strattesept282008form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
[
x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the
quarterly period ended September 28, 2008
or
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
transition period from ____________ to ____________
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)
|
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 X NO
__
Indicate
by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
Accelerated filer __ Accelerated filer X
Non-accelerated
filer __ (Do not check if a smaller reporting
company) Smaller
Reporting
Company __
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES
__ NO X
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as of the latest practicable date.
Common
stock, par value $0.01 per share: 3,270,480 shares outstanding as of September
28, 2008.
STRATTEC
SECURITY CORPORATION
FORM
10-Q
September
28, 2008
INDEX
|
|
|
Page
|
Part
I
|
FINANCIAL
INFORMATION
|
|
Item
1
|
|
Financial
Statements
|
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
|
|
6-9
|
Item
2
|
|
|
10-16
|
Item
3
|
|
|
17
|
Item
4
|
|
|
17
|
|
|
|
|
Part
II
|
OTHER
INFORMATION
|
|
Item
1
|
|
|
18
|
Item
1A
|
|
|
18
|
Item
2
|
|
|
18
|
Item
3
|
|
|
18
|
Item
4
|
|
|
18
|
Item
5
|
|
|
18
|
Item
6
|
|
|
18
|
PROSPECTIVE
INFORMATION
A
number
of the matters and subject areas discussed in this Form 10-Q 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.” 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 in this Form 10-Q. 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, customer demand for the
Company’s and its customers’ products, competitive and technological
developments, customer purchasing actions, foreign currency fluctuations, costs
of operations and other matters described under “Risk Factors” in the
Management’s Discussion and Analysis of Financial Condition and Results of
Operations section of this Form 10-Q and in the section titled “Risk Factors” in
the Company’s Form 10-K report filed with the Securities and Exchange Commission
for the year ended June 29, 2008.
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-Q 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-Q.
Item
1 Financial
Statements
STRATTEC
SECURITY CORPORATION AND
SUBSIDIARIES
(In
Thousands, Except Per Share
Amounts)
(Unaudited)
|
|
Three
Months
Ended
|
|
|
|
September
28,
2008
|
|
|
September
30,
2007
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
34,731 |
|
|
$ |
42,739 |
|
Cost
of goods
sold
|
|
|
29,289 |
|
|
|
34,345 |
|
Gross
profit
|
|
|
5,442 |
|
|
|
8,394 |
|
Engineering,
selling and
administrative expenses
|
|
|
5,952 |
|
|
|
5,793 |
|
(Loss)
Income from
operations
|
|
|
(510 |
)
|
|
|
2,601 |
|
Interest
income
|
|
|
318 |
|
|
|
913 |
|
Other
income,
net
|
|
|
223 |
|
|
|
308 |
|
Minority
Interest
|
|
|
(182 |
)
|
|
|
49 |
|
(Loss)
income before provision
for
income
taxes
|
|
|
(151 |
)
|
|
|
3,871 |
|
(Benefit
from) provision for
income taxes
|
|
|
(189 |
)
|
|
|
1,452 |
|
Net
income
|
|
$ |
38 |
|
|
$ |
2,419 |
|
Earnings
per
share:
|
Basic
|
$ 0.01
|
|
$ 0.69
|
Diluted
|
$ 0.01
|
|
$ 0.69
|
Average
shares
outstanding:
|
Basic
|
3,332
|
|
3,519
|
Diluted
|
3,340
|
|
3,525
|
Cash
dividends declared per
share
|
$ 0.15
|
|
$ 1.15
|
The
accompanying notes are an integral
part of these condensed consolidated statements of income.
STRATTEC
SECURITY CORPORATION AND
SUBSIDIARIES
(In
Thousands, Except Share
Amounts)
|
|
September
28,
2008
|
|
|
June
29,
2008
|
|
ASSETS
|
|
(Unaudited)
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
|
$ |
41,058 |
|
|
$ |
51,501 |
|
Receivables,
net
|
|
|
21,899 |
|
|
|
23,518 |
|
Inventories-
|
|
|
|
|
|
|
|
|
Finished
products
|
|
|
3,241 |
|
|
|
2,521 |
|
Work
in
process
|
|
|
4,652 |
|
|
|
4,379 |
|
Purchased
materials
|
|
|
6,759 |
|
|
|
7,414 |
|
LIFO
adjustment
|
|
|
(4,027 |
) |
|
|
(4,045 |
)
|
Total
inventories
|
|
|
10,625 |
|
|
|
10,269 |
|
Other
current
assets
|
|
|
19,123 |
|
|
|
17,978 |
|
Total
current
assets
|
|
|
92,705 |
|
|
|
103,266 |
|
Deferred
income
taxes
|
|
|
3,684 |
|
|
|
3,684 |
|
Investment
in joint
ventures
|
|
|
3,861 |
|
|
|
3,642 |
|
Prepaid
pension
obligations
|
|
|
655 |
|
|
|
758 |
|
Other
long-term
assets
|
|
|
24 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
Property,
plant and
equipment
|
|
|
124,274 |
|
|
|
119,445 |
|
Less:
accumulated
depreciation
|
|
|
(90,354 |
)
|
|
|
(89,109 |
)
|
Net
property, plant and
equipment
|
|
|
33,920 |
|
|
|
30,336 |
|
|
|
$ |
134,849 |
|
|
$ |
141,713 |
|
LIABILITIES
AND SHAREHOLDERS'
EQUITY
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
15,126 |
|
|
$ |
15,974 |
|
Accrued
Liabilities:
|
|
|
|
|
|
|
|
|
Payroll
and
benefits
|
|
|
7,025 |
|
|
|
7,319 |
|
Environmental
reserve
|
|
|
2,642 |
|
|
|
2,648 |
|
Other
|
|
|
7,763 |
|
|
|
6,998 |
|
Total
current
liabilities
|
|
|
32,556 |
|
|
|
32,939 |
|
Accrued
pension
obligations
|
|
|
2,680 |
|
|
|
2,606 |
|
Accrued
postretirement
obligations
|
|
|
9,532 |
|
|
|
9,783 |
|
Minority
interest
|
|
|
1,134 |
|
|
|
953 |
|
Shareholders'
Equity:
|
|
|
|
|
|
|
|
|
Common
stock, authorized
12,000,000 shares, $.01 par value,
issued
6,887,757
shares
at September 28, 2008 and
June
29, 2008
|
|
|
69 |
|
|
|
69 |
|
Capital
in excess of par
value
|
|
|
79,021 |
|
|
|
78,885 |
|
Retained
earnings
|
|
|
163,430 |
|
|
|
163,889 |
|
Accumulated
other comprehensive
loss
|
|
|
(17,948 |
)
|
|
|
(17,495 |
)
|
Less:
treasury stock, at cost
(3,617,277
shares
at September 28,
2008
and
3,444,548 shares at June 29,
2008)
|
|
|
(135,625 |
) |
|
|
(129,916 |
)
|
Total
shareholders'
equity
|
|
|
88,947 |
|
|
|
95,432 |
|
|
|
$ |
134,849 |
|
|
$ |
141,713 |
|
The
accompanying notes are an integral
part of these condensed consolidated balance sheets.
STRATTEC
SECURITY CORPORATION AND
SUBSIDIARIES
(In
Thousands)
(Unaudited)
|
|
Three
Months
Ended
|
|
|
|
September
28,
2008
|
|
|
September
30,
2007
|
|
CASH
FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
Net
income
|
|
$ |
38 |
|
|
$ |
2,419 |
|
Adjustments
to reconcile net
income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
186 |
|
|
|
(61 |
)
|
Depreciation
and
amortization
|
|
|
1,380 |
|
|
|
1,738 |
|
Stock
based compensation
expense
|
|
|
128 |
|
|
|
313 |
|
Change
in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
1,546 |
|
|
|
1,234 |
|
Inventories
|
|
|
(356 |
)
|
|
|
(2,366 |
)
|
Other
assets
|
|
|
(1,234 |
)
|
|
|
(2,381 |
)
|
Accounts
payable and accrued
liabilities
|
|
|
(727 |
)
|
|
|
94 |
|
Other,
net
|
|
|
(113 |
)
|
|
|
(218 |
)
|
Net
cash provided by operating
activities
|
|
|
848 |
|
|
|
772 |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Investment
in joint
ventures
|
|
|
(125 |
)
|
|
|
(1,746 |
)
|
Purchase
of property, plant and
equipment
|
|
|
(5,316 |
)
|
|
|
- |
|
Net
cash used in investing
activities
|
|
|
(5,441 |
)
|
|
|
(1,746 |
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of treasury
stock
|
|
|
(5,714 |
)
|
|
|
- |
|
Dividends
paid
|
|
|
(521 |
)
|
|
|
(4,050 |
)
|
Exercise
of stock options and
employee stock purchases
|
|
|
10 |
|
|
|
7 |
|
Loan
from minority
interest
|
|
|
375 |
|
|
|
- |
|
Contribution
from minority
interest
|
|
|
- |
|
|
|
349 |
|
Net
cash used in financing
activities
|
|
|
(5,850 |
)
|
|
|
(3,694 |
)
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH
AND
CASH
EQUIVALENTS
|
|
|
(10,443 |
)
|
|
|
(4,668 |
)
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH
EQUIVALENTS
|
|
|
|
|
|
|
|
|
Beginning
of
period
|
|
|
51,501 |
|
|
|
65,491 |
|
End
of
period
|
|
$ |
41,058 |
|
|
$ |
60,823 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH
FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Income
taxes
paid
|
|
$ |
150 |
|
|
$ |
188 |
|
Interest
paid
|
|
|
- |
|
|
|
- |
|
The
accompanying notes are an integral
part of these condensed consolidated statements of cash
flows.
STRATTEC
SECURITY CORPORATION AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis
of Financial Statements
STRATTEC
SECURITY CORPORATION
designs, develops, manufactures and markets mechanical locks and keys,
electronically enhanced locks and keys, steering column and instrument panel
ignition lock housings, latches, door handles and related access control
products for North American automotive customers, and for global automotive
manufacturers through the VAST Alliance in which we participate with WITTE
Automotive of Velbert, Germany and ADAC Automotive of Grand Rapids,
Michigan. STRATTEC’s history in the automotive business spans 100
years. The accompanying condensed consolidated financial statements
reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly
owned Mexican subsidiaries, STRATTEC de Mexico and STRATTEC Componentes
Automotrices, and its majority owned subsidiary, ADAC-STRATTEC,
LLC. STRATTEC SECURITY CORPORATION is located in Milwaukee,
Wisconsin. STRATTEC de Mexico and STRATTEC Componentes Automotrices
are located in Juarez, Mexico. ADAC-STRATTEC, LLC has operations in
El Paso, Texas and Juarez, Mexico. Equity investments in China and
Brazil relating to the VAST Alliance for which we exercise significant influence
but do not control and are not the primary beneficiary are accounted for using
the equity method.
In
the opinion of management, the
accompanying condensed consolidated balance sheet as of June 29, 2008, which
has
been derived from our audited financial statements, and the related unaudited
interim condensed consolidated financial statements contain all adjustments,
consisting only of normal recurring items, necessary for their fair presentation
in conformity with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). All significant intercompany transactions
have been eliminated.
Interim
financial results are not
necessarily indicative of operating results for an entire year. The
information included in this Form 10-Q should be read in conjunction with
Management’s Discussion and Analysis and the financial statements and notes
thereto included in the STRATTEC SECURITY CORPORATION 2008 Annual Report, which
was filed with the Securities and Exchange Commission as an exhibit to our
Form
10-K on August 29, 2008.
In
December 2007, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 160, “Noncontrolling Interests in Consolidated Financial
Statements – an amendment to ARB No. 51.” SFAS No. 160 establishes
accounting and reporting standards that require the ownership interest in
subsidiaries held by parties other than the parent be clearly identified and
presented in the consolidated balance sheets within equity, but separate from
the parent’s equity, the amount of consolidated net income attributable to the
parent and the noncontrolling interest be clearly identified and presented
on
the face of the consolidated statements of income, and changes in a parent’s
ownership interest while the parent retains its controlling financial interest
in its subsidiary be accounted for consistently. This statement is
effective for fiscal years beginning after December 15, 2008 and will be
effective for us beginning in fiscal 2010. We do not expect the new
standard to have a material impact on our financial position or results of
operations.
In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations.” SFAS No. 141(R) retains the underlying concepts of
SFAS No. 141 in that all business combinations are required to be accounted
for
at fair value under the acquisition method of accounting, but SFAS No. 141(R)
changed the method of applying the acquisition method in a number of
aspects. SFAS No. 141(R) will require that (1) for all business
combinations, the acquirer records all assets and liabilities of the acquired
business, including goodwill, generally at their fair values; (2) certain
contingent assets and liabilities acquired be recognized at their fair value
on
the acquisition date; (3) contingent consideration be recognized at its fair
value on the acquisition date and, for certain arrangements, changes in fair
value will be recognized in earnings when settled; (4) acquisition related
transaction and restructuring costs be expensed rather than treated as part
of
the cost of the acquisition and included in the amount recorded for assets
acquired; (5) in step acquisitions, previous equity interests in an
acquiree held prior to obtaining control be remeasured to their acquisition
date
fair values, with any gain or loss recognized in earnings; and (6) when making
adjustments to finalize initial accounting, companies revise any previously
issued post-acquisition financial information in future financial statements
to
reflect any adjustments as if they had been recorded on the acquisition
date. SFAS No. 141(R) is effective on a prospective basis for all
business combinations for which the acquisition date is on or after the
beginning of the first annual period subsequent to December 15, 2008, with
the
exception of the accounting for valuation allowances on deferred taxes and
acquired tax contingencies. SFAS No. 141(R) amends SFAS No. 109 such
that the adjustments made to valuation allowances on deferred taxes and acquired
tax contingencies associated with acquisitions that closed prior to the
effective date of this statement should also apply the provisions of SFAS No.
141(R). This standard will be applied to all future business
combinations in accordance with the effective dates.
Income
Taxes
The
current quarter income tax
benefit is the result of the higher U.S. effective tax rate applied to pre-tax
U.S. losses and a lower Mexican tax rate being applied to pre-tax income in
Mexico. Our U.S. effective tax rate is approximately 37
percent. Our effective tax rate in Mexico is approximately 15
percent.
Earnings
Per Share (EPS)
Basic
earnings per share is computed
on the basis of the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share is computed
on the basis of the weighted average number of shares of common stock plus
the
dilutive potential common shares outstanding during the period using the
treasury stock method. Dilutive potential common shares include
outstanding stock options and restricted stock awards. A
reconciliation of the components of the basic and diluted per-share computations
follows (in thousands, except per share amounts):
|
|
Three
Months Ended
|
|
|
|
September
28, 2008
|
|
|
September
30, 2007
|
|
|
|
Net
Income
|
|
|
Weighted
Average
Shares
|
|
|
Per-Share
Amount
|
|
|
Net
Income
|
|
|
Weighted
Average
Shares
|
|
|
Per-Share
Amount
|
|
Basic
Earnings Per Share
|
|
$ |
38 |
|
|
|
3,332 |
|
|
$ |
0.01 |
|
|
$ |
2,419 |
|
|
|
3,519 |
|
|
$ |
0.69 |
|
Stock-Based
Compensation
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
Diluted
Earnings Per Share
|
|
$ |
38 |
|
|
|
3,340 |
|
|
$ |
0.01 |
|
|
$ |
2,419 |
|
|
|
3,525 |
|
|
$ |
0.69 |
|
As
of September 28, 2008, options to
purchase 135,440 shares of common stock at a weighted-average exercise price
of
$57.61 were excluded from the calculation of diluted earnings per share because
their inclusion would have been anti-dilutive. As of September 30,
2007, options to purchase 182,680 shares of common stock at a weighted-average
exercise price of $59.29 were excluded from the calculation of diluted earnings
per share because their inclusion would have been anti-dilutive.
Comprehensive
Income (Loss)
Comprehensive
income (loss) is
presented in the following table (in thousands):
|
|
Three
Months Ended
|
|
|
|
September
28,
2008
|
|
|
September
30, 2007
|
|
Net
Income
|
|
$ |
38 |
|
|
$ |
2,419 |
|
Change
in Cumulative Translation
Adjustments,
net
|
|
|
(453 |
) |
|
|
(75 |
)
|
Total
Comprehensive (Loss) Income
|
|
$ |
(415 |
) |
|
$ |
2,344 |
|
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 1,700,000 shares of common stock available for
the
grant of awards under the plan. Remaining shares available to be
granted under the plan as of September 28, 2008 were 423,203. Awards
that expire or are canceled 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 and
specified employees under our 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 the Board of Directors. The
options expire 5 to 10 years after the grant date unless an earlier expiration
date is set at the time of grant. The options vest 1 to 3 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
the
Board of Directors at the time the shares are granted and have a minimum vesting
period of three years from the date of grant. Restricted shares
granted have voting and dividend rights. The restricted stock grants
issued to date vest 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 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.
A
summary of stock option activity
under the plan for the three months ended September 28, 2008 is as
follows:
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average Remaining Contractual
Term
(years)
|
|
|
Aggregate
Intrinsic
Value
(in
thousands)
|
|
Outstanding,
June 29, 2008
|
|
|
187,780 |
|
|
$ |
58.74 |
|
|
|
|
|
|
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Expired
|
|
|
(52,340 |
) |
|
$ |
61.68 |
|
|
|
|
|
|
|
Forfeited
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
Outstanding,
September 28, 2008
|
|
|
135,440 |
|
|
$ |
57.61 |
|
|
|
4.3 |
|
|
$ |
0 |
|
Exercisable,
September 28, 2008
|
|
|
135,440 |
|
|
$ |
57.61 |
|
|
|
4.3 |
|
|
$ |
0 |
|
The
intrinsic value of stock options exercised and the fair value of stock options
vesting during the three month periods presented is as follows (in
thousands):
|
|
Three
Months Ended
|
|
|
|
September
28,
2008
|
|
|
September
30, 2007
|
|
Intrinsic
Value of Options Exercised
|
|
$ |
- |
|
|
$ |
- |
|
Fair
Value of Stock Options Vesting
|
|
$ |
469 |
|
|
$ |
197 |
|
A
summary of restricted stock
activity under the plan for the three months ended September 28, 2008 is as
follows:
|
|
Shares
|
|
|
Weighted
Average
Grant
Date
Fair
Value
|
|
Nonvested
Balance, June 29, 2008
|
|
|
29,400 |
|
|
$ |
46.32 |
|
Granted
|
|
|
10,000 |
|
|
$ |
29.00 |
|
Vested
|
|
|
- |
|
|
|
- |
|
Forfeited
|
|
|
(400 |
) |
|
$ |
43.89 |
|
Nonvested
Balance, September 28, 2008
|
|
|
39,000 |
|
|
$ |
41.90 |
|
As
of September 28, 2008, all
compensation cost related to stock options granted under the plan has been
recognized. As of September 28, 2008, there was $647,000 of total
unrecognized compensation cost related to restricted stock grants under the
plan. This cost is expected to be recognized over a weighted average
period of 1.1 years. Total unrecognized compensation cost will be
adjusted for any future changes in estimated and actual forfeitures of awards
granted under the plan.
Pension
and Other Postretirement Benefits
We
have a noncontributory defined
benefit pension plan covering substantially all U.S.
associates. Benefits are based on years of service and final average
compensation. Our policy is to fund at least the minimum actuarially computed
annual contribution required under the Employee Retirement Income Security
Act
of 1974 (ERISA). Plan assets consist primarily of listed equity and
fixed income securities. We have a noncontributory supplemental
executive retirement plan (SERP), which is a nonqualified defined benefit
plan. The SERP will pay supplemental pension benefits to certain key
employees upon retirement based upon the employees’ years of service and
compensation. The SERP is being funded through a rabbi trust with
M&I Trust Company. We also sponsor a postretirement health care
plan for all of our U.S. associates hired prior to June 2, 2001. The
expected cost of retiree health care benefits is recognized during the years
that the associates who are covered under the plan render service. The
postretirement health care plan is unfunded.
The
following tables summarize the
net periodic benefit cost recognized for each of the periods indicated under
these two plans (in thousands):
|
|
Pension
Benefits
|
|
|
Postretirement
Benefits
|
|
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
|
|
September
28,
2008
|
|
|
September
30,
2007
|
|
|
September
28,
2008
|
|
|
September
30,
2007
|
|
Service
cost
|
|
$ |
463 |
|
|
$ |
505 |
|
|
$ |
48 |
|
|
$ |
55 |
|
Interest
cost
|
|
|
1,271 |
|
|
|
1,170 |
|
|
|
184 |
|
|
|
179 |
|
Expected
return on plan assets
|
|
|
(1,641 |
) |
|
|
(1,553 |
) |
|
|
- |
|
|
|
- |
|
Amortization
of prior service cost
|
|
|
20 |
|
|
|
16 |
|
|
|
(97 |
) |
|
|
(94 |
) |
Amortization
of unrecognized net loss
|
|
|
63 |
|
|
|
161 |
|
|
|
174 |
|
|
|
176 |
|
Net
periodic benefit cost
|
|
$ |
176 |
|
|
$ |
299 |
|
|
$ |
309 |
|
|
$ |
316 |
|
No
contributions were made to the qualified pension plan during the three months
ended September 28, 2008. Voluntary contributions made to the
qualified pension plan totaled $1.5 million during the three months ended
September 30, 2007. Voluntary contributions of $3 million were made
subsequent to September 28, 2008. No additional contributions are
anticipated to be made during the remainder of fiscal 2009.
Item
2
STRATTEC
SECURITY CORPORATION AND SUBSIDIARIES
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following Management’s Discussion
and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s
accompanying Condensed Consolidated Financial Statements and Notes thereto
and
its 2008 Annual Report which was filed with the Securities and Exchange
Commission as an exhibit to our Form 10-K on August 29, 2008. Unless
otherwise indicated, all references to years refer to fiscal years.
Analysis
of Results of Operations
Three
months ended September 28, 2008 compared to the three months ended September
30,
2007
Net
sales for the three months ended
September 28, 2008 were $34.7 million compared to net sales of $42.7 million
for
the three months ended September 30, 2007. Sales to our largest
customers overall were lower in the current quarter compared to the prior year
quarter levels. Sales to Chrysler LLC were $7.1 million in the
current quarter compared to $10.6 million in the prior year
quarter. The sales reduction was due to a combination of lower
vehicle production volumes and reduced component content on the products we
supply. Sales to General Motors Corporation were $12.3 million in the
current quarter compared to $12.5 million in the prior year
quarter. Sales increases to General Motors resulting from the
takeover of certain passenger car business were offset by lower vehicle
production volumes for trucks and SUV’s. Sales to Delphi Corporation
decreased to $2.0 million during the three months ended September 28, 2008
compared to $4.0 million in the prior year quarter primarily due to lower Delphi
production volumes. Sales to Ford Motor Company were $2.3 million in
the current quarter compared to $5.5 million in the prior year
quarter. The sales reduction was due to lower Ford vehicle production
volumes.
Gross
profit as a percentage of net
sales was 15.7 percent in the current quarter compared to 19.6 percent in the
prior year quarter. The reduction in the gross profit margin was
primarily attributed to the reduction in customer vehicle production volumes
as
discussed above, which lowered overhead absorption of our manufacturing
costs. This was somewhat offset by lower purchased raw material costs
for zinc in comparison to the prior year quarter. The average zinc
price paid per pound decreased to $1.22 in the current quarter from $1.64 in
the
prior year quarter. During the current quarter, we used approximately
1.7 million pounds of zinc. This resulted in decreased zinc costs of
approximately $700,000 in the current quarter compared to the prior year
quarter.
Engineering,
selling and
administrative expenses were relatively consistent between periods and totaled
$6.0 million in the current quarter and $5.8 million in the prior year
quarter.
The
loss
from operations in the current quarter was $510,000 compared to income from
operations of $2.6 million in the prior year quarter. This reduction
was the result of the decrease in sales and gross profit margin as discussed
above.
Our
U.S. effective tax rate is
approximately 37 percent. Our effective tax rate in Mexico is
approximately 15 percent. The current quarter income tax benefit is
the result of the higher U.S. effective tax rate applied to pre-tax U.S. losses
and a lower Mexican tax rate being applied to pre-tax income in
Mexico. The overall U.S. effective tax rate differs from the Federal
statutory tax rate primarily due to the effects of state income
taxes.
Liquidity
and Capital Resources
Cash
flow generated from operating
activities was $848,000 during the three months ended September 28, 2008
compared to $772,000 during the three months ended September 30,
2007. Current period operating cash flow was negatively impacted by
overall financial results. Pension contributions to our qualified
plan during the prior year quarter totaled $1.5 million. No pension
contributions were made during the current quarter.
Accounts
receivable balances
decreased $1.6 million from the June 29, 2008 balances. This decrease
is primarily the result of decreased sales during the current quarter as
compared to the prior year quarter.
Capital
expenditures during the three months ended September 28, 2008, were $5.3 million
compared to expenditures of $1.7 million during the three months ended September
30, 2007. We anticipate that capital expenditures will be
approximately $10 million in fiscal 2009, primarily relating to expenditures
in
support of requirements for new product programs, the upgrade and replacement
of
existing equipment and the construction of a new building in Juarez, Mexico
to
replace our existing leased facility.
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 September 28, 2008. A total of 3,634,371 shares have
been repurchased as of September 30, 2008, at a cost of approximately $135.9
million. During the three months ended September 28, 2008, 173,038
shares were repurchased at a cost of approximately $5.7
million. 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.
We
have a $50.0 million unsecured
line of credit (the “Line of Credit”), which expires October 31,
2009. There were no outstanding borrowings under the Line of Credit
at September 28, 2008 or June 29, 2008. Interest on borrowings under
the Line of Credit is at varying rates based on the London Interbank Offering
Rate or the bank’s prime rate. We believe that the Line of Credit is
adequate, along with existing cash balances and cash flow from operations,
to
meet our anticipated capital expenditure, working capital and operating
expenditure requirements.
Over
the past two years, we have been
impacted by rising health care costs, which have increased our cost of employee
medical coverage. We have also been impacted by increases in the
market price of zinc, brass and magnesium and inflation in Mexico, which impacts
the U.S. dollar costs of our Mexican operations. We do not hedge
against our Mexican peso exposure.
Joint
Ventures
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
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 provides 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 interest, exists to seek opportunities to manufacture
and
sell the companies’ products in areas of the world outside of North America and
Europe.
VAST
LLC
participates in joint ventures in Brazil and China. VAST do Brasil, a
joint venture between VAST LLC and Ifer do Brasil Ltda., was formed to service
customers in South America. VAST Fuzhou and VAST Great Shanghai,
joint ventures between VAST LLC, Fortitude Corporation and a unit of Elitech
Technology Co. Ltd. of Taiwan, are the base of operations to service our
automotive customers in the Asian market.
The
VAST investments are accounted for
using the equity method of accounting. The activities related to the
VAST joint ventures resulted in a gain of approximately $41,000 during the
three
months ended September 28, 2008 and $146,000 during the three months ended
September 30, 2007. A capital contribution of $125,000 was made in
the current quarter in support of general operating expenses.
In
fiscal
year 2007, we entered into a joint venture with ADAC, in which STRATTEC holds
a
50.1 percent interest and ADAC holds a 49.9 percent interest. The
joint venture was created to establish injection molding and door handle
assembly operations in Mexico. ADAC-STRATTEC LLC, a Delaware limited
liability company, was formed on October 27, 2006. An additional
Mexican entity, ADAC-STRATTEC de Mexico, which is wholly owned by ADAC-STRATTEC
LLC, was formed on February 21, 2007. ADAC-STRATTEC de Mexico
production activities began in July 2007. ADAC-STRATTEC LLC’s
financial results are consolidated with the financial results of STRATTEC and
resulted in increased net income to STRATTEC of $186,000 during the three months
ended September 28, 2008 and decreased net income to STRATTEC of $61,000 during
the three months ended September 30, 2007.
In
combination with WITTE and VAST LLC, we have entered into a definitive agreement
to acquire certain assets, primarily equipment and inventory, and assume certain
employee liabilities of Delphi Corporation’s Power Products business for $7.8
million, subject to closing adjustments. Under this agreement, we
would acquire the North American portion of Delphi’s Power Products
business. WITTE would acquire the European portion and VAST LLC would
acquire the Asian portion. The transaction is subject to both
customary closing conditions for transactions of this nature and other closing
conditions relating to Delphi’s bankruptcy court proceedings. We
expect to complete the transaction before the end of calendar year
2008.
Delphi’s
Power Products business designs, develops, tests, manufactures, markets and
sells power systems to operate vehicle sliding doors, and rear compartment
access points such as liftgates and trunk lids. In addition, the
product line includes power cinching latches and power cinching strikers used
in
these systems. Current customers for these products supplied from
North America include Chrysler LLC, Hyundai Motor Company, General Motors
Corporation and Ford Motor Company.
Recently
Issued Accounting Standards
In
December 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment to ARB No. 51.” SFAS
No. 160 establishes accounting and reporting standards that require the
ownership interest in subsidiaries held by parties other than the parent be
clearly identified and presented in the consolidated balance sheets within
equity, but separate from the parent’s equity, the amount of consolidated net
income attributable to the parent and the noncontrolling interest be clearly
identified and presented on the face of the consolidated statements of income,
and changes in a parent’s ownership interest while the parent retains its
controlling financial interest in its subsidiary be accounted for
consistently. This statement is effective for fiscal years beginning
after December 15, 2008 and will be effective for us beginning in fiscal
2010. We do not expect the new standard to have a material impact on
our financial position or results of operations.
In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations.” SFAS No. 141(R) retains the underlying concepts of
SFAS No. 141 in that all business combinations are required to be accounted
for
at fair value under the acquisition method of accounting, but SFAS No. 141(R)
changed the method of applying the acquisition method in a number of
aspects. SFAS No. 141(R) will require that (1) for all business
combinations, the acquirer records all assets and liabilities of the acquired
business, including goodwill, generally at their fair values; (2) certain
contingent assets and liabilities acquired be recognized at their fair value
on
the acquisition date; (3) contingent consideration be recognized at its fair
value on the acquisition date and, for certain arrangements, changes in fair
value will be recognized in earnings when settled; (4) acquisition related
transaction and restructuring costs be expensed rather than treated as part
of
the cost of the acquisition and included in the amount recorded for assets
acquired; (5) in step acquisitions, previous equity interests in an
acquiree held prior to obtaining control be remeasured to their acquisition
date
fair values, with any gain or loss recognized in earnings; and (6) when making
adjustments to finalize initial accounting, companies revise any previously
issued post-acquisition financial information in future financial statements
to
reflect any adjustments as if they had been recorded on the acquisition
date. SFAS No. 141(R) is effective on a prospective basis for all
business combinations for which the acquisition date is on or after the
beginning of the first annual period subsequent to December 15, 2008, with
the
exception of the accounting for valuation allowances on deferred taxes and
acquired tax contingencies. SFAS No. 141(R) amends SFAS No. 109 such
that the adjustments made to valuation allowances on deferred taxes and acquired
tax contingencies associated with acquisitions that closed prior to the
effective date of this statement should also apply the provisions of SFAS No.
141(R). This standard will be applied to all future business
combinations in accordance with the effective dates.
Critical
Accounting Policies
The
Company believes the following
represents its critical accounting policies:
Pension
and Postretirement Health
Benefits– Pension and postretirement health obligations and costs are
developed from actuarial valuations. The determination of the
obligation and expense for pension and postretirement health benefits is
dependent on the selection of certain assumptions used by actuaries in
calculating such amounts. Those assumptions are described in the
Notes to Financial Statements in our 2008 Annual Report and include, among
others, the discount rate, expected long-term rate of return on plan assets,
retirement age and rates of increase in compensation and health care
costs. Actual results that differ from these assumptions are deferred
and, under certain circumstances, amortized over future
periods. While we believe that the assumptions used are appropriate,
significant differences in the actual experience or significant changes in
the
assumptions may materially affect our pension and postretirement health
obligations and future expense.
Other
Reserves– We have
reserves such as an environmental reserve, an incurred but not reported claim
reserve for self-insured health plans, a workers’ compensation reserve, an
allowance for doubtful accounts related to trade accounts receivable and a
repair and maintenance supply parts reserve. These reserves require
the use of estimates and judgment with regard to risk exposure, ultimate
liability and net realizable value. We believe such reserves are
estimated using consistent and appropriate methods. However, changes
to the assumptions could materially affect the recorded reserves.
Stock-Based
Compensation– We
account for stock-based compensation in accordance with SFAS No. 123(R),
“Share-based Payments.” Under the fair value recognition provisions
of this statement, share-based compensation cost is measured at the grant date
based on the value of the award and is recognized as expense over the vesting
period. Determining the fair value of share-based awards at the grant
date requires judgment, including estimating future volatility of our stock,
the
amount of share-based awards that are expected to be forfeited and the expected
term of awards granted. We estimate the fair value of stock options
granted using the Black-Scholes option valuation model. We amortize
the fair value of all awards on a straight-line basis over the vesting
periods. The expected term of awards granted represents the period of
time they are expected to be outstanding. We determine the expected
term based on historical experience with similar awards, giving consideration
to
the contractual terms and vesting schedules. We estimate the expected
volatility of our common stock at the date of grant based on the historical
volatility of our common stock. The volatility factor used in the
Black-Scholes option valuation model is based on our historical stock prices
over the most recent period commensurate with the estimated expected term of
the
award. We base the risk-free interest rate used in the Black-Scholes
option valuation model on the implied yield currently available on U.S. Treasury
zero-coupon issues with a remaining term commensurate with the expected term
of
the award. We use historical data to estimate pre-vesting option
forfeitures. We record stock-based compensation only for those awards
that are expected to vest. If actual results differ significantly
from these estimates, stock-based compensation expense and our results of
operations could be materially impacted.
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:
Loss
of Significant Customers,
Vehicle Content, Vehicle Models and Market Share– Sales to General
Motors
Corporation, Ford Motor Company, Chrysler LLC and Delphi Corporation represent
approximately 75 percent of our annual net sales. 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, reduction in vehicle content, 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 and net income.
Our
major
customers also have significant underfunded legacy liabilities related to
pension and postretirement health care obligations. The future impact
of these items along with a continuing loss in their North American automotive
market share to the “New Domestic” automotive manufacturers (primarily the
Japanese automotive manufacturers) may have a significant impact on our future
sales and collectibility risks. For example, on October 8, 2005,
Delphi Corporation filed for Chapter 11 bankruptcy protection. As a
result, we wrote-off $1.6 million of uncollectible pre-petition Chapter 11
accounts receivable due from Delphi Corporation. This directly
reduced our pre-tax net income during fiscal 2006.
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, our gross
margin and profitability will be adversely affected.
Cyclicality
and Seasonality in the
Automotive Market– The automotive market is highly cyclical and is
dependent on consumer spending 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.
Foreign
Operations– As
discussed under “Joint Ventures”, we have joint venture investments in Mexico,
Brazil and China. These operations are currently not
material. However, as these operations 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.
Currency
Exchange Rate
Fluctuations– We incur a portion of our expenses in Mexican
pesos. Exchange rate fluctuations between the U.S. dollar and the
Mexican peso could have an adverse effect on our financial results.
Sources
of and Fluctuations in Market
Prices of Raw Materials– Our primary raw materials are high-grade zinc,
brass, magnesium, aluminum, steel and plastic resins. 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 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 affect on our financial
results if the increased raw material costs cannot be recovered from our
customers.
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 and the United
Auto Workers led to extended shut-downs of most of General Motors Corporation’s
North American assembly plants in February 2008 and 1998. 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 the unionized associates is effective through June 30,
2012. We may encounter further labor disruption after the expiration
date of this contract and 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 and our financial results.
Environmental
and Safety
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 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
contaminated by a former above-ground solvent storage tank, located on the
east
side of the facility. The contamination occurred in
1985. This 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 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.
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 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 also 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 net sales and net income.
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 acquisitions,
alliances or establishing joint ventures that would enable us to expand
globally. 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.
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 and may have a material adverse effect on our financial
results.
Our
exposure to market risk is limited
to foreign currency exchange rate risk associated with STRATTEC’s foreign
operations. We do not utilize financial instruments for trading
purposes and hold no derivative financial instruments which would expose us
to
significant market risk. We have not had outstanding borrowings since
December 1997. To the extent that we incur future borrowings under
our line of credit, we would be subject to interest rate risk related to such
borrowings. There is, therefore, currently no significant exposure to
market risk for changes in interest rates. However, we are subject to
foreign currency exchange rate exposure related to the U.S. dollar costs of
our
Mexican operations. A material increase in the value of the Mexican
peso relative to the U.S. dollar would increase our expenses and, therefore,
could adversely affect our profitability.
As
of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including the
Chief Executive Officer and Chief Financial Officer, of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended). Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of the end of such period, our disclosure controls and procedures
were
effective in recording, processing, summarizing and reporting, within the time
periods specified in the Securities and Exchange Commission’s rules and forms,
information required to be disclosed by us in reports that we file with or
submit to the Securities and Exchange Commission and that such information
is
accumulated and communicated to our management, as appropriate to allow timely
decisions regarding required disclosure. 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 necessarily was 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 and, based on the evaluation described above, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls
and
procedures were effective at reaching that level of reasonable
assurance.
There
was
no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
amended) during our most recently completed fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Part
II
Other
Information
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 or action the ultimate disposition of which would have a material adverse
effect on our financial statements.
There
have been no material changes in our risk factors from those disclosed in Part
I, Item 1A “Risk Factors,” of our 2008 Annual Report on Form
10-K. Please refer to that section for disclosures regarding the
risks and uncertainties relating to our business.
Issuer
Purchases of Equity Securities
Our
Board
of Directors authorized a stock repurchase program on October 16, 1996, and
the
program was publicly announced on October 17, 1996. The Board of
Directors has periodically increased the number of shares authorized under
the
program, most recently in August 2008. The program currently
authorizes the repurchase of up to 3,839,395 shares of our 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 September 28,
2008, a total of 3,634,371 shares have been repurchased at a cost of
approximately $135.9 million.
Period
|
|
Total
Number
Of
Shares Purchased
|
|
|
Average
Price
Paid
Per Share
|
|
|
Total
Number
Of
Shares Purchased As Part of Publicly Announced Program
|
|
|
Maximum
Number Of Shares that May Yet be Purchased Under the
Program
|
|
June
30, 2008–August 3, 2008
|
|
|
100,000 |
|
|
$ |
33.04 |
|
|
|
100,000 |
|
|
|
78,062 |
|
August
4, 2008–August 31, 2008
|
|
|
73,038 |
|
|
$ |
33.00 |
|
|
|
73,038 |
|
|
|
205,024 |
|
September
1, 2008–September 28, 2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
205,024 |
|
Total
|
|
|
173,038 |
|
|
$ |
33.02 |
|
|
|
173,038 |
|
|
|
205,024 |
|
|
_________________________________________
|
(1)
|
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.
|
SIGNATURE
Pursuant
to the requirements 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 (Registrant)
Date:
November 7, 2008
By
/s/
Patrick J.
Hansen
Patrick
J. Hansen
Senior
Vice President,
Chief
Financial Officer,
Treasurer
and Secretary
(Principal
Accounting and Financial Officer)