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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, 2003

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 an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES   _X       NO ___

 
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: 3,759,517 shares outstanding as of September 28, 2003.
 
     
 
STRATTEC SECURITY CORPORATION

FORM 10-Q

September 28, 2003

INDEX


Page
Part I - FINANCIAL INFORMATION
 
 
 
  
 
  
 
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
6-7
Item 2
Management’s Discussion and Analysis of Results
  of Operations and Financial Condition
 
8-12
Item 3
Quantitative and Qualitative Disclosures About Market Risk
 
12
Item 4
Controls and Procedures
13
 
 
  
 
  
 
Part II - OTHER INFORMATION
 
 
 
 
  
 
  
 
Item 1
Legal Proceedings
 
14
Item 2
Changes in Securities and Use of Proceeds
 
14
Item 3
Defaults Upon Senior Securities
 
14
Item 4
Submission of Matters to a Vote of Security Holders
 
14
Item 5
Other Information
 
14
Item 6
Exhibits and Reports on Form 8-K
 
14
 
   2  
 

 
Item 1 Financial Statements
 
 

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
      
Three Months Ended
 
 
 
  
September 28, 2003
September 29, 2002
   
 
 
  
(unaudited)
 
 
    
 
  
 
Net sales
 
$
44,420
 
$
47,906
 
Cost of goods sold
   
33,962
   
36,553
 
   
 
 
Gross profit
   
10,458
   
11,353
 
Engineering, selling and administrative expenses
   
4,918
   
4,611
 
   
 
 
      Income from operations
   
5,540
   
6,742
 
Interest Income
   
89
   
98
 
Other Income (expense), net
   
102
   
(203
)
   
 
 
     Income before provision for income taxes
   
5,731
   
6,637
 
Provision for income taxes
   
2,149
   
2,456
 
   
 
 
Net income
 
$
3,582
 
$
4,181
 
   
 
 
Earnings per share:
     
 
      
 
  
Basic
 
$
0.95
 
$
1.08
 
   
 
 
Diluted
 
$
0.94
 
$
1.06
 
   
 
 
Average Shares Outstanding:
     
 
      
 
  
Basic
   
3,760
   
3,877
 
Diluted
   
3,818
   
3,946
 

The accompanying notes are an integral part of these condensed consolidated statements.

 
 
   3  
 
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)

 
 
  
September 28, 2003
June 29, 2003
     
(unaudited)		  
  		  
ASSETS
   
 
 
    
 
  
Current Assets:
     
 
      
 
  
Cash and cash equivalents
  $
26,359
  $
29,902
 
Receivables, net
   
31,006
   
31,173
 
Inventories-
     
 
      
 
  
   Finished products
   
2,638
   
2,269
 
   Work in process
   
8,601
   
7,763
 
   Raw materials
   
659
   
507
 
    LIFO adjustment
   
(2,667
)
 
(2,655
)
     
  		    
  		  
    Total inventories
   
9,231
   
7,884
 
Customer tooling in progress
   
4,043
   
3,573
 
Other current assets
   
7,922
   
8,554
 
     
  		    
 		  
         Total current assets
   
78,561
   
81,086
 
 
Deferred Income Taxes
   
1,973
   
1,973
 
Investment in Joint Ventures
   
1,201
   
1,141
 
 
Property, plant and equipment
   
99,780
   
99,070
 
Less: accumulated depreciation
   
(66,929
)
 
(65,176
)
     
  		    
  		  
  Net property, plant and equipment
   
32,851
   
33,894
 
     
  		    
  		  
   
$
114,586
 
$
118,094
 
     
  		    
  		  
LIABILITIES AND SHAREHOLDERS' EQUITY
             
Current Liabilities:
     
 
      
 
  
Accounts payable
 
$
15,578
 
$
13,990
 
Accrued payroll and benefits
   
6,225
   
11,205
 
Environmental reserve
   
2,713
   
2,720
 
Other accrued liabilities
   
      2,910
   
      1,894
 
     
  		    
  		  
      Total current liabilities
   
27,426
   
29,809
 
 
Accrued pension and postretirement obligations
   
14,804
   
19,190
 
Shareholders' equity:
     
 
      
 
  
Common stock, authorized 12,000,000 shares $.01 par value, Issued 6,617,642 shares at September 28, 2003 and 608,642 shares at June 29, 2003
   
66
   
66
 
Capital in excess of par value
   
64,099
   
63,830
 
Retained earnings
   
116,530
   
112,948
 
Accumulated other comprehensive loss
   
(7,064
)
 
(6,891
)
Less: treasury stock, at cost (2,858,125 shares at
September 28, 2003 and 2,850,390 shares at
June 29, 2003)
   
(101,275
)
 
(100,858
)
     
  		    
  		  
 Total shareholders' equity     72,356     69,095  
     
  		    
  		  
 
   $
114,586
  $
118,094
  
   
 		  
  		  


The accompanying notes are an integral part of these condensed consolidated statements.
 
 
   4  
 
 
 
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)


 
Three Months Ended
 
 
 
September 28, 2003
September 29, 2002
 

 
 
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
   
 
      
 
  
  Net income
$
3,582
 
$
4,181
 
  Adjustments to reconcile net income to net cash provided by operating  activities:
    
 
      
 
  
    Depreciation
 
2,017
   
1,963
 
    Change in operating assets and liabilities:
               
      Receivables
 
96
   
(4,841
)
      Inventories
 
(1,347
)
 
(2,718
)
      Other assets
 
24
   
449
 
      Accounts payable and accrued liabilities
 
(6,587
)
 
100
 
   Tax benefit from options exercised
 
128
   
-
 
   Other, net
 
(84
)
 
7
 
   
  		    
  		  
  Net cash used in operating activities
 
(2,171
)
 
(859
)
             
CASH FLOWS FROM INVESTING ACTIVITIES:
           
  Additions to property, plant and equipment
 
(1,096
)
 
(797
)
 
   		    
 		  
  Net cash used in investing activities
 
(1,096
)
 
(797
)
           
CASH FLOWS FROM FINANCING ACTIVITIES:
           
  Purchase of treasury stock
 
(421
)
 
(16,136
)
  Exercise of stock options
 
145
   
-
 
   
  		    
  		  
  Net cash used in financing activities
 
 (276
)
 
(16,136
)
 
  
   		   
  		  
NET DECREASE IN CASH AND CASH EQUIVALENTS
 
(3,543
)
 
(17,792
)
           
CASH AND CASH EQUIVALENTS
           
  Beginning of period  
29,902
   
34,956
 
   
  		    
  		  
  End of period
$
26,359
 
$
17,164
 
 
   		   
   		 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
           
  Income taxes paid
$
384
 
$
708
 
  Interest paid
 
-
   
-
 
 
The accompanying notes are an integral part of these condensed consolidated statements.

 
  5   
 
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Basis of Financial Statements
STRATTEC SECURITY CORPORATION (the “Company”) designs, develops, manufactures and markets mechanical locks, electro-mechanical locks and related access-control products for North American and global automotive manufacturers.   The accompanying condensed unaudited financial statements reflect the consolidated results of the Company and its wholly owned Mexican subsidiaries.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position of the Company as of September 28, 2003, and the results of operations and cash flows for the three month period then ended. All significant intercompany transactions have been eliminated. Interim financial results are not necessarily indicative of operating results for an entire year.

These financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s 2003 Annual Report.

Earnings Per Share (EPS)
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, 2003
September 29, 2002
 
 
 
Net Income
Shares
Per-Share
Amount
Net
Income
Shares
Per-Share
Amount
  
 
  
 
  
  
Basic Earnings Per Share
 
$3,582
3,760
$0.95 
$4,181
3,877
$1.08
 
  
Stock Options
 
58

 

 
69
 
 
   
Diluted Earnings Per Share
 
$3,582
3,818
$0.94
$4,181
3,946
$1.06
   
   
   
   

Options to purchase the following shares of common stock were outstanding as of each date indicated but were not included in the computation of diluted EPS because the options’ exercise prices were greater than the average market price of the common shares:

Period Ended
 
Shares
Exercise
  Price
 
 
  
September 28, 2003
   
74,160
 
$
58.59
 
     
79,500
 
$
53.07
 
     
80,000
 
$
61.68
 
     
4,500
 
$
53.22
 
               
September 29, 2002
   
80,000
 
$
58.59
 

Comprehensive Income
The following table presents the Company’s comprehensive income (in thousands):

 
 
 
  
Three Months Ended
   
 
 
  
March 30,
 2003
March 31, 2002
   
  
  
Net Income
 
$
3,582
 
$
4,181
 
Change in Cumulative Translation
     
 
      
 
  
           Adjustments, net
   
(173
)
 
(75
)
   
 
 
Total Comprehensive Income
 
$
3,409
 
$
4,106
 
   
 
 

 
  6  
 
 
Stock Based Compensation
The Company accounts for its stock-based compensation plans using the intrinsic value method. Accordingly, no compensation cost related to these plans was charged against earnings during fiscal 2004 and 2003. Had compensation cost for these plans been determined using the fair value method rather than the intrinsic value method, the pro forma impact on earnings per share would have been as follows (in thousands):
 

 
 
  
Three Months Ended
   
 
 
  
September 28, 2003
September 29, 2002
   
 
 
Net Income as Reported
 
$
3,582
 
$
4,181