 and $8.8 million in 2021. The related outstanding payable balance to ADAC was $1.9 million as of each of July 3, 2022 and June 27, 2021. Additionally, ADAC-STRATTEC LLC sells production parts to ADAC. Sales to ADAC are included in the consolidated results of STRATTEC and totaled $9.1 million in 2022 and $11.6 million in 2021. The related outstanding receivable balance from ADAC was $1.6 million and $1.5 million as of July 3, 2022 and June 27, 2021, respectively.

STRATTEC POWER ACCESS LLC (“SPA”) was formed in fiscal year 2009 to supply the North American portion of the power sliding door, lift gate, tail gate and deck lid system access control products which were acquired from Delphi Corporation. SPA was 80 percent owned by STRATTEC and 20 percent owned by WITTE for all periods presented in this report. An additional Mexican entity, STRATTEC POWER ACCESS de Mexico, is wholly owned by SPA. The financial results of SPA are consolidated with the financial results of STRATTEC and resulted in increased net sales and increased net income to STRATTEC of approximately $95.7 million and $5.3 million, respectively, in 2022 and $95.2 million and $6.4 million, respectively, in 2021.

 See further discussion under Equity Earnings of Joint Ventures included in Notes to Financial Statements herein.

EQUITY EARNINGS OF JOINT VENTURES

As discussed above under the note Investment in Joint Ventures and Majority Owned Subsidiaries, we hold a one-third ownership interest in VAST LLC, for which we exercise significant influence but do not control and VAST LLC is not a variable interest entity of STRATTEC. Our investment in VAST LLC is accounted for using the equity method. The results of the VAST LLC foreign subsidiaries and joint venture are reported on a one-month lag basis.

During the quarter ended March 27, 2022, VAST China experienced a fire at their Taicang facility. As a result, certain door handle and painting operations were subsequently transferred to their new Jingzhou facility and to another supplier. The transfer of production negatively impacted VAST China’s profitability for the six month period ended July 3, 2022.

The following are summarized statements of operations and summarized balance sheet data for VAST LLC (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Net sales	$	191,642		$	210,149
Cost of goods sold		160,886			171,930
Gross profit		30,756			38,219
Engineering, selling and administrative expense		31,887			30,605
(Loss) income from operations		(1,131	)		7,614
Other income, net		902			1,681
(Loss) income before (benefit) provision for     income taxes		(229	)		9,295
(Benefit) provision for income taxes		(766	)		1,554
Net income	$	537		$	7,741
STRATTEC’s share of VAST LLC net
income	$	179		$	2,580
Intercompany profit eliminations		2			(20	)
STRATTEC’s equity earnings of VAST LLC	$	181		$	2,560

44

	July 3, 2022		June 27, 2021
Cash and cash equivalents	$	21,694	$	7,623
Receivables, net		39,467		48,717
Inventories, net		26,881		27,697
Other current assets		14,574		28,592
Total current assets		102,616		112,629
Property, plant and equipment, net		70,096		69,352
Other long-term assets		16,686		17,432
Total assets	$	189,398	$	199,413
Current debt	$	388	$	4,605
Other current liabilities		87,294		91,373
Long-term debt		20,079		18,993
Other long-term liabilities		2,258		2,418
Total liabilities	$	110,019	$	117,389
Net assets	$	79,379	$	82,024
STRATTEC’s share of VAST LLC net assets	$	26,460	$	27,341

We have sales of component parts to VAST LLC, purchases of component parts from VAST LLC, expenses charged to VAST LLC for engineering and accounting services and expenses charged from VAST LLC to STRATTEC for general headquarter expenses. The following tables summarize the related party transactions with VAST LLC for the periods indicated (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Sales to VAST LLC	$	1,805	$	3,900
Purchases from VAST LLC	$	169	$	527
Expenses charged to VAST LLC	$	593	$	1,507
Expenses charged from VAST LLC	$	784	$	1,167

	July 3, 2022		June 27, 2021
Accounts receivable from VAST LLC	$	63	$	84
Accounts payable to VAST LLC	$	23	$	25

CREDIT FACILITIES

STRATTEC has a $40 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $25 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities expire on August 1, 2024. Borrowings under either credit facility are secured by our U.S. cash balances, accounts receivable, inventory, and fixed assets located in the U.S. Interest on borrowings under the STRATTEC Credit Facility through May 31, 2021 was at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate. Interest on borrowings under the ADAC-STRATTEC Credit Facility through May 31, 2021 was at varying rates based, at our option, on LIBOR plus 1.25 percent or the bank’s prime rate. Effective June 1, 2021, interest on borrowings under both credit facilities were at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.25 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. As of July 3, 2022, we were in compliance with all financial covenants required by these credit facilities.

Outstanding borrowings under the credit facilities referenced in the above paragraph as of the end of 2022 and 2021 were as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
STRATTEC Credit Facility	$	—	$	—
ADAC-STRATTEC Credit Facility		11,000		12,000
	$	11,000	$	12,000

45

Average outstanding borrowings and the weighted average interest rate under each such credit facility during 2022 and 2021 were as follows (thousands of dollars):

	Average Outstanding Borrowings				Weighted Average Interest Rate
	Years Ended				Years Ended
	July 3, 2022		June 27, 2021		July 3, 2022			June 27, 2021
STRATTEC Credit Facility	$	332	$	8,775		2.0	%		1.2	%
ADAC-STRATTEC Credit Facility	$	14,248	$	14,346		1.5	%		1.4	%

We believe that the credit facilities referenced above are adequate, along with existing cash balances and cash flow from operations, to meet our anticipated capital expenditure, working capital, dividend and operating expenditure requirements.

COMMITMENTS AND CONTINGENCIES

We are from time to time subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, alleged breaches of contracts, product warranties, intellectual property matters and employment related matters. It is our opinion that the outcome of such matters will not have a material adverse impact on the consolidated financial position, results of operations or cash flows of STRATTEC. With respect to warranty matters, although we cannot ensure that the future costs of warranty claims by customers will not be material, we believe our established reserves are adequate to cover potential warranty settlements.

In 1995, we recorded a provision for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The facility was contaminated by a solvent spill, which occurred in 1985, from a former above ground solvent storage tank located on the east side of the facility. The reserve was originally established based on third party estimates to adequately cover the cost for active remediation of the contamination. Due to changing technology and related costs associated with active remediation of the contamination, in fiscal years 2010, 2016, and 2021, we obtained updated third party estimates of projected costs to adequately cover the cost for active remediation of this contamination and adjusted the reserve as needed. We monitor and evaluate the site with the use of these groundwater monitoring wells. An environmental consultant samples these wells one or two times a year to determine the status of the contamination and the potential for remediation of the contamination by natural attenuation, the dissipation of the contamination over time to concentrations below applicable standards. If such sampling evidences a sufficient degree of and trend toward natural attenuation of the contamination at the site, we may be able to obtain a closure letter from the regulatory authorities resolving the issue without the need for active remediation. If a sufficient degree and trend toward natural attenuation is not evidenced by sampling, a more active form of remediation beyond natural attenuation may be required. The sampling has not yet satisfied all of the requirements for closure by natural attenuation. As a result, sampling continues and the reserve remains at an amount to reflect our estimated cost of active remediation. The reserve is not measured on a discounted basis. We believe, based on findings-to-date and known environmental regulations, that the environmental reserve of $1.4 million at July 3, 2022 is adequate.

 At July 3, 2022, we had purchase commitments related to zinc and aluminum. We also had minimum rental commitments under non-cancelable operating leases with a term in excess of one year. The purchase and minimum rental commitments are payable as follows (thousands of dollars):

	Purchase		Minimum Rental
Fiscal Year	Commitments		Commitments
2023	$	5,925	$	497
2024	$	—	$	509
2025	$	—	$	522
2026	$	—	$	535
2027	$	—	$	1,299

INCOME TAXES

The provision for income taxes consisted of the following (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Currently (recoverable) payable:
Federal	$	(691	)	$	557
State		161			420
Foreign		2,931			2,661
		2,401			3,638
Deferred tax provision		(1,981	)		1,473
	$	420		$	5,111

46

The items accounting for the difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes were as follows:

	Years Ended
	July 3, 2022			June 27, 2021
U.S. statutory rate		21.0	%		21.0	%
State taxes, net of Federal tax benefit		0.4			1.1
Foreign subsidiaries		8.4			1.0
Return to provision adjustment		(11.1	)		—
Global intangible low-taxed income		0.5			0.5
Research and development tax credit		(9.7	)		(2.3	)
Solar investment tax credit		(0.8	)		—
Non-controlling interest		(1.8	)		(5.9	)
Stock based compensation		(1.3	)		0.1
Other		(1.1	)		(0.9	)
		4.5	%		14.6	%

The return to provision adjustment related to adjustments we made to our fiscal 2021 estimated foreign tax credits and estimated tax impacts associated with our investment in VAST LLC. These true-up adjustments resulted from the filing of our US income tax returns during fiscal 2022 and were attributable to actual results included in the non-US income tax returns, which are filed on a calendar year basis, and which differ from estimates included in our fiscal 2021 tax provision. This adjustment was not material to our previously issued financial statements.  

The components of deferred tax (liabilities) assets were as follows (thousands of dollars):

	July 3, 2022			June 27, 2021
Unrecognized pension and postretirement benefit    plan liabilities	$	604		$	659
Accrued warranty		423			499
Payroll-related accruals		3,085			3,044
Stock-based compensation		360			306
Inventory reserve		1,010			964
Environmental reserve		327			327
Repair and maintenance supply parts reserve		222			284
Allowance for doubtful accounts		118			118
Lease Liability		710			799
Right of Use Assets		(710	)		(799	)
Credit carry-forwards		2,986			1,544
Postretirement obligations		(233	)		(294	)
Accumulated depreciation		(3,886	)		(4,663	)
Accrued pension obligations		504			459
Joint ventures		971			1,187
Other		446			618
	$	6,937		$	5,052

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

Federal credit carry-forwards at July 3, 2022 resulted in future benefits of approximately $2.8 million and expire between 2031 and 2040. We currently anticipate having sufficient Federal taxable income to offset these credit carry-forwards. State credit carry-forwards at July 3, 2022 resulted in future benefits of approximately $192,000 and expire at varying times between 2025 and 2031. A valuation allowance of $158,000 has been recorded as of July 3, 2022, due to our assessment of the future realization of certain state credit carry-forward benefits. We do not currently anticipate having sufficient state taxable income to offset these credit carry-forwards. Foreign income before the provision for income taxes was $8.6 million in 2022 and $5.1 million in 2021.

47

The total liability for unrecognized tax benefits was $1.5 million as of July 3, 2022 and $1.6 million as of June 27, 2021 and was included in Other Long-term Liabilities in the accompanying Consolidated Balance Sheets. This liability includes approximately $1.3 million and $1.5 million of unrecognized tax benefits at July 3, 2022 and June 27, 2021, respectively, and approximately $137,000 of accrued interest at July 3, 2022 and $146,000 at June 27, 2021. This liability does not include an amount for accrued penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was approximately $1.0 million at July 3, 2022 and $ 1.1 million at June 27, 2021. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended July 3, 2022 and June 27, 2021 (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Unrecognized tax benefits, beginning of year	$	1,458		$	1,462
Gross increases – tax positions in prior years		13			76
Gross decreases – tax positions in prior years		(19	)		—
Gross increases – current period tax positions		241			207
Tax years closed		(379	)		(287	)
Unrecognized tax benefits, end of year	$	1,314		$	1,458

We or one of our subsidiaries files income tax returns in the United States (Federal), Wisconsin (state), Michigan (state) and various other states, Mexico and other foreign jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal 2019 through 2022 for Federal, fiscal 2018 through 2022 for most states and calendar 2017 through 2021 for foreign jurisdictions.

RETIREMENT PLANS AND POSTRETIREMENT COSTS

We have a noncontributory Supplemental Executive Retirement Plan (“SERP”), which is a nonqualified defined benefit plan. The SERP is funded through a Rabbi Trust with TMI Trust Company. Under the SERP, as amended December 31, 2013, participants received an accrued lump-sum benefit as of December 31, 2013 which was credited to each participant’s account. Subsequent to December 31, 2013, each eligible participant receives a supplemental retirement benefit equal to the foregoing lump-sum benefit, plus an annual benefit accrual equal to 8 percent of the participant’s base salary and cash bonus, plus annual credited interest on the participant’s account balance. All then current participants as of December 31, 2013 are fully vested in their account balances with any new individuals participating in the SERP effective on or after January 1, 2014 being subject to a five year vesting period. The SERP, which is considered a nonqualified defined benefit plan under applicable rules and regulations of the Internal Revenue Code, will continue to be funded through use of a Rabbi Trust to hold investment assets to be used in part to fund any future required lump sum benefit payments to participants. The Rabbi Trust assets had a value of $3.3 million at July 3, 2022 and $3.6 million at June 27, 2021, respectively. Refer to Fair Value of Financial Instruments discussion included in Notes to Financial Statements herein for further discussion of Rabbi Trust assets. The Rabbi Trust assets are excluded from the SERP tables below as they do not qualify as plan assets. The projected benefit obligation under the SERP, which is included in the SERP tables below, was $3.2 million at July 3, 2022 and $2.8 million at June 27, 2021. The SERP has a separately determined accumulated benefit obligation, which is the actuarial present value of benefits based on service rendered and current and past compensation levels. This differs from the projected benefit obligation in that it includes no assumptions about future compensation levels. The accumulated benefit obligation under the SERP was $2.8 million at July 3, 2022 and $2.6 million at June 27, 2021.

We also sponsor a postretirement health care plan for all U.S. associates hired prior to June 1, 2001. The expected cost of retiree health care benefits is recognized during the years the associates who are covered under the plan render service. Effective January 1, 2010, an amendment to the postretirement health care plan limited the benefit for future eligible retirees to $4,000 per plan year and the benefit is further subject to a maximum five year coverage period based on the associate’s retirement date and age. The postretirement health care plan is unfunded.

Amounts included in accumulated other comprehensive loss, net of tax, at July 3, 2022, which have not yet been recognized in net periodic benefit cost were as follows (thousands of dollars):

	SERP		Postretirement
Net actuarial loss	$	777	$	1,157

Unrecognized net actuarial losses included in accumulated other comprehensive loss at July 3, 2022 which are expected to be recognized in net periodic benefit cost (credit) in fiscal 2023, net of tax, for the SERP and postretirement plans are as follows (thousands of dollars):

	SERP		Postretirement
Net actuarial loss	$	94	$	205

48

The following tables summarize the SERP and postretirement plans’ income and expense, funded status and actuarial assumptions for the years indicated (thousands of dollars). We use a June 30 measurement date for our SERP and postretirement plans.

	SERP Benefits				Postretirement Benefits
	Years Ended				Years Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
COMPONENTS OF NET PERIODIC BENEFIT    COST (CREDIT):
Service cost	$	63	$	63	$	12	$	13
Interest cost		53		41		13		16
Plan settlements		—		65		—		—
Amortization of prior service cost (credit)		—		—		—		(8	)
Amortization of unrecognized net loss		86		10		336		359
Net periodic benefit cost (credit)	$	202	$	179	$	361	$	380

WEIGHTED-AVERAGE ASSUMPTIONS:
Benefit Obligations:
Discount rate		4.26	%		2.06	%		4.23	%		2.01	%
Rate of compensation increases		4.0	%		3.0	%	n/a			n/a
Net Periodic Benefit Cost:
Discount rate		2.06	%		2.33	%		2.01	%		2.07	%
Rate of compensation increases		3.0	%		3.0	%	n/a			n/a
CHANGE IN PROJECTED BENEFIT    OBLIGATION:
Benefit obligation at beginning of year	$	2,797		$	2,293		$	709		$	821
Service cost		63			63			12			13
Interest cost		53			41			13			16
Actuarial loss (gain)		265			631			(77	)		(26	)
Benefits paid		(14	)		(231	)		(99	)		(115	)
Benefit obligation at end of year	$	3,164		$	2,797		$	558		$	709
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	—		$	—		$	—		$	—
Employer contribution		14			231			99			115
Benefits paid		(14	)		(231	)		(99	)		(115	)
Fair value of plan assets at end of year	$	—		$	—		$	—		$	—
Funded status – accrued benefit obligations	$	(3,164	)	$	(2,797	)	$	(558	)	$	(709	)
AMOUNTS RECOGNIZED IN CONSOLIDATED    BALANCE SHEETS:
Accrued payroll and benefits (current liabilities)		(1,905	)		(463	)		(95	)		(110	)
Accrued benefit obligations (long-term liabilities)		(1,259	)		(2,334	)		(463	)		(599	)
Net amount recognized	$	(3,164	)	$	(2,797	)	$	(558	)	$	(709	)
CHANGES IN PLAN ASSETS AND BENEFIT    OBLIGATIONS RECOGNIZED IN OTHER    COMPREHENSIVE INCOME:
Net periodic benefit cost	$	202		$	179		$	361		$	380
Net actuarial loss (gain)		265			631			(77	)		(26	)
Settlement loss		—			(65	)		—			—
Amortization of prior service credits		—			—			—			8
Amortization of unrecognized net loss		(86	)		(10	)		(336	)		(359	)
Total recognized in other comprehensive    (income) loss, before tax		179			556			(413	)		(377	)
Total recognized in net periodic benefit    cost and other comprehensive loss,    before tax	$	381		$	735		$	(52	)	$	3

49

For measurement purposes as it pertains to the estimated obligation associated with retirees prior to January 1, 2010, a 5.6 percent annual rate increase in the per capita cost of covered health care benefits was assumed for fiscal 2023; the rate was assumed to decrease gradually to 3.0 percent by the year 2025 and remain at that level thereafter. The health care cost trend assumption has a minimal effect on our postretirement benefit amounts reported.

We expect to contribute $1.9 million to our SERP and $96,000 to our postretirement health care plan in fiscal 2023. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during the fiscal years noted below (thousands of dollars):

	SERP Benefits		Postretirement Benefits
2023	$	1,946	$	96
2024	$	14	$	98
2025	$	14	$	67
2026	$	14	$	40
2027	$	14	$	38
2028-2032	$	2,373	$	233

All U.S. associates may participate in our 401(k) Plan. We contribute 100 percent up to the first 5 percent of eligible compensation that a participant contributes to the plan. Our contributions to the 401(k) Plan were as follows (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Company contributions	$	1,964	$	1,706

SHAREHOLDERS’ EQUITY

We have 18,000,000 and 12,000,000 shares of authorized common stock, par value $.01 per share, with 3,876,703 and 3,805,065 shares outstanding at July 3, 2022 and June 27, 2021, respectively. Holders of our common stock are entitled to one vote for each share on all matters voted on by shareholders.

Our Board of Directors previously authorized a stock repurchase program to buy back up to 3,839,395 outstanding shares of our common stock as of July 3, 2022. As of July 3, 2022, 3,655,322 shares have been repurchased under this program at a cost of approximately $136.4 million. No shares were repurchased under this program during 2022 or 2021.

EARNINGS PER SHARE

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the potential dilutive common shares outstanding during the applicable period using the treasury stock method. Potential dilutive common shares include outstanding stock options and unvested restricted stock awards. A reconciliation of the components of the basic and diluted per share computations follows (in thousands, except per share amounts):

	Years Ended
	July 3, 2022		June 27, 2021
Net income attributable to STRATTEC	$	7,032	$	22,532
Weighted average shares of common stock outstanding		3,861		3,788
Incremental shares – stock based compensation		49		64
Diluted weighted average shares of common stock    outstanding		3,910		3,852
Basic earnings per share	$	1.82	$	5.95
Diluted earnings per share	$	1.80	$	5.85

Potentially dilutive common shares that were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive were as follows:

Years Ended	Number of Options Excluded
July 3, 2022		36,921
June 27, 2021		9,010

50

STOCK OPTION AND PURCHASE PLANS

A summary of stock option activity under our stock incentive plan was as follows:

				Weighted Average		Weighted Average Remaining Contractual		Aggregate Intrinsic Value
	Shares			Exercise Price		Term (in years)		(in thousands)
Balance at June 28, 2020		90,860		$	35.88
Exercised		(18,236	)	$	28.85
Balance at June 27, 2021		72,624		$	37.65
Exercised		(31,452	)	$	26.28
Balance at July 3, 2022		41,172		$	46.34		1.2	$	31
Exercisable as of:
July 3, 2022		41,172		$	46.34		1.2	$	31
June 27, 2021		72,624		$	37.65		1.5	$	790

No options were granted during fiscal 2022 or 2021.

A summary of restricted stock activity under our stock incentive plan was as follows:

				Weighted Average
				Grant Date
	Shares			Fair Value
Nonvested Balance at June 28, 2020		69,394		$	30.59
Granted		48,300		$	21.20
Vested		(34,669	)	$	34.95
Forfeited		(1,050	)	$	22.84
Nonvested Balance at June 27, 2021		81,975		$	23.31
Granted		43,875		$	42.50
Vested		(38,000	)	$	25.56
Forfeited		(2,750	)	$	32.70
Nonvested Balance at July 3, 2022		85,100		$	31.89

We have an Employee Stock Purchase Plan to provide substantially all U.S. full-time associates an opportunity to purchase shares of STRATTEC common stock through payroll deductions. A participant may contribute a maximum of $5,200 per calendar year to the plan. On the last day of each month or if such date is not a trading day on the most recent previous trading day, participant account balances are used to purchase shares of our common stock at the average of the highest and lowest reported sales prices of a share of STRATTEC common stock on the NASDAQ Global Market on such date. A total of 100,000 shares may be issued under the plan. Shares issued from treasury stock under the plan totaled 2,186 at an average price of $37.32 during 2022 and 2,541 at an average price of $31.03 during 2021. A total of 46,484 shares remain available for purchase under the plan as of July 3, 2022.

EXPORT SALES

Total export sales, sales from the United States to locations outside of the United States, are summarized as follows (thousands of dollars and percent of total net sales): 

	Years Ended
	July 3, 2022			June 27, 2021
	Net Sales		%	Net Sales		%
Export sales	$	122,293	27%	$	130,260	27%

During the years ended July 3, 2022 and June 27, 2021, no countries accounted for sales of ten percent or more of total net sales.

51

PRODUCT SALES

Sales by product group were as follows (thousands of dollars and percent of total net sales):

	Years Ended
	July 3, 2022					June 27, 2021
	Net Sales		%			Net Sales		%
Door handles & exterior trim	$	111,805		25	%	$	126,218		26	%
Keys & locksets		107,274		24			116,572		24
Power access		95,662		21			95,245		20
Latches		48,947		11			51,211		10
Aftermarket & OE service		44,826		10			47,138		10
Driver controls		34,442		7			40,031		8
Other		9,309		2			8,880		2
	$	452,265		100	%	$	485,295		100	%

SALES AND RECEIVABLE CONCENTRATION

Sales to our largest customers were as follows (thousands of dollars and percent of total net sales):

	Years Ended
	July 3, 2022					June 27, 2021
	Net Sales		%			Net Sales		%
General Motors Company	$	130,184		29	%	$	146,547		30	%
Stellantis (Formerly Fiat Chrysler Automobiles)		83,255		18			85,629		18
Ford Motor Company		79,735		18			67,670		14
	$	293,174		65	%	$	299,846		62	%

Receivables from our largest customers were as follows (thousands of dollars and percent of gross receivables):

	July 3, 2022					June 27, 2021
	Receivables		%			Receivables		%
General Motors Company	$	24,594		32	%	$	22,934		32	%
Stellantis (Formerly Fiat Chrysler Automobiles)		12,845		17			11,938		17
Ford Motor Company		10,602		14			8,204		12
	$	48,041		63	%	$	43,076		61	%

52

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by STRATTEC in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that the information required to be disclosed by STRATTEC in reports that it files or submits under the Exchange Act is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  We carried out an evaluation as of the end of the period covered by this report, 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 STRATTEC’s disclosure controls and procedures.  Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report 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 was necessarily 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) that occurred during the quarter ended July 3, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

53

Management’s Annual Report on Internal Controls over Financial Reporting

STRATTEC SECURITY CORPORATION 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. Crowe 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 Corporation’s system of internal control over financial reporting as of July 3, 2022, 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 July 3, 2022, its system of internal control over financial reporting was effective and met the criteria of the Internal Control – Integrated Framework. Crowe LLP, independent registered public accounting firm, has issued an attestation report on the Corporation’s internal control over financial reporting, which is included herein.

/s/ Frank J. Krejci	/s/ Patrick J. Hansen
Frank J. Krejci	Patrick J. Hansen
President and Chief Executive Officer	Senior Vice President and Chief Financial Officer

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors of STRATTEC SECURITY CORPORATION

Milwaukee, Wisconsin

Opinion on Internal Control over Financial Reporting

We have audited STRATTEC SECURITY CORPORATION‘s (the “Company”) internal control over financial reporting as of July 3, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of July 3, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of July 3, 2022 and June 27, 2021, the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for each of the years in the two-year period ended July 3, 2022, and the related notes (collectively referred to as the "financial statements") and our report dated September 8, 2022 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.  We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audit also included performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  

/s/ Crowe LLP

Oak Brook, Illinois

September 8, 2022

55

ITEM 9B. OTHER INFORMATION

Not applicable.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

56

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information included in our Proxy Statement, dated on or about September 8, 2022, under “Proposal 1: Election of Directors,”  “Corporate Governance Matters-Code of Business Ethics,” “Audit Committee Matters-Audit Committee Financial Expert,” “Executive Officers,”  “Delinquent Section 16(a) Reports,” “Director’s Meetings and Committees – Nominating and Corporate Governance Committee,” and “Corporate Governance Matters-Director Nominations” is incorporated herein by reference.

The Audit Committee of our Board of Directors is an “audit committee” for purposes of Section 3(a)(58)(A) of the Securities Exchange Act of 1934.  The members of the Audit Committee consist of three outside independent directors, David R. Zimmer, Audit Committee Chairman, Thomas W. Florsheim, Jr., and Michael J. Koss.

ITEM 11.  EXECUTIVE COMPENSATION

The information included in our Proxy Statement, dated on or about September 8, 2022, under “Director Compensation” and “Executive Compensation” is incorporated herein by reference.  

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The information included in our Proxy Statement, dated on or about September 8, 2022, under “Security Ownership” is incorporated herein by reference.

Equity Compensation Plan Information

The following table summarizes share information, as of July 3, 2022, for our Amended and Restated Stock Incentive Plan.

Plan Category	Number of common shares to be issued upon exercise of outstanding options, warrants, and rights		Weighted-average exercise price of outstanding options, warrants, and rights		Number of common shares available for future issuance under equity compensation plans
Equity compensation plans    approved by shareholders		41,172	$	46.34		177,959
Equity compensation plans not    approved by shareholders		—		—		—
Total		41,172	$	46.34		177,959

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information included in our Proxy Statement, dated on or about September 8, 2022, under “Transactions With Related Persons” and “Corporate Governance Matters-Director Independence” is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information included in our Proxy Statement, dated on or about September 8, 2022, under “Audit Committee Matters-Fees of Independent Registered Public Accounting Firm” is incorporated herein by reference.

57

PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

10 (a)Financial Statements

See Item 8 for the Consolidated Financial Statements included in this Form 10-K

(b) Exhibits

See the following List of Exhibits:

Exhibit
3.1 (13)	Amended and Restated Articles of Incorporation of the Company	*
3.2 (20)	Amendment to Amended and Restated Articles of Incorporation of the Company	*
3.3 (27)	Amendment to Amended and Restated Articles of Incorporation of the Company	*
3.4 (1)	Amended By-laws of the Company	*
4.1 (21)	Description of Registrants’ Securities	*
4.2 (2)	Credit Agreement, dated as of August 1, 2011, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.3 (12)	Amendment No. 1 to Amended and Restated Security Agreement, dated as of June 26, 2017, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.4 (13)	Amended and Restated Security Agreement, dated as of June 28, 2012, made by STRATTEC SECURITY CORPORATION in favor of BMO Harris Bank N.A., as lender	*
4.5 (5)	Amendment No. 1 to Credit Agreement, dated as of December 27, 2013, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.6 (6)	Amendment No. 2 to Credit Agreement, dated as of June 25, 2015, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.7 (10)	Amendment No. 3 to Credit Agreement, dated as of June 24, 2016, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.8 (12)	Amendment No. 4 to Credit Agreement, dated as of June 26, 2017, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.9 (15)	Amendment No. 5 to Credit Agreement, dated as of September 28, 2018, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.10 (19)	Amendment No. 6 to Credit Agreement, dated as of October 28, 2019, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.11 (25)	Amendment No. 7 to Credit Agreement, dated as of June 1, 2021, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.12 (6)	Credit Agreement, dated as of June 28, 2012, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.13 (6)	Amendment No. 1 to Credit Agreement, dated as of January 22, 2014, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.14 (6)	Amendment No. 2 to Credit Agreement, dated as of June 25, 2015, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.15 (9)	Amendment No. 3 to Credit Agreement, dated as of April 27, 2016, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.16 (12)	Amendment No. 4 to Credit Agreement, dated as of June 26, 2017, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.17 (14)	Amendment No. 5 to Credit Agreement, dated as of March 27, 2018, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.18 (16)	Amendment No. 6 to Credit Agreement, dated as of December 30, 2018, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.19 (19)	Amendment No. 7 to Credit Agreement, dated as of October 28, 2019, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
4.20 (25)	Amendment No. 8 to Credit Agreement, dated as of June 1, 2021, between ADAC-STRATTEC LLC and BMO Harris Bank N.A., as lender	*
10.1 (22)**	Amended and Restated STRATTEC SECURITY CORPORATION Stock Incentive Plan (Incorporated by reference from Appendix B to the Company’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on September 3, 2020.)	*
10.2 (23)**	Form of Restricted Stock Grant Agreement with Employees to be used under the Amended and Restated STRATTEC SECURITY CORPORATION Stock Incentive Plan	*
10.3 (18)**	STRATTEC SECURITY CORPORATION Team Incentive Plan for STRATTEC: Bonus Plan for Executive Officers and Senior Managers	*
10.4 (18)**	STRATTEC SECURITY CORPORATION Team Incentive Plan for STRATTEC: Bonus Plan for Non-employee Members of the Board of Directors	*
10.5 (18)**	STRATTEC SECURITY CORPORATION Team Incentive Plan for STRATTEC: Bonus Plan for Salaried Employees and Represented Employees	*
10.6 (7) **	Amended and Restated STRATTEC SECURITY CORPORATION Supplemental Executive Retirement Plan	*
10.7 (3)**	Employment Agreement between the Company and Frank J. Krejci made as of May 5, 2010	*

58

10.8 (3)**	Employment Agreement between the Company and Patrick J. Hansen made as of May 5, 2010	*
10.9 (3)**	Employment Agreement between the Company and Rolando J. Guillot made as of May 5, 2010	*
10.10 (3)**	Employment Agreement between the Company and Richard P. Messina made as of May 5, 2010	*
10.11 (13) **	Employment Agreement between the Company and Al Hamdan made as of May 4, 2017	*
10.12 (11) **	Change of Control Employment Agreement between the Company and Frank J. Krejci made as of July 1, 2016	*
10.13 (11) **	Change of Control Employment Agreement between the Company and Patrick J. Hansen  made as of July 1, 2016	*
10.14 (11) **	Change of Control Employment Agreement between the Company and Rolando J. Guillot made as of July 1, 2016	*
10.15 (11) **	Change of Control Employment Agreement between the Company and Richard P. Messina made as of July 1, 2016	*
10.16 (13)**	Change of Control Employment Agreement between the Company and Al Hamdan made as of May 4, 2017	*
10.17 (8)**	Form of Restricted Stock Grant Agreement with non-employee directors	*
10.18 (24)**	STRATTEC SECURITY CORPORATION EMPLOYEE STOCK PURCHASE PLAN (Amended effective as of February 22, 2021)	*
10.19 (4)**	Letter Agreement between the Company and Harold M. Stratton II made as of September 1, 2012	*
16.1 (26)	Letter regarding Change in Auditors	*
21 (17)	Subsidiaries of the Company	*
23	Consent of Independent Registered Public Accounting Firm dated September 8, 2022
31.1	Rule 13a-14(a) Certification for Frank J. Krejci, Chief Executive Officer
31.2	Rule 13a-14(a) Certification for Patrick J. Hansen, Chief Financial Officer
32 (28)	18 U.S.C. Section 1350 Certifications
101	Interactive Data Files pursuant to Rule 405 of Regulation S-T. XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104	The cover page from the Company’s Annual Report on Form 10-K for the year ended July 3, 2022 has been formatted in Inline XBRL.

* Previously filed

** Management contract or compensatory plan or arrangement

⁽¹⁾ Incorporated by reference from the exhibit to the Form 8-K filed on October 7, 2005.

⁽²⁾ Incorporated by reference from the exhibit to the Form 8-K filed on August 4, 2011.

⁽³⁾ Incorporated by reference from the exhibit to the March 28, 2010 Form 10-Q filed on May 6, 2010.

⁽⁴⁾ Incorporated by reference from the exhibit to the July 1, 2012 Form 10-K filed on September 6, 2012.

⁽⁵⁾ Incorporated by reference from the exhibit to the Form 8-K filed on December 27, 2013.

⁽⁶⁾ Incorporated by reference from the exhibit to the Form 8-K filed on June 25, 2015.

⁽⁷⁾ Incorporated by reference from the exhibit to the Form 8-K filed on October 10, 2013.

⁽⁸⁾ Incorporated by reference from the exhibit to the Form 10-K filed on September 5, 2014.

⁽⁹⁾ Incorporated by reference from the exhibit to the Form 8-K filed on April 29, 2016.

⁽¹⁰⁾ Incorporated by reference from the exhibit to the Form 8-K filed on June 24, 2016.

⁽¹¹⁾ Incorporated by reference from the exhibit to the Form 10-K filed on September 8, 2016.

⁽¹²⁾ Incorporated by reference from the exhibit to the Form 8-K filed on June 27, 2017.

⁽¹³⁾ Incorporated by reference from the exhibit to the Form 10-K filed on September 7, 2017.

⁽¹⁴⁾ Incorporated by reference from the exhibit to the Form 8-K filed on March 27, 2018.

⁽¹⁵⁾ Incorporated by reference from the exhibit to the Form 8-K filed on September 28, 2018.

⁽¹⁶⁾ Incorporated by reference from the exhibit to the Form 8-K filed on December 31, 2018.

⁽¹⁷⁾ Incorporated by reference from the exhibit to the Form 10-K filed on September 6, 2018.

⁽¹⁸⁾ Incorporated by reference from the exhibit to the Form 10-K filed on September 5, 2019.

⁽¹⁹⁾ Incorporated by reference from the exhibit to the Form 8-K filed on October 28, 2019.

⁽²⁰⁾ Incorporated by reference from the exhibit to the Form 10-Q filed on November 7, 2019.

⁽²¹⁾ Incorporated by reference from the exhibit to the Form 10-K filed on September 3, 2020.

⁽²²⁾ Incorporated by reference from Appendix B to the Company’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on September 3, 2020.

⁽²³⁾ Incorporated by reference from the exhibit to the Form 10-Q filed on November 5, 2020.

⁽²⁴⁾ Incorporated by reference from the exhibit to the Form 10-Q filed on May 6, 2021.

⁽²⁵⁾ Incorporated by reference from the exhibit to the Form 8-K filed on June 2, 2021.

⁽²⁶⁾ Incorporated by reference from the exhibit to the Form 8-K filed on October 9, 2020.

⁽²⁷⁾ Incorporated by reference from the exhibit to the Form 8-K filed on October 21, 2021.

⁽²⁸⁾ This certification is not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

ITEM 16.  FORM 10-K SUMMARY

None

59

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

STRATTEC SECURITY CORPORATION
By:	/s/ Frank J. Krejci
	Frank J. Krejci
	President and Chief Executive Officer

Date:  September 8, 2022

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Frank J. Krejci	President, Chief Executive Officer,	September 8, 2022
Frank J. Krejci	and Director
	(Principal Executive Officer)
/s/ Harold M. Stratton II	Chairman and Director	August 23, 2022
Harold M. Stratton II
/s/ Michael J. Koss	Director	August 23, 2022
Michael J. Koss
/s/ Thomas W. Florsheim, Jr.	Director	August 23, 2022
Thomas W. Florsheim, Jr.
/s/ David R. Zimmer	Director	August 23, 2022
David R. Zimmer
/s/ Tina Chang	Director	August 23, 2022
Tina Chang
/s/ Patrick J. Hansen	Senior Vice President, Chief	September 8, 2022
Patrick J. Hansen	Financial Officer,
	Secretary and Treasurer
	(Principal Financial and
	Accounting Officer)

60

EX-23.1

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-249611, 333-103219, 333-31002, 333-45221, 333-4300, 333-140715 and 333-199906 on Form S-8 of STRATTEC SECURITY CORPORATION our report dated September 8, 2022, on the 2022 financial statements of STRATTEC SECURITY CORPORATION, and our report dated the same date relative to the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K for the year ended July 3, 2022.

/s/ Crowe LLP

Oak Brook, Illinois

September 8, 2022

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Frank J. Krejci, certify that:

1.I have reviewed this annual report on Form 10-K of STRATTEC SECURITY CORPORATION;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  September 8, 2022

/s/ Frank J. Krejci

Frank J. Krejci,

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Patrick J. Hansen, certify that:

1.I have reviewed this annual report on Form 10-K of STRATTEC SECURITY CORPORATION;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  September 8, 2022

/s/ Patrick J. Hansen

Patrick J. Hansen,

Chief Financial Officer

EX-32

Exhibit 32

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of STRATTEC SECURITY CORPORATION (the "Company") certifies that the Annual Report on Form 10-K of the Company for the year ended July 3, 2022 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  September 8, 2022	/s/ Frank J. Krejci
	Frank J. Krejci,
	Chief Executive Officer

Dated:  September 8, 2022	/s/ Patrick J. Hansen
	Patrick J. Hansen,
	Chief Financial Officer

This certification is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

XML

Document and Entity Information - USD ($)	12 Months Ended
	Jul. 03, 2022	Aug. 05, 2022	Dec. 23, 2021
Cover [Abstract]
Entity Registrant Name	STRATTEC SECURITY CORP
Entity Central Index Key	0000933034
Document Type	10-K
Document Period End Date	Jul. 03, 2022
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--07-03
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Public Float			$ 139,321,000
Entity Filer Category	Accelerated Filer
Entity Common Stock Shares Outstanding		3,961,999
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
ICFR Auditor Attestation Flag	true
Entity File Number	0-25150
Entity Incorporation, State or Country Code	WI
Entity Tax Identification Number	39-1804239
Entity Address, Address Line One	3333 West Good Hope Road
Entity Address, City or Town	Milwaukee
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53209
City Area Code	414
Local Phone Number	247-3333
Document Annual Report	true
Document Transition Report	false
Documents Incorporated by Reference	Portions of the Proxy Statement dated September 8, 2022, for the Annual Meeting of Shareholders to be held on October 11, 2022.
Auditor Name	Crowe LLP
Auditor Location	Oak Brook, Illinois
Auditor Firm ID	173
Title of 12(b) Security	Common Stock, $.01 par value
Trading Symbol	STRT
Security Exchange Name	NASDAQ

XML

Consolidated Statements of Income and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Income Statement [Abstract]
NET SALES	$ 452,265	$ 485,295
Cost of goods sold	396,249	406,637
GROSS PROFIT	56,016	78,658
Engineering, selling, and administrative expenses	47,119	44,743
(Loss) income from operations	8,897	33,915
Equity earnings of joint ventures	181	2,560
Interest expense	(221)	(302)
Other income (expense), net	423	(1,165)
INCOME BEFORE BENEFIT FOR INCOME TAXES AND NON- CONTROLLING INTEREST	9,280	35,008
Provision for income taxes	420	5,111
NET INCOME	8,860	29,897
Net income attributable to non-controlling interest	1,828	7,365
NET INCOME ATTRIBUTABLE TO STRATTEC SECURITY CORPORATION	7,032	22,532
COMPREHENSIVE INCOME:
NET INCOME	8,860	29,897
Currency translation adjustments, net of tax	(2,306)	7,144
Pension and postretirement plans, net of tax	178	(135)
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME	(2,128)	7,009
COMPREHENSIVE INCOME	6,732	36,906
Comprehensive income attributable to non-controlling interest	1,560	9,058
COMPREHENSIVE INCOME ATTRIBUTABLE TO STRATTEC SECURITY CORPORATION	$ 5,172	$ 27,848
INCOME PER SHARE ATTRIBUTABLE TO STRATTEC SECURITY CORPORATION:
Basic	$ 1.82	$ 5.95
Diluted	$ 1.80	$ 5.85
AVERAGE SHARES OUTSTANDING:
Basic	3,861	3,788
Diluted	3,910	3,852

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
CURRENT ASSETS:
Cash and cash equivalents	$ 8,774	$ 14,465
Receivables, less allowance for doubtful accounts of $500 at July 3, 2022 and June 27, 2021	75,827	69,902
Inventories, net	80,482	70,860
Customer tooling in progress, net	10,828	7,571
Income taxes recoverable	2,492	5,716
Other current assets	9,829	6,390
Total current assets	188,232	174,904
INVESTMENT IN JOINT VENTURES	26,344	27,224
DEFERRED INCOME TAXES	6,937	5,052
OTHER LONG-TERM ASSETS	5,438	6,982
PROPERTY, PLANT AND EQUIPMENT, NET	91,729	96,401
Total assets	318,680	310,563
CURRENT LIABILITIES:
Accounts payable	43,950	36,727
Accrued liabilities:
Payroll and benefits	17,905	22,483
Environmental	1,390	1,390
Warranty	8,100	8,425
Other	10,130	8,547
Total current liabilities	81,475	77,572
Commitments and Contingencies
BORROWINGS UNDER CREDIT FACILITIES	11,000	12,000
ACCRUED PENSION OBLIGATIONS	1,259	2,334
ACCRUED POSTRETIREMENT OBLIGATIONS	463	599
OTHER LONG-TERM LIABILITIES	4,070	4,625
SHAREHOLDERS’ EQUITY:
Common stock, authorized 18,000,000 shares at July 3, 2022 and 12,000,000 shares at June 27, 2021, $.01 par value, issued 7,481,169 shares at July 3, 2022 and 7,411,717 shares at June 27, 2021	75	74
Capital in excess of par value	101,524	99,512
Retained earnings	241,504	234,472
Accumulated other comprehensive loss	(18,657)	(16,797)
Less: Treasury stock at cost (3,604,466 shares at July 3, 2022 and 3,606,652 shares at June 27, 2021)	(135,580)	(135,615)
Total STRATTEC SECURITY CORPORATION shareholders’ equity	188,866	181,646
Non-controlling interest	31,547	31,787
Total shareholders’ equity	220,413	213,433
Total liabilities and shareholders' equity	$ 318,680	$ 310,563

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Statement Of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 500	$ 500
Common stock, shares authorized	18,000,000	12,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares issued	7,481,169	7,411,717
Treasury stock, shares	3,604,466	3,606,652

XML

Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Non-controlling interest
Beginning balance at Jun. 28, 2020	$ 175,441	$ 74	$ 97,977	$ 211,940	$ (22,113)	$ (135,656)	$ 23,219
NET INCOME	29,897			22,532			7,365
Currency translation adjustments	7,144				5,451		1,693
Pension and postretirement funded status adjustment, net of tax	(135)				(135)
Cash dividends paid to non-controlling interests of subsidiaries	(490)						(490)
Stock-based compensation	972		972
Stock option exercises	526		526
Employee stock purchases	78		37			41
Ending balance at Jun. 27, 2021	213,433	74	99,512	234,472	(16,797)	(135,615)	31,787
NET INCOME	8,860			7,032			1,828
Currency translation adjustments	(2,306)				(2,038)		(268)
Pension and postretirement funded status adjustment, net of tax	178				178
Cash dividends paid to non-controlling interests of subsidiaries	(1,800)						(1,800)
Stock-based compensation	1,140		1,140
Stock option exercises	827	1	826
Employee stock purchases	81		46			35
Ending balance at Jul. 03, 2022	$ 220,413	$ 75	$ 101,524	$ 241,504	$ (18,657)	$ (135,580)	$ 31,547

XML

Consolidated Statements of Shareholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Statement Of Stockholders Equity [Abstract]
Pension and postretirement funded status adjustment tax impact	$ 55	$ 42

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$ 8,860	$ 29,897
Adjustments to reconcile net income to net cash provided by operating activities:
Equity earnings of joint ventures	(181)	(2,560)
Depreciation	19,379	19,786
Foreign currency transaction (gain) loss	(237)	2,445
Unrealized gain on peso forward contracts	(384)	(723)
Loss on disposition of property, plant and equipment	192	1,421
Deferred income taxes	(1,981)	1,473
Stock-based compensation expense	1,140	972
Change in operating assets and liabilities:
Receivables	(5,935)	(27,744)
Inventories	(9,622)	(16,460)
Other assets	(3,074)	(2,435)
Accounts payable and accrued liabilities	1,794	28,540
Other, net	485	538
Net cash provided by operating activities	10,436	35,150
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in joint ventures	(150)	(100)
Additions to property, plant and equipment	(14,188)	(8,929)
Proceeds received on sale of property, plant and equipment	5	8
Net cash used in investing activities	(14,333)	(9,021)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facilities	13,000
Repayments under credit facilities	(14,000)	(23,000)
Exercise of stock options and employee stock purchases	908	604
Dividends paid to non-controlling interests of subsidiaries	(1,800)	(490)
Net cash used in financing activities	(1,892)	(22,886)
FOREIGN CURRENCY IMPACT ON CASH	98	(552)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(5,691)	2,691
CASH AND CASH EQUIVALENTS
Beginning of year	14,465	11,774
End of year	8,774	14,465
Cash (Recovered) Paid During the Period For:
Income taxes	(842)	5,431
Interest	230	320
Non-Cash Investing Activities:
Change in capital expenditures in accounts payable	$ 1,297	$ 225

XML

Organization and Summary of Significant Accounting Policies

12 Months Ended

Jul. 03, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

STRATTEC SECURITY CORPORATION designs, develops, manufactures and markets automotive access control products including mechanical locks and keys, electronically enhanced locks and keys, passive entry passive start systems (PEPS), steering column and instrument panel ignition lock housings, latches, power sliding side door systems, power tailgate systems, power lift gate systems, power deck lid systems, door handles and related products for primarily North American automotive customers. We also supply global automotive manufacturers through a unique strategic relationship with WITTE Automotive (“WITTE”) of Velbert, Germany and ADAC Automotive (“ADAC”) of Grand Rapids, Michigan. Under this 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 herein). 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 partner’s products.

The accompanying consolidated financial statements reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, STRATTEC de Mexico, and its majority owned subsidiaries, ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC. STRATTEC SECURITY CORPORATION is located in Milwaukee, Wisconsin. STRATTEC de Mexico is located in Juarez, Mexico. ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC have operations in El Paso, Texas and in Juarez and Leon, Mexico. Equity investments in Vehicle Access Systems Technology LLC (“VAST LLC”) for which we exercise significant influence but do not control and are not variable interest entities of STRATTEC, are accounted for using the equity method. VAST LLC consists primarily of four wholly owned subsidiaries in China, one wholly owned subsidiary in Brazil and one joint venture entity in India. The results of the VAST LLC foreign subsidiaries and joint venture are reported on a one-month lag basis. We have only one reporting segment.

Risks and Uncertainties:    In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. The coronavirus subsequently spread, and infections occurred in multiple countries around the world, including the United States. In March 2020, the World Health Organization recognized the COVID-19 outbreak as a pandemic based on the global spread of the disease, the severity of illnesses it causes and its effects on society. In response to the COVID-19 outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations, and in certain cases, advising or requiring individuals to limit or forego their time outside of their homes or from participating in large group gatherings. Accordingly, the COVID-19 outbreak, as well as the recent conflict in the Ukraine, has severely restricted the level of economic activity in many countries, and continues to adversely impact global economic activity, including with respect to customer purchasing actions and supply chain continuity and disruption, and in particular the supply of semiconductor chips, transponders and related components to the automotive industry.

STRATTEC’s operating performance is subject to global economic conditions, inflationary pressures and levels of consumer spending specifically within the automotive industry. During the period from late March 2020 through mid-June 2020, the majority of our OEM customer assembly plant operations were completely closed including most of the supply chain. Additionally, during most of this same period, STRATTEC’s Mexico facilities were closed as a result of the Mexican government’s shutdown of non-essential businesses. Re-opening of our OEM customer facilities and our Mexico facilities began in June 2020, and the automotive industry continued to ramp-up throughout our fiscal year ended June 27, 2021. Nonetheless, during the fourth quarter of our fiscal 2021, our net sales were negatively impacted by a global semiconductor chip shortage (especially as it relates to the automotive industry), which shortage continued into our fiscal 2022 resulting in a decrease in our net sales for 2022 as compared to 2021. Additionally, inflationary pressures resulted in increased raw material and purchased part costs as well as increased wage rates in Mexico beginning in calendar 2021. Such increases negatively impacted our operating results in 2022 as compared to 2021.

Each of the COVID-19 outbreak, the Ukraine conflict and the resulting inflationary pressures in the U.S. and global economy continue to adversely impact our operating results due mostly to the supply chain continuity and disruption issues noted above, and in particular related to the supply of semiconductor chips, transponders and related components to our customers in the automotive industry.  The extent of such impacts, including related to their duration and intensity, depends upon any continued spread of the COVID-19 outbreak, the length of the Ukraine conflict and related regulatory or operating restraints, which may be precautionary, imposed by local governments and the private sector. All of these events may continue to impact the supply chain and our operations, including impacting our customers, workforce and suppliers, any of which may continue to disrupt and limit sourcing of semiconductor chips, transponders and other critical supply chain components needed by us and our customers to meet expected production schedules.  Moreover, these events may continue to create added inflationary pressures on our operations, including related to wages and the prices of raw materials and purchased parts.  All of these foregoing matters, including their scope and duration are uncertain and cannot be predicted as to timing and cost impacts.  These changing conditions may also affect the estimates and assumptions made by our management in our financial statements. Such estimates and assumptions affect, among other things, our long-lived asset valuations, equity investment valuation, assessment of our annual effective tax rate, valuation of deferred income taxes, assessment of excess and obsolete inventory reserves, and assessment of collectability of trade receivables.

Significant Accounting Policies: The significant accounting policies followed in the preparation of these financial statements, as summarized in the following paragraphs, are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Principles of Consolidation and Presentation: The accompanying consolidated financial statements include the accounts of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary and its majority owned subsidiaries. Equity investments for which STRATTEC exercises significant influence but does not control and are not variable interest entities of STRATTEC are accounted for using the equity method. All significant inter-company transactions and balances have been eliminated.

New Accounting Standards: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The update revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, the update was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases. This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are planning to adopt this standard in the first quarter of our fiscal 2024. We do not expect that the adoption of this pronouncement will have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, which enhances and simplifies various aspects of income tax accounting including hybrid tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, investment ownership changes from a subsidiary to an equity method investment and vice versa, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. This accounting update is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

Fiscal Year: Our fiscal year ends on the Sunday nearest June 30. The year ended July 3, 2022 is comprised of 53 weeks. The year ended June 27, 2021 is comprised of 52 weeks.

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods presented. These estimates and assumptions could also affect the disclosure of contingencies. Actual results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents: Cash and cash equivalents include all short-term investments with an original maturity of three months or less due to the short-term nature of the instruments. Excess cash balances are placed in short-term commercial paper.

Derivative Instruments: We own and operate manufacturing operations in Mexico. As a result, a portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate. We have contracts with Bank of Montreal that provide for monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. Our objective in entering into currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges. As a result, all currency forward contracts are recognized in our accompanying consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other Income (Expense), net.

The following table quantifies the outstanding Mexican peso forward contracts as of July 3, 2022 (thousands of dollars, except with respect to the average forward contractual exchange rate):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	July 19, 2022 - June 13, 2023	$	9,000		22.42	$	627

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Consolidated Balance Sheets was as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Not designated as hedging instruments:
Other current assets:
Mexican peso forward contracts	$	627	$	243

The pre-tax effects of the Mexican peso forward contracts on the accompanying Consolidated Statements of Income and Comprehensive Income consisted of the following (thousands of dollars):

	Other Income (Expense), net
	Years Ended
	July 3, 2022			June 27, 2021
Not Designated as Hedging Instruments:
Realized gain	$	434		$	164
Realized (loss)	$	(73	)	$	—
Unrealized gain	$	384		$	723

Fair Value of Financial Instruments: The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facilities approximated their book value as of July 3, 2022 and June 27, 2021. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is an established fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. Level 1 – Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 – Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments. Level 3 – Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of July 3, 2022 and June 27, 2021 (thousands of dollars):

	July 3, 2022								June 27, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Rabbi Trust assets:
Stock index funds:
Small cap	$	142	$	—	$	—	$	142	$	384	$	—	$	—	$	384
Mid cap		291		—		—		291		377		—		—		377
Large cap		416		—		—		416		756		—		—		756
International		447		—		—		447		1,104		—		—		1,104
Fixed income funds		1,023		—		—		1,023		960		—		—		960
Cash and cash equivalents		—		961		—		961		—		2		—		2
Mexican peso forward contracts		—		627		—		627		—		243		—		243
Total assets at fair value	$	2,319	$	1,588	$	—	$	3,907	$	3,581	$	245	$	—	$	3,826

The Rabbi Trust assets fund our supplemental executive retirement plan. Of the July 3, 2022 $3.3 million Rabbi Trust asset balance, $863,000 was included in Other Current Assets and $2.4 million was included in Other Long-Term Assets in the accompanying Consolidated Balance Sheets. The June 27, 2021 $3.6 million Rabbi Trust asset balance was included in Other Long-Term Assets in the accompanying Balance Sheets. Refer to discussion of Mexican peso forward contracts under Derivative Instruments above. The fair value of the Mexican peso forward contracts considers the remaining term, current exchange rate and interest rate differentials between the two currencies.

Receivables: Receivables consist primarily of trade receivables due from Original Equipment Manufacturers in the automotive industry and locksmith/dealership distributors relating to our service and aftermarket sales. We evaluate the collectability of receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items, general economic conditions (including with respect to the impact of COVID-19, the Ukraine conflict and the supply chain disruptions on our customers) and the industry as a whole. The allowance for doubtful accounts totaled $500,000 at July 3, 2022 and June 27, 2021.

Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at net realizable value using the first-in, first-out (“FIFO”) cost method of accounting. Inventories consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Finished products	$	19,499		$	20,633
Work in process		18,263			14,707
Purchased materials		48,209			40,900
		85,971			76,240
Excess and obsolete reserve		(5,489	)		(5,380	)
Inventories, net	$	80,482		$	70,860

We record a reserve for excess and obsolete inventory based on historical and estimated future demand and market conditions. The reserve level is determined by comparing inventory levels of individual materials and parts to historical usage and estimated future sales by analyzing the age of the inventory in order to identify specific materials and parts that are unlikely to be sold. Technical obsolescence and other known factors are also considered in evaluating the reserve level. The activity related to the excess and obsolete inventory reserve was as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Amounts Written Off		Balance, End of Year
Year ended July 3, 2022	$	5,380	$	962	$	853	$	5,489
Year ended June 27, 2021	$	4,890	$	973	$	483	$	5,380

Customer Tooling in Progress: We incur costs related to tooling used in component production and assembly. Costs for development of certain tooling, which will be directly reimbursed by the customer whose parts are produced from the tool, are accumulated on the balance sheet and are then billed to the customer. The accumulated costs are billed upon formal acceptance by the customer of products produced with the individual tool. Other tooling costs are not directly reimbursed by the customer. We capitalize and amortize these other tooling costs over the life of the related product based on the fact that the related tool will be used over the life of the supply arrangement. To the extent that estimated costs exceed expected reimbursement from the customer we recognize a loss.

Property, Plant and Equipment: Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	Expected Useful Lives
Land improvements	20 years
Buildings and improvements	15 to 35 years
Machinery and equipment	3 to 15 years

Property, plant and equipment consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Land and improvements	$	6,041		$	5,963
Buildings and improvements		37,158			36,325
Machinery and equipment		235,050			228,141
		278,249			270,429
Less: accumulated depreciation		(186,520	)		(174,028	)
	$	91,729		$	96,401

Depreciation expense was as follows for the periods indicated (thousands of dollars):

Fiscal Year	Depreciation Expense
2022	$	19,379
2021	$	19,786

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Gross book value	$	159,909	$	154,371
Net book value	$	64,645	$	67,348

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such indicators are present, the recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is determined to not be recoverable, the impairment recognized is calculated as the excess of the carrying amount of the asset over the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less estimated costs to sell. There were no impairments recorded in the years ended July 3, 2022 or June 27, 2021.

Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income.

Leases:  Our right-of-use operating lease assets are recorded at the present value of future minimum lease payments, net of amortization. We have an operating lease for our El Paso, Texas finished goods and service parts distribution warehouse that has a current lease term through October 2023. This lease includes renewal terms that can extend the lease term for five additional years. For purposes of calculating operating lease obligations, we included the option to extend the lease as it is reasonably certain that we will exercise such option. The lease does not contain material residual value guarantees or restrictive covenants. Operating lease expense is recognized on a straight-line basis over the lease term.

As the lease does not provide an implicit rate, we used our incremental borrowing rate at lease commencement to determine the present value of our lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest we would pay to borrow over a similar term with similar payments.

The operating lease asset and obligation related to our El Paso warehouse lease included in the accompanying Consolidated Balance Sheets are presented below (thousands of dollars):

	July 3, 2022		June 27, 2021
Right-of-Use Asset Under Operating Lease:
Other Long-Term Assets	$	3,021	$	3,399
Lease Obligation Under Operating Lease:
Current Liabilities: Accrued Liabilities: Other	$	403	$	378
Other Long-Term Liabilities		2,618		3,021
	$	3,021	$	3,399

Future minimum lease payments, by our fiscal year, including options to extend that are reasonably certain to be exercised, under the non-cancelable lease are as follows as of July 3, 2022 (thousands of dollars):

2023	$	497
2024		509
2025		522
2026		535
Thereafter		1,299
Total Future Minimum Lease Payments		3,362
Less: Imputed Interest		(341	)
Total Lease Obligations	$	3,021

Cash flow information related to the operating lease is shown below (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Operating Cash Flows:
Cash Paid Related to Operating Lease Obligation	$	484	$	473

The weighted average remaining lease term and discount rate for the El Paso, Texas operating lease are shown below:

	July 3, 2022			June 27, 2021
Weighted Average Remaining Lease Term, (in years)		6.3			7.3
Weighted Average Discount Rate		3.3	%		3.3	%

Operating lease expense for the year ended July 3, 2022 and June 27, 2021 totaled $484,000 and $473,000, respectively.  

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted:

Fiscal Year	Percentage of Inventory Purchases			Number of Suppliers
2022		38	%		6
2021		44	%		8

We have long-term contracts or arrangements with most of our suppliers to guarantee the availability of raw materials and component parts.

Labor Concentrations: We had approximately 3,373 full-time associates. Approximately 180 or 5.3 percent of our full time associates were represented by a labor union at July 3, 2022 at our Milwaukee facility, which associates account for all production associates at our Milwaukee, WI facility. The current contract with our Milwaukee unionized associates is effective through November 1, 2025. Additionally, approximately 104 or 3.1 percent of our full time associates were represented by a labor union at our Leon, Mexico facility. The current contract with our Leon unionized associates is effective through April 12, 2023.

Revenue Recognition: We generate revenue from the production of parts sold to automotive and light-truck Original Equipment Manufacturers (“OEMs”), or Tier 1 suppliers at the direction of the OEM, under long-term supply agreements supporting new vehicle production. Such agreements also require related production of service parts subsequent to the initial vehicle production periods. Additionally, we generate revenue from the production of parts sold in aftermarket service channels and to non-automotive commercial customers.

Revenue Recognition:

Our contracts with customers under long-term supply agreements do not commit the customer to a specified quantity of parts. However, we are generally required to fulfill our customers’ purchasing requirements for the production life of the vehicle. Contracts do not become a performance obligation until we receive either a purchase order and/or customer release for a specific number of parts at a specified price. While long-term supply agreements may range from four to six years for new vehicle production and ten to fifteen subsequent years for service parts production, contracts may be terminated by customers at any time. Historically, terminations have been minimal. Contracts may also provide for annual price reductions over the production life of the vehicle, and prices are adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors.

Revenue is recognized at a point in time when control of the parts produced are transferred to the customer according to the terms of the contract, which is usually when the parts are shipped or delivered to the customer’s premises. Customers are generally invoiced upon shipment or delivery and payment generally occurs within 45 to 90 days after the shipment date. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for those products based on purchase orders, annual price reductions and ongoing price adjustments, some of which are accounted for as variable consideration. We use the most likely amount method, the single most likely outcome of the contract, to estimate the amount to which we expect to be entitled. There were no significant changes to our estimates of variable consideration during the reporting periods referenced in our accompanying financial statements and significant changes to our estimates of variable consideration are not expected in future periods.

We do not have an enforceable right to payment at any time prior to when the parts are shipped or delivered to the customer. Therefore, we recognize revenue at the point in time we satisfy a performance obligation by transferring control of a part to a customer. Amounts billed to customers related to shipping and handling costs are included in Net Sales in the accompanying Consolidated Statements of Income and Comprehensive Income. Shipping and handling costs are accounted for as fulfillment costs and are included in Cost of Goods Sold in the accompanying Consolidated Statements of Income and Comprehensive Income.

Tooling and Pre-Production Engineering Costs Related to Long-Term Supply Arrangements:

We incur pre-production engineering and tooling costs related to the products produced for our customers under long-term supply agreements. Customer reimbursements for tooling and pre-production engineering activities that are part of a long-term supply arrangement are accounted for as a reduction of cost in accordance with ASC 340, Other Assets and Deferred Costs. Pre-production costs related to long-term supply agreements with a contractual guarantee for reimbursement are included in Other Current Assets in

the accompanying Consolidated Balance Sheets. We expense all pre-production engineering costs for which reimbursement is not contractually guaranteed by the customer. All pre-production tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer or for which we do not have a non-cancelable right to use the tooling is also expensed when incurred.

Receivables, net:

Receivables, net include amounts billed and currently due from customers. We maintain an allowance for doubtful accounts to provide for estimated amounts of receivables not expected to be collected. We continually assess our receivables for collectability and any allowance is recorded based upon age of the outstanding receivables, historical payment experience, customer creditworthiness and general economic conditions.

Contract Balances:

We had no material contract assets or contract liabilities as of July 3, 2022 or June 27, 2021.

Product Sales and Sales and Receivable Concentration:

Refer to Product Sales and Sales and Receivable Concentration included herein for revenue by product group and revenue by customer.

Research and Development Costs: Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development expenditures were approximately $12.2 million in 2022 and $10.8 million in 2021.

Other Income (Expense), Net: Net other income (expense) included in the accompanying Consolidated Statements of Income and Comprehensive Income primarily included foreign currency transaction gains and losses, realized and unrealized gains and losses on our Mexican peso currency forward contracts, the components of net periodic benefit cost other than the service cost component related to our pension and postretirement plans and Rabbi Trust gains and losses. Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in the Trust are considered trading securities. We entered into the Mexican peso currency forward contracts during fiscal 2022 and 2021 to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Unrealized gains and losses on the peso forward contracts recognized as a result of mark-to-market adjustments as of July 3, 2022 may or may not be realized in future periods, depending on actual Mexican peso to U.S. dollar exchange rates experienced during the balance of the contract period. Pension and postretirement plan costs include the components of net periodic benefit cost other than the service cost component. The impact of these items for the periods presented was as follows (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Foreign currency transaction gain (loss)	$	237		$	(2,445	)
Rabbi Trust Assets (loss) gain		(304	)		865
Unrealized gain on Mexican peso forward contracts		384			723
Realized gain on Mexican peso forward contracts, net		361			164
Pension and postretirement plans cost		(488	)		(483	)
Other		233			11
	$	423		$	(1,165	)

Warranty Reserve: We have a warranty liability recorded related to our known and potential exposure to warranty claims in the event our products fail to perform as expected, and in the event we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension and/or expansion of their warranty programs. In recent fiscal periods, our largest customers have extended their warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers in their terms and conditions to purchase, including from STRATTEC. As additional information becomes available, actual results may differ from recorded estimates, which may require us to adjust the amount of our warranty provision. Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Payments		Balance, End of Year
Year ended July 3, 2022	$	8,425	$	265	$	590	$	8,100
Year ended June 27, 2021	$	8,500	$	373	$	448	$	8,425

Foreign Currency Translation: The financial statements of our foreign subsidiaries and equity investees are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the average exchange rate for each applicable period for sales, costs and expenses. Foreign currency translation adjustments are included as a component of accumulated other comprehensive loss. Foreign currency transaction gains and losses are included in other income (expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income.

Accumulated Other Comprehensive Loss (“AOCL”): The following tables summarize the changes in AOCL for the years ended July 3, 2022 and June 27, 2021 (thousands of dollars): 

	Year Ended July 3, 2022
	Foreign Currency Translation Adjustments		Retirement and Postretirement Plans			Total
Balance June 27, 2021	$	14,685	$	2,112		$	16,797
Other comprehensive loss before reclassifications		1,700		188			1,888
Income Tax		606		(43	)		563
Net other comprehensive loss before    Reclassifications		2,306		145			2,451
Reclassifications:
Actuarial losses (A)		—		(422	)		(422	)
Total reclassifications before tax		—		(422	)		(422	)
Income Tax		—		99			99
Net reclassifications		—		(323	)		(323	)
Other comprehensive loss		2,306		(178	)		2,128
Other comprehensive loss attributable
to non-controlling interest		268		—			268
Balance July 3, 2022	$	16,723	$	1,934		$	18,657

	Year Ended June 27, 2021
	Foreign Currency Translation Adjustments			Retirement and Postretirement Plans			Total
Balance June 28, 2020	$	20,136		$	1,977		$	22,113
Other comprehensive loss before reclassifications		(6,924	)		540			(6,384	)
Income Tax		(220	)		(128	)		(348	)
Net other comprehensive loss before    Reclassifications		(7,144	)		412			(6,732	)
Reclassifications:
Prior service credits (A)		—			8			8
Actuarial losses (A)		—			(369	)		(369	)
Total reclassifications before tax		—			(361	)		(361	)
Income Tax		—			84			84
Net reclassifications		—			(277	)		(277	)
Other comprehensive income		(7,144	)		135			(7,009	)
Other comprehensive income attributable
to non-controlling interest		(1,693	)		—			(1,693	)
Balance June 27, 2021	$	14,685		$	2,112		$	16,797

(A) Amounts reclassified are included in the computation of net periodic benefit cost, which is included in Other Income (Expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income. See Retirement Plans and Postretirement Costs note to these Notes to Financial Statements below.

Stock-Based Compensation: We maintain an omnibus stock incentive plan. This plan provides for the granting of stock options, shares of restricted stock and stock appreciation rights. The Board of Directors has designated 2 million shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of July 3, 2022 were 177,959. Awards that expire or are cancelled without delivery of shares become available for re-issuance under the plan. We issue new shares of common stock to satisfy stock option exercises.

Nonqualified and incentive stock options and shares of restricted stock have been granted to our officers, outside directors and specified associates under the stock incentive plan. Stock options granted under the plan may not be issued with an exercise price less than the fair market value of the common stock on the date the option is granted. Stock options become exercisable as determined at the date of grant by the Compensation Committee of our Board of Directors. The options expire 10 years after the grant date unless an earlier expiration date is set at the time of grant. The options vest 1 to 4 years after the date of grant. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of our Board of Directors at the time the shares are granted and have a minimum vesting period of one year from the date of grant. Restricted shares granted have voting rights, regardless of whether the shares are vested or unvested, but only have the right to receive cash dividends after such shares become vested. Restricted stock grants issued vest 1 to 3 years after the date of grant.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules. The expected volatility is determined based on our historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based primarily on historical data. The fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant. The resulting compensation cost is amortized on a straight-line basis over the vesting period. We record stock based compensation only for those awards that are expected to vest.

All compensation cost related to stock options granted under the plan has been recognized as of July 3, 2022. Unrecognized compensation cost as of July 3, 2022 related to restricted stock granted under the plan was as follows (thousands of dollars):

	Compensation Cost		Weighted Average Period over which Cost is to be Recognized (in years)
Restricted stock granted	$	1,374		1.0

Unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.

Cash received from stock option exercises and the related income tax benefit were as follows (thousands of dollars):

Fiscal Year	Cash Received from Stock Option Exercises		Income Tax Benefit
2022	$	827	$	74
2021	$	526	$	130

The intrinsic value of stock options exercised and the fair value of options vested were as follows (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Intrinsic value of options exercised	$	451	$	555
Fair value of stock options vested	$	—	$	—

No options were granted during the fiscal years ended July 3, 2022 or June 27, 2021.

The range of options outstanding as of July 3, 2022 was as follows:

	Number of Options Outstanding and Exercisable		Weighted Average Exercise Price Outstanding and Exercisable		Weighted Average Remaining Contractual Life Outstanding (In Years)
$25.64		4,251	$	25.64	0.13
$38.71		27,911	$	38.71	1.13
$79.73		9,010	$	79.73	2.13
		41,172	$	46.34

Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We recognize the benefit of an income tax position only if it is more likely than not (greater than 50 percent) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties on uncertain tax positions are classified in the (Benefit) Provision for Income Taxes in the accompanying Consolidated Statements of Income and Comprehensive Income.

XML

Investment in Joint Ventures and Majority Owned Subsidiaries

12 Months Ended

Jul. 03, 2022

Equity Method Investments And Joint Ventures [Abstract]

Investment in Joint Ventures and Majority Owned Subsidiaries

INVESTMENT IN JOINT VENTURES AND MAJORITY OWNED SUBSIDIARIES

We participate in certain Alliance Agreements with WITTE Automotive (“WITTE”) and ADAC Automotive (“ADAC”). WITTE, of Velbert, Germany, is a privately held automotive supplier. WITTE designs, manufactures and markets automotive components, including locks and keys, hood latches, rear compartment latches, seat back latches, door handles and specialty fasteners. WITTE’s primary market for these products has been Europe. ADAC, of Grand Rapids, Michigan, is a privately held automotive supplier and manufactures engineered products, including door handles and other automotive trim parts, utilizing plastic injection molding, automated painting and various assembly processes.

The Alliance Agreements include a set of cross-licensing agreements for the manufacture, distribution and sale of WITTE products by STRATTEC and ADAC in North America, and the manufacture, distribution and sale of STRATTEC and ADAC products by WITTE in Europe. Additionally, a joint venture company, Vehicle Access Systems Technology LLC (“VAST LLC”), in which WITTE, STRATTEC and ADAC each hold a one-third equity interest, exists to seek opportunities to manufacture and sell each company’s products in areas of the world outside of North America and Europe. As a result of these relationships, the entities involved purchase products from each other on an as needed basis to use as components in end products assembled and sold in their respective home markets. STRATTEC currently purchases such component parts from WITTE. These purchases totaled $918,000 in 2022 and $874,000 in 2021. STRATTEC also pays WITTE a royalty related to certain latch product sales. Such royalties incurred totaled $889,000 in 2022 and $1.1 million in 2021. The outstanding payable balance to WITTE was $459,000 and $427,000 as of July 3, 2022 and June 27, 2021, respectively.

VAST LLC has investments in Sistema de Acesso Veicular Ltda, VAST China (Taicang), VAST Jingzhou Co. Ltd., VAST Shanghai Co., VAST Fuzhou and Minda-VAST Access Systems. The operations under VAST Fuzhou closed during our fiscal 2021, and the land and building owned by VAST Fuzhou are currently for sale. Sistema de Acesso Veicular Ltda is located in Brazil and services customers in South America. VAST China (Taicang), VAST Jingzhou Co. Ltd, and VAST Shanghai Co. (collectively known as VAST China), provide a base of operations to service each VAST partner’s automotive customers in the Asian market. Minda-VAST Access Systems is based in Pune, India and is a 50:50 joint venture between VAST LLC and Minda Management Services Limited, an affiliate of both Minda Corporation Limited and Spark Minda, Ashok Minda Group of New Delhi, India (collectively “Minda”). Minda and its affiliates cater to the needs of all major car, motorcycle, commercial vehicle, tractor and off-road vehicle manufacturers in India. They are a leading manufacturer in the Indian marketplace of security & access products, handles, automotive safety, restraint systems, driver information and telematics systems for both OEMs and the aftermarket. VAST LLC also maintains branch offices in South Korea and Japan in support of customer sales and engineering requirements.

VAST LLC investments are accounted for using the equity method of accounting. Results of the VAST LLC foreign subsidiaries and joint venture are reported on a one-month lag basis. The activities of the VAST LLC foreign subsidiaries and joint ventures resulted in equity earnings of joint ventures to STRATTEC of approximately $181,000 during 2022 and $2.6 million during 2021. During 2022, capital contributions totaling $450,000 were made to VAST LLC for purposes of funding operations in Brazil. STRATTEC’s portion of the capital contribution totaled $150,000. During 2021, capital contributions totaling $300,000 were made to VAST LLC for purposes of funding operations in Brazil. STRATTEC’s portion of the capital contributions totaled $100,000.

ADAC-STRATTEC LLC, a Delaware limited liability company, was formed in fiscal year 2007 to support injection molding and door handle assembly operations in Mexico. ADAC-STRATTEC LLC was 51 percent owned by STRATTEC and 49 percent owned by ADAC for all periods presented in this report. An additional Mexican entity, ADAC-STRATTEC de Mexico, is wholly owned by ADAC-STRATTEC LLC. ADAC-STRATTEC LLC’s financial results are consolidated with the financial results of STRATTEC and resulted in increased net sales and decreased net income to STRATTEC of approximately $111.8 million and $100,000, respectively, in 2022 and increased net sales and increased net income to STRATTEC of approximately $126.2 million and $4.1 million, respectively, in 2021. ADAC Charges ADAC-STRATTEC LLC an engineering, research and design fee as well as a sales fee. Such fees are calculated as a percentage of ADAC-STRATTEC LLC net sales, are included in the consolidated results of STRATTEC, and totaled $7.8 million in 2022 and $8.8 million in 2021. The related outstanding payable balance to ADAC was $1.9 million as of each of July 3, 2022 and June 27, 2021. Additionally, ADAC-STRATTEC LLC sells production parts to ADAC. Sales to ADAC are included in the consolidated results of STRATTEC and totaled $9.1 million in 2022 and $11.6 million in 2021. The related outstanding receivable balance from ADAC was $1.6 million and $1.5 million as of July 3, 2022 and June 27, 2021, respectively.

STRATTEC POWER ACCESS LLC (“SPA”) was formed in fiscal year 2009 to supply the North American portion of the power sliding door, lift gate, tail gate and deck lid system access control products which were acquired from Delphi Corporation. SPA was 80 percent owned by STRATTEC and 20 percent owned by WITTE for all periods presented in this report. An additional Mexican entity, STRATTEC POWER ACCESS de Mexico, is wholly owned by SPA. The financial results of SPA are consolidated with the financial results of STRATTEC and resulted in increased net sales and increased net income to STRATTEC of approximately $95.7 million and $5.3 million, respectively, in 2022 and $95.2 million and $6.4 million, respectively, in 2021.

 See further discussion under Equity Earnings of Joint Ventures included in Notes to Financial Statements herein.

XML

Equity Earnings of Joint Ventures

12 Months Ended

Jul. 03, 2022

Equity Method Investments And Joint Ventures [Abstract]

Equity Earnings of Joint Ventures

EQUITY EARNINGS OF JOINT VENTURES

As discussed above under the note Investment in Joint Ventures and Majority Owned Subsidiaries, we hold a one-third ownership interest in VAST LLC, for which we exercise significant influence but do not control and VAST LLC is not a variable interest entity of STRATTEC. Our investment in VAST LLC is accounted for using the equity method. The results of the VAST LLC foreign subsidiaries and joint venture are reported on a one-month lag basis.

During the quarter ended March 27, 2022, VAST China experienced a fire at their Taicang facility. As a result, certain door handle and painting operations were subsequently transferred to their new Jingzhou facility and to another supplier. The transfer of production negatively impacted VAST China’s profitability for the six month period ended July 3, 2022.

The following are summarized statements of operations and summarized balance sheet data for VAST LLC (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Net sales	$	191,642		$	210,149
Cost of goods sold		160,886			171,930
Gross profit		30,756			38,219
Engineering, selling and administrative expense		31,887			30,605
(Loss) income from operations		(1,131	)		7,614
Other income, net		902			1,681
(Loss) income before (benefit) provision for     income taxes		(229	)		9,295
(Benefit) provision for income taxes		(766	)		1,554
Net income	$	537		$	7,741
STRATTEC’s share of VAST LLC net
income	$	179		$	2,580
Intercompany profit eliminations		2			(20	)
STRATTEC’s equity earnings of VAST LLC	$	181		$	2,560

	July 3, 2022		June 27, 2021
Cash and cash equivalents	$	21,694	$	7,623
Receivables, net		39,467		48,717
Inventories, net		26,881		27,697
Other current assets		14,574		28,592
Total current assets		102,616		112,629
Property, plant and equipment, net		70,096		69,352
Other long-term assets		16,686		17,432
Total assets	$	189,398	$	199,413
Current debt	$	388	$	4,605
Other current liabilities		87,294		91,373
Long-term debt		20,079		18,993
Other long-term liabilities		2,258		2,418
Total liabilities	$	110,019	$	117,389
Net assets	$	79,379	$	82,024
STRATTEC’s share of VAST LLC net assets	$	26,460	$	27,341

We have sales of component parts to VAST LLC, purchases of component parts from VAST LLC, expenses charged to VAST LLC for engineering and accounting services and expenses charged from VAST LLC to STRATTEC for general headquarter expenses. The following tables summarize the related party transactions with VAST LLC for the periods indicated (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Sales to VAST LLC	$	1,805	$	3,900
Purchases from VAST LLC	$	169	$	527
Expenses charged to VAST LLC	$	593	$	1,507
Expenses charged from VAST LLC	$	784	$	1,167

	July 3, 2022		June 27, 2021
Accounts receivable from VAST LLC	$	63	$	84
Accounts payable to VAST LLC	$	23	$	25

XML

Credit Facilities

12 Months Ended

Jul. 03, 2022

Debt Disclosure [Abstract]

Credit Facilities

CREDIT FACILITIES

STRATTEC has a $40 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $25 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities expire on August 1, 2024. Borrowings under either credit facility are secured by our U.S. cash balances, accounts receivable, inventory, and fixed assets located in the U.S. Interest on borrowings under the STRATTEC Credit Facility through May 31, 2021 was at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate. Interest on borrowings under the ADAC-STRATTEC Credit Facility through May 31, 2021 was at varying rates based, at our option, on LIBOR plus 1.25 percent or the bank’s prime rate. Effective June 1, 2021, interest on borrowings under both credit facilities were at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.25 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. As of July 3, 2022, we were in compliance with all financial covenants required by these credit facilities.

Outstanding borrowings under the credit facilities referenced in the above paragraph as of the end of 2022 and 2021 were as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
STRATTEC Credit Facility	$	—	$	—
ADAC-STRATTEC Credit Facility		11,000		12,000
	$	11,000	$	12,000

Average outstanding borrowings and the weighted average interest rate under each such credit facility during 2022 and 2021 were as follows (thousands of dollars):

	Average Outstanding Borrowings				Weighted Average Interest Rate
	Years Ended				Years Ended
	July 3, 2022		June 27, 2021		July 3, 2022			June 27, 2021
STRATTEC Credit Facility	$	332	$	8,775		2.0	%		1.2	%
ADAC-STRATTEC Credit Facility	$	14,248	$	14,346		1.5	%		1.4	%

We believe that the credit facilities referenced above are adequate, along with existing cash balances and cash flow from operations, to meet our anticipated capital expenditure, working capital, dividend and operating expenditure requirements.

XML

Commitments and Contingencies

12 Months Ended

Jul. 03, 2022

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

We are from time to time subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, alleged breaches of contracts, product warranties, intellectual property matters and employment related matters. It is our opinion that the outcome of such matters will not have a material adverse impact on the consolidated financial position, results of operations or cash flows of STRATTEC. With respect to warranty matters, although we cannot ensure that the future costs of warranty claims by customers will not be material, we believe our established reserves are adequate to cover potential warranty settlements.

In 1995, we recorded a provision for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The facility was contaminated by a solvent spill, which occurred in 1985, from a former above ground solvent storage tank located on the east side of the facility. The reserve was originally established based on third party estimates to adequately cover the cost for active remediation of the contamination. Due to changing technology and related costs associated with active remediation of the contamination, in fiscal years 2010, 2016, and 2021, we obtained updated third party estimates of projected costs to adequately cover the cost for active remediation of this contamination and adjusted the reserve as needed. We monitor and evaluate the site with the use of these groundwater monitoring wells. An environmental consultant samples these wells one or two times a year to determine the status of the contamination and the potential for remediation of the contamination by natural attenuation, the dissipation of the contamination over time to concentrations below applicable standards. If such sampling evidences a sufficient degree of and trend toward natural attenuation of the contamination at the site, we may be able to obtain a closure letter from the regulatory authorities resolving the issue without the need for active remediation. If a sufficient degree and trend toward natural attenuation is not evidenced by sampling, a more active form of remediation beyond natural attenuation may be required. The sampling has not yet satisfied all of the requirements for closure by natural attenuation. As a result, sampling continues and the reserve remains at an amount to reflect our estimated cost of active remediation. The reserve is not measured on a discounted basis. We believe, based on findings-to-date and known environmental regulations, that the environmental reserve of $1.4 million at July 3, 2022 is adequate.

 At July 3, 2022, we had purchase commitments related to zinc and aluminum. We also had minimum rental commitments under non-cancelable operating leases with a term in excess of one year. The purchase and minimum rental commitments are payable as follows (thousands of dollars):

	Purchase		Minimum Rental
Fiscal Year	Commitments		Commitments
2023	$	5,925	$	497
2024	$	—	$	509
2025	$	—	$	522
2026	$	—	$	535
2027	$	—	$	1,299

XML

Income Taxes

12 Months Ended

Jul. 03, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The provision for income taxes consisted of the following (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Currently (recoverable) payable:
Federal	$	(691	)	$	557
State		161			420
Foreign		2,931			2,661
		2,401			3,638
Deferred tax provision		(1,981	)		1,473
	$	420		$	5,111

The items accounting for the difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes were as follows:

	Years Ended
	July 3, 2022			June 27, 2021
U.S. statutory rate		21.0	%		21.0	%
State taxes, net of Federal tax benefit		0.4			1.1
Foreign subsidiaries		8.4			1.0
Return to provision adjustment		(11.1	)		—
Global intangible low-taxed income		0.5			0.5
Research and development tax credit		(9.7	)		(2.3	)
Solar investment tax credit		(0.8	)		—
Non-controlling interest		(1.8	)		(5.9	)
Stock based compensation		(1.3	)		0.1
Other		(1.1	)		(0.9	)
		4.5	%		14.6	%

The return to provision adjustment related to adjustments we made to our fiscal 2021 estimated foreign tax credits and estimated tax impacts associated with our investment in VAST LLC. These true-up adjustments resulted from the filing of our US income tax returns during fiscal 2022 and were attributable to actual results included in the non-US income tax returns, which are filed on a calendar year basis, and which differ from estimates included in our fiscal 2021 tax provision. This adjustment was not material to our previously issued financial statements.  

The components of deferred tax (liabilities) assets were as follows (thousands of dollars):

	July 3, 2022			June 27, 2021
Unrecognized pension and postretirement benefit    plan liabilities	$	604		$	659
Accrued warranty		423			499
Payroll-related accruals		3,085			3,044
Stock-based compensation		360			306
Inventory reserve		1,010			964
Environmental reserve		327			327
Repair and maintenance supply parts reserve		222			284
Allowance for doubtful accounts		118			118
Lease Liability		710			799
Right of Use Assets		(710	)		(799	)
Credit carry-forwards		2,986			1,544
Postretirement obligations		(233	)		(294	)
Accumulated depreciation		(3,886	)		(4,663	)
Accrued pension obligations		504			459
Joint ventures		971			1,187
Other		446			618
	$	6,937		$	5,052

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

Federal credit carry-forwards at July 3, 2022 resulted in future benefits of approximately $2.8 million and expire between 2031 and 2040. We currently anticipate having sufficient Federal taxable income to offset these credit carry-forwards. State credit carry-forwards at July 3, 2022 resulted in future benefits of approximately $192,000 and expire at varying times between 2025 and 2031. A valuation allowance of $158,000 has been recorded as of July 3, 2022, due to our assessment of the future realization of certain state credit carry-forward benefits. We do not currently anticipate having sufficient state taxable income to offset these credit carry-forwards. Foreign income before the provision for income taxes was $8.6 million in 2022 and $5.1 million in 2021.

The total liability for unrecognized tax benefits was $1.5 million as of July 3, 2022 and $1.6 million as of June 27, 2021 and was included in Other Long-term Liabilities in the accompanying Consolidated Balance Sheets. This liability includes approximately $1.3 million and $1.5 million of unrecognized tax benefits at July 3, 2022 and June 27, 2021, respectively, and approximately $137,000 of accrued interest at July 3, 2022 and $146,000 at June 27, 2021. This liability does not include an amount for accrued penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was approximately $1.0 million at July 3, 2022 and $ 1.1 million at June 27, 2021. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended July 3, 2022 and June 27, 2021 (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Unrecognized tax benefits, beginning of year	$	1,458		$	1,462
Gross increases – tax positions in prior years		13			76
Gross decreases – tax positions in prior years		(19	)		—
Gross increases – current period tax positions		241			207
Tax years closed		(379	)		(287	)
Unrecognized tax benefits, end of year	$	1,314		$	1,458

We or one of our subsidiaries files income tax returns in the United States (Federal), Wisconsin (state), Michigan (state) and various other states, Mexico and other foreign jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal 2019 through 2022 for Federal, fiscal 2018 through 2022 for most states and calendar 2017 through 2021 for foreign jurisdictions.

XML

Retirement Plans and Postretirement Costs

12 Months Ended

Jul. 03, 2022

Compensation And Retirement Disclosure [Abstract]

Retirement Plans and Postretirement Costs

RETIREMENT PLANS AND POSTRETIREMENT COSTS

We have a noncontributory Supplemental Executive Retirement Plan (“SERP”), which is a nonqualified defined benefit plan. The SERP is funded through a Rabbi Trust with TMI Trust Company. Under the SERP, as amended December 31, 2013, participants received an accrued lump-sum benefit as of December 31, 2013 which was credited to each participant’s account. Subsequent to December 31, 2013, each eligible participant receives a supplemental retirement benefit equal to the foregoing lump-sum benefit, plus an annual benefit accrual equal to 8 percent of the participant’s base salary and cash bonus, plus annual credited interest on the participant’s account balance. All then current participants as of December 31, 2013 are fully vested in their account balances with any new individuals participating in the SERP effective on or after January 1, 2014 being subject to a five year vesting period. The SERP, which is considered a nonqualified defined benefit plan under applicable rules and regulations of the Internal Revenue Code, will continue to be funded through use of a Rabbi Trust to hold investment assets to be used in part to fund any future required lump sum benefit payments to participants. The Rabbi Trust assets had a value of $3.3 million at July 3, 2022 and $3.6 million at June 27, 2021, respectively. Refer to Fair Value of Financial Instruments discussion included in Notes to Financial Statements herein for further discussion of Rabbi Trust assets. The Rabbi Trust assets are excluded from the SERP tables below as they do not qualify as plan assets. The projected benefit obligation under the SERP, which is included in the SERP tables below, was $3.2 million at July 3, 2022 and $2.8 million at June 27, 2021. The SERP has a separately determined accumulated benefit obligation, which is the actuarial present value of benefits based on service rendered and current and past compensation levels. This differs from the projected benefit obligation in that it includes no assumptions about future compensation levels. The accumulated benefit obligation under the SERP was $2.8 million at July 3, 2022 and $2.6 million at June 27, 2021.

We also sponsor a postretirement health care plan for all U.S. associates hired prior to June 1, 2001. The expected cost of retiree health care benefits is recognized during the years the associates who are covered under the plan render service. Effective January 1, 2010, an amendment to the postretirement health care plan limited the benefit for future eligible retirees to $4,000 per plan year and the benefit is further subject to a maximum five year coverage period based on the associate’s retirement date and age. The postretirement health care plan is unfunded.

Amounts included in accumulated other comprehensive loss, net of tax, at July 3, 2022, which have not yet been recognized in net periodic benefit cost were as follows (thousands of dollars):

	SERP		Postretirement
Net actuarial loss	$	777	$	1,157

Unrecognized net actuarial losses included in accumulated other comprehensive loss at July 3, 2022 which are expected to be recognized in net periodic benefit cost (credit) in fiscal 2023, net of tax, for the SERP and postretirement plans are as follows (thousands of dollars):

	SERP		Postretirement
Net actuarial loss	$	94	$	205

The following tables summarize the SERP and postretirement plans’ income and expense, funded status and actuarial assumptions for the years indicated (thousands of dollars). We use a June 30 measurement date for our SERP and postretirement plans.

	SERP Benefits				Postretirement Benefits
	Years Ended				Years Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
COMPONENTS OF NET PERIODIC BENEFIT    COST (CREDIT):
Service cost	$	63	$	63	$	12	$	13
Interest cost		53		41		13		16
Plan settlements		—		65		—		—
Amortization of prior service cost (credit)		—		—		—		(8	)
Amortization of unrecognized net loss		86		10		336		359
Net periodic benefit cost (credit)	$	202	$	179	$	361	$	380

WEIGHTED-AVERAGE ASSUMPTIONS:
Benefit Obligations:
Discount rate		4.26	%		2.06	%		4.23	%		2.01	%
Rate of compensation increases		4.0	%		3.0	%	n/a			n/a
Net Periodic Benefit Cost:
Discount rate		2.06	%		2.33	%		2.01	%		2.07	%
Rate of compensation increases		3.0	%		3.0	%	n/a			n/a
CHANGE IN PROJECTED BENEFIT    OBLIGATION:
Benefit obligation at beginning of year	$	2,797		$	2,293		$	709		$	821
Service cost		63			63			12			13
Interest cost		53			41			13			16
Actuarial loss (gain)		265			631			(77	)		(26	)
Benefits paid		(14	)		(231	)		(99	)		(115	)
Benefit obligation at end of year	$	3,164		$	2,797		$	558		$	709
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	—		$	—		$	—		$	—
Employer contribution		14			231			99			115
Benefits paid		(14	)		(231	)		(99	)		(115	)
Fair value of plan assets at end of year	$	—		$	—		$	—		$	—
Funded status – accrued benefit obligations	$	(3,164	)	$	(2,797	)	$	(558	)	$	(709	)
AMOUNTS RECOGNIZED IN CONSOLIDATED    BALANCE SHEETS:
Accrued payroll and benefits (current liabilities)		(1,905	)		(463	)		(95	)		(110	)
Accrued benefit obligations (long-term liabilities)		(1,259	)		(2,334	)		(463	)		(599	)
Net amount recognized	$	(3,164	)	$	(2,797	)	$	(558	)	$	(709	)
CHANGES IN PLAN ASSETS AND BENEFIT    OBLIGATIONS RECOGNIZED IN OTHER    COMPREHENSIVE INCOME:
Net periodic benefit cost	$	202		$	179		$	361		$	380
Net actuarial loss (gain)		265			631			(77	)		(26	)
Settlement loss		—			(65	)		—			—
Amortization of prior service credits		—			—			—			8
Amortization of unrecognized net loss		(86	)		(10	)		(336	)		(359	)
Total recognized in other comprehensive    (income) loss, before tax		179			556			(413	)		(377	)
Total recognized in net periodic benefit    cost and other comprehensive loss,    before tax	$	381		$	735		$	(52	)	$	3

For measurement purposes as it pertains to the estimated obligation associated with retirees prior to January 1, 2010, a 5.6 percent annual rate increase in the per capita cost of covered health care benefits was assumed for fiscal 2023; the rate was assumed to decrease gradually to 3.0 percent by the year 2025 and remain at that level thereafter. The health care cost trend assumption has a minimal effect on our postretirement benefit amounts reported.

We expect to contribute $1.9 million to our SERP and $96,000 to our postretirement health care plan in fiscal 2023. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during the fiscal years noted below (thousands of dollars):

	SERP Benefits		Postretirement Benefits
2023	$	1,946	$	96
2024	$	14	$	98
2025	$	14	$	67
2026	$	14	$	40
2027	$	14	$	38
2028-2032	$	2,373	$	233

All U.S. associates may participate in our 401(k) Plan. We contribute 100 percent up to the first 5 percent of eligible compensation that a participant contributes to the plan. Our contributions to the 401(k) Plan were as follows (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Company contributions	$	1,964	$	1,706

XML

Shareholders' Equity

12 Months Ended

Jul. 03, 2022

Equity [Abstract]

Shareholders' Equity

SHAREHOLDERS’ EQUITY

We have 18,000,000 and 12,000,000 shares of authorized common stock, par value $.01 per share, with 3,876,703 and 3,805,065 shares outstanding at July 3, 2022 and June 27, 2021, respectively. Holders of our common stock are entitled to one vote for each share on all matters voted on by shareholders.

Our Board of Directors previously authorized a stock repurchase program to buy back up to 3,839,395 outstanding shares of our common stock as of July 3, 2022. As of July 3, 2022, 3,655,322 shares have been repurchased under this program at a cost of approximately $136.4 million. No shares were repurchased under this program during 2022 or 2021.

XML

Earnings Per Share

12 Months Ended

Jul. 03, 2022

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the potential dilutive common shares outstanding during the applicable period using the treasury stock method. Potential dilutive common shares include outstanding stock options and unvested restricted stock awards. A reconciliation of the components of the basic and diluted per share computations follows (in thousands, except per share amounts):

	Years Ended
	July 3, 2022		June 27, 2021
Net income attributable to STRATTEC	$	7,032	$	22,532
Weighted average shares of common stock outstanding		3,861		3,788
Incremental shares – stock based compensation		49		64
Diluted weighted average shares of common stock    outstanding		3,910		3,852
Basic earnings per share	$	1.82	$	5.95
Diluted earnings per share	$	1.80	$	5.85

Potentially dilutive common shares that were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive were as follows:

Years Ended	Number of Options Excluded
July 3, 2022		36,921
June 27, 2021		9,010

XML

Stock Option and Purchase Plans

12 Months Ended

Jul. 03, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Option and Purchase Plans

STOCK OPTION AND PURCHASE PLANS

A summary of stock option activity under our stock incentive plan was as follows:

				Weighted Average		Weighted Average Remaining Contractual		Aggregate Intrinsic Value
	Shares			Exercise Price		Term (in years)		(in thousands)
Balance at June 28, 2020		90,860		$	35.88
Exercised		(18,236	)	$	28.85
Balance at June 27, 2021		72,624		$	37.65
Exercised		(31,452	)	$	26.28
Balance at July 3, 2022		41,172		$	46.34		1.2	$	31
Exercisable as of:
July 3, 2022		41,172		$	46.34		1.2	$	31
June 27, 2021		72,624		$	37.65		1.5	$	790

No options were granted during fiscal 2022 or 2021.

A summary of restricted stock activity under our stock incentive plan was as follows:

				Weighted Average
				Grant Date
	Shares			Fair Value
Nonvested Balance at June 28, 2020		69,394		$	30.59
Granted		48,300		$	21.20
Vested		(34,669	)	$	34.95
Forfeited		(1,050	)	$	22.84
Nonvested Balance at June 27, 2021		81,975		$	23.31
Granted		43,875		$	42.50
Vested		(38,000	)	$	25.56
Forfeited		(2,750	)	$	32.70
Nonvested Balance at July 3, 2022		85,100		$	31.89

We have an Employee Stock Purchase Plan to provide substantially all U.S. full-time associates an opportunity to purchase shares of STRATTEC common stock through payroll deductions. A participant may contribute a maximum of $5,200 per calendar year to the plan. On the last day of each month or if such date is not a trading day on the most recent previous trading day, participant account balances are used to purchase shares of our common stock at the average of the highest and lowest reported sales prices of a share of STRATTEC common stock on the NASDAQ Global Market on such date. A total of 100,000 shares may be issued under the plan. Shares issued from treasury stock under the plan totaled 2,186 at an average price of $37.32 during 2022 and 2,541 at an average price of $31.03 during 2021. A total of 46,484 shares remain available for purchase under the plan as of July 3, 2022.

XML

Export Sales

12 Months Ended

Jul. 03, 2022

Segment Reporting [Abstract]

Schedule Of Revenues From External Customers Attributed To Foreign Countries By Geographic Area Text Block

EXPORT SALES

Total export sales, sales from the United States to locations outside of the United States, are summarized as follows (thousands of dollars and percent of total net sales): 

	Years Ended
	July 3, 2022			June 27, 2021
	Net Sales		%	Net Sales		%
Export sales	$	122,293	27%	$	130,260	27%

During the years ended July 3, 2022 and June 27, 2021, no countries accounted for sales of ten percent or more of total net sales.

XML

Product Sales

12 Months Ended

Jul. 03, 2022

Segment Reporting [Abstract]

Product Sales

PRODUCT SALES

Sales by product group were as follows (thousands of dollars and percent of total net sales):

	Years Ended
	July 3, 2022					June 27, 2021
	Net Sales		%			Net Sales		%
Door handles & exterior trim	$	111,805		25	%	$	126,218		26	%
Keys & locksets		107,274		24			116,572		24
Power access		95,662		21			95,245		20
Latches		48,947		11			51,211		10
Aftermarket & OE service		44,826		10			47,138		10
Driver controls		34,442		7			40,031		8
Other		9,309		2			8,880		2
	$	452,265		100	%	$	485,295		100	%

XML

Sales and Receivable Concentration

12 Months Ended

Jul. 03, 2022

Segment Reporting Information Receivable [Abstract]

Sales and Receivable Concentration

SALES AND RECEIVABLE CONCENTRATION

Sales to our largest customers were as follows (thousands of dollars and percent of total net sales):

	Years Ended
	July 3, 2022					June 27, 2021
	Net Sales		%			Net Sales		%
General Motors Company	$	130,184		29	%	$	146,547		30	%
Stellantis (Formerly Fiat Chrysler Automobiles)		83,255		18			85,629		18
Ford Motor Company		79,735		18			67,670		14
	$	293,174		65	%	$	299,846		62	%

Receivables from our largest customers were as follows (thousands of dollars and percent of gross receivables):

	July 3, 2022					June 27, 2021
	Receivables		%			Receivables		%
General Motors Company	$	24,594		32	%	$	22,934		32	%
Stellantis (Formerly Fiat Chrysler Automobiles)		12,845		17			11,938		17
Ford Motor Company		10,602		14			8,204		12
	$	48,041		63	%	$	43,076		61	%

XML

Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Jul. 03, 2022

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Risks and Uncertainties

Risks and Uncertainties:    In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. The coronavirus subsequently spread, and infections occurred in multiple countries around the world, including the United States. In March 2020, the World Health Organization recognized the COVID-19 outbreak as a pandemic based on the global spread of the disease, the severity of illnesses it causes and its effects on society. In response to the COVID-19 outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations, and in certain cases, advising or requiring individuals to limit or forego their time outside of their homes or from participating in large group gatherings. Accordingly, the COVID-19 outbreak, as well as the recent conflict in the Ukraine, has severely restricted the level of economic activity in many countries, and continues to adversely impact global economic activity, including with respect to customer purchasing actions and supply chain continuity and disruption, and in particular the supply of semiconductor chips, transponders and related components to the automotive industry.

STRATTEC’s operating performance is subject to global economic conditions, inflationary pressures and levels of consumer spending specifically within the automotive industry. During the period from late March 2020 through mid-June 2020, the majority of our OEM customer assembly plant operations were completely closed including most of the supply chain. Additionally, during most of this same period, STRATTEC’s Mexico facilities were closed as a result of the Mexican government’s shutdown of non-essential businesses. Re-opening of our OEM customer facilities and our Mexico facilities began in June 2020, and the automotive industry continued to ramp-up throughout our fiscal year ended June 27, 2021. Nonetheless, during the fourth quarter of our fiscal 2021, our net sales were negatively impacted by a global semiconductor chip shortage (especially as it relates to the automotive industry), which shortage continued into our fiscal 2022 resulting in a decrease in our net sales for 2022 as compared to 2021. Additionally, inflationary pressures resulted in increased raw material and purchased part costs as well as increased wage rates in Mexico beginning in calendar 2021. Such increases negatively impacted our operating results in 2022 as compared to 2021.

Each of the COVID-19 outbreak, the Ukraine conflict and the resulting inflationary pressures in the U.S. and global economy continue to adversely impact our operating results due mostly to the supply chain continuity and disruption issues noted above, and in particular related to the supply of semiconductor chips, transponders and related components to our customers in the automotive industry.  The extent of such impacts, including related to their duration and intensity, depends upon any continued spread of the COVID-19 outbreak, the length of the Ukraine conflict and related regulatory or operating restraints, which may be precautionary, imposed by local governments and the private sector. All of these events may continue to impact the supply chain and our operations, including impacting our customers, workforce and suppliers, any of which may continue to disrupt and limit sourcing of semiconductor chips, transponders and other critical supply chain components needed by us and our customers to meet expected production schedules.  Moreover, these events may continue to create added inflationary pressures on our operations, including related to wages and the prices of raw materials and purchased parts.  All of these foregoing matters, including their scope and duration are uncertain and cannot be predicted as to timing and cost impacts.  These changing conditions may also affect the estimates and assumptions made by our management in our financial statements. Such estimates and assumptions affect, among other things, our long-lived asset valuations, equity investment valuation, assessment of our annual effective tax rate, valuation of deferred income taxes, assessment of excess and obsolete inventory reserves, and assessment of collectability of trade receivables.

Significant Accounting Policies

Significant Accounting Policies: The significant accounting policies followed in the preparation of these financial statements, as summarized in the following paragraphs, are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Principles of Consolidation and Presentation

Principles of Consolidation and Presentation: The accompanying consolidated financial statements include the accounts of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary and its majority owned subsidiaries. Equity investments for which STRATTEC exercises significant influence but does not control and are not variable interest entities of STRATTEC are accounted for using the equity method. All significant inter-company transactions and balances have been eliminated.

New Accounting Standards

New Accounting Standards: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The update revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, the update was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases. This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are planning to adopt this standard in the first quarter of our fiscal 2024. We do not expect that the adoption of this pronouncement will have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes, which enhances and simplifies various aspects of income tax accounting including hybrid tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of entities not subject to tax, the intraperiod tax allocation exception to the incremental approach, investment ownership changes from a subsidiary to an equity method investment and vice versa, interim-period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. This accounting update is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

Fiscal Year

Fiscal Year: Our fiscal year ends on the Sunday nearest June 30. The year ended July 3, 2022 is comprised of 53 weeks. The year ended June 27, 2021 is comprised of 52 weeks.

Use of Estimates

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods presented. These estimates and assumptions could also affect the disclosure of contingencies. Actual results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents

Cash and Cash Equivalents: Cash and cash equivalents include all short-term investments with an original maturity of three months or less due to the short-term nature of the instruments. Excess cash balances are placed in short-term commercial paper.

Derivatives Instruments

Derivative Instruments: We own and operate manufacturing operations in Mexico. As a result, a portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate. We have contracts with Bank of Montreal that provide for monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. Our objective in entering into currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges. As a result, all currency forward contracts are recognized in our accompanying consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other Income (Expense), net.

The following table quantifies the outstanding Mexican peso forward contracts as of July 3, 2022 (thousands of dollars, except with respect to the average forward contractual exchange rate):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	July 19, 2022 - June 13, 2023	$	9,000		22.42	$	627

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Consolidated Balance Sheets was as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Not designated as hedging instruments:
Other current assets:
Mexican peso forward contracts	$	627	$	243

The pre-tax effects of the Mexican peso forward contracts on the accompanying Consolidated Statements of Income and Comprehensive Income consisted of the following (thousands of dollars):

	Other Income (Expense), net
	Years Ended
	July 3, 2022			June 27, 2021
Not Designated as Hedging Instruments:
Realized gain	$	434		$	164
Realized (loss)	$	(73	)	$	—
Unrealized gain	$	384		$	723

Fair Value of Financial Instruments

Fair Value of Financial Instruments: The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facilities approximated their book value as of July 3, 2022 and June 27, 2021. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is an established fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. Level 1 – Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 – Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments. Level 3 – Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of July 3, 2022 and June 27, 2021 (thousands of dollars):

	July 3, 2022								June 27, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Rabbi Trust assets:
Stock index funds:
Small cap	$	142	$	—	$	—	$	142	$	384	$	—	$	—	$	384
Mid cap		291		—		—		291		377		—		—		377
Large cap		416		—		—		416		756		—		—		756
International		447		—		—		447		1,104		—		—		1,104
Fixed income funds		1,023		—		—		1,023		960		—		—		960
Cash and cash equivalents		—		961		—		961		—		2		—		2
Mexican peso forward contracts		—		627		—		627		—		243		—		243
Total assets at fair value	$	2,319	$	1,588	$	—	$	3,907	$	3,581	$	245	$	—	$	3,826

The Rabbi Trust assets fund our supplemental executive retirement plan. Of the July 3, 2022 $3.3 million Rabbi Trust asset balance, $863,000 was included in Other Current Assets and $2.4 million was included in Other Long-Term Assets in the accompanying Consolidated Balance Sheets. The June 27, 2021 $3.6 million Rabbi Trust asset balance was included in Other Long-Term Assets in the accompanying Balance Sheets. Refer to discussion of Mexican peso forward contracts under Derivative Instruments above. The fair value of the Mexican peso forward contracts considers the remaining term, current exchange rate and interest rate differentials between the two currencies.

Receivables

Receivables: Receivables consist primarily of trade receivables due from Original Equipment Manufacturers in the automotive industry and locksmith/dealership distributors relating to our service and aftermarket sales. We evaluate the collectability of receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items, general economic conditions (including with respect to the impact of COVID-19, the Ukraine conflict and the supply chain disruptions on our customers) and the industry as a whole. The allowance for doubtful accounts totaled $500,000 at July 3, 2022 and June 27, 2021.

Inventories

Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at net realizable value using the first-in, first-out (“FIFO”) cost method of accounting. Inventories consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Finished products	$	19,499		$	20,633
Work in process		18,263			14,707
Purchased materials		48,209			40,900
		85,971			76,240
Excess and obsolete reserve		(5,489	)		(5,380	)
Inventories, net	$	80,482		$	70,860

We record a reserve for excess and obsolete inventory based on historical and estimated future demand and market conditions. The reserve level is determined by comparing inventory levels of individual materials and parts to historical usage and estimated future sales by analyzing the age of the inventory in order to identify specific materials and parts that are unlikely to be sold. Technical obsolescence and other known factors are also considered in evaluating the reserve level. The activity related to the excess and obsolete inventory reserve was as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Amounts Written Off		Balance, End of Year
Year ended July 3, 2022	$	5,380	$	962	$	853	$	5,489
Year ended June 27, 2021	$	4,890	$	973	$	483	$	5,380

Customer Tooling in Progress

Customer Tooling in Progress: We incur costs related to tooling used in component production and assembly. Costs for development of certain tooling, which will be directly reimbursed by the customer whose parts are produced from the tool, are accumulated on the balance sheet and are then billed to the customer. The accumulated costs are billed upon formal acceptance by the customer of products produced with the individual tool. Other tooling costs are not directly reimbursed by the customer. We capitalize and amortize these other tooling costs over the life of the related product based on the fact that the related tool will be used over the life of the supply arrangement. To the extent that estimated costs exceed expected reimbursement from the customer we recognize a loss.

Property, Plant and Equipment

Property, Plant and Equipment: Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	Expected Useful Lives
Land improvements	20 years
Buildings and improvements	15 to 35 years
Machinery and equipment	3 to 15 years

Property, plant and equipment consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Land and improvements	$	6,041		$	5,963
Buildings and improvements		37,158			36,325
Machinery and equipment		235,050			228,141
		278,249			270,429
Less: accumulated depreciation		(186,520	)		(174,028	)
	$	91,729		$	96,401

Depreciation expense was as follows for the periods indicated (thousands of dollars):

Fiscal Year	Depreciation Expense
2022	$	19,379
2021	$	19,786

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Gross book value	$	159,909	$	154,371
Net book value	$	64,645	$	67,348

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such indicators are present, the recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is determined to not be recoverable, the impairment recognized is calculated as the excess of the carrying amount of the asset over the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less estimated costs to sell. There were no impairments recorded in the years ended July 3, 2022 or June 27, 2021.

Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income.

Leases

Leases:  Our right-of-use operating lease assets are recorded at the present value of future minimum lease payments, net of amortization. We have an operating lease for our El Paso, Texas finished goods and service parts distribution warehouse that has a current lease term through October 2023. This lease includes renewal terms that can extend the lease term for five additional years. For purposes of calculating operating lease obligations, we included the option to extend the lease as it is reasonably certain that we will exercise such option. The lease does not contain material residual value guarantees or restrictive covenants. Operating lease expense is recognized on a straight-line basis over the lease term.

As the lease does not provide an implicit rate, we used our incremental borrowing rate at lease commencement to determine the present value of our lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest we would pay to borrow over a similar term with similar payments.

The operating lease asset and obligation related to our El Paso warehouse lease included in the accompanying Consolidated Balance Sheets are presented below (thousands of dollars):

	July 3, 2022		June 27, 2021
Right-of-Use Asset Under Operating Lease:
Other Long-Term Assets	$	3,021	$	3,399
Lease Obligation Under Operating Lease:
Current Liabilities: Accrued Liabilities: Other	$	403	$	378
Other Long-Term Liabilities		2,618		3,021
	$	3,021	$	3,399

Future minimum lease payments, by our fiscal year, including options to extend that are reasonably certain to be exercised, under the non-cancelable lease are as follows as of July 3, 2022 (thousands of dollars):

2023	$	497
2024		509
2025		522
2026		535
Thereafter		1,299
Total Future Minimum Lease Payments		3,362
Less: Imputed Interest		(341	)
Total Lease Obligations	$	3,021

Cash flow information related to the operating lease is shown below (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Operating Cash Flows:
Cash Paid Related to Operating Lease Obligation	$	484	$	473

The weighted average remaining lease term and discount rate for the El Paso, Texas operating lease are shown below:

	July 3, 2022			June 27, 2021
Weighted Average Remaining Lease Term, (in years)		6.3			7.3
Weighted Average Discount Rate		3.3	%		3.3	%

Operating lease expense for the year ended July 3, 2022 and June 27, 2021 totaled $484,000 and $473,000, respectively.  

Supplier Concentrations

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted:

Fiscal Year	Percentage of Inventory Purchases			Number of Suppliers
2022		38	%		6
2021		44	%		8

We have long-term contracts or arrangements with most of our suppliers to guarantee the availability of raw materials and component parts.

Labor Concentrations

Labor Concentrations: We had approximately 3,373 full-time associates. Approximately 180 or 5.3 percent of our full time associates were represented by a labor union at July 3, 2022 at our Milwaukee facility, which associates account for all production associates at our Milwaukee, WI facility. The current contract with our Milwaukee unionized associates is effective through November 1, 2025. Additionally, approximately 104 or 3.1 percent of our full time associates were represented by a labor union at our Leon, Mexico facility. The current contract with our Leon unionized associates is effective through April 12, 2023.

Revenue Recognition

Revenue Recognition: We generate revenue from the production of parts sold to automotive and light-truck Original Equipment Manufacturers (“OEMs”), or Tier 1 suppliers at the direction of the OEM, under long-term supply agreements supporting new vehicle production. Such agreements also require related production of service parts subsequent to the initial vehicle production periods. Additionally, we generate revenue from the production of parts sold in aftermarket service channels and to non-automotive commercial customers.

Revenue Recognition:

Our contracts with customers under long-term supply agreements do not commit the customer to a specified quantity of parts. However, we are generally required to fulfill our customers’ purchasing requirements for the production life of the vehicle. Contracts do not become a performance obligation until we receive either a purchase order and/or customer release for a specific number of parts at a specified price. While long-term supply agreements may range from four to six years for new vehicle production and ten to fifteen subsequent years for service parts production, contracts may be terminated by customers at any time. Historically, terminations have been minimal. Contracts may also provide for annual price reductions over the production life of the vehicle, and prices are adjusted on an ongoing basis to reflect changes in product content/cost and other commercial factors.

Revenue is recognized at a point in time when control of the parts produced are transferred to the customer according to the terms of the contract, which is usually when the parts are shipped or delivered to the customer’s premises. Customers are generally invoiced upon shipment or delivery and payment generally occurs within 45 to 90 days after the shipment date. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for those products based on purchase orders, annual price reductions and ongoing price adjustments, some of which are accounted for as variable consideration. We use the most likely amount method, the single most likely outcome of the contract, to estimate the amount to which we expect to be entitled. There were no significant changes to our estimates of variable consideration during the reporting periods referenced in our accompanying financial statements and significant changes to our estimates of variable consideration are not expected in future periods.

We do not have an enforceable right to payment at any time prior to when the parts are shipped or delivered to the customer. Therefore, we recognize revenue at the point in time we satisfy a performance obligation by transferring control of a part to a customer. Amounts billed to customers related to shipping and handling costs are included in Net Sales in the accompanying Consolidated Statements of Income and Comprehensive Income. Shipping and handling costs are accounted for as fulfillment costs and are included in Cost of Goods Sold in the accompanying Consolidated Statements of Income and Comprehensive Income.

Tooling and Pre-Production Engineering Costs Related to Long-Term Supply Arrangements:

We incur pre-production engineering and tooling costs related to the products produced for our customers under long-term supply agreements. Customer reimbursements for tooling and pre-production engineering activities that are part of a long-term supply arrangement are accounted for as a reduction of cost in accordance with ASC 340, Other Assets and Deferred Costs. Pre-production costs related to long-term supply agreements with a contractual guarantee for reimbursement are included in Other Current Assets in

the accompanying Consolidated Balance Sheets. We expense all pre-production engineering costs for which reimbursement is not contractually guaranteed by the customer. All pre-production tooling costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer or for which we do not have a non-cancelable right to use the tooling is also expensed when incurred.

Receivables, net:

Receivables, net include amounts billed and currently due from customers. We maintain an allowance for doubtful accounts to provide for estimated amounts of receivables not expected to be collected. We continually assess our receivables for collectability and any allowance is recorded based upon age of the outstanding receivables, historical payment experience, customer creditworthiness and general economic conditions.

Contract Balances:

We had no material contract assets or contract liabilities as of July 3, 2022 or June 27, 2021.

Product Sales and Sales and Receivable Concentration:

Refer to Product Sales and Sales and Receivable Concentration included herein for revenue by product group and revenue by customer.

Research and Development Costs

Research and Development Costs: Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development expenditures were approximately $12.2 million in 2022 and $10.8 million in 2021.

Other Income (Expense), Net

Other Income (Expense), Net: Net other income (expense) included in the accompanying Consolidated Statements of Income and Comprehensive Income primarily included foreign currency transaction gains and losses, realized and unrealized gains and losses on our Mexican peso currency forward contracts, the components of net periodic benefit cost other than the service cost component related to our pension and postretirement plans and Rabbi Trust gains and losses. Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in the Trust are considered trading securities. We entered into the Mexican peso currency forward contracts during fiscal 2022 and 2021 to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Unrealized gains and losses on the peso forward contracts recognized as a result of mark-to-market adjustments as of July 3, 2022 may or may not be realized in future periods, depending on actual Mexican peso to U.S. dollar exchange rates experienced during the balance of the contract period. Pension and postretirement plan costs include the components of net periodic benefit cost other than the service cost component. The impact of these items for the periods presented was as follows (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Foreign currency transaction gain (loss)	$	237		$	(2,445	)
Rabbi Trust Assets (loss) gain		(304	)		865
Unrealized gain on Mexican peso forward contracts		384			723
Realized gain on Mexican peso forward contracts, net		361			164
Pension and postretirement plans cost		(488	)		(483	)
Other		233			11
	$	423		$	(1,165	)

Warranty Reserve

Warranty Reserve: We have a warranty liability recorded related to our known and potential exposure to warranty claims in the event our products fail to perform as expected, and in the event we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension and/or expansion of their warranty programs. In recent fiscal periods, our largest customers have extended their warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers in their terms and conditions to purchase, including from STRATTEC. As additional information becomes available, actual results may differ from recorded estimates, which may require us to adjust the amount of our warranty provision. Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Payments		Balance, End of Year
Year ended July 3, 2022	$	8,425	$	265	$	590	$	8,100
Year ended June 27, 2021	$	8,500	$	373	$	448	$	8,425

Foreign Currency Translation

Foreign Currency Translation: The financial statements of our foreign subsidiaries and equity investees are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the average exchange rate for each applicable period for sales, costs and expenses. Foreign currency translation adjustments are included as a component of accumulated other comprehensive loss. Foreign currency transaction gains and losses are included in other income (expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss (“AOCL”): The following tables summarize the changes in AOCL for the years ended July 3, 2022 and June 27, 2021 (thousands of dollars): 

	Year Ended July 3, 2022
	Foreign Currency Translation Adjustments		Retirement and Postretirement Plans			Total
Balance June 27, 2021	$	14,685	$	2,112		$	16,797
Other comprehensive loss before reclassifications		1,700		188			1,888
Income Tax		606		(43	)		563
Net other comprehensive loss before    Reclassifications		2,306		145			2,451
Reclassifications:
Actuarial losses (A)		—		(422	)		(422	)
Total reclassifications before tax		—		(422	)		(422	)
Income Tax		—		99			99
Net reclassifications		—		(323	)		(323	)
Other comprehensive loss		2,306		(178	)		2,128
Other comprehensive loss attributable
to non-controlling interest		268		—			268
Balance July 3, 2022	$	16,723	$	1,934		$	18,657

	Year Ended June 27, 2021
	Foreign Currency Translation Adjustments			Retirement and Postretirement Plans			Total
Balance June 28, 2020	$	20,136		$	1,977		$	22,113
Other comprehensive loss before reclassifications		(6,924	)		540			(6,384	)
Income Tax		(220	)		(128	)		(348	)
Net other comprehensive loss before    Reclassifications		(7,144	)		412			(6,732	)
Reclassifications:
Prior service credits (A)		—			8			8
Actuarial losses (A)		—			(369	)		(369	)
Total reclassifications before tax		—			(361	)		(361	)
Income Tax		—			84			84
Net reclassifications		—			(277	)		(277	)
Other comprehensive income		(7,144	)		135			(7,009	)
Other comprehensive income attributable
to non-controlling interest		(1,693	)		—			(1,693	)
Balance June 27, 2021	$	14,685		$	2,112		$	16,797

(A) Amounts reclassified are included in the computation of net periodic benefit cost, which is included in Other Income (Expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income. See Retirement Plans and Postretirement Costs note to these Notes to Financial Statements below.

Stock-Based Compensation

Stock-Based Compensation: We maintain an omnibus stock incentive plan. This plan provides for the granting of stock options, shares of restricted stock and stock appreciation rights. The Board of Directors has designated 2 million shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of July 3, 2022 were 177,959. Awards that expire or are cancelled without delivery of shares become available for re-issuance under the plan. We issue new shares of common stock to satisfy stock option exercises.

Nonqualified and incentive stock options and shares of restricted stock have been granted to our officers, outside directors and specified associates under the stock incentive plan. Stock options granted under the plan may not be issued with an exercise price less than the fair market value of the common stock on the date the option is granted. Stock options become exercisable as determined at the date of grant by the Compensation Committee of our Board of Directors. The options expire 10 years after the grant date unless an earlier expiration date is set at the time of grant. The options vest 1 to 4 years after the date of grant. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of our Board of Directors at the time the shares are granted and have a minimum vesting period of one year from the date of grant. Restricted shares granted have voting rights, regardless of whether the shares are vested or unvested, but only have the right to receive cash dividends after such shares become vested. Restricted stock grants issued vest 1 to 3 years after the date of grant.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight-line basis over the vesting period for the entire award. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules. The expected volatility is determined based on our historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based primarily on historical data. The fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant. The resulting compensation cost is amortized on a straight-line basis over the vesting period. We record stock based compensation only for those awards that are expected to vest.

All compensation cost related to stock options granted under the plan has been recognized as of July 3, 2022. Unrecognized compensation cost as of July 3, 2022 related to restricted stock granted under the plan was as follows (thousands of dollars):

	Compensation Cost		Weighted Average Period over which Cost is to be Recognized (in years)
Restricted stock granted	$	1,374		1.0

Unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.

Cash received from stock option exercises and the related income tax benefit were as follows (thousands of dollars):

Fiscal Year	Cash Received from Stock Option Exercises		Income Tax Benefit
2022	$	827	$	74
2021	$	526	$	130

The intrinsic value of stock options exercised and the fair value of options vested were as follows (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Intrinsic value of options exercised	$	451	$	555
Fair value of stock options vested	$	—	$	—

No options were granted during the fiscal years ended July 3, 2022 or June 27, 2021.

The range of options outstanding as of July 3, 2022 was as follows:

	Number of Options Outstanding and Exercisable		Weighted Average Exercise Price Outstanding and Exercisable		Weighted Average Remaining Contractual Life Outstanding (In Years)
$25.64		4,251	$	25.64	0.13
$38.71		27,911	$	38.71	1.13
$79.73		9,010	$	79.73	2.13
		41,172	$	46.34

Income Taxes

Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We recognize the benefit of an income tax position only if it is more likely than not (greater than 50 percent) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties on uncertain tax positions are classified in the (Benefit) Provision for Income Taxes in the accompanying Consolidated Statements of Income and Comprehensive Income.

XML

Organization and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jul. 03, 2022

Schedule of Quantification of Outstanding Mexican Peso Forward Contracts

The following table quantifies the outstanding Mexican peso forward contracts as of July 3, 2022 (thousands of dollars, except with respect to the average forward contractual exchange rate):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	July 19, 2022 - June 13, 2023	$	9,000		22.42	$	627

Fair Market Value of All Outstanding Peso Forward Contracts

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Consolidated Balance Sheets was as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Not designated as hedging instruments:
Other current assets:
Mexican peso forward contracts	$	627	$	243

Pre-Tax Effects of the Peso Forward Contracts

The pre-tax effects of the Mexican peso forward contracts on the accompanying Consolidated Statements of Income and Comprehensive Income consisted of the following (thousands of dollars):

	Other Income (Expense), net
	Years Ended
	July 3, 2022			June 27, 2021
Not Designated as Hedging Instruments:
Realized gain	$	434		$	164
Realized (loss)	$	(73	)	$	—
Unrealized gain	$	384		$	723

Summary of Financial Assets and Liabilities at Fair Value on Recurring Basis

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of July 3, 2022 and June 27, 2021 (thousands of dollars)

	July 3, 2022								June 27, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Rabbi Trust assets:
Stock index funds:
Small cap	$	142	$	—	$	—	$	142	$	384	$	—	$	—	$	384
Mid cap		291		—		—		291		377		—		—		377
Large cap		416		—		—		416		756		—		—		756
International		447		—		—		447		1,104		—		—		1,104
Fixed income funds		1,023		—		—		1,023		960		—		—		960
Cash and cash equivalents		—		961		—		961		—		2		—		2
Mexican peso forward contracts		—		627		—		627		—		243		—		243
Total assets at fair value	$	2,319	$	1,588	$	—	$	3,907	$	3,581	$	245	$	—	$	3,826

Inventories

Inventories consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Finished products	$	19,499		$	20,633
Work in process		18,263			14,707
Purchased materials		48,209			40,900
		85,971			76,240
Excess and obsolete reserve		(5,489	)		(5,380	)
Inventories, net	$	80,482		$	70,860

Activity Related to the Excess and Obsolete Inventory Reserve

The activity related to the excess and obsolete inventory reserve was as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Amounts Written Off		Balance, End of Year
Year ended July 3, 2022	$	5,380	$	962	$	853	$	5,489
Year ended June 27, 2021	$	4,890	$	973	$	483	$	5,380

Property, Plant and Equipment, Useful Lives of Assets

Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	Expected Useful Lives
Land improvements	20 years
Buildings and improvements	15 to 35 years
Machinery and equipment	3 to 15 years

Property, Plant and Equipment

Property, plant and equipment consisted of the following (thousands of dollars):

	July 3, 2022			June 27, 2021
Land and improvements	$	6,041		$	5,963
Buildings and improvements		37,158			36,325
Machinery and equipment		235,050			228,141
		278,249			270,429
Less: accumulated depreciation		(186,520	)		(174,028	)
	$	91,729		$	96,401

Schedule of Depreciation Expenses

Depreciation expense was as follows for the periods indicated (thousands of dollars):

Fiscal Year	Depreciation Expense
2022	$	19,379
2021	$	19,786

Schedule of Operating Lease Asset and Obligation Included in Condensed Consolidated Balance Sheet

The operating lease asset and obligation related to our El Paso warehouse lease included in the accompanying Consolidated Balance Sheets are presented below (thousands of dollars):

	July 3, 2022		June 27, 2021
Right-of-Use Asset Under Operating Lease:
Other Long-Term Assets	$	3,021	$	3,399
Lease Obligation Under Operating Lease:
Current Liabilities: Accrued Liabilities: Other	$	403	$	378
Other Long-Term Liabilities		2,618		3,021
	$	3,021	$	3,399

Schedule of Future Minimum Lease Payments Under Non-Cancelable Lease Including Options to Extend

Future minimum lease payments, by our fiscal year, including options to extend that are reasonably certain to be exercised, under the non-cancelable lease are as follows as of July 3, 2022 (thousands of dollars):

2023	$	497
2024		509
2025		522
2026		535
Thereafter		1,299
Total Future Minimum Lease Payments		3,362
Less: Imputed Interest		(341	)
Total Lease Obligations	$	3,021

Schedule of Cash Flow Information Related to Operating Lease

Cash flow information related to the operating lease is shown below (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Operating Cash Flows:
Cash Paid Related to Operating Lease Obligation	$	484	$	473

Schedule of Weighted Average Remaining Lease Term and Discount Rate for Operating Lease

The weighted average remaining lease term and discount rate for the El Paso, Texas operating lease are shown below:

	July 3, 2022			June 27, 2021
Weighted Average Remaining Lease Term, (in years)		6.3			7.3
Weighted Average Discount Rate		3.3	%		3.3	%

Inventory Purchase from Major Suppliers

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted

Fiscal Year	Percentage of Inventory Purchases			Number of Suppliers
2022		38	%		6
2021		44	%		8

Summary of Other Income (Expense), Net

The impact of these items for the periods presented was as follows (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Foreign currency transaction gain (loss)	$	237		$	(2,445	)
Rabbi Trust Assets (loss) gain		(304	)		865
Unrealized gain on Mexican peso forward contracts		384			723
Realized gain on Mexican peso forward contracts, net		361			164
Pension and postretirement plans cost		(488	)		(483	)
Other		233			11
	$	423		$	(1,165	)

Changes in Warranty Reserve

Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Payments		Balance, End of Year
Year ended July 3, 2022	$	8,425	$	265	$	590	$	8,100
Year ended June 27, 2021	$	8,500	$	373	$	448	$	8,425

Summary of Changes in Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss (“AOCL”): The following tables summarize the changes in AOCL for the years ended July 3, 2022 and June 27, 2021 (thousands of dollars): 

	Year Ended July 3, 2022
	Foreign Currency Translation Adjustments		Retirement and Postretirement Plans			Total
Balance June 27, 2021	$	14,685	$	2,112		$	16,797
Other comprehensive loss before reclassifications		1,700		188			1,888
Income Tax		606		(43	)		563
Net other comprehensive loss before    Reclassifications		2,306		145			2,451
Reclassifications:
Actuarial losses (A)		—		(422	)		(422	)
Total reclassifications before tax		—		(422	)		(422	)
Income Tax		—		99			99
Net reclassifications		—		(323	)		(323	)
Other comprehensive loss		2,306		(178	)		2,128
Other comprehensive loss attributable
to non-controlling interest		268		—			268
Balance July 3, 2022	$	16,723	$	1,934		$	18,657

	Year Ended June 27, 2021
	Foreign Currency Translation Adjustments			Retirement and Postretirement Plans			Total
Balance June 28, 2020	$	20,136		$	1,977		$	22,113
Other comprehensive loss before reclassifications		(6,924	)		540			(6,384	)
Income Tax		(220	)		(128	)		(348	)
Net other comprehensive loss before    Reclassifications		(7,144	)		412			(6,732	)
Reclassifications:
Prior service credits (A)		—			8			8
Actuarial losses (A)		—			(369	)		(369	)
Total reclassifications before tax		—			(361	)		(361	)
Income Tax		—			84			84
Net reclassifications		—			(277	)		(277	)
Other comprehensive income		(7,144	)		135			(7,009	)
Other comprehensive income attributable
to non-controlling interest		(1,693	)		—			(1,693	)
Balance June 27, 2021	$	14,685		$	2,112		$	16,797

(A) Amounts reclassified are included in the computation of net periodic benefit cost, which is included in Other Income (Expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income. See Retirement Plans and Postretirement Costs note to these Notes to Financial Statements below.

Schedule of Unrecognized Compensation Cost

Unrecognized compensation cost as of July 3, 2022 related to restricted stock granted under the plan was as follows (thousands of dollars):

	Compensation Cost		Weighted Average Period over which Cost is to be Recognized (in years)
Restricted stock granted	$	1,374		1.0

Cash Received from Stock Option Exercises and Related Income Tax Benefit

Cash received from stock option exercises and the related income tax benefit were as follows (thousands of dollars):

Fiscal Year	Cash Received from Stock Option Exercises		Income Tax Benefit
2022	$	827	$	74
2021	$	526	$	130

Intrinsic Value of Stock Options Exercised and Fair Value Of Stock Options Vested

The intrinsic value of stock options exercised and the fair value of options vested were as follows (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Intrinsic value of options exercised	$	451	$	555
Fair value of stock options vested	$	—	$	—

Range of Options Outstanding

The range of options outstanding as of July 3, 2022 was as follows

	Number of Options Outstanding and Exercisable		Weighted Average Exercise Price Outstanding and Exercisable		Weighted Average Remaining Contractual Life Outstanding (In Years)
$25.64		4,251	$	25.64	0.13
$38.71		27,911	$	38.71	1.13
$79.73		9,010	$	79.73	2.13
		41,172	$	46.34

MEXICO

Property, Plant and Equipment

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
Gross book value	$	159,909	$	154,371
Net book value	$	64,645	$	67,348

XML

Equity Earnings of Joint Ventures (Tables) - VAST LLC

12 Months Ended

Jul. 03, 2022

Summarized Statements of Operations and Balance Sheet Data

The following are summarized statements of operations and summarized balance sheet data for VAST LLC (thousands of dollars)

	Years Ended
	July 3, 2022			June 27, 2021
Net sales	$	191,642		$	210,149
Cost of goods sold		160,886			171,930
Gross profit		30,756			38,219
Engineering, selling and administrative expense		31,887			30,605
(Loss) income from operations		(1,131	)		7,614
Other income, net		902			1,681
(Loss) income before (benefit) provision for     income taxes		(229	)		9,295
(Benefit) provision for income taxes		(766	)		1,554
Net income	$	537		$	7,741
STRATTEC’s share of VAST LLC net
income	$	179		$	2,580
Intercompany profit eliminations		2			(20	)
STRATTEC’s equity earnings of VAST LLC	$	181		$	2,560

	July 3, 2022		June 27, 2021
Cash and cash equivalents	$	21,694	$	7,623
Receivables, net		39,467		48,717
Inventories, net		26,881		27,697
Other current assets		14,574		28,592
Total current assets		102,616		112,629
Property, plant and equipment, net		70,096		69,352
Other long-term assets		16,686		17,432
Total assets	$	189,398	$	199,413
Current debt	$	388	$	4,605
Other current liabilities		87,294		91,373
Long-term debt		20,079		18,993
Other long-term liabilities		2,258		2,418
Total liabilities	$	110,019	$	117,389
Net assets	$	79,379	$	82,024
STRATTEC’s share of VAST LLC net assets	$	26,460	$	27,341

Summarize of Related Party Transaction

The following tables summarize the related party transactions with VAST LLC for the periods indicated (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Sales to VAST LLC	$	1,805	$	3,900
Purchases from VAST LLC	$	169	$	527
Expenses charged to VAST LLC	$	593	$	1,507
Expenses charged from VAST LLC	$	784	$	1,167

	July 3, 2022		June 27, 2021
Accounts receivable from VAST LLC	$	63	$	84
Accounts payable to VAST LLC	$	23	$	25

XML

Credit Facilities (Tables)

12 Months Ended

Jul. 03, 2022

Debt Disclosure [Abstract]

Schedule of Outstanding Borrowings Under the Credit Facilities

Outstanding borrowings under the credit facilities referenced in the above paragraph as of the end of 2022 and 2021 were as follows (thousands of dollars):

	July 3, 2022		June 27, 2021
STRATTEC Credit Facility	$	—	$	—
ADAC-STRATTEC Credit Facility		11,000		12,000
	$	11,000	$	12,000

Schedule of Average Outstanding Borrowings and the Weighted Average Interest Rate

Average outstanding borrowings and the weighted average interest rate under each such credit facility during 2022 and 2021 were as follows (thousands of dollars):

	Average Outstanding Borrowings				Weighted Average Interest Rate
	Years Ended				Years Ended
	July 3, 2022		June 27, 2021		July 3, 2022			June 27, 2021
STRATTEC Credit Facility	$	332	$	8,775		2.0	%		1.2	%
ADAC-STRATTEC Credit Facility	$	14,248	$	14,346		1.5	%		1.4	%

XML

Commitments and Contingencies (Tables)

12 Months Ended

Jul. 03, 2022

Commitments And Contingencies Disclosure [Abstract]

Purchase and Minimum Rental Commitments Under Non-Cancelable Operating Leases

At July 3, 2022, we had purchase commitments related to zinc and aluminum. We also had minimum rental commitments under non-cancelable operating leases with a term in excess of one year. The purchase and minimum rental commitments are payable as follows (thousands of dollars):

	Purchase		Minimum Rental
Fiscal Year	Commitments		Commitments
2023	$	5,925	$	497
2024	$	—	$	509
2025	$	—	$	522
2026	$	—	$	535
2027	$	—	$	1,299

XML

Income Taxes (Tables)

12 Months Ended

Jul. 03, 2022

Income Tax Disclosure [Abstract]

Provision (Benefit) for Income Taxes

The provision for income taxes consisted of the following (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Currently (recoverable) payable:
Federal	$	(691	)	$	557
State		161			420
Foreign		2,931			2,661
		2,401			3,638
Deferred tax provision		(1,981	)		1,473
	$	420		$	5,111

Difference Between Income Taxes Computed at the Federal Statutory Tax Rate and the Provision for Income Taxes

The items accounting for the difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes were as follows:

	Years Ended
	July 3, 2022			June 27, 2021
U.S. statutory rate		21.0	%		21.0	%
State taxes, net of Federal tax benefit		0.4			1.1
Foreign subsidiaries		8.4			1.0
Return to provision adjustment		(11.1	)		—
Global intangible low-taxed income		0.5			0.5
Research and development tax credit		(9.7	)		(2.3	)
Solar investment tax credit		(0.8	)		—
Non-controlling interest		(1.8	)		(5.9	)
Stock based compensation		(1.3	)		0.1
Other		(1.1	)		(0.9	)
		4.5	%		14.6	%

Components of Deferred Tax (Liabilities) Assets

The components of deferred tax (liabilities) assets were as follows (thousands of dollars):

	July 3, 2022			June 27, 2021
Unrecognized pension and postretirement benefit    plan liabilities	$	604		$	659
Accrued warranty		423			499
Payroll-related accruals		3,085			3,044
Stock-based compensation		360			306
Inventory reserve		1,010			964
Environmental reserve		327			327
Repair and maintenance supply parts reserve		222			284
Allowance for doubtful accounts		118			118
Lease Liability		710			799
Right of Use Assets		(710	)		(799	)
Credit carry-forwards		2,986			1,544
Postretirement obligations		(233	)		(294	)
Accumulated depreciation		(3,886	)		(4,663	)
Accrued pension obligations		504			459
Joint ventures		971			1,187
Other		446			618
	$	6,937		$	5,052

Reconciliation of the Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended July 3, 2022 and June 27, 2021 (thousands of dollars):

	Years Ended
	July 3, 2022			June 27, 2021
Unrecognized tax benefits, beginning of year	$	1,458		$	1,462
Gross increases – tax positions in prior years		13			76
Gross decreases – tax positions in prior years		(19	)		—
Gross increases – current period tax positions		241			207
Tax years closed		(379	)		(287	)
Unrecognized tax benefits, end of year	$	1,314		$	1,458

XML

Retirement Plans and Postretirement Costs (Tables)

12 Months Ended

Jul. 03, 2022

Compensation And Retirement Disclosure [Abstract]

Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax

Amounts included in accumulated other comprehensive loss, net of tax, at July 3, 2022, which have not yet been recognized in net periodic benefit cost were as follows (thousands of dollars):

	SERP		Postretirement
Net actuarial loss	$	777	$	1,157

Amounts Included in Accumulated Other Comprehensive Loss Expected to be Recognized, Net of Tax

Unrecognized net actuarial losses included in accumulated other comprehensive loss at July 3, 2022 which are expected to be recognized in net periodic benefit cost (credit) in fiscal 2023, net of tax, for the SERP and postretirement plans are as follows (thousands of dollars):

	SERP		Postretirement
Net actuarial loss	$	94	$	205

Summary of Supplemental Executive Retirement Plan and Postretirement Plans Income and Expense

The following tables summarize the SERP and postretirement plans’ income and expense, funded status and actuarial assumptions for the years indicated (thousands of dollars). We use a June 30 measurement date for our SERP and postretirement plans.

	SERP Benefits				Postretirement Benefits
	Years Ended				Years Ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
COMPONENTS OF NET PERIODIC BENEFIT    COST (CREDIT):
Service cost	$	63	$	63	$	12	$	13
Interest cost		53		41		13		16
Plan settlements		—		65		—		—
Amortization of prior service cost (credit)		—		—		—		(8	)
Amortization of unrecognized net loss		86		10		336		359
Net periodic benefit cost (credit)	$	202	$	179	$	361	$	380

WEIGHTED-AVERAGE ASSUMPTIONS:
Benefit Obligations:
Discount rate		4.26	%		2.06	%		4.23	%		2.01	%
Rate of compensation increases		4.0	%		3.0	%	n/a			n/a
Net Periodic Benefit Cost:
Discount rate		2.06	%		2.33	%		2.01	%		2.07	%
Rate of compensation increases		3.0	%		3.0	%	n/a			n/a
CHANGE IN PROJECTED BENEFIT    OBLIGATION:
Benefit obligation at beginning of year	$	2,797		$	2,293		$	709		$	821
Service cost		63			63			12			13
Interest cost		53			41			13			16
Actuarial loss (gain)		265			631			(77	)		(26	)
Benefits paid		(14	)		(231	)		(99	)		(115	)
Benefit obligation at end of year	$	3,164		$	2,797		$	558		$	709
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	—		$	—		$	—		$	—
Employer contribution		14			231			99			115
Benefits paid		(14	)		(231	)		(99	)		(115	)
Fair value of plan assets at end of year	$	—		$	—		$	—		$	—
Funded status – accrued benefit obligations	$	(3,164	)	$	(2,797	)	$	(558	)	$	(709	)
AMOUNTS RECOGNIZED IN CONSOLIDATED    BALANCE SHEETS:
Accrued payroll and benefits (current liabilities)		(1,905	)		(463	)		(95	)		(110	)
Accrued benefit obligations (long-term liabilities)		(1,259	)		(2,334	)		(463	)		(599	)
Net amount recognized	$	(3,164	)	$	(2,797	)	$	(558	)	$	(709	)
CHANGES IN PLAN ASSETS AND BENEFIT    OBLIGATIONS RECOGNIZED IN OTHER    COMPREHENSIVE INCOME:
Net periodic benefit cost	$	202		$	179		$	361		$	380
Net actuarial loss (gain)		265			631			(77	)		(26	)
Settlement loss		—			(65	)		—			—
Amortization of prior service credits		—			—			—			8
Amortization of unrecognized net loss		(86	)		(10	)		(336	)		(359	)
Total recognized in other comprehensive    (income) loss, before tax		179			556			(413	)		(377	)
Total recognized in net periodic benefit    cost and other comprehensive loss,    before tax	$	381		$	735		$	(52	)	$	3

Expected Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid during the fiscal years noted below (thousands of dollars):

	SERP Benefits		Postretirement Benefits
2023	$	1,946	$	96
2024	$	14	$	98
2025	$	14	$	67
2026	$	14	$	40
2027	$	14	$	38
2028-2032	$	2,373	$	233

Schedule of 401(k) Plan Contribution

Our contributions to the 401(k) Plan were as follows (thousands of dollars):

	Years Ended
	July 3, 2022		June 27, 2021
Company contributions	$	1,964	$	1,706

XML

Earnings Per Share (Tables)

12 Months Ended

Jul. 03, 2022

Earnings Per Share [Abstract]

Reconciliation of the Components of Basic and Diluted Per Share

A reconciliation of the components of the basic and diluted per share computations follows (in thousands, except per share amounts):

	Years Ended
	July 3, 2022		June 27, 2021
Net income attributable to STRATTEC	$	7,032	$	22,532
Weighted average shares of common stock outstanding		3,861		3,788
Incremental shares – stock based compensation		49		64
Diluted weighted average shares of common stock    outstanding		3,910		3,852
Basic earnings per share	$	1.82	$	5.95
Diluted earnings per share	$	1.80	$	5.85

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

Potentially dilutive common shares that were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive were as follows:

Years Ended	Number of Options Excluded
July 3, 2022		36,921
June 27, 2021		9,010

XML

Stock Option and Purchase Plans (Tables)

12 Months Ended

Jul. 03, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Option Activity Under Our Stock Incentive Plan

A summary of stock option activity under our stock incentive plan was as follows:

				Weighted Average		Weighted Average Remaining Contractual		Aggregate Intrinsic Value
	Shares			Exercise Price		Term (in years)		(in thousands)
Balance at June 28, 2020		90,860		$	35.88
Exercised		(18,236	)	$	28.85
Balance at June 27, 2021		72,624		$	37.65
Exercised		(31,452	)	$	26.28
Balance at July 3, 2022		41,172		$	46.34		1.2	$	31
Exercisable as of:
July 3, 2022		41,172		$	46.34		1.2	$	31
June 27, 2021		72,624		$	37.65		1.5	$	790

Summary of Restricted Stock Activity Under Our Stock Incentive Plan

A summary of restricted stock activity under our stock incentive plan was as follows:

				Weighted Average
				Grant Date
	Shares			Fair Value
Nonvested Balance at June 28, 2020		69,394		$	30.59
Granted		48,300		$	21.20
Vested		(34,669	)	$	34.95
Forfeited		(1,050	)	$	22.84
Nonvested Balance at June 27, 2021		81,975		$	23.31
Granted		43,875		$	42.50
Vested		(38,000	)	$	25.56
Forfeited		(2,750	)	$	32.70
Nonvested Balance at July 3, 2022		85,100		$	31.89

XML

Export Sales (Tables)

12 Months Ended

Jul. 03, 2022

Segment Reporting [Abstract]

Schedule of Sales to Locations Outside of the United States

Total export sales, sales from the United States to locations outside of the United States, are summarized as follows (thousands of dollars and percent of total net sales): 

	Years Ended
	July 3, 2022			June 27, 2021
	Net Sales		%	Net Sales		%
Export sales	$	122,293	27%	$	130,260	27%

XML

Product Sales (Tables)

12 Months Ended

Jul. 03, 2022

Segment Reporting [Abstract]

Schedule of Product Sales

Sales by product group were as follows (thousands of dollars and percent of total net sales):

	Years Ended
	July 3, 2022					June 27, 2021
	Net Sales		%			Net Sales		%
Door handles & exterior trim	$	111,805		25	%	$	126,218		26	%
Keys & locksets		107,274		24			116,572		24
Power access		95,662		21			95,245		20
Latches		48,947		11			51,211		10
Aftermarket & OE service		44,826		10			47,138		10
Driver controls		34,442		7			40,031		8
Other		9,309		2			8,880		2
	$	452,265		100	%	$	485,295		100	%

XML

Sales and Receivable Concentration (Tables)

12 Months Ended

Jul. 03, 2022

Segment Reporting Information Receivable [Abstract]

Sales to Largest Customers

Sales to our largest customers were as follows (thousands of dollars and percent of total net sales):

	Years Ended
	July 3, 2022					June 27, 2021
	Net Sales		%			Net Sales		%
General Motors Company	$	130,184		29	%	$	146,547		30	%
Stellantis (Formerly Fiat Chrysler Automobiles)		83,255		18			85,629		18
Ford Motor Company		79,735		18			67,670		14
	$	293,174		65	%	$	299,846		62	%

Receivables from Largest Customers

Receivables from our largest customers were as follows (thousands of dollars and percent of gross receivables):

	July 3, 2022					June 27, 2021
	Receivables		%			Receivables		%
General Motors Company	$	24,594		32	%	$	22,934		32	%
Stellantis (Formerly Fiat Chrysler Automobiles)		12,845		17			11,938		17
Ford Motor Company		10,602		14			8,204		12
	$	48,041		63	%	$	43,076		61	%

XML

Organization and Summary of Significant Accounting Policies (Details Textual)	12 Months Ended
	Jul. 03, 2022 USD ($) Subsidiary Joint_Venture Segment Associates shares	Jun. 27, 2021 USD ($) shares
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of reportable segments | Segment	1
Fiscal year duration	371 days	364 days
Rabbi Trust Assets	$ 3,300,000	$ 3,600,000
Allowance for doubtful accounts receivable	500,000	500,000
Property, plant and equipment impairment	$ 0	0
Operating lease, existence of option to extend	true
Operating lease, renewal Term	5 years
Operating lease, expiration term	2023-10
Operating lease expense	$ 484,000	473,000
Research and development expenditures	$ 12,200,000	$ 10,800,000
Options, granted | shares	0	0
Employee Stock Option
Organization And Summary Of Significant Accounting Policies [Line Items]
Options expires after date of grant	10 years
Omnibus Stock Incentive Plan
Organization And Summary Of Significant Accounting Policies [Line Items]
Share based compensation arrangement by share based payment award number of shares authorized | shares	2,000,000
Shares of common stock available for grant | shares	177,959
Minimum
Organization And Summary Of Significant Accounting Policies [Line Items]
Payment generally occurs after shipment date	45 days
Minimum | Employee Stock Option
Organization And Summary Of Significant Accounting Policies [Line Items]
Vesting period after the date of grant	1 year
Minimum | Restricted stock
Organization And Summary Of Significant Accounting Policies [Line Items]
Vesting period after the date of grant	1 year
Minimum | New Vehicle Production | Long-term Supply Agreements
Organization And Summary Of Significant Accounting Policies [Line Items]
Production period	4 years
Minimum | Service Parts Production | Long-term Supply Agreements
Organization And Summary Of Significant Accounting Policies [Line Items]
Production period	10 years
Maximum
Organization And Summary Of Significant Accounting Policies [Line Items]
Payment generally occurs after shipment date	90 days
Maximum | Employee Stock Option
Organization And Summary Of Significant Accounting Policies [Line Items]
Vesting period after the date of grant	4 years
Maximum | Restricted stock
Organization And Summary Of Significant Accounting Policies [Line Items]
Vesting period after the date of grant	3 years
Maximum | New Vehicle Production | Long-term Supply Agreements
Organization And Summary Of Significant Accounting Policies [Line Items]
Production period	6 years
Maximum | Service Parts Production | Long-term Supply Agreements
Organization And Summary Of Significant Accounting Policies [Line Items]
Production period	15 years
Other Current Assets
Organization And Summary Of Significant Accounting Policies [Line Items]
Rabbi Trust Assets	$ 863,000
Other Noncurrent Assets
Organization And Summary Of Significant Accounting Policies [Line Items]
Rabbi Trust Assets	$ 2,400,000	$ 3,600,000
Milwaukee, WI Facility
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of full time associates | Associates	3,373
Number of associates represented by labor union | Associates	180
Percentage of total STRATTEC associates represented by labor union.	5.30%
Mexico Facility
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of associates represented by labor union | Associates	104
Percentage of total STRATTEC associates represented by labor union.	3.10%
VAST LLC | CHINA
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of wholly owned subsidiaries | Subsidiary	4
VAST LLC | BRAZIL
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of wholly owned subsidiaries | Subsidiary	1
VAST LLC | INDIA
Organization And Summary Of Significant Accounting Policies [Line Items]
Number of joint venture entities | Joint_Venture	1

XML

Organization and Summary of Significant Accounting Policies - Schedule of Quantification of Outstanding Mexican Peso Forward Contracts (Details) - Buy MXP/Sell USD	12 Months Ended
	Jul. 03, 2022 USD ($) $ / $
Derivative [Line Items]
Derivative, Effective Dates, Inception	Jul. 19, 2022
Derivative, Effective Dates, Maturity	Jun. 13, 2023
Derivative, Notional Amount	$ 9,000,000
Derivative, Average Forward Contractual Exchange Rate | $ / $	22.42
Derivative, Fair Value	$ 627,000

XML

Organization and Summary of Significant Accounting Policies - Fair Market Value of All Outstanding Peso Forward Contracts (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Other Current Assets | Mexican Peso Forward Contracts
Not designated as hedging instruments:
Fair market value of derivative instruments	$ 627	$ 243

XML

Organization and Summary of Significant Accounting Policies - Pre-Tax Effects of the Peso Forward Contracts (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Pre-tax effects of the Mexican peso forward contracts
Unrealized gain	$ 384	$ 723
Not Designated as Hedging Instrument | Other Expense, Net
Pre-tax effects of the Mexican peso forward contracts
Realized gain	434	164
Realized (loss)	(73)
Unrealized gain	$ 384	$ 723

XML

Organization and Summary of Significant Accounting Policies -Summary of Financial Assets and Liabilities at Fair Value on Recurring Basis (Details) - Fair Value Measurements Recurring - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	$ 3,907	$ 3,826
Fixed Income Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	1,023	960
Stock Index Funds | Small Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	142	384
Stock Index Funds | Mid Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	291	377
Stock Index Funds | Large Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	416	756
Stock Index Funds | International
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	447	1,104
Cash and Cash Equivalents
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	961	2
Mexican Peso Forward Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	627	243
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	2,319	3,581
Level 1 | Fixed Income Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	1,023	960
Level 1 | Stock Index Funds | Small Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	142	384
Level 1 | Stock Index Funds | Mid Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	291	377
Level 1 | Stock Index Funds | Large Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	416	756
Level 1 | Stock Index Funds | International
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	447	1,104
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	1,588	245
Level 2 | Cash and Cash Equivalents
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	961	2
Level 2 | Mexican Peso Forward Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	$ 627	$ 243

XML

Organization and Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021	Jun. 28, 2020
Inventories
Finished products	$ 19,499	$ 20,633
Work in process	18,263	14,707
Purchased materials	48,209	40,900
Inventory, Gross, Total	85,971	76,240
Excess and obsolete reserve	(5,489)	(5,380)	$ (4,890)
Inventories, net	$ 80,482	$ 70,860

XML

Organization and Summary of Significant Accounting Policies - Activity Related to the Excess and Obsolete Inventory Reserve (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Activity related to the excess and obsolete inventory reserve
Balance, Beginning of Year	$ 5,380	$ 4,890
Provision Charged to Expense	962	973
Amounts Written Off	853	483
Balance, End of Year	$ 5,489	$ 5,380

XML

Organization and Summary of Significant Accounting Policies - Property, Plant and Equipment, Useful Lives of Assets (Details)	12 Months Ended
	Jul. 03, 2022
Land improvements
Estimated useful lives of the assets
Expected Useful Lives	20 years
Buildings and improvements | Minimum
Estimated useful lives of the assets
Expected Useful Lives	15 years
Buildings and improvements | Maximum
Estimated useful lives of the assets
Expected Useful Lives	35 years
Machinery and equipment | Minimum
Estimated useful lives of the assets
Expected Useful Lives	3 years
Machinery and equipment | Maximum
Estimated useful lives of the assets
Expected Useful Lives	15 years

XML

Organization and Summary of Significant Accounting Policies - Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Property, plant and equipment
Gross	$ 278,249	$ 270,429
Less: accumulated depreciation	(186,520)	(174,028)
Total	91,729	96,401
Land and improvements
Property, plant and equipment
Gross	6,041	5,963
Buildings and improvements
Property, plant and equipment
Gross	37,158	36,325
Machinery and equipment
Property, plant and equipment
Gross	$ 235,050	$ 228,141

XML

Organization and Summary of Significant Accounting Policies - Schedule of Depreciation Expenses (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Depreciation [Abstract]
Depreciation Expense	$ 19,379	$ 19,786

XML

Organization and Summary of Significant Accounting Policies - Gross and Net Book Value of Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Gross and net book value of property plant and equipment
Property, plant and equipment, gross	$ 278,249	$ 270,429
Property, plant and equipment, net	91,729	96,401
MEXICO
Gross and net book value of property plant and equipment
Property, plant and equipment, gross	159,909	154,371
Property, plant and equipment, net	$ 64,645	$ 67,348

XML

Organization and Summary of Significant Accounting Policies - Schedule of Operating Lease Asset and Obligation Included in Condensed Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Right-of-Use Asset Under Operating Lease:
Other Long-Term Assets	$ 3,021	$ 3,399
Operating Lease Right Of Use Asset Statement Of Financial Position [Extensible List]	OTHER LONG-TERM ASSETS	OTHER LONG-TERM ASSETS
Lease Obligation Under Operating Lease:
Current Liabilities: Accrued Liabilities: Other	$ 403	$ 378
Operating Lease Liability Current Statement Of Financial Position [Extensible List]	Other	Other
Other Long-Term Liabilities	$ 2,618	$ 3,021
Operating Lease Liability Noncurrent Statement Of Financial Position [Extensible List]	OTHER LONG-TERM LIABILITIES	OTHER LONG-TERM LIABILITIES
Operating Lease, Liability	$ 3,021	$ 3,399

XML

Organization and Summary of Significant Accounting Policies - Schedule of Future Minimum Lease Payments Under Non-Cancelable Lease Including Options to Extend (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Future minimum lease payments
2023	$ 497
2024	509
2025	522
2026	535
Thereafter	1,299
Total Future Minimum Lease Payments	3,362
Less: Imputed Interest	(341)
Total Lease Obligations	$ 3,021	$ 3,399

XML

Organization and Summary of Significant Accounting Policies - Schedule of Cash Flow Information Related to Operating Lease (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Operating Cash Flows:
Cash Paid Related to Operating Lease Obligation	$ 484	$ 473

XML

Organization and Summary of Significant Accounting Policies - Schedule of Weighted Average Remaining Lease Term and Discount Rate for Operating Lease (Details)	Jul. 03, 2022	Jun. 27, 2021
Weighted average remaining lease term and discount rate
Weighted Average Remaining Lease Term, (in years)	6 years 3 months 18 days	7 years 3 months 18 days
Weighted Average Discount Rate	3.30%	3.30%

XML

Organization and Summary of Significant Accounting Policies - Inventory Purchase from Major Suppliers (Details) - Supplier	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Supplier Concentrations
Percentage of inventory purchases from major suppliers	38.00%	44.00%
Number of major Suppliers	6	8

XML

Organization and Summary of Significant Accounting Policies - Summary of Other Income (Expense), Net (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Other Income and Expenses [Abstract]
Foreign currency transaction gain (loss)	$ 237	$ (2,445)
Rabbi Trust Assets (loss) gain	(304)	865
Unrealized gain on Mexican peso forward contracts	384	723
Realized gain on Mexican peso forward contracts, net	361	164
Pension and postretirement plans cost	(488)	(483)
Other	233	11
Other Income (Expense), net	$ 423	$ (1,165)

XML

Organization and Summary of Significant Accounting Policies - Changes in Warranty Reserve (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Changes in warranty reserve
Balance, Beginning of Year	$ 8,425	$ 8,500
Provision Charged to Expense	265	373
Payments	590	448
Balance, End of Year	$ 8,100	$ 8,425

XML

Organization and Summary of Significant Accounting Policies - Summary of Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	$ (213,433)	$ (175,441)
Other comprehensive loss before reclassifications	1,888	(6,384)
Other comprehensive loss before reclassifications, Income Tax	563	(348)
Net other comprehensive loss before Reclassifications	2,451	(6,732)
Reclassifications:
Prior service credits		8
Actuarial losses	(422)	(369)
Total reclassifications before tax	(422)	(361)
Retirement and Postretirement Plans Reclassifications, Income Tax	99	84
Net reclassifications	(323)	(277)
Other Comprehensive (Income) Loss	2,128	(7,009)
Ending balance	(220,413)	(213,433)
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	14,685	20,136
Other comprehensive loss before reclassifications	1,700	(6,924)
Other comprehensive loss before reclassifications, Income Tax	606	(220)
Net other comprehensive loss before Reclassifications	2,306	(7,144)
Reclassifications:
Other Comprehensive (Income) Loss	2,306	(7,144)
Other comprehensive loss (income) attributable to non-controlling interest	268	(1,693)
Ending balance	16,723	14,685
Retirement and Postretirement Benefit Plans
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	2,112	1,977
Other comprehensive loss before reclassifications	188	540
Other comprehensive loss before reclassifications, Income Tax	(43)	(128)
Net other comprehensive loss before Reclassifications	145	412
Reclassifications:
Prior service credits		8
Actuarial losses	(422)	(369)
Total reclassifications before tax	(422)	(361)
Retirement and Postretirement Plans Reclassifications, Income Tax	99	84
Net reclassifications	(323)	(277)
Other Comprehensive (Income) Loss	(178)	135
Ending balance	1,934	2,112
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	16,797	22,113
Reclassifications:
Ending balance	18,657	16,797
AOCI Including Portion Attributable to Noncontrolling Interest
Reclassifications:
Other Comprehensive (Income) Loss	2,128	(7,009)
AOCI Attributable to Noncontrolling Interest
Reclassifications:
Other comprehensive loss (income) attributable to non-controlling interest	$ 268	$ (1,693)

XML

Organization and Summary of Significant Accounting Policies - Schedule of Unrecognized Compensation Cost (Details) - Restricted stock $ in Thousands	12 Months Ended
	Jul. 03, 2022 USD ($)
Unrecognized compensation cost related to restricted stock granted under the plan
Compensation Cost	$ 1,374
Weighted Average Period Over Which Cost is to be Recognized (in years)	1 year

XML

Organization and Summary of Significant Accounting Policies - Cash Received from Stock Option Exercises and Related Income Tax Benefit (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Cash Received From Stock Option Exercises And Related Income Tax Benefit
Cash Received from Stock Option Exercises	$ 827	$ 526
Income Tax Benefit	$ 74	$ 130

XML

Organization and Summary of Significant Accounting Policies - Intrinsic Value of Stock Options Exercised and Fair Value Of Stock Options Vested (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Intrinsic value of stock options exercised and the fair value of stock options vested
Intrinsic value of options exercised	$ 451	$ 555

XML

Organization and Summary of Significant Accounting Policies - Range of Options Outstanding (Details)	12 Months Ended
	Jul. 03, 2022 $ / shares shares
Range of options outstanding
Number of Options Outstanding and Exercisable | shares	41,172
Weighted Average Exercise Price Outstanding and Exercisable	$ 46.34
Exercise Price Range One
Range of options outstanding
Number of Options Outstanding and Exercisable | shares	4,251
Weighted Average Exercise Price Outstanding and Exercisable	$ 25.64
Weighted Average Remaining Contractual Life Outstanding (In Years)	1 month 17 days
Exercise Price Range	$ 25.64
Exercise Price Range Two
Range of options outstanding
Number of Options Outstanding and Exercisable | shares	27,911
Weighted Average Exercise Price Outstanding and Exercisable	$ 38.71
Weighted Average Remaining Contractual Life Outstanding (In Years)	1 year 1 month 17 days
Exercise Price Range	$ 38.71
Exercise Price Range Three
Range of options outstanding
Number of Options Outstanding and Exercisable | shares	9,010
Weighted Average Exercise Price Outstanding and Exercisable	$ 79.73
Weighted Average Remaining Contractual Life Outstanding (In Years)	2 years 1 month 17 days
Exercise Price Range	$ 79.73

XML

Investment in Joint Ventures and Majority Owned Subsidiaries (Details Textual) - USD ($)	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Schedule Of Equity Method Investments [Line Items]
Equity (loss) earnings of joint ventures	$ 181,000	$ 2,560,000
Payments to acquire interest in joint venture	$ 150,000	$ 100,000
Strattec Power Access Llc | STRATTEC
Schedule Of Equity Method Investments [Line Items]
Percentage ownership interest in less than wholly owned consolidated subsidiary	80.00%	80.00%
Majority owned subsidiary, impact on net income	$ 5,300,000	$ 6,400,000
Majority owned subsidiary, impact on net sales	95,700,000	95,200,000
Strattec Power Access Llc | WITTE
Schedule Of Equity Method Investments [Line Items]
Purchases	918,000	874,000
Royalties on product sales	889,000	1,100,000
Outstanding payable balance	$ 459,000	$ 427,000
Percentage ownership interest in less than wholly owned consolidated subsidiary	20.00%	20.00%
ADAC-STRATTEC LLC | STRATTEC
Schedule Of Equity Method Investments [Line Items]
Percentage ownership interest in less than wholly owned consolidated subsidiary	51.00%	51.00%
Majority owned subsidiary, impact on net income	$ (100,000)	$ 4,100,000
Majority owned subsidiary, impact on net sales	111,800,000	126,200,000
ADAC-STRATTEC LLC | ADAC
Schedule Of Equity Method Investments [Line Items]
Outstanding payable balance	$ 1,900,000	$ 1,900,000
Percentage ownership interest in less than wholly owned consolidated subsidiary	49.00%	49.00%
Engineering, research, design and sales fee	$ 7,800,000	$ 8,800,000
Sales	9,100,000	11,600,000
Outstanding receivable balance	1,600,000	1,500,000
VAST LLC | BRAZIL
Schedule Of Equity Method Investments [Line Items]
Payments to acquire interest in joint venture	$ 450,000	300,000
VAST LLC | MINDA-VAST ACCESS SYSTEMS
Schedule Of Equity Method Investments [Line Items]
Percentage ownership interest in equity method investment	50.00%
VAST LLC | STRATTEC
Schedule Of Equity Method Investments [Line Items]
Percentage ownership interest in equity method investment	33.33%
Equity (loss) earnings of joint ventures	$ 181,000	2,600,000
Payments to acquire interest in joint venture	$ 150,000	$ 100,000
VAST LLC | ADAC
Schedule Of Equity Method Investments [Line Items]
Percentage ownership interest in equity method investment	33.30%
VAST LLC | WITTE
Schedule Of Equity Method Investments [Line Items]
Percentage ownership interest in equity method investment	33.30%

XML

Equity Earnings of Joint Ventures (Details Textual)	Jul. 03, 2022
VAST LLC | STRATTEC
Schedule Of Equity Method Investments [Line Items]
STRATTEC's percentage ownership in joint venture	33.33%

XML

Equity Earnings of Joint Ventures - Summarized Statements of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Summarized statements of operations
Net sales	$ 452,265	$ 485,295
Cost of goods sold	396,249	406,637
GROSS PROFIT	56,016	78,658
Engineering, selling and administrative expense	47,119	44,743
(Loss) income from operations	8,897	33,915
Other income, net	423	(1,165)
(Loss) income before (benefit) provision for income taxes	9,280	35,008
Provision for income taxes	420	5,111
NET INCOME	8,860	29,897
STRATTEC’s equity earnings of VAST LLC	181	2,560
VAST LLC | Equity Method Investment, Nonconsolidated Investee or Group of Investees
Summarized statements of operations
Net sales	191,642	210,149
Cost of goods sold	160,886	171,930
GROSS PROFIT	30,756	38,219
Engineering, selling and administrative expense	31,887	30,605
(Loss) income from operations	(1,131)	7,614
Other income, net	902	1,681
(Loss) income before (benefit) provision for income taxes	(229)	9,295
Provision for income taxes	(766)	1,554
NET INCOME	537	7,741
STRATTEC's Share of VAST LLC Net Income	179	2,580
Intercompany profit eliminations	2	(20)
STRATTEC’s equity earnings of VAST LLC	$ 181	$ 2,560

XML

Equity Earnings of Joint Ventures - Summarized Statements Balance Sheet (Details) - VAST LLC - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Summarized balance sheets
Cash and cash equivalents	$ 21,694	$ 7,623
Receivables, net	39,467	48,717
Inventories, net	26,881	27,697
Other current assets	14,574	28,592
Total current assets	102,616	112,629
Property, plant and equipment, net	70,096	69,352
Other long-term assets	16,686	17,432
Total assets	189,398	199,413
Current debt	388	4,605
Other current liabilities	87,294	91,373
Long-term debt	20,079	18,993
Other long-term liabilities	2,258	2,418
Total liabilities	110,019	117,389
Net assets	79,379	82,024
STRATTEC’s share of VAST LLC net assets	$ 26,460	$ 27,341

XML

Equity Earnings of Joint Ventures - Summarize of Related Party Transaction (Details) - VAST LLC - Equity Method Investee - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Schedule Of Equity Method Investments [Line Items]
Sales to VAST LLC	$ 1,805	$ 3,900
Purchases from VAST LLC	169	527
Expenses charged to VAST LLC	593	1,507
Expenses charged from VAST LLC	784	1,167
Accounts receivable from VAST LLC	63	84
Accounts payable to VAST LLC	$ 23	$ 25

XML

Credit Facilities (Details Textual) - USD ($)	11 Months Ended	12 Months Ended	13 Months Ended
	May 31, 2021	Jul. 03, 2022	Jul. 03, 2022
Line Of Credit Facility [Line Items]
Interest rate on borrowings under the credit facility		the London Interbank Offering Rate (“LIBOR”) plus 1.25 percent or the bank’s prime rate.
Interest rate - percentage points added to LIBOR - on borrowings under credit facility		1.25%
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Secured revolving credit facility		$ 40,000,000	$ 40,000,000
Credit facility maturity date		Aug. 01, 2024
Interest rate on borrowings under the credit facility	the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate.		the London Interbank Offering Rate (“LIBOR”) plus 1.25 percent or the bank’s prime rate.
Interest rate - percentage points added to LIBOR - on borrowings under credit facility	1.00%		1.25%
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Secured revolving credit facility		$ 25,000,000	$ 25,000,000
Credit facility maturity date		Aug. 01, 2024
Interest rate on borrowings under the credit facility		LIBOR plus 1.25 percent or the bank’s prime rate.
Interest rate - percentage points added to LIBOR - on borrowings under credit facility		1.25%

XML

Credit Facilities - Schedule of Outstanding Borrowings Under the Credit Facilities (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Line Of Credit Facility [Line Items]
Outstanding Borrowing	$ 11,000	$ 12,000
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Outstanding Borrowing	$ 11,000	$ 12,000

XML

Credit Facilities - Schedule of Average Outstanding Borrowings and the Weighted Average Interest Rate (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Average Outstanding Borrowings	$ 332	$ 8,775
Weighted Average Interest Rate	2.00%	1.20%
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Average Outstanding Borrowings	$ 14,248	$ 14,346
Weighted Average Interest Rate	1.50%	1.40%

XML

Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Commitments And Contingencies Disclosure [Abstract]
Environmental	$ 1,390	$ 1,390

XML

Commitments and Contingencies - Purchase and Minimum Rental Commitments Under Non-Cancelable Operating Leases (Details) $ in Thousands	Jul. 03, 2022 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2023	$ 497
2024	509
2025	522
2026	535
Minimum rental commitments, 2027	1,299
Purchase commitments, 2023	$ 5,925

XML

Income Taxes - Provision (Benefit) for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Currently (recoverable) payable:
Federal	$ (691)	$ 557
State	161	420
Foreign	2,931	2,661
Total current income tax expense	2,401	3,638
Deferred tax provision	(1,981)	1,473
Total tax provision	$ 420	$ 5,111

XML

Income Taxes - Difference Between Income Taxes Computed at the Federal Statutory Tax Rate and the Provision for Income Taxes (Details)	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes
U.S. statutory rate	21.00%	21.00%
State taxes, net of Federal tax benefit	0.40%	1.10%
Foreign subsidiaries	8.40%	1.00%
Return to provision adjustment	(11.10%)
Global intangible low-taxed income	0.50%	0.50%
Research and development tax credit	(9.70%)	(2.30%)
Solar investment tax credit	(0.80%)
Non-controlling interest	(1.80%)	(5.90%)
Stock based compensation	(1.30%)	0.10%
Other	(1.10%)	(0.90%)
Total	4.50%	14.60%

XML

Income Taxes - Components of Deferred Tax (Liabilities) Assets (Details) - USD ($) $ in Thousands	Jul. 03, 2022	Jun. 27, 2021
Income Tax Disclosure [Abstract]
Unrecognized pension and postretirement benefit plan liabilities	$ 604	$ 659
Accrued warranty	423	499
Payroll-related accruals	3,085	3,044
Stock-based compensation	360	306
Inventory reserve	1,010	964
Environmental reserve	327	327
Repair and maintenance supply parts reserve	222	284
Allowance for doubtful accounts	118	118
Lease Liability	710	799
Right of Use Assets	(710)	(799)
Credit carry-forwards	2,986	1,544
Postretirement obligations	(233)	(294)
Accumulated depreciation	(3,886)	(4,663)
Accrued pension obligations	504	459
Joint ventures	971	1,187
Other	446	618
Deferred tax assets, net	$ 6,937	$ 5,052

XML

Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021	Jun. 28, 2020
Income Tax [Line Items]
Federal operating loss and credit carry-forwards	$ 2,800,000
State operating loss and credit carry-forwards	192,000
Valuation allowance	158,000
Foreign income before income taxes	8,600,000	$ 5,100,000
Total liability for unrecognized tax benefits including interest	1,500,000	1,600,000
Unrecognized tax benefits	1,314,000	1,458,000	$ 1,462,000
Unrecognized tax benefits, accrued interest	137,000	146,000
Unrecognized tax benefits, would effect tax rate	$ 1,000,000.0	$ 1,100,000
Earliest Tax Year | Federal
Income Tax [Line Items]
Expiration year of operating loss and credit carry-forwards	2031
Earliest Tax Year | State
Income Tax [Line Items]
Expiration year of operating loss and credit carry-forwards	2025
Latest Tax Year | Federal
Income Tax [Line Items]
Expiration year of operating loss and credit carry-forwards	2040
Latest Tax Year | State
Income Tax [Line Items]
Expiration year of operating loss and credit carry-forwards	2031

XML

Income Taxes - Reconciliation of the Beginning and Ending Amount of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Reconciliation of the beginning and ending amount of unrecognized tax benefits
Unrecognized tax benefits, beginning of year	$ 1,458	$ 1,462
Gross increases – tax positions in prior years	13	76
Gross decreases – tax positions in prior years	(19)
Gross increases – current period tax positions	241	207
Tax years closed	(379)	(287)
Unrecognized tax benefits, end of year	$ 1,314	$ 1,458

XML

Retirement Plans and Postretirement Costs (Details Textual) - USD ($)	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021	Jun. 28, 2020
Defined Benefit Plan Disclosure [Line Items]
Rabbi Trust Assets	$ 3,300,000	$ 3,600,000
Postretirement plan annual benefit limit for future eligible retirees	$ 4,000
Other postretirement benefits maximum benefit period	5 years
Health care cost trend rate for next fiscal year	5.60%
Ultimate health care cost trend rate	3.00%
401(K) Plan
Defined Benefit Plan Disclosure [Line Items]
Percent of each dollar of eligible employee contributions matched by employer	100.00%
Employer matching contribution to employee up to participant's eligible contribution	5.00%
Supplemental Employee Retirement Plan, Defined Benefit
Defined Benefit Plan Disclosure [Line Items]
Percentage of participant's base salary received as Supplemental Retirement Benefits	8.00%
Vesting period, SERP	5 years
Projected benefit obligation	$ 3,164,000	2,797,000	$ 2,293,000
Accumulated benefit obligation	2,800,000	2,600,000
Expected employer contributions in next fiscal year	1,900,000
Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Projected benefit obligation	558,000	$ 709,000	$ 821,000
Expected employer contributions in next fiscal year	$ 96,000

XML

Retirement Plans and Postretirement Costs - Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax (Details) $ in Thousands	Jul. 03, 2022 USD ($)
SERP
Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax
Net actuarial loss	$ 777
Postretirement
Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax
Net actuarial loss	$ 1,157

XML

Retirement Plans and Postretirement Costs - Amounts Included in Accumulated Other Comprehensive Loss Expected to be Recognized, Net of Tax (Details) $ in Thousands	Jul. 03, 2022 USD ($)
SERP
Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax
Net actuarial loss	$ 94
Postretirement
Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax
Net actuarial loss	$ 205

XML

Retirement Plans and Postretirement Costs - Summary of Supplemental Executive Retirement Plan and Postretirement Plans Income and Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME:
Amortization of prior service credits		$ 8
Amortization of unrecognized net loss	$ (422)	(369)
SERP
COMPONENTS OF NET PERIODIC BENEFIT COST (CREDIT):
Service cost	63	63
Interest cost	53	41
Plan settlements		65
Amortization of unrecognized net loss	86	10
Net periodic benefit cost (credit)	$ 202	$ 179
Benefit Obligations:
Benefit Obligations, Discount rate	4.26%	2.06%
Benefit Obligations, Rate of compensation increases	4.00%	3.00%
Net Periodic Benefit Cost:
Net Periodic Benefit Cost, Discount rate	2.06%	2.33%
Benefit Obligations, Rate of compensation increases	3.00%	3.00%
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$ 2,797	$ 2,293
Service cost	63	63
Interest cost	53	41
Actuarial loss (gain)	265	631
Benefits paid	(14)	(231)
Benefit obligation at end of year	3,164	2,797
CHANGE IN PLAN ASSETS:
Employer contribution	14	231
Benefits paid	(14)	(231)
Funded status – accrued benefit obligations	(3,164)	(2,797)
AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS:
Accrued payroll and benefits (current liabilities)	(1,905)	(463)
Accrued benefit obligations (long-term liabilities)	(1,259)	(2,334)
Net amount recognized	(3,164)	(2,797)
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME:
Net periodic benefit cost	202	179
Net actuarial loss (gain)	265	631
Settlement loss		(65)
Amortization of unrecognized net loss	(86)	(10)
Total recognized in other comprehensive (income) loss, before tax	179	556
Total recognized in net periodic benefit cost and other comprehensive loss, before tax	381	735
Postretirement Benefits
COMPONENTS OF NET PERIODIC BENEFIT COST (CREDIT):
Service cost	12	13
Interest cost	13	16
Amortization of prior service cost (credit)		(8)
Amortization of unrecognized net loss	336	359
Net periodic benefit cost (credit)	$ 361	$ 380
Benefit Obligations:
Benefit Obligations, Discount rate	4.23%	2.01%
Net Periodic Benefit Cost:
Net Periodic Benefit Cost, Discount rate	2.01%	2.07%
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$ 709	$ 821
Service cost	12	13
Interest cost	13	16
Actuarial loss (gain)	(77)	(26)
Benefits paid	(99)	(115)
Benefit obligation at end of year	558	709
CHANGE IN PLAN ASSETS:
Employer contribution	99	115
Benefits paid	(99)	(115)
Funded status – accrued benefit obligations	(558)	(709)
AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS:
Accrued payroll and benefits (current liabilities)	(95)	(110)
Accrued benefit obligations (long-term liabilities)	(463)	(599)
Net amount recognized	(558)	(709)
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME:
Net periodic benefit cost	361	380
Net actuarial loss (gain)	(77)	(26)
Amortization of prior service credits		8
Amortization of unrecognized net loss	(336)	(359)
Total recognized in other comprehensive (income) loss, before tax	(413)	(377)
Total recognized in net periodic benefit cost and other comprehensive loss, before tax	$ (52)	$ 3

XML

Retirement Plans and Postretirement Costs - Expected Future Benefit Payments (Details) $ in Thousands	Jul. 03, 2022 USD ($)
SERP
Expected future benefit payments
2023	$ 1,946
2024	14
2025	14
2026	14
2027	14
2028-2032	2,373
Postretirement Benefits
Expected future benefit payments
2023	96
2024	98
2025	67
2026	40
2027	38
2028-2032	$ 233

XML

Retirement Plans and Postretirement Costs - Schedule of 401(k) Plan Contribution (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Compensation And Retirement Disclosure [Abstract]
Employer contribution defined contribution plan	$ 1,964	$ 1,706

XML

Shareholders' Equity (Details Textual) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Equity [Abstract]
Common stock, shares authorized	18,000,000	12,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares outstanding	3,876,703	3,805,065
Number of shares authorized to be repurchased	3,839,395
Number of shares repurchased to date	3,655,322
Cost of shares repurchased to date	$ 136.4
Number of shares repurchased during period	0	0

XML

Earnings Per Share - Reconciliation of the Components of Basic and Diluted Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Reconciliation of the components of the basic and diluted per share
Net income attributable to STRATTEC	$ 7,032	$ 22,532
Weighted average shares of common stock outstanding	3,861	3,788
Incremental shares – stock based compensation	49	64
Diluted weighted average shares of common stock outstanding	3,910	3,852
Basic	$ 1.82	$ 5.95
Diluted	$ 1.80	$ 5.85

XML

Earnings Per Share - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Earnings Per Share [Abstract]
Antidilutive shares excluded from earnings per share computation	36,921	9,010

XML

Stock Option and Purchase Plans - Summary of Stock Option Activity Under Our Stock Incentive Plan (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Share Based Compensation [Abstract]
Shares, Beginning Balance	72,624	90,860
Shares, Exercised	(31,452)	(18,236)
Shares, Ending Balance	41,172	72,624
Shares, Exercisable	41,172	72,624
Weighted Average Exercise Price, Beginning Balance	$ 37.65	$ 35.88
Weighted Average Exercise Price, Exercised	26.28	28.85
Weighted Average Exercise Price, Ending Balance	46.34	37.65
Weighted Average Exercise Price, Exercisable	$ 46.34	$ 37.65
Weighted Average Remaining Contractual Term, Outstanding	1 year 2 months 12 days
Weighted Average Remaining Contractual Term, Exercisable	1 year 2 months 12 days	1 year 6 months
Aggregate Intrinsic Value, Outstanding	$ 31
Aggregate Intrinsic Value, Exercisable	$ 31	$ 790

XML

Stock Option and Purchase Plans (Details Textual) - USD ($)	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options, granted	0	0
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum Contribution per participant per calendar year	$ 5,200
Maximum number of shares authorized for issuance from treasury under the Employee Stock Purchase Plan	100,000
Employee stock purchase plan average price of shares purchased during period	$ 37.32	$ 31.03
Shares available for issuance from treasury under the Employee Stock Purchase plan	46,484
Employee Stock Purchase Plan | Treasury Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issued under stock purchase plan	2,186	2,541

XML

Stock Option and Purchase Plans - Summary of Restricted Stock Activity Under Our Stock Incentive Plan (Details) - Restricted stock - $ / shares	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Nonvested, Shares Beginning Balance	81,975	69,394
Granted, Shares	43,875	48,300
Vested, Shares	(38,000)	(34,669)
Forfeited, Shares	(2,750)	(1,050)
Nonvested, Shares Ending Balance	85,100	81,975
Nonvested, Weighted Average Grant Date Fair Value Beginning Balance	$ 23.31	$ 30.59
Granted, Weighted Average Grant Date Fair Value	42.50	21.20
Vested, Weighted Average Grant Date Fair Value	25.56	34.95
Forfeited, Weighted Average Grant Date Fair Value	32.70	22.84
Nonvested, Weighted Average Grant Date Fair Value Ending Balance	$ 31.89	$ 23.31

XML

Export Sales - Schedule of Sales to Locations Outside of the United States (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Concentration Risk [Line Items]
Net sales	$ 452,265	$ 485,295
Export Sales
Concentration Risk [Line Items]
Net sales	$ 122,293	$ 130,260
Export Sales | Sales Revenue Net | Geographic Concentration Risk
Concentration Risk [Line Items]
Percentage of Export Sales	27.00%	27.00%

XML

Product Sales - Schedule of Product Sales (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Product Information [Line Items]
Net sales	$ 452,265	$ 485,295
Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	100.00%	100.00%
Keys & Locksets
Product Information [Line Items]
Net sales	$ 107,274	$ 116,572
Keys & Locksets | Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	24.00%	24.00%
Door Handles & Exterior Trim
Product Information [Line Items]
Net sales	$ 111,805	$ 126,218
Door Handles & Exterior Trim | Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	25.00%	26.00%
Power Access
Product Information [Line Items]
Net sales	$ 95,662	$ 95,245
Power Access | Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	21.00%	20.00%
Latches
Product Information [Line Items]
Net sales	$ 48,947	$ 51,211
Latches | Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	11.00%	10.00%
Aftermarket & OE Service
Product Information [Line Items]
Net sales	$ 44,826	$ 47,138
Aftermarket & OE Service | Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	10.00%	10.00%
Driver Controls
Product Information [Line Items]
Net sales	$ 34,442	$ 40,031
Driver Controls | Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	7.00%	8.00%
Other
Product Information [Line Items]
Net sales	$ 9,309	$ 8,880
Other | Revenue, Product and Service Benchmark | Product Concentration Risk
Product Information [Line Items]
Percentage of Net Sales	2.00%	2.00%

XML

Sales and Receivable Concentration - Sales to Largest Customers (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Sales to largest customers
Net sales	$ 452,265	$ 485,295
General Motors Company | Customer Concentration Risk
Sales to largest customers
Net sales	$ 130,184	$ 146,547
General Motors Company | Customer Concentration Risk | Sales Revenue Net
Sales to largest customers
Percentage of Net Sales	29.00%	30.00%
Stellantis (Formerly Fiat Chrysler Automobiles) | Customer Concentration Risk
Sales to largest customers
Net sales	$ 83,255	$ 85,629
Stellantis (Formerly Fiat Chrysler Automobiles) | Customer Concentration Risk | Sales Revenue Net
Sales to largest customers
Percentage of Net Sales	18.00%	18.00%
Ford Motor Company | Customer Concentration Risk
Sales to largest customers
Net sales	$ 79,735	$ 67,670
Ford Motor Company | Customer Concentration Risk | Sales Revenue Net
Sales to largest customers
Percentage of Net Sales	18.00%	14.00%
Total of Major Customers | Customer Concentration Risk
Sales to largest customers
Net sales	$ 293,174	$ 299,846
Total of Major Customers | Customer Concentration Risk | Sales Revenue Net
Sales to largest customers
Percentage of Net Sales	65.00%	62.00%

XML

Sales and Receivable Concentration - Receivables from Largest Customers (Details) - USD ($) $ in Thousands	12 Months Ended
	Jul. 03, 2022	Jun. 27, 2021
Receivables from largest customers
Receivables	$ 75,827	$ 69,902
General Motors Company | Customer Concentration Risk
Receivables from largest customers
Receivables	$ 24,594	$ 22,934
General Motors Company | Customer Concentration Risk | Accounts Receivable
Receivables from largest customers
Percentage of Gross Receivables	32.00%	32.00%
Stellantis (Formerly Fiat Chrysler Automobiles) | Customer Concentration Risk
Receivables from largest customers
Receivables	$ 12,845	$ 11,938
Stellantis (Formerly Fiat Chrysler Automobiles) | Customer Concentration Risk | Accounts Receivable
Receivables from largest customers
Percentage of Gross Receivables	17.00%	17.00%
Ford Motor Company | Customer Concentration Risk
Receivables from largest customers
Receivables	$ 10,602	$ 8,204
Ford Motor Company | Customer Concentration Risk | Accounts Receivable
Receivables from largest customers
Percentage of Gross Receivables	14.00%	12.00%
Total of Major Customers | Customer Concentration Risk
Receivables from largest customers
Receivables	$ 48,041	$ 43,076
Total of Major Customers | Customer Concentration Risk | Accounts Receivable
Receivables from largest customers
Percentage of Gross Receivables	63.00%	61.00%