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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 December 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: 3,769,816 shares outstanding as of December 28, 2003.

 
     
 

STRATTEC SECURITY CORPORATION

FORM 10-Q

December 28, 2003

INDEX


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
6-7
Item 2  Management’s Discussion and Analysis of Results
             of Operations and Financial Condition
8-13
Item 3  Quantitative and Qualitative Disclosures About Market Risk
13
Item 4  Controls and Procedures
14
 
 
 
 
Part II - OTHER INFORMATION
 
 
 
Item 1  Legal Proceedings
15
Item 2  Changes in Securities and Use of Proceeds
15
Item 3  Defaults Upon Senior Securities
15
Item 4  Submission of Matters to a Vote of Security Holders
15
Item 5  Other Information
15
Item 6  Exhibits and Reports on Form 8-K
15 
 
 



 
  2  
 

Item 1 Financial Statements

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)

 

 

   Three Months Ended     

 

  Six Months Ended       

  
 		  
 		  
 

December 28, 2003 

 

December 29, 2002 

 

December 28, 2003 

 

December 29, 2002 
 
 		  
 		  
 		  
 		  
Net sales
$
50,014
 
$
48,680
 
$
94,434
 
$
96,586
 
 
  
 
    
 
    
 
    
 
  
Cost of goods sold
 
37,912
   
37,742
   
71,874
   
74,295
 
 
 
 
 
 
Gross profit
 
12,102
   
10,938
   
22,560
   
22,291
 
 
  
 
    
 
    
 
    
 
  
Engineering, selling and administrative expenses
 
4,983
   
4,571
   
9,901
   
9,182
 
 
 
 
 
 
Income from operations
 
7,119
   
6,367
   
12,659
   
13,109
 
 
  
 
    
 
    
 
    
 
  
Interest income
 
88
   
85
   
177
   
183
 
Other income (expense), net
 
184
   
(45
)
 
286
   
(248
)
 
 
 
 
 
Income before provision for income taxes
 
7,391
   
6,407
   
13,122
   
13,044
 
 
  
 
    
 
    
 
    
 
  
Provision for income taxes
 
2,772
   
2,371
   
4,921
   
4,827
 
 
 
 
 
 
Net income
$
4,619
 
$
4,036
 
$
8,201
 
$
8,217
 
 
 
 
 
 
Earnings per share:
 
 
    
 
    
 
    
 
  
Basic
$
1.23
 
$
1.07
 
$
2.18
 
$
2.15
 
 
 
 
 
 
Diluted
$
1.21
 
$
1.05
 
$
2.15
 
$
2.11
 
 
 
 
 
 
Average Shares Outstanding:
 
 
    
 
    
 
    
 
  
Basic
 
3,765
   
3,756
   
3,762
   
3,816
 
Diluted
 
3,824
   
3,832
   
3,821
   
3,889
 
 
 
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)
(Unaudited)


      

 December 28, 2003 

 June 29,        2003     

 
 
ASSETS
 
 
Current Assets:
 
 
Cash and cash equivalents
$               36,332
$            29,902
Receivables, net
28,688
31,173
  Inventories-
 
 
Finished products
2,952
2,269
Work in process
9,203
7,763
Raw materials
573
507
LIFO adjustment
(2,638
)
(2,655
)
 
  		  
 
Total inventories
10,090
7,884
Customer tooling in progress
2,164
3,573
Other current assets
8,482
8,554
 
  		  
 		  
Total current assets
85,756
81,086
 
 
 
Deferred income taxes
1,973
1,973
Investment in Joint Venture
1,379
1,141
     
Property, plant and equipment
101,632
99,070
Less: accumulated depreciation
(68,835
)
(65,176
)
 
  		  
  		  
Net property, plant and equipment
32,797
33,894
 
  		  
  		  
 
$             121,905
$          118,094
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
Current Liabilities:
 
 
Accounts payable
$               17,551
$            13,990
Accrued payroll and benefits
7,597
11,205
Environmental reserve
2,710
2,720
Other accrued liabilities
1,688
1,894
 
  		  
 		  
Total current liabilities
29,546
29,809
 
 
 
Accrued pension and post-retirement obligations
15,251
19,190
 
 
 
Shareholders' equity:
 
 
 
 
 
Common stock, authorized 12,000,000 shares $.01 par value,  Issued 6,647,715 shares at December 28, 2003 and 6,608,642 shares at June 29, 2003
 
67
 
66
Capital in excess of par value
65,364
63,830
Retained earnings
121,149
112,948
Accumulated other comprehensive loss
(7,127
)
(6,891
)
Less: treasury stock, at cost (2,877,899 shares at December 28,
 
 
2003 and 2,850,390 shares at June 29, 2003)
(102,345
)
(100,858
)
 
  		  
 		  
Total shareholders' equity
77,108
69,095
 
 
  		  
 
 
$             121,905
 

$       118,094

 
 
 

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

 
  4  
 

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)


 
Six Months Ended  
 
 

December 28, 2003

 

  December 29, 2002

 		  
  
CASH FLOWS FROM OPERATING ACTIVITIES:
$
8,201
 
$
8,217
 
Net income
 
 
    
 
  
Adjustments to reconcile net income to net cash provided
          by operating activities:
     
 
  
Depreciation
 
3,959
     3,916  
Tax benefit from options exercised
 
356
 
  
-
  
Other, net
 
(142
)  
144
  
 
  
 
    
 
  
Change in operating assets and liabilities:
 
 
    
 
  
Receivables
 
2,383
   
2,095
 
Inventories
 
(2,206
)
 
(2,599
)
Other assets
 
1,290
   
378
 
Accounts payable and accrued liabilities
 
(3,955
)
 
(5,917
)
 
 
 
Net cash provided by operating activities
 
9,886
   
6,234
 
 
  
 
    
 
  
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
    
 
  
Investment in joint venture
 
(125
)
 
-
 
Additions to property, plant and equipment
 
(3,022
)
 
(1,373
)
 
 
 
Net cash used in investing activities
 
(3,147
)
 
(1,373
)
 
  
 
    
 
  
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
    
 
  
Purchase of treasury stock
 
(1,492
)
 
(16,136
)
Exercise of stock options
 
1,183
   
22
 
 
 
 
Net cash used in financing activities
 
(309
)
 
(16,114
)
 
 
 
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS
 
 
6,430
   
 
(11,253
)
 
  
 
    
 
  
CASH AND CASH EQUIVALENTS
 
 
    
 
  
Beginning of period
 
29,902
   
34,956
 
 
 
 
End of period
$
36,332
 
$
23,703
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
    
 
  
Income taxes paid
$
4,135
 
$
6,007
 
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 December 28, 2003, and the results of operations and cash flows for the three and six month periods 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 

 
 
December 28, 2003
December 29, 2002
  
 

 Net Income  

 

 Shares

 

 Per Share Amount

 

 Net Income

 

 Shares

 

 Per Share Amount

 
 
 
 
 
 
 
 
Basic Earnings Per Share
$
4,619
   
3,765
 
$
1.23
 
$
4,036
   
3,756
 
$
1.07
 
             
             
 
Stock Options
 
 
    
59
   
 
    
 
    
76
   
 
  
       
             
       
Diluted Earnings Per Share
$
4,619
   
3,824
 
$
1.21
 
$
4,036
   
3,832
 
$
1.05