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Investment in Joint Ventures and Majority Owned Subsidiaries | 12 Months Ended
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Jul. 02, 2023
Equity Method Investments and Joint Ventures [Abstract] |
Investment in Joint Ventures and Majority Owned Subsidiaries | INVESTMENT IN JOINT VENTURES AND MAJORITY OWNED SUBSIDIARIES Prior to June 30, 2023, we participated 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 included 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 held a one-third equity interest, existed 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 purchased component products from each other for use in end products assembled and sold in their respective home markets. STRATTEC purchased such component parts from WITTE. These purchases totaled $839,000 in 2023 and $918,000 in 2022. STRATTEC also paid WITTE a royalty related to certain latch product sales. Such royalties incurred totaled $528,000 in 2023 and $889,000 in 2022. The outstanding payable balance to WITTE was $459,000 as of July 3, 2022. WITTE was no longer a related party as of July 2, 2023 as a result of the Equity Restructuring Agreement discussed below. VAST LLC had 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 related land and building were held for sale. Sistema de Acesso Veicular Ltda was located in Brazil and serviced customers in South America. VAST LLC disposed of Sistema de Acesso Veicular Ltda in June 2023. VAST China (Taicang), VAST Jingzhou Co. Ltd, and VAST Shanghai Co. (collectively known as VAST China), provided 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. VAST LLC also maintained branch offices in South Korea and Japan in support of customer sales and engineering requirements. Effective June 30, 2023, we entered into and completed transactions contemplated by an Equity Restructuring Agreement ("Restructuring Agreement") between STRATTEC and WITTE. Pursuant to the terms of the Restructuring Agreement, STRATTEC sold its one-third interest in VAST LLC to WITTE and STRATTEC purchased WITTE's 20 percent non-controlling interest in STRATTEC POWER ACCESS LLC ("SPA") along with the net assets of VAST LLC's Korea branch office. The total net purchase price payable from WITTE to STRATTEC was $18.5 million, of which $16.5 million was paid on June 30, 2023 and $2 million was paid in July 2023. The $2 million paid in July 2023 was included in other current assets in the accompanying Consolidated Balance Sheet as of July 2, 2023. The allocation of the $18.5 million net purchase price was as follows (millions of dollars):
|  | Cash Received (Paid) |
Sale of STRATTEC's one-third ownership interest in VAST LLC |  | $ | 28.2 |
Purchase of 20 percent non-controlling interest in SPA |  |  | (9.0 | )
Purchase of net assets of VAST LLC's Korean branch office |  |  | (0.7 | )
Net purchase price received by STRATTEC |  | $ | 18.5 |
As of June 30, 2023, the Korean branch office is wholly owned by STRATTEC and its subsequent financial results are consolidated with the financial results of STRATTEC. The Restructuring Agreement will position STRATTEC to redeploy assets, both financial and technical, to create greater focus on STRATTEC-specific strategic growth opportunities in North America and around the world. This transaction will allow STRATTEC to be well-positioned to take advantage of new opportunities, including more of our product applications on Electric Vehicles, growing consumer demand for Power Access products, expansion of electronics capabilities and other new automotive products. It will also give us greater resources to further explore diversification of markets, complimentary technology and regions outside of North America. As part of the Restructuring Agreement, STRATTEC also entered into a cooperation framework agreement with WITTE related to VAST LLC which provides a framework for the parties to collaborate on global programs related to product development and manufacturing. Prior to the restructuring agreement, VAST LLC investments were accounted for using the equity method of accounting. Results of the VAST LLC foreign subsidiaries and joint venture were 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 $1.6 million during 2023 and $177,000 during 2022. STRATTEC's 2023 equity earnings includes STRATTEC's one-third of a loss on disposal of Brazil of $531,000 and a gain on sale of STRATTEC's one-third share of VAST LLC of $110,000. During 2023, capital contributions totaling $834,000 were made to VAST LLC for purposes of funding operations in Brazil with STRATTEC's portion of such capital contributions totaling $278,000. During 2022, capital contributions totaling $450,000 were made to VAST LLC for purposes of funding operations in Brazil with STRATTEC’s portion of such capital contribution totaling $150,000. As of June 30, 2023, STRATTEC has no continuing involvement in VAST LLC other than under the cooperation framework agreement described above. 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. Prior to the Restructuring Agreement, SPA was 80 percent owned by STRATTEC and 20 percent owned by WITTE. As a result of the Restructuring Agreement, STRATTEC purchased the remaining 20 percent interest in SPA, and SPA became a wholly owned subsidiary of STRATTEC. An additional Mexican entity, STRATTEC POWER ACCESS de Mexico, is wholly owned by SPA. STRATTEC's purchase of WITTE's 20 percent noncontrolling interest in SPA was accounted for as an equity transaction. No gain or loss was recognized in the Consolidated Statement of (Loss) Income and Comprehensive (Loss) Income. The difference between the fair value of the consideration paid and the amount by which the non-controlling interest was adjusted was recognized in equity attributable to STRATTEC. The financial results of SPA are consolidated with the financial results of STRATTEC. SPA net sales and net income to STRATTEC totaled approximately $114.1 million and $2.5 million, respectively, in 2023 and $95.7 million and $5.3 million, respectively, in 2022. 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. ADAC-STRATTEC LLC net sales and net loss to STRATTEC totaled approximately $121.9 million and $2.1 million, respectively, in 2023 and app roximately $111.8 million and $100,000, respectively, in 2022. 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 tot aled $8.5 milli on in 2023 and $7.8 million in 2022. The related outstanding payable balance to ADAC was $4.9 mil lion as of July 2, 2023 and $1.9 million as of July 3, 2022. Effective January 1, 2023, ADAC and STRATTEC agreed to suspend the payment of these fees as needed to comply with debt covenant provisions included in the ADAC-STRATTEC LLC credit facility described in greater detail under Credit Facilities below. Additionally, ADAC-STRATTEC LLC sells production parts to ADAC. Sales to ADAC are included in the consolidated results of STRATTEC and totaled $12.2 million in 2023 and $9.1 million in 2022. The related outstanding receivable balance from ADAC was $3.9 milli on and $1.6 million as of July 2, 2023 and July 3, 2022, respectively. See further discussion under Equity Earnings of Joint Ventures included in Notes to Financial Statements herein.

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