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)
|
Part I - FINANCIAL INFORMATION | Page | |
Item
1
|
Financial
Statements
|
|
Condensed
Consolidated Statements of Income
|
3
|
|
Condensed
Consolidated Balance Sheets
|
4
|
|
Condensed
Consolidated Statements of Cash Flows
|
5
|
|
Notes
to Condensed Consolidated Financial Statements
|
6-10
|
|
Item
2
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
11-18
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
19
|
Item
4
|
Controls
and Procedures
|
19
|
Part II - OTHER INFORMATION | ||
Item
1
|
Legal
Proceedings
|
20
|
Item
1A
|
Risk
Factors
|
20
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
20
|
Item
3
|
Defaults
Upon Senior Securities
|
20
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
20
|
Item
5
|
Other
Information
|
20
|
Item
6
|
Exhibits
|
21
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
December
31,
|
January
1,
|
December
31,
|
January
1,
|
||||||||||
2006
|
2006
|
2006
|
2006
|
||||||||||
Net
sales
|
$
|
37,913
|
$
|
43,278
|
$
|
75,963
|
$
|
88,071
|
|||||
Cost
of goods sold
|
32,873
|
34,736
|
65,641
|
69,755
|
|||||||||
Gross
profit
|
5,040
|
8,542
|
10,322
|
18,316
|
|||||||||
Engineering,
selling and administrative expenses
|
4,852
|
5,494
|
9,908
|
10,779
|
|||||||||
Provision
for bad debts
|
-
|
-
|
-
|
3,200
|
|||||||||
Income
from operations
|
188
|
3,048
|
414
|
4,337
|
|||||||||
Interest
income
|
905
|
574
|
1,827
|
1,063
|
|||||||||
Other
income, net
|
121
|
124
|
149
|
164
|
|||||||||
Income
before provision for income taxes
|
1,214
|
3,746
|
2,390
|
5,564
|
|||||||||
Provision
for income taxes
|
120
|
1,090
|
555
|
1,168
|
|||||||||
Net
income
|
$
|
1,094
|
$
|
2,656
|
$
|
1,835
|
$
|
4,396
|
|||||
Earnings
per share:
|
|||||||||||||
Basic
|
$
|
0.31
|
$
|
0.71
|
$
|
0.51
|
$
|
1.17
|
|||||
Diluted
|
$
|
0.31
|
$
|
0.71
|
$
|
0.51
|
$
|
1.17
|
|||||
Average
Shares Outstanding:
|
|||||||||||||
Basic
|
3,539
|
3,744
|
3,568
|
3,745
|
|||||||||
Diluted
|
3,542
|
3,748
|
3,571
|
3,751
|
December
31,
|
|
|
July
2,
|
|
|||
|
|
|
2006
|
|
|
2006
|
|
(Unaudited)
|
|||||||
ASSETS
|
|
||||||
Current
Assets:
|
|||||||
Cash
and cash equivalents
|
$
|
66,285
|
$
|
65,712
|
|||
Receivables,
net
|
18,292
|
25,357
|
|||||
Inventories-
|
|||||||
Finished
products
|
3,667
|
2,937
|
|||||
Work
in process
|
4,593
|
5,401
|
|||||
Purchased
Materials
|
4,840
|
5,802
|
|||||
LIFO
adjustment
|
(4,960
|
)
|
(4,803
|
)
|
|||
Total
inventories
|
8,140
|
9,337
|
|||||
Other
current assets
|
10,601
|
10,468
|
|||||
Total
current assets
|
103,318
|
110,874
|
|||||
Investment
in joint ventures
|
2,495
|
2,202
|
|||||
Prepaid
pension obligations
|
9,847
|
7,602
|
|||||
Other
long-term assets
|
191
|
197
|
|||||
Property,
plant and equipment
|
110,574
|
108,871
|
|||||
Less:
accumulated depreciation
|
(83,990
|
)
|
(81,107
|
)
|
|||
Net
property, plant and equipment
|
26,584
|
27,764
|
|||||
$
|
142,435
|
$
|
148,639
|
Current
Liabilities:
|
|||||||
Accounts
payable
|
$
|
13,551
|
$
|
17,701
|
|||
Accrued
Liabilities:
|
|||||||
Payroll
and benefits
|
5,452
|
5,475
|
|||||
Environmental
reserve
|
2,658
|
2,683
|
|||||
Other
|
2,950
|
3,667
|
|||||
Total
current liabilities
|
24,611
|
29,526
|
|||||
Deferred
income taxes
|
4,266
|
4,266
|
|||||
Accrued
postretirement obligations
|
4,592
|
4,572
|
|||||
Shareholders'
equity:
|
|||||||
Common
stock, authorized 12,000,000 shares $.01 par value,
issued
6,880,457 shares at December 31, 2006 and July 2, 2006
|
69
|
69
|
|||||
Capital
in excess of par value
|
77,565
|
77,175
|
|||||
Retained
earnings
|
159,580
|
157,745
|
|||||
Accumulated
other comprehensive loss
|
(2,578
|
)
|
(2,958
|
)
|
|||
Less:
treasury stock, at cost (3,344,656 shares at December 31,
2006
and
3,243,177 shares at July 2, 2006)
|
(125,670
|
)
|
(121,756
|
)
|
|||
Total
shareholders' equity
|
108,966
|
110,275
|
|||||
$
|
142,435
|
$
|
148,639
|
Six
Months Ended
|
||||||||||
December
31,
|
|
|
January
1,
|
|||||||
2006
|
2006
|
|||||||||
(Unaudited)
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
Net
income
|
$
|
1,835
|
$
|
4,396
|
||||||
Adjustments
to reconcile net income to net cash provided by
operating
activities:
|
||||||||||
Depreciation
|
3,517
|
3,632
|
||||||||
Tax
benefit from options exercised
|
-
|
61
|
||||||||
Stock
based compensation expense
|
379
|
560
|
||||||||
Provision
for bad debts
|
-
|
3,200
|
||||||||
Change
in operating assets and liabilities:
|
||||||||||
Receivables
|
7,114
|
2,275
|
||||||||
Inventories
|
1,197
|
(683
|
)
|
|||||||
Other
assets
|
(2,279
|
)
|
(1,192
|
)
|
||||||
Accounts
payable and accrued liabilities
|
(5,046
|
)
|
(10,112
|
)
|
||||||
Other,
net
|
132
|
65
|
||||||||
Net
cash provided by operating activities
|
6,849
|
2,202
|
||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||
Investment
in joint ventures
|
(100
|
)
|
(50
|
)
|
||||||
Purchase
of property, plant and equipment
|
(2,292
|
)
|
(3,840
|
)
|
||||||
Proceeds
received on sale of property, plant and equipment
|
21
|
22
|
||||||||
Net
cash used in investing activities
|
(2,371
|
)
|
(3,868
|
)
|
||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||
Purchase
of treasury stock
|
(3,922
|
)
|
(1,196
|
)
|
||||||
Exercise
of stock options and employee stock purchases
|
17
|
1,080
|
||||||||
Net
cash used in financing activities
|
(3,905
|
)
|
(116
|
)
|
||||||
NET
INCREASE (DECREASE) IN CASH AND
|
||||||||||
CASH
EQUIVALENTS
|
573
|
(1,782
|
)
|
|||||||
CASH
AND CASH EQUIVALENTS
|
||||||||||
Beginning
of period
|
65,712
|
56,950
|
||||||||
End
of period
|
$
|
66,285
|
$
|
55,168
|
||||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||||
Income
taxes paid
|
$
|
1,790
|
$
|
2,861
|
||||||
Interest
paid
|
-
|
-
|
Three
Months Ended
|
|||||||||||||||||||
December
31, 2006
|
January
1, 2006
|
||||||||||||||||||
Weighted
|
Weighted
|
||||||||||||||||||
Net
|
Average
|
Per-Share
|
Net
|
Average
|
Per-Share
|
||||||||||||||
Income
|
Shares
|
Amount
|
Income
|
Shares
|
Amount
|
||||||||||||||
Basic
Earnings Per Share
|
$
|
1,094
|
3,539
|
$
|
0.31
|
$
|
2,656
|
3,744
|
$
|
0.71
|
|||||||||
Dilutive
Effect of Employee Stock Options
|
3
|
4
|
|||||||||||||||||
Diluted
Earnings Per Share
|
$
|
1,094
|
3,542
|
$
|
0.31
|
$
|
2,656
|
3,748
|
$
|
0.71
|
Six
Months Ended
|
|||||||||||||||||||
December
31, 2006
|
January
1, 2006
|
||||||||||||||||||
Weighted
|
Weighted
|
||||||||||||||||||
Net
|
Average
|
Per-Share
|
Net
|
Average
|
Per-Share
|
||||||||||||||
Income
|
Shares
|
Amount
|
Income
|
Shares
|
Amount
|
||||||||||||||
Basic
Earnings Per Share
|
$
|
1,835
|
3,568
|
$
|
0.51
|
$
|
4,396
|
3,745
|
$
|
1.17
|
|||||||||
Dilutive
Effect of Employee Stock Options
|
3
|
6
|
|||||||||||||||||
Diluted
Earnings Per Share
|
$
|
1,835
|
3,571
|
$
|
0.51
|
4,396
|
3,751
|
$
|
1.17
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
December
31,
|
January
1,
|
December
31,
|
January
1,
|
||||||||||
2006
|
2006
|
2006
|
2006
|
||||||||||
Net
Income
|
$
|
1,094
|
$
|
2,656
|
$
|
1,835
|
$
|
4,396
|
|||||
Change
in Cumulative Translation
|
|||||||||||||
Adjustments,
net
|
179
|
70
|
380
|
85
|
|||||||||
Total
Comprehensive Income
|
$
|
1,273
|
$
|
2,726
|
$
|
2,215
|
$
|
4,481
|
Weighted
|
|||||||||||||
Average
|
Aggregate
|
||||||||||||
Weighted
|
Remaining
|
Intrinsic
|
|||||||||||
Average
|
Contractual
|
Value
|
|||||||||||
Shares
|
Exercise
Price
|
Term
(years)
|
(in
thousands)
|
||||||||||
Balance,
July 2, 2006
|
283,530
|
$
|
56.53
|
||||||||||
Granted
|
-
|
-
|
|||||||||||
Exercised
|
-
|
-
|
|||||||||||
Expired
|
(27,310
|
)
|
$
|
46.71
|
|||||||||
Forfeited
|
(3,000
|
)
|
$
|
53.07
|
|||||||||
Balance,
December 31, 2006
|
253,220
|
$
|
57.63
|
4.0
|
$
|
219
|
|||||||
Exercisable,
December 31, 2006
|
190,380
|
$
|
56.64
|
3.6
|
$
|
219
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
December
31,
|
January
1,
|
December
31,
|
January
1,
|
||||||||||
2006
|
2006
|
2006
|
2006
|
||||||||||
Intrinsic
Value of Options Exercised
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
188
|
|||||
Fair
Value of Stock Options Vesting
|
$
|
-
|
$
|
-
|
$
|
658
|
$
|
969
|
|
Weighted
Average
|
|
|||||
|
|
|
|
Grant
Date
|
|
||
|
|
Shares
|
|
Fair
Value
|
|||
Nonvested
Balance, July 2, 2006
|
9,600
|
$
|
51.24
|
||||
Granted
|
10,000
|
$
|
40.00
|
||||
Vested
|
-
|
-
|
|||||
Forfeited
|
-
|
-
|
|||||
Nonvested
Balance, December 31, 2006
|
19,600
|
$
|
45.51
|
Pension
Benefits
|
Postretirement
Benefits
|
||||||||||||
Three
Months Ended
|
Three
Months Ended
|
||||||||||||
December
31,
2006
|
January
1,
2006
|
December
31,
2006
|
January
1,
2006
|
||||||||||
COMPONENTS
OF NET PERIODIC BENEFIT COST:
|
|||||||||||||
Service
cost
|
$
|
493
|
$
|
635
|
$
|
55
|
$
|
58
|
|||||
Interest
cost
|
1,087
|
981
|
172
|
122
|
|||||||||
Expected
return on plan assets
|
(1,337
|
)
|
(1,248
|
)
|
-
|
-
|
|||||||
Amortization
of prior service cost
|
16
|
5
|
(95
|
)
|
(94
|
)
|
|||||||
Amortization
of unrecognized net loss
|
118
|
320
|
160
|
132
|
|||||||||
Net
periodic benefit cost
|
$
|
377
|
$
|
693
|
$
|
292
|
$
|
218
|
Pension
Benefits
|
Postretirement
Benefits
|
||||||||||||
Six
Months Ended
|
Six
Months Ended
|
||||||||||||
December
31,
2006
|
January
1,
2006
|
December
31,
2006
|
January
1,
2006
|
||||||||||
COMPONENTS
OF NET PERIODIC BENEFIT COST:
|
|||||||||||||
Service
cost
|
$
|
987
|
$
|
1,270
|
$
|
110
|
$
|
116
|
|||||
Interest
cost
|
2,174
|
1,962
|
344
|
245
|
|||||||||
Expected
return on plan assets
|
(2,674
|
)
|
(2,495
|
)
|
-
|
-
|
|||||||
Amortization
of prior service cost
|
32
|
10
|
(189
|
)
|
(189
|
)
|
|||||||
Amortization
of unrecognized net loss
|
236
|
638
|
320
|
264
|
|||||||||
Net
periodic benefit cost
|
$
|
755
|
$
|
1,385
|
$
|
585
|
$
|
436
|
Total
Number Of
|
|||||||||||||
Total
|
|
Shares
Purchased
|
Maximum
Number
|
||||||||||
Number
|
Average
|
As
Part of Publicly
|
Of
Shares that May
|
||||||||||
Of
Shares
|
Price
Paid
|
Announced
|
Yet
be Purchased
|
||||||||||
Period
|
Purchased
|
Per
Share
|
Program
|
Under
the Program
|
|||||||||
October
2, 2006-November 5, 2006
|
17,000
|
$
|
35.05
|
17,000
|
279,008
|
||||||||
November
6, 2006-December 3, 2006
|
-
|
-
|
-
|
279,008
|
|||||||||
December
4, 2006-December 31, 2006
|
-
|
-
|
-
|
279,008
|
|||||||||
Total
|
17,000
|
$
|
35.05
|
17,000
|
279,008
|
4.4 | Promissory Note dated as of November 1, 2006 by and between the Company and M&I Bank |
31.1 |
Rule
13a-14(a) Certification for Harold M. Stratton II, Chairman and Chief
Executive Officer
|
31.2 |
Rule
13a-14(a) Certification for Patrick J. Hansen, Chief Financial
Officer
|
32 (1) | 18 U.S.C. Section 1350 Certifications |