Business Context and Reporting Period
Company: Strattec Security Corp.
Filing Type: Form 10-K (Annual Report)
Period Ended: June 28, 1998
Business Overview: Strattec is a manufacturer of engineered locksets and security systems for the automotive industry. The company operates manufacturing facilities in Milwaukee, Wisconsin, and Juarez, Mexico, serving primarily the "Big Three" U.S. automakers. The company does not pay cash dividends and retains earnings for business operations.
Key Financial Metrics
Note: Specific revenue, profit, cash flow, margin, debt, and liquidity figures are incorporated by reference from the 1998 Annual Report to Shareholders and are not explicitly stated in the provided text.
- Research & Development (R&D): $2,979,000 for fiscal year 1998 (compared to $2,713,000 in 1997 and $2,772,000 in 1996).
- Market Capitalization: Approximately $165,646,000 (as of August 19, 1998, based on non-affiliate holdings).
- Shares Outstanding: 5,721,858 shares of Common Stock (as of August 19, 1998).
- Allowance for Doubtful Accounts: $250,000 (unchanged from prior years).
- Employees: Approximately 2,680 full-time employees (19% unionized).
Material Changes and Operational Context
- Customer Concentration: Sales to General Motors, Ford, and Chrysler accounted for 85% of total net sales in fiscal 1998, consistent with 85% in 1997 and 82% in 1996.
- Technology Shift: The company is transitioning toward emerging electronic technologies, including radio frequency transmission, Hall effects sensing, and RFID applications with encrypted signals.
- Cost Structure: The company utilizes assembly operations in Mexico to reduce labor costs while maintaining technical support capabilities.
- Intellectual Property: The company holds 25 issued U.S. patents expiring between 1999 and 2016, though no single patent is considered material to the business as a whole.
Outlook, Risks, and Contingencies
- Customer Dependency Risk: The company is highly dependent on the "Big Three" automakers. A significant loss of volume or change in purchasing practices by these customers could detrimentally affect financial performance.
- Competitive Landscape: Competition is based on design, engineering, quality, delivery, and price. The company faces potential challenges from competitors with specific electronic expertise as locksets become more sophisticated.
- Environmental Compliance: The company is subject to various environmental laws. Remediation is ongoing for contamination at the Milwaukee site (underground waste coolant and solvent tanks). Management does not anticipate a materially adverse impact from compliance costs, though inherent risks remain.
- Legal Proceedings: No material legal proceedings are currently pending that would have a material adverse effect.
- 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 "Five Year Financial Summary" and "Management's Discussion and Analysis" sections of the 1998 Annual Report to Shareholders (incorporated by reference).
- Confirm the status of contracts with General Motors, Ford, and Chrysler, given they represent 85% of sales.
- Review the "Quarterly Financial Data" on page 24 of the Annual Report for recent performance trends.
- Assess the progress of the Milwaukee site environmental remediation and any associated costs.
- Monitor the adoption rate of new electronic security technologies (RFID, encrypted signals) in upcoming vehicle models.