Business Context and Reporting Period
Company: Strattec Security Corp.
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended June 30, 2002
Business Overview: The Company manufactures engineered locksets and steering column housings for the automotive industry. It operates as a Tier 2 supplier with aspirations for Tier 1 status, focusing on mechanical-electrical vehicle access systems. The Company is highly dependent on four major customers (General Motors, Delphi, Ford, and DaimlerChrysler), which accounted for approximately 82% to 85% of total net sales in fiscal years 2000 through 2002.
Key Financial Metrics
Note: Specific revenue, profit, cash flow, and margin figures are incorporated by reference from the 2002 Annual Report to Shareholders and are not explicitly stated in the provided text.
- Research & Development (R&D): $2,550,000 for fiscal year 2002 (compared to $2,380,000 in 2001 and $2,306,000 in 2000).
- Allowance for Doubtful Accounts: $250,000 at year-end (unchanged from the prior year).
- Market Capitalization: Approximately $161.6 million as of July 31, 2002.
- Shares Outstanding: 3,915,623 shares of Common Stock as of July 31, 2002.
- Employees: Approximately 2,415 full-time employees as of June 30, 2002 (19% unionized).
- Debt/Liquidity: The filing references a Revolving Credit Facility but does not disclose specific balances or liquidity ratios in the provided text.
Material Changes and Operational Highlights
- Customer Concentration: Continued high reliance on four major automotive customers, representing 82-85% of sales.
- Accounting Firm Change: On May 30, 2002, the Company dismissed Arthur Andersen LLP and appointed Deloitte & Touche LLP as its independent public accountants. No disagreements were reported regarding accounting principles or practices with the former auditor.
- Technology Shift: The Company is transitioning from purely mechanical locks to electronic vehicle access systems (passive entry/start) to maintain competitiveness.
- Operational Structure: Utilizes manufacturing facilities in Milwaukee, Wisconsin, and Juarez, Mexico, to leverage lower labor costs in Mexico.
Outlook, Risks, and Contingencies
- Customer Dependency Risk: A significant loss of volume or change in purchasing practices by any of the four major customers could have a detrimental effect on financial performance.
- Competition: Faces competition from domestic and foreign suppliers (e.g., Huf, Ushin-Ortech, Delphi). The Company competes on design, engineering support, quality, and price.
- Environmental Liability: A solvent spill from 1985 at the Milwaukee facility is being monitored. The Company does not currently anticipate a materially adverse impact but acknowledges inherent risks.
- Intellectual Property: Holds 27 issued U.S. patents expiring between 2010 and 2019. The Company relies on trade secrets and confidentiality agreements.
- Market Risk: The Company did not hold any market risk-sensitive instruments during the reporting period.
Investor Verification Checklist
- Verify the specific revenue, net income, and cash flow figures in the 2002 Annual Report to Shareholders (incorporated by reference).
- Confirm the status of contracts with the four major customers (GM, Delphi, Ford, DaimlerChrysler) given the 82-85% sales concentration.
- Review the "Management's Discussion and Analysis" section for details on the 2001 labor strike impact and current labor relations.
- Assess the progress of the transition to electronic vehicle access systems and associated R&D ROI.
- Examine the details of the Revolving Credit Facility to understand current debt obligations and liquidity.