10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549  

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2017

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  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐(Do not check if a smaller reporting company)	Smaller Reporting Company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES  ☐    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: 3,671,252 shares outstanding as of October 2, 2017 (which number includes all restricted shares previously awarded that have not vested as of such date).

STRATTEC SECURITY CORPORATION

FORM 10-Q

October 1, 2017

INDEX

		Page
Part I - FINANCIAL INFORMATION
Item 1	Financial Statements
	Condensed Consolidated Statements of Income and Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6-16
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4	Controls and Procedures	26
Part II - OTHER INFORMATION
Item 1	Legal Proceedings	27
Item 1A	Risk Factors	27
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3	Defaults Upon Senior Securities	27
Item 4	Mine Safety Disclosures	27
Item 5	Other Information	27
Item 6	Exhibits	27

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,” or the negative of these terms or words of similar meaning. These include statements regarding 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 discussion of such matters and subject areas contained herein is 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, consumer demand for the Company’s and its customers’ products, competitive and technological developments, customer purchasing actions, changes in warranty provisions and customers’ product recall policies,  foreign currency fluctuations, costs of operations, the volume and scope of product returns and warranty claims and other matters described in the section titled “Risk Factors” in the Company’s Form 10-K report filed on September 7, 2017 with the Securities and Exchange Commission for the year ended July 2, 2017.

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

Condensed Consolidated Statements of Income and Comprehensive Income

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended
	October 1, 2017			October 2, 2016
Net sales	$	102,460		$	100,244
Cost of goods sold		88,997			85,441
Gross profit		13,463			14,803
Engineering, selling and administrative expenses		10,042			11,283
Income from operations		3,421			3,520
Interest income		4			41
Equity earnings (loss) of joint ventures		1,026			62
Interest expense		(203	)		(78	)
Other income (expense), net		87			(242	)
Income before provision for income taxes and non-    controlling interest		4,335			3,303
Provision for income taxes		1,066			898
Net income		3,269			2,405
Net income attributable to non-controlling interest		813			863
Net income attributable to STRATTEC SECURITY       CORPORATION	$	2,456		$	1,542
Comprehensive Income:
Net income	$	3,269		$	2,405
Pension and postretirement plans, net of tax		278			475
Currency translation adjustments		297			(1,623	)
Other comprehensive income (loss), net of tax		575			(1,148	)
Comprehensive income		3,844			1,257
Comprehensive income attributable to non-controlling     interest		735			753
Comprehensive income attributable to STRATTEC       SECURITY CORPORATION	$	3,109		$	504
Earnings per share attributable to STRATTEC SECURITY       CORPORATION:
Basic	$	0.68		$	0.43
Diluted	$	0.67		$	0.42
Average shares outstanding:
Basic		3,611			3,576
Diluted		3,681			3,661
Cash dividends declared per share	$	0.14		$	0.14

The accompanying notes are an integral part of these Condensed Consolidated Statements of Income and Comprehensive Income.

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STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Amounts)

	October 1, 2017			July 2, 2017
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	8,498		$	8,361
Receivables, net		64,016			64,933
Inventories:
Finished products		10,375			9,976
Work in process		10,062			9,328
Purchased materials		23,401			20,682
Excess and obsolete reserve		(4,443	)		(4,510	)
Inventories, net		39,395			35,476
Other current assets		21,959			20,235
Total current assets		133,868			129,005
Investment in joint ventures		18,416			16,840
Deferred income taxes		241			256
Other long-term assets		16,665			16,022
Property, plant and equipment		257,081			251,519
Less: accumulated depreciation		(142,575	)		(139,928	)
Net property, plant and equipment		114,506			111,591
	$	283,696		$	273,714
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	39,908		$	39,679
Accrued Liabilities:
Payroll and benefits		12,049			13,055
Environmental		1,307			1,308
Warranty		5,535			5,550
Other		7,395			8,303
Total current liabilities		66,194			67,895
Borrowings under credit facility		40,000			30,000
Accrued pension obligations		1,521			1,492
Accrued postretirement obligations		934			1,003
Other long-term liabilities		618			610
Shareholders’ Equity:
Common stock, authorized 12,000,000 shares, $.01 par value, 7,246,503    issued shares at October 1, 2017 and 7,216,103 issued shares at    July 2, 2017		72			72
Capital in excess of par value		94,198			93,813
Retained earnings		227,861			225,913
Accumulated other comprehensive loss		(32,235	)		(32,888	)
Less: treasury stock, at cost (3,618,751 shares at October 1, 2017 and    3,619,487 shares at July 2, 2017)		(135,811	)		(135,822	)
Total STRATTEC SECURITY CORPORATION shareholders’ equity		154,085			151,088
Non-controlling interest		20,344			21,626
Total shareholders’ equity		174,429			172,714
	$	283,696		$	273,714

The accompanying notes are an integral part of these Condensed Consolidated Balance Sheets.

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STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Three Months Ended
	October 1, 2017			October 2, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,269		$	2,405
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,095			2,760
Foreign currency transaction loss (gain)		137			(689	)
Unrealized loss on peso forward contracts		258			899
Stock based compensation expense		371			428
Equity earnings of joint ventures		(1,026	)		(62	)
Change in operating assets and liabilities:
Receivables		1,200			(4,433	)
Inventories		(3,919	)		(3	)
Other assets		(2,174	)		(1,372	)
Accounts payable and accrued liabilities		(852	)		5,268
Other, net		(5	)		(172	)
Net cash provided by operating activities		354			5,029
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to joint ventures		—			(850	)
Repayment from loan to joint ventures		—			75
Purchase of property, plant and equipment		(7,571	)		(7,446	)
Net cash used in investing activities		(7,571	)		(8,221	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facility		12,000			8,000
Repayments of borrowings under credit facility		(2,000	)		(4,000	)
Contribution from non-controlling interest of subsidiaries		—			2,940
Dividends paid to non-controlling interests of subsidiaries		(2,017	)		(1,764	)
Dividends paid		(508	)		(503	)
Exercise of stock options and employee stock purchases		25			74
Net cash provided by financing activities		7,500			4,747
Foreign currency impact on cash		(146	)		37
NET INCREASE IN CASH AND CASH EQUIVALENTS		137			1,592
CASH AND CASH EQUIVALENTS
Beginning of period		8,361			15,477
End of period	$	8,498		$	17,069
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes	$	615		$	487
Interest	$	183		$	86
Non-cash investing activities:
Change in capital expenditures in accounts payable	$	(1,337	)	$	(1,714	)

The accompanying notes are an integral part of these Condensed Consolidated Statements of Cash Flows.

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STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Basis of Financial Statements

STRATTEC SECURITY CORPORATION designs, develops, manufactures and markets automotive access control products including mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings, latches, power sliding door systems, power lift gate systems, power deck lid systems, door handles and related products for primarily North American automotive customers. We also supply global automotive manufacturers through a unique strategic relationship with WITTE Automotive (“WITTE”) of Velbert, Germany, and ADAC Automotive (“ADAC”) of Grand Rapids, Michigan. Under this relationship, STRATTEC, WITTE and ADAC market the products of each company to global customers under the “VAST” brand name (as more fully described herein). STRATTEC products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea, China and India, and we provide full service and aftermarket support for each VAST partner’s products. We also maintain a 51 percent interest in a joint venture, STRATTEC Advanced Logic, LLC (“SAL LLC”), which exists to introduce a new generation of biometric security products based on the designs of Actuator Systems, our partner and the owner of the remaining ownership interest. Currently, we, along with our joint venture partner, are winding down and discontinuing operating the business of SAL LLC.

The accompanying condensed consolidated financial statements reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, STRATTEC de Mexico, and its majority owned subsidiaries, ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC. STRATTEC SECURITY CORPORATION is located in Milwaukee, Wisconsin. STRATTEC de Mexico is located in Juarez, Mexico. ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC have operations in El Paso, Texas and Juarez and Leon, Mexico. Equity investments in Vehicle Access Systems Technology LLC (“VAST LLC”) and SAL LLC, for which we exercise significant influence but do not control and are not the primary beneficiary, are accounted for using the equity method. VAST LLC consists primarily of three wholly owned subsidiaries in China, one wholly owned subsidiary in Brazil and one joint venture entity in India. SAL LLC is located in El Paso, Texas. We have only one reporting segment.

In the opinion of management, the accompanying condensed consolidated balance sheets as of October 1, 2017 and July 2, 2017, which have been derived from our audited financial statements, and the related unaudited interim condensed consolidated financial statements included herein 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”) and in accordance with Rule 10-01 of Regulation S-X. 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 the financial statements and notes thereto included in the STRATTEC SECURITY CORPORATION 2017 Annual Report, which was filed with the Securities and Exchange Commission as an exhibit to our Form 10-K on September 7, 2017.

New Accounting Standards

In May 2014, the FASB issued an update to the accounting guidance for the recognition of revenue arising from contracts with customers. The update supersedes most current revenue recognition guidance and outlines a single comprehensive model for revenue recognition based on the principle that an entity should recognize revenue in an amount that reflects the expected consideration to be received in the exchange of goods and services. The guidance update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The guidance permits two methods of adoption: the full retrospective method, which requires retrospective restatement of each prior reporting period presented, or the modified retrospective method, which requires the cumulative effect of initially applying the guidance be recognized at the date of initial application. We currently do not expect any changes to how we account for reimbursable pre-production costs, which are currently accounted for as a cost reduction. In addition, we are continuing to evaluate our contracts with customers, analyzing the impact, if any, on revenue from the sale of production parts. Currently, we do not expect the adoption of this standard to have a material impact on our results of operations or financial position; however, we expect to expand disclosures in line with the requirements of the new standard. We will adopt this standard as of July 2, 2018, the first day of our 2019 fiscal year. We currently plan to adopt the new standard using the modified retrospective approach; however, we will decide which retrospective application to apply once our revenue standard assessment is finalized.

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In August 2014, the FASB issued an update to the accounting guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. This accounting update is effective for annual and interim periods beginning on or after December 15, 2016, with early adoption permitted.  The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In July 2015, the FASB issued an accounting standard to simplify the measurement of inventory by changing the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory. The standard update is effective for fiscal years beginning after December 15, 2016 and interim periods within those years, and early adoption was permitted. The standard is to be applied prospectively. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued an update to the accounting guidance for leases. The update increases the transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. We do not expect that the adoption of this pronouncement will have a material impact on our consolidated financial statements.

In March 2016, the FASB issued an update to the accounting guidance for share-based payments. The update simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification of such items in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In August 2016, the FASB issued an update to the accounting guidance on the classification of certain cash receipts and cash payments. The update aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. We do not expect that the adoption of this pronouncement will have a material impact on our consolidated financial statements.

In March 2017, the FASB issued an update to the accounting guidance for the presentation of net periodic pension cost and net periodic postretirement benefit cost. The update requires the service cost component of net periodic benefit cost be reported in the same line items as other compensation costs arising from services rendered by the pertinent employees during the applicable period. The remaining components of net periodic benefit cost are required to be presented separately from the service cost component outside a subtotal of income from operations. Additionally, the update allows only the service cost component to be eligible for capitalization when applicable. The guidance requires retrospective restatement for each period presented for the presentation of the service cost component and the other components of net periodic benefit cost in the income statement and prospective application for the capitalization of the service cost component of net periodic benefit cost. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years, with early adoption permitted. We elected early adoption beginning with the interim periods of our fiscal 2018. The adoption of this guidance resulted in the reclassification of expense within our Condensed Consolidated Statements of Income and Comprehensive Income for the quarter ended October 2, 2016 of $198,000 from cost of goods sold and $87,000 from engineering, selling and administrative expenses to Other Income (Expense), net.      

Subsequent Event

In October 2017, we entered into additional contracts with Bank of Montreal that provide for monthly Mexican peso currency forward contracts covering the period January 12, 2018 through June 15, 2018. The contracts provide for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of $19.50. The notional amount over the contract periods totals $3 million. See further discussion of Mexican peso forward contracts under Derivative Instruments included in these Notes to Condensed Consolidated Financial Statements.

Derivative Instruments

We own and operate manufacturing operations in Mexico.  As a result, a portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate.  We executed contracts with Bank of Montreal that provide for bi-weekly and monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. The peso currency forward contracts include settlement dates that began on October 16, 2015 and end on June 15, 2018. Additional contracts were executed subsequent to October 1, 2017. Refer to

7

Subsequent Event included in these Notes to Condensed Consolidated Financial Statements.Our objective in entering into these currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges.  As a result, all currency forward contracts are recognized in our accompanying condensed consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other Income (Expense), net.

The following table quantifies the outstanding Mexican peso forward contracts as of October 1, 2017 (thousands of dollars, except average forward contractual exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 13, 2017 - June 15, 2018	$	9,000		20.37	$	862

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Condensed Consolidated Balance Sheets was as follows (thousands of dollars):

	October 1, 2017		July 2, 2017
Not Designated as Hedging Instruments:
Other Current Assets:
Mexican Peso Forward Contracts	$	862	$	1,121

The pre-tax effects of the Mexican peso forward contracts are included in Other Income (Expense), net on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income and consisted of the following (thousands of dollars):

	Three Months Ended
	October 1, 2017			October 2, 2016
Not Designated as Hedging Instruments:
Realized Gain (Loss)	$	458		$	(230	)
Unrealized Loss	$	(258	)	$	(899	)

Fair Value of Financial Instruments

The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facility approximated book value as of October 1, 2017 and July 2, 2017. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of October 1, 2017 (in thousands):  

	Fair Value Inputs
	Level 1 Assets: Quoted Prices InActive Markets		Level 2 Assets: Observable Inputs Other Than Market Prices		Level 3 Assets: Unobservable Inputs
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	400	$	—	$	—
Mid Cap		404		—		—
Large Cap		542		—		—
International		573		—		—
Fixed Income Funds		766		—		—
Cash and Cash Equivalents		—		2		—
Mexican Peso Forward Contracts		—		862		—
Total Assets at Fair Value	$	2,685	$	864	$	—

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The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan and are included in Other Long-term Assets in the accompanying Condensed Consolidated Balance Sheets. Refer to discussion of Mexican peso forward contracts under Derivative Instruments above. The fair value of the Mexican peso forward contracts considers the remaining term, current exchange rate, and interest rate differentials between the two currencies. There were no transfers between Level 1 and Level 2 assets during the three month period ended October 1, 2017.

Equity Earnings (Loss) of Joint Ventures

We hold a one-third interest in a joint venture company, VAST LLC, with WITTE and ADAC. VAST LLC exists to seek opportunities to manufacture and sell all three companies’ products in areas of the world outside of North America and Europe. Our investment in VAST LLC, for which we exercise significant influence but do not control and are not the primary beneficiary, is accounted for using the equity method.

The following are summarized statements of operations for VAST LLC (in thousands):  

	Three Months Ended
	October 1, 2017		October 2, 2016
Net Sales	$	38,510	$	25,009
Cost of Goods Sold		29,013		20,093
Gross Profit		9,497		4,916
Engineering, Selling and Administrative Expenses		6,021		4,015
Income From Operations		3,476		901
Other Income, net		150		441
Income before Provision for Income Taxes		3,626		1,342
Provision for Income Taxes		522		172
Net Income	$	3,104	$	1,170
STRATTEC’s Share of VAST LLC Net Income	$	1,035	$	390
Intercompany Profit Elimination		—		—
STRATTEC’s Equity Earnings of VAST LLC	$	1,035	$	390

We hold a 51% ownership interest in a joint venture company, SAL LLC, which exists to introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner. SAL LLC is considered a variable interest entity based on loans from STRATTEC as discussed below. STRATTEC is not the primary beneficiary and does not control the entity. Accordingly, our investment in SAL LLC is accounted for using the equity method.

SAL LLC maintains a license agreement with Westinghouse allowing SAL LLC to do business as Westinghouse Security. Payments due Westinghouse under the license agreement were guaranteed by STRATTEC. As of October 1, 2017 and July 2, 2017, STRATTEC has a recorded liability equal to the estimated fair value of the future payments due under this guarantee of $250,000. The liability is included in Accrued Liabilities: Other in the accompanying Condensed Consolidated Balance Sheets.

Loans were made from STRATTEC to SAL LLC in support of operating expenses and working capital needs. The outstanding loan amounts totaled $2.6 million as of October 1, 2017 and July 2, 2017. As of each balance sheet date, the outstanding loan amount was eliminated against STRATTEC’s Investment in SAL LLC in the preparation of the consolidated financial statements.

Even though we maintain a 51 percent ownership interest in SAL LLC, effective with our fiscal 2015 fourth quarter, 100 percent of the funding for SAL LLC was being made by loans from STRATTEC to SAL LLC. Therefore, STRATTEC recognized 100 percent of the losses of SAL LLC up to our committed financial support through Equity (Loss) Earnings of Joint Ventures in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income for all periods presented in this report.

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The following are summarized statements of operations for SAL, LLC (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2016
Net Sales	$	108		$	100
Cost of Goods Sold		152			87
Gross Profit		(44	)		13
Engineering, Selling and Administrative Expenses		(10	)		337
Loss From Operations		(34	)		(324	)
Other Expense, net		(65	)		(12	)
Net Loss	$	(99	)	$	(336	)
STRATTEC’s Equity Loss of SAL LLC	$	(9	)	$	(328	)

Currently, we, along with our joint venture partner, are winding down and discontinuing operating the business of SAL LLC.

We have sales of component parts to VAST LLC and SAL LLC, purchases of component parts from VAST LLC, expenses charged to VAST LLC for engineering and accounting services and expenses charged to us from VAST LLC for general headquarters expenses.  The following table summarizes these related party transactions with VAST LLC and SAL LLC for the periods indicated below (in thousands):

	Three Months Ended
	October 1, 2017		October 2, 2016
Sales to VAST LLC	$	596	$	50
Sales to SAL, LLC	$	35	$	75
Purchases from VAST LLC	$	45	$	31
Expenses Charged to VAST LLC	$	212	$	228
Expenses Charged from VAST LLC	$	218	$	409

Credit Facilities and Guarantees

STRATTEC has a $30 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $25 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities both expire August 1, 2020. Borrowings under either credit facility are secured by our U.S. cash balances, accounts receivable, inventory, and fixed assets located in the U.S. Interest on borrowings under both credit facilities is at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. The ADAC-STRATTEC Credit Facility also required that a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC be completed by September 30, 2016. This capital contribution was completed as required. STRATTEC’s portion of the capital contribution totaled $3.06 million. As of October 1, 2017, we were in compliance with all financial covenants required by these credit facilities.

Outstanding borrowings under the credit facilities were as follows (in thousands):

	October 1, 2017		July 2, 2017
STRATTEC Credit Facility	$	20,000	$	16,000
ADAC-STRATTEC Credit Facility	$	20,000	$	14,000

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Average outstanding borrowings and the weighted average interest rate under each credit facility referenced above were as follows for each period presented (in thousands):

	Three Months Ended
	AverageOutstanding Borrowings				Weighted Average Interest Rate
	October 1, 2017		October 2, 2016		October 1, 2017			October 2, 2016
STRATTEC Credit Facility	$	18,143	$	12,159		2.3	%		1.5	%
ADAC-STRATTEC Credit Facility	$	18,022	$	8,473		2.2	%		1.5	%

Commitments and Contingencies

We are from time to time subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, alleged breaches of contracts, product warranties, intellectual property matters and employment related matters. It is our opinion that the outcome of such matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. With respect to warranty matters, although we cannot ensure that future costs of warranty claims by customers will not be material, we believe our established reserves are adequate to cover potential warranty settlements.

In 1995, we recorded a provision of $3 million for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The facility was contaminated by a solvent spill, which occurred in 1985, from a former above ground solvent storage tank located on the east side of the facility. The reserve was originally established based on third party estimates to adequately cover the cost for active remediation of the contamination. Due to changing technology and related costs associated with active remediation of the contamination, in fiscal 2010, the reserve was adjusted based on updated third party estimates to adequately cover the cost for active remediation of the contamination. Additionally, in fiscal 2016, we obtained updated third party estimates for adequately covering the cost for active remediation of this contamination. Based upon the updated estimates, no further adjustment to the reserve was required. From 1995 through October 1, 2017, costs of approximately $568,000 have been incurred related to the installation of monitoring wells on the property and ongoing monitoring costs. We monitor and evaluate the site with the use of these groundwater monitoring wells. An environmental consultant samples these wells one or two times a year to determine the status of the contamination and the potential for remediation of the contamination by natural attenuation, the dissipation of the contamination over time to concentrations below applicable standards. If such sampling evidences a sufficient degree of and trend toward natural attenuation of the contamination at the site, we may be able to obtain a closure letter from the regulatory authorities resolving the issue without the need for active remediation. If a sufficient degree and trend toward natural attenuation is not evidenced by sampling, a more active form of remediation beyond natural attenuation may be required. The sampling has not yet satisfied all of the requirements for closure by natural attenuation. As a result, sampling continues and the reserve remains at an amount to reflect the estimated cost of active remediation. The reserve is not measured on a discounted basis. We believe, based on findings-to-date and known environmental regulations, that the remaining environmental reserve of $1.3 million at October 1, 2017 is adequate.

Shareholders’ Equity

A summary of activity impacting shareholders’ equity for the three month period ended October 1, 2017 was as follows (in thousands):

	Total Shareholders’ Equity			Equity Attributable to STRATTEC			Equity Attributable toNon- Controlling Interest
Balance, July 2, 2017	$	172,714		$	151,088		$	21,626
Net Income		3,269			2,456			813
Dividend Declared		(508	)		(508	)		—
Dividend Declared – Non-controlling Interests of    Subsidiaries		(2,017	)		—			(2,017	)
Translation adjustments		297			375			(78	)
Stock Based Compensation		371			371			—
Pension and Postretirement Adjustment, Net of    tax		278			278			—
Employee Stock Purchases and Stock Option    Exercises		25			25			—
Balance, October 1, 2017	$	174,429		$	154,085		$	20,344

11

Other Income (Expense), net

Net other income (expense) included in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income primarily included foreign currency transaction gains and losses, realized and unrealized losses on our Mexican peso currency forward contracts, net periodic pension and postretirement benefit (costs) credits, other than the service cost component, and Rabbi Trust gains and losses. Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. We entered into the Mexican Peso currency forward contracts to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Pension and postretirement plan impacts include the components of net periodic benefit cost other than the service cost component. The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in this Trust are considered trading securities.

The impact of these items for each of the periods presented was as follows (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2016
Foreign Currency Transaction (Loss) Gain	$	(137	)	$	689
Unrealized Loss on Peso Forward Contracts		(258	)		(899	)
Realized Gain (Loss) on Peso Forward Contracts		458			(230	)
Pension and Postretirement Plans		112			(285	)
Rabbi Trust Gain		89			83
Other		(177	)		400
	$	87		$	(242	)

Income Taxes

The income tax provisions for the three month periods ended October 1, 2017 and October 2, 2016 were affected by the non-controlling interest portion of our pre-tax income. The non-controlling interest impacts the effective tax rate as ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes. The reduction in our effective tax rate in the current year period as compared to the prior year period was due to a larger anticipated research and development tax credit for Federal tax purposes.

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 applicable period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the potential dilutive common shares outstanding during the applicable period using the treasury stock method. Potential dilutive common shares include outstanding stock options and unvested 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
			October 1, 2017							October 2, 2016
	Net income		Shares		Per-Share Amount		Net income			Shares		Per-Share Amount
Basic Earnings Per Share	$	2,456		3,611	$	0.68	$	1,542			3,576	$	0.43
Stock Option and Restricted    Stock Awards		—		70				(1	)		85
Diluted Earnings Per Share	$	2,456		3,681	$	0.67	$	1,541			3,661	$	0.42

The calculation of earnings per share excluded 63,550 and 14,010 share-based payment awards as of October 1, 2017 and October 2, 2016, respectively, because their inclusion would have been anti-dilutive.  

12

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. As of October 1, 2017, the Board of Directors had designated 1,850,000 shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of October 1, 2017 were 179,164. 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, outside directors and specified associates 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 10 years after the grant date unless an earlier expiration date is set at the time of grant. The options vest 1 to 4 years after the date of grant as determined by the Compensation Committee of the Board of Directors. 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 one year from the date of grant. Unvested restricted shares granted have voting rights, regardless of whether the shares are vested or unvested, but only have the right to receive cash dividends after such shares become vested. Prior to August 2016, the restricted stock grants issued vest 3 to 5 years after the date of grant. As of August 2016, restricted stock grants issued vest 1 to 5 years after the date of grant as determined by the Compensation Committee of the Board of Directors.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. 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 for fixed awards with graded vesting schedules is amortized on a straight line basis over the vesting period for the entire award.

There was no stock option activity under our stock incentive plan for the three months ended October 1, 2017. Options outstanding as of October 1, 2017 were as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding, July 2, 2017		138,508	$	29.23
Outstanding, October 1, 2017		138,508	$	29.23		4.2	$	1,967
Exercisable, October 1, 2017		138,508	$	25.71		4.2	$	1,967

The intrinsic value of stock options exercised and the fair value of stock options that vested during the three month periods presented below were as follows (in thousands):

	Three Months Ended
	October 1, 2017		October 2, 2016
Intrinsic Value of Options Exercised	$	—	$	71
Fair Value of Stock Options Vesting	$	315	$	596

No options were granted during the three month period ended October 1, 2017 or October 2, 2016.  

A summary of restricted stock activity under our omnibus stock incentive plan for the three months ended October 1, 2017 was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Balance, July 2, 2017		75,850		$	60.61
Granted		27,950		$	33.30
Vested		(30,400	)	$	62.99
Forfeited		(2,175	)	$	56.91
Nonvested Balance, October 1, 2017		71,225		$	48.99

13

As of October 1, 2017, all compensation cost related to outstanding stock options granted under our omnibus stock incentive plan has been recognized. As of October 1, 2017, there was approximately $1.9 million of total unrecognized compensation cost related to unvested restricted stock grants outstanding under the plan. This cost is expected to be recognized over a remaining 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 our omnibus stock incentive plan.

Pension and Postretirement Benefits

We have a qualified, noncontributory defined benefit pension plan (“Qualified Pension Plan”) covering substantially all U.S. associates employed by us prior to January 1, 2010. Benefits under the Qualified Pension Plan are based on credited years of service and final average compensation. Our policy is to fund the Qualified Pension Plan with 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. Effective December 31, 2009, the Board of Directors amended the Qualified Pension Plan to freeze benefit accruals and future eligibility. The Board of Directors has approved the termination of the Qualified Pension Plan with a proposed termination date of December 31, 2017. The termination of the Qualified Pension Plan is contingent upon receipt of an IRS determination letter that the Qualified Pension Plan was qualified upon termination and approval by the Pension Benefit Guaranty Corporation (“PBGC”). The date the termination will be approved and benefits can be distributed will not be known until we receive all required regulatory approvals. On or about October 13, 2017, we submitted a request to the IRS for a determination letter that the Qualified Pension Plan is qualified upon termination prior to the end of the 2017 calendar year. Depending on the time receipt of IRS and PBGC approval, we intend to distribute Qualified Pension Plan assets prior to the end of the 2018 calendar year.  Additionally, in connection with preparing for the termination of the Qualified Pension Plan, we have amended the plan to provide that participants are 100 percent vested in their accrued benefits as of the effective date of the plan termination, to adopt a new standard for disability benefits that will apply when the plan’s assets are distributed due to the termination, to add a lump sum distribution for employees and terminated vested participants who are not in payment status when Qualified Pension Plan assets are distributed due to the termination and to make certain other conforming amendments to the Qualified Pension Plan to comply with applicable laws that may be required by the IRS or may be deemed necessary or advisable to improve the administration of the Qualified Pension Plan or facilitate its termination and liquidation.  We will contribute to the Trust Fund for the Qualified Pension Plan as necessary to ensure there are sufficient assets to provide all Qualified Pension Plan benefits as required by the PBGC.  The financial impact of the Qualified Pension Plan termination will be recognized as a settlement of the Qualified Pension Plan liabilities.  The settlement date and related financial impact have not yet been determined.

We have historically had in place a noncontributory supplemental executive retirement plan (“SERP”), which prior to January 1, 2014 was a nonqualified defined benefit plan that essentially mirrored the Qualified Pension Plan, but provided benefits in excess of certain limits placed on our Qualified Pension Plan by the Internal Revenue Code.  As noted above, we froze our Qualified Pension Plan effective as of December 31, 2009 and the SERP provided benefits to participants as if the Qualified Pension Plan had not been frozen.  Because the Qualified Pension Plan was frozen and because new employees were not eligible to participate in the Qualified Pension Plan, our Board of Directors adopted amendments to the SERP on October 8, 2013 that were effective as of December 31, 2013 to simplify the SERP calculation.  The SERP is funded through a Rabbi Trust with BMO Harris Bank N.A.  Under the amended SERP, participants received an accrued lump-sum benefit as of December 31, 2013 which was credited to each participant’s account.  Subsequent to December 31, 2013, each eligible participant receives a supplemental retirement benefit equal to the foregoing lump sum benefit, plus an annual benefit accrual equal to 8 percent of the participant’s base salary and cash bonus, plus annual credited interest on the participant’s account balance.  All then current participants as of December 31, 2013 are fully vested in their account balances with any new individuals participating in the SERP effective on or after January 1, 2014 being subject to a five year vesting period.  The SERP, which is considered a defined benefit plan under applicable rules and regulations of the Internal Revenue Code, will continue to be funded through use of a Rabbi Trust to hold investment assets to be used in part to fund any future required lump sum benefit payments to participants.  The Rabbi Trust assets had a value of $2.7 million at October 1, 2017 and $2.6 million at July 2, 2017, respectively, and are included in Other Long-Term Assets in the accompanying Condensed Consolidated Balance Sheets.

We also sponsor a postretirement health care plan for all U.S. associates hired prior to June 1, 2001. The expected cost of retiree health care benefits is recognized during the years the associates who are covered under the plan render service. Effective January 1, 2010, an amendment to the postretirement health care plan limited the benefit for future eligible retirees to $4,000 per plan year and the benefit is further subject to a maximum five year coverage period based on the associate’s retirement date and age. The postretirement health care plan is unfunded.

The service cost component of the net periodic benefit costs under these plans is allocated between Cost of Goods Sold and Engineering, Selling and Administrative Expenses while the remaining components of the net periodic benefit costs are included in Other Income (Expense), net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

14

The following table summarizes the net periodic benefit cost recognized for each of the periods indicated under these plans (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Service cost	$	17		$	14		$	3		$	3
Interest cost		964			981		11				14
Expected return on plan assets		(1,528	)		(1,464	)		—			—
Amortization of prior service cost (credit)	3				3			(191	)		(191	)
Amortization of unrecognized net loss	509				807		120				135
Net periodic benefit cost (credit)	$	(35	)	$	341		$	(57	)	$	(39	)

No voluntary contributions were made to the Qualified Pension Plan during the three month period ended October 1, 2017. Voluntary contributions of $3 million were made to the Qualified Pension Plan during the three month period ended October 2, 2016. Additional contributions totaling $3 million are anticipated to be made during the remainder of fiscal 2018.

Accumulated Other Comprehensive Loss

The following tables summarize the changes in accumulated other comprehensive loss (“AOCL”) for each period presented (in thousands):

	Three Months Ended October 1, 2017
	Foreign Currency Translation Adjustments			Retirement and Postretirement Benefit Plans			Total
Balance, July 2, 2017	$	14,138		$	18,750		$	32,888
Other comprehensive loss before reclassifications		(297	)		—			(297	)
Income tax		—			—			—
Net other comprehensive loss before       reclassifications		(297	)		—			(297	)
Reclassifications:
Prior service credits (A)		—			188			188
Actuarial gains (A)		—			(629	)		(629	)
Total reclassifications before tax		—			(441	)		(441	)
Income tax		—			163			163
Net reclassifications		—			(278	)		(278	)
Other comprehensive loss (income)		(297	)		(278	)		(575	)
Other comprehensive loss attributable to non-    controlling interest		78			—			78
Balance, October 1, 2017	$	13,763		$	18,472		$	32,235

15

	Three Months Ended October 2, 2016
	Foreign Currency Translation Adjustments		Retirement and Postretirement Benefit Plans			Total
Balance, July 3, 2016	$	13,155	$	24,518		$	37,673
Other comprehensive loss before reclassifications		1,623		—			1,623
Income tax		—		—			—
Net other comprehensive loss before       Reclassifications		1,623		—			1,623
Reclassifications:
Prior service credits (A)		—		188			188
Unrecognized net loss (A)		—		(941	)		(941	)
Total reclassifications before tax		—		(753	)		(753	)
Income tax		—		278			278
Net reclassifications		—		(475	)		(475	)
Other comprehensive loss (income)		1,623		(475	)		1,148
Other comprehensive loss attributable to non-    controlling interest		110		—			110
Balance, October 2, 2016	$	14,668	$	24,043		$	38,711

(A) Amounts reclassified are included in the computation of net periodic benefit cost, which is included in Other Income (Expense), net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. See Pension and Postretirement Benefits note to these Notes to Condensed Consolidated Financial Statements above.

16

Item 2

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 2017 Annual Report which was filed with the Securities and Exchange Commission as an exhibit to its Form 10-K on September 7, 2017. Unless otherwise indicated, all references to quarters and years refer to fiscal quarters and fiscal years.

Outlook

During the fiscal year ended July 2, 2017, we experienced stronger sales demand for our components from our major North American automotive customers, Fiat Chrysler Automobiles, General Motors Company and Ford Motor Company, as it relates to light trucks and both sport and car based utility vehicles in comparison to passenger cars, which was likely influenced by both lower gas prices and consumer preferences. If gas prices continue to remain low over the next few years, we anticipate this consumer buying trend will continue. As we look out over the next calendar year, the current sales projections from our third party forecasting service indicate that the  North American light vehicle production will remain flat or slightly lower than the levels experienced during calendar year 2017. However, our capital spending will remain high through our fiscal year 2018 as we continue to support several new customer program launches, in particular production at our new paint and door handle assembly facility in Leon, Mexico.

Analysis of Results of Operations

Three months ended October 1, 2017 compared to the three months ended October 2, 2016

	Three Months Ended
	October 1, 2017		October 2, 2016
Net Sales (in millions)	$	102.5	$	100.2

Net sales to each of our customers or customer groups in the current year quarter and prior year quarter were as follows (in millions): 

	Three Months Ended
	October 1, 2017		October 2, 2016
Fiat Chrysler Automobiles	$	24.1	$	23.9
General Motors Company		20.3		22.0
Ford Motor Company		15.4		15.0
Tier 1 Customers		15.8		17.8
Commercial and Other OEM Customers		17.9		13.6
Hyundai / Kia		9.0		7.9
	$	102.5	$	100.2

Sales to Fiat Chrysler Automobiles and Ford Motor Company in the current year quarter were essentially flat in comparison to the prior year quarter. The decrease in sales to General Motors Company in the current year quarter as compared to the prior year quarter was attributed to lower production volumes and content on products we supplied to Opel Automotive GmbH as part of our General Motors business in the prior year quarter. Sales to Tier 1 Customers decreased in the current year quarter as compared to the prior year quarter due to lower sales on our driver controls products. Sales to Commercial and Other OEM Customers during the current year quarter increased in comparison to the prior year quarter due to new programs at Honda of America Manufacturing, Inc. These customers, along with Tier 1 customers, represent purchasers of vehicle access control products, such as latches, fobs, driver controls and door handles and related components, that we have developed in recent years to complement our historic core business of locks and keys. The increased sales to Hyundai / Kia in the current year quarter as compared to the prior year quarter were due to higher vehicle production volumes on vehicles for which we supply components.

	Three Months Ended
	October 1, 2017		October 2, 2016
Cost of Goods Sold (in millions)	$	89.0	$	85.4

17

Direct material costs are the most significant component of our cost of goods sold and comprised $57.4 million or 64.5 percent of our cost of goods sold in the current year quarter compared to $56.6 million or 66.3 percent of our cost of goods sold in the prior year quarter. The increase in our direct material costs between these quarters of $800,000 or 1.4 percent was due to increased sales volumes in the current year quarter as compared to the prior year quarter. The reduction in our direct material costs as a percentage of our cost of goods sold in the current year quarter as compared to the prior year quarter is due to an increase in the remaining components of our cost of goods sold as discussed below.

The remaining components of our cost of goods sold consist of labor and overhead costs which increased $2.8 million or 9.7 percent to $31.6 million in the current year quarter from $28.8 million in the prior year quarter as the variable portion of these costs increased due to the increase in sales volumes between the three month periods. Additionally, the current year quarter as compared to the prior year quarter included higher production and expediting costs associated with new product launches occurring during the current year quarter, in particular in connection with the opening of our new paint facility in Leon, Mexico, to meet certain customer schedules and due to an unfavorable Mexican peso to U.S. dollar exchange rate affecting our operations in Mexico. The U.S. dollar value of our Mexican operations increased approximately $540,000 in the current year quarter as compared to the prior year quarter due to an unfavorable Mexican peso to U.S. dollar exchange rate between these quarterly periods. The average U.S. dollar / Mexican peso exchange rate decreased to approximately 17.95 pesos to the dollar in the current year quarter from approximately 18.73 pesos to the dollar in the prior year quarter.

	Three Months Ended
	October 1, 2017			October 2, 2016
Gross Profit (in millions)	$	13.5		$	14.8
Gross Profit as a percentage of net sales		13.1	%		14.8	%

The decrease in gross profit and gross profit as a percentage of net sales in the current year quarter as compared to the prior year quarter were attributed to higher than expected production and expediting costs associated with new product launches occurring during the current year quarter, in particular in connection with the opening of our new paint facility in Leon, Mexico to meet certain customer schedules as well as an unfavorable Mexican Peso to U.S. Dollar exchange rate affecting the cost of our Mexican operations, all as discussed above.

Engineering, selling and administrative expenses in the current year quarter and prior year quarter were as follows:

	Three Months Ended
	October 1, 2017			October 2, 2016
Expenses (in millions)	$	10.0		$	11.3
Expenses as a percentage of net sales		9.8	%		11.3	%

Engineering, selling and administrative expenses decreased during the current year quarter as compared to the prior year quarter. The current year quarter as compared to the prior year quarter included a reduction in new product program development costs for which we utilized third party vendors for a portion of the development work.

Income from operations in the current year quarter was $3.4 million compared to $3.5 million in the prior year quarter. The quarter over quarter reduction in the gross profit was offset by a reduction in engineering, selling and administrative expenses in the current year quarter as compared to the prior year quarter, all as discussed above.  

The equity earnings (loss) of joint ventures was comprised of the following in the current year quarter and prior year quarter (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2016
Vehicle Access Systems Technology LLC	$	1,035		$	390
STRATTEC Advanced Logic, LLC		(9	)		(328	)
	$	1,026		$	62

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Our Vehicle Access Systems Technology LLC (“VAST LLC”) joint ventures in China and India continue to report profitable operating results while our joint venture in Brazil continues to report losses due to the weak automotive build in that region. STRATTEC is not the primary beneficiary and does not control STRATTEC Advanced Logic, LLC (“SAL LLC”). Accordingly, our investment in SAL LLC is accounted for using the equity method. During all periods presented in this report, 100 percent of the funding for SAL LLC was being made through loans from STRATTEC to SAL LLC. Therefore, during all periods presented in this report, even though STRATTEC maintains a 51 percent ownership interest in SAL LLC, STRATTEC recognized 100 percent of the losses of SAL LLC up to our committed financial support. Currently, we, along with our joint venture partner, are winding down and discontinuing operating the business of SAL LLC.

Included in Other Income (Expense), net in the current year quarter and prior year quarter were the following items (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2017
Foreign Currency Transaction (Loss) Gain	$	(137	)	$	689
Unrealized Loss on Peso Forward Contracts		(258	)		(899	)
Realized Gain (Loss) on Peso Forward Contracts		458			(230	)
Pension and Postretirement Plans		112			(285	)
Rabbi Trust Gain		89			83
Other		(177	)		400
	$	87		$	(242	)

Foreign currency transaction losses during the current year quarter resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. We entered into the Mexican peso currency forward contracts to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Unrealized gains and losses on the peso forward contracts recognized as a result of mark-to-market adjustments as of October 1, 2017 may or may not be realized in future periods, depending on the actual Mexican peso to U.S. dollar exchange rates experienced during the balance of the contract period. Pension and postretirement plan impacts include the components of net periodic benefit cost other than the service cost component. Our Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in the Trust are considered trading securities.  

Our effective tax rate was 24.6 percent for the current year quarter compared to 27.2 percent for the prior year quarter. The income tax provisions for the three month periods ended October 1, 2017 and October 2, 2016 were affected by the non-controlling interest portion of our pre-tax income. The non-controlling interest impacts the effective tax rate as ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes. The reduction in our effective tax rate in the current year period as compared to the prior year period was due to a larger anticipated research and development tax credit for Federal tax purposes.

Liquidity and Capital Resources

Outstanding Receivable Balances from Major Customers

Our primary source of cash flow is from our major customers, which include Fiat Chrysler Automobiles, General Motors Company and Ford Motor Company. As of the date of filing this Form 10-Q with the Securities and Exchange Commission, all of our major customers are making payments on their outstanding accounts receivable in accordance with the payment terms included on their purchase orders. A summary of our outstanding receivable balances from our major customers as of October 1, 2017 was as follows (in millions):

Fiat Chrysler Automobiles	$	17.1
General Motors Company	$	12.1
Ford Motor Company	$	9.5

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Cash Balances in Mexico

We earn a portion of our operating income in Mexico. During 2017, we changed our assertion regarding the permanent reinvestment of earnings from two of our Mexican subsidiaries. Prior to our fiscal 2017 second quarter, the accumulated undistributed earnings from such subsidiaries were considered to be permanently reinvested in Mexico. During our fiscal 2017 second quarter, the strength of the U.S. dollar to the Mexican peso significantly decreased the U.S. tax cost associated with a distribution from the Mexican entities as compared to the U.S. tax cost associated with such a distribution in prior periods. Consequently, we changed our assertion regarding the permanent reinvestment of earnings from these Mexican subsidiaries. Such earnings are no longer considered permanently reinvested. We repatriated $15 million from Mexico to the U.S. during the quarter ended January 1, 2017. As of October 1, 2017, $646,000 of our $8.5 million cash and cash equivalents balance was held in Mexico. These funds, with some restrictions and tax implications, are available for repatriation as deemed necessary.

Cash Flow Analysis

	Three Months Ended
	October 1, 2017			October 2, 2016
Cash Flows from (in millions):
Operating Activities	$	0.4		$	5.0
Investing Activities	$	(7.6	)	$	(8.2	)
Financing Activities	$	7.5		$	4.7

The change in operating cash flow between periods was impacted by a larger increase in working capital requirements in the current year period as compared to the prior year period. The quarter over quarter increase in net working capital requirements totaled $5.3 million. The increase in our working capital requirements between periods was made up of the following working capital changes between periods (in millions):

	Increase (Decrease) in Working Capital Requirements
	Three Months Ended
	October 1, 2017			October 2, 2016			Change
Accounts Receivable	$	(1.2	)	$	4.4		$	(5.6	)
Inventory	$	3.9		$	—		$	3.9
Other Assets	$	2.2		$	1.4		$	0.8
Accounts Payable and Accrued Liabilities	$	0.9		$	(5.3	)	$	6.2

The quarter over quarter change in the accounts receivable balances reflected a reduction in our accounts receivable balances during the current year quarter compared to an increase in accounts receivable balances during the prior year quarter. The reduction in accounts receivable balances during the current year quarter reflected reduced sales levels toward the end of our current year quarter as compared to the end of our June 2017 quarter. The increase in accounts receivable balances during the prior year quarter reflected higher sales levels toward the end of our prior year quarter as compared to the end of our June 2016 quarter. The period over period change in inventory reflected an increase in inventory balances during the current year quarter, which was the result of ramping up for new customer program launches. The quarter over quarter change in other assets reflected an increase in customer tooling balances of $1.9 million in the current year quarter, which was more than offset by cash contributions of $3 million made to our qualified pension plan during the prior year quarter. Customer tooling balances consisted of costs incurred for the development of tooling that will be directly reimbursed by our customer whose parts are produced from the tool. The current quarter change in customer tooling balances was the result of the timing of tooling development spending required to meet customer production requirements and related customer reimbursements. No contributions were made to our qualified pension plan during the current year quarter. The quarter over quarter change in accounts payable and accrued liability balances reflected a slight increase in working capital requirements in the current year quarter compared to a significant decrease in working capital requirements in the prior year quarter. The prior year quarter included an increase in accounts payable balances of $4.6 million due to a combination of a change in payment terms from 30 days to 45 days with certain large vendors and the timing of purchases and payments with our vendors based on normal payment terms.

20

Net cash used by investing activities of $7.6 million during the current year quarter and $8.2 million during the prior year quarter included capital expenditures of $7.6 million and $7.4 million, respectively. Capital expenditures during each period were made in support of requirements for new product programs and the upgrade and replacement of existing equipment. Current year quarter and prior year quarter capital expenditures also included $792,000 and $3.7 million, respectively, related to the construction of a new ADAC-STRATTEC facility and the purchase of related equipment in Leon, Mexico. Refer to discussion under Future Capital Expenditures included herein. Net cash used in investing activities during the prior year quarter also included $850,000 of loans to our joint venture, SAL LLC, in support of operating expenses, working capital needs, and the payment of outstanding balances due to STRATTEC for the supply of parts. Currently, we, along with our joint venture partner, are winding down and discontinuing operating the business of SAL LLC.

Net cash provided by financing activities during the current year quarter of $7.5 million included $12.0 million of additional borrowings under credit facilities, partially offset by repayments of borrowings under credit facilities of $2.0 million, $508,000 of regular quarterly dividend payments to shareholders and $2.0 million of dividend payments to non-controlling interests in our subsidiaries. Net cash provided by financing activities of $4.7 million during the prior year period included $8.0 million of additional borrowings under credit facilities and $2.9 million in non-controlling interest contributions to ADAC-STRATTEC LLC in accordance with the ADAC-STRATTEC debt facility provisions, which cash inflows were partially offset by repayments of borrowings under credit facilities of $4.0 million, $503,000 million of regular quarterly dividend payments to shareholders and $1.8 million of dividend payments to non-controlling interests in our subsidiaries.

VAST LLC Cash Requirements

No capital contributions were made to VAST LLC during the three month periods ended October 1, 2017 or October 2, 2016. We currently anticipate that both VAST China and Minda-VAST Access Systems have adequate debt facilities in place over the next fiscal year to cover the future operating and capital requirements of each business. Due to economic conditions in Brazil, we anticipate Sistema de Acesso Veicular Ltda, will require a capital contribution of approximately $750,000 collectively by all VAST partners to fund operations during the remainder of fiscal year 2018. STRATTEC’s portion of these remaining capital contributions is anticipated to be $250,000.

ADAC-STRATTEC LLC Cash Requirements

ADAC-STRATTEC de Mexico (ASdM), a wholly owned subsidiary of ADAC-STRATTEC LLC, which is a joint venture between STRATTEC SECURITY CORPORATION and ADAC Automotive, completed the construction of a new manufacturing facility in Leon, Mexico during the current quarter. Total capital expenditures required for the land, facility, paint system, and assembly equipment totaled approximately $20.8 million as of October 1, 2017. See further discussion under Future Capital Expenditures included herein. In contemplation of this facility construction, effective April 27, 2016, the ADAC-STRATTEC Credit Facility was amended to increase the available borrowings under the credit facility from $10 million to $20 million. Under the terms of the amended credit agreement, a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC was completed during the quarter ended October 2, 2016. STRATTEC’s portion of the required capital contribution was $3.06 million. The ADAC-STRATTEC Credit Facility was again amended effective as of June 26, 2017 to increase the borrowing limit to $25 million.

STRATTEC Advanced Logic, LLC Cash Requirements

During all periods presented in this report, STRATTEC provided 100 percent of the financial support to fund the start-up operating losses of SAL LLC through loans due to our joint venture partner’s inability to contribute capital to this joint venture. Currently, we, along with our joint venture partner, are in the process of winding down and discontinuing operating the business of SAL LLC. We anticipate STRATTEC will provide minimal to no funding for SAL LLC in fiscal year 2018.

Future Capital Expenditures

We anticipate capital expenditures will be approximately $27 million in fiscal 2018 in support of requirements for new product programs, the upgrade and replacement of existing equipment, and the completion of the construction of a new facility in Leon, Mexico. On March 17, 2016, ASdM purchased land in Leon, Mexico. ASdM completed the construction of a new manufacturing facility on this land during the current quarter. This facility will be used primarily to paint and assemble door handle products. It is expected that the paint system and assembly equipment will be fully operational during our December 2017 fiscal quarter. Currently, the ADAC-STRATTEC LLC joint venture has net sales of approximately $60 million. With newly awarded customer business, we anticipate net sales will increase to approximately $110 million within the next two years. As of October 1, 2017, total capital expenditures required for the land, facility, paint system, and assembly equipment totaled approximately $20.8 million. Capital expenditures required for the land, facility, paint system, and assembly equipment totaled approximately $792,000 during the current quarter ended October 1, 2017.

21

Stock Repurchase Program

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 October 1, 2017. A total of 3,655,322 shares have been repurchased over the life of the program through October 1, 2017, at a cost of approximately $136.4 million. No shares were repurchased during the three month periods ended October 1, 2017 or October 2, 2016. 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. Based on the current economic environment and our preference to conserve cash for other uses, we anticipate modest or no stock repurchase activity for the remainder of fiscal year 2018.

Credit Facilities and Guarantees

STRATTEC has a $30 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $25 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities both expire August 1, 2020. Borrowings under either credit facility are secured by our U.S. cash balances, accounts receivable, inventory and fixed assets located in the U.S. Interest on borrowings under both credit facilities is at varying rates based, at our option, on LIBOR plus 1.0 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. The ADAC-STRATTEC Credit Facility also required that a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC be completed by September 30, 2016. This capital contribution was completed as required. STRATTEC’s portion of this capital contribution totaled $3.06 million. Outstanding borrowings under the STRATTEC Credit Facility totaled $20 million at October 1, 2017 and $16.0 million at July 2, 2017. The average outstanding borrowings and weighted average interest rate on the STRATTEC Credit Facility loans were approximately $18.2 million and 2.3 percent, respectively, during the three months ended October 1, 2017. Outstanding borrowings under the ADAC-STRATTEC Credit Facility totaled $20 million at October 1, 2017 and $14.0 million at July 2, 2017. The average outstanding borrowings and weighted average interest rate on the ADAC-STRATTEC Credit Facility loans were approximately $18.0 million and 2.2 percent, respectively, during the three months ended October 1, 2017.

SAL LLC maintains a license agreement with Westinghouse allowing SAL LLC to do business as Westinghouse Security. STRATTEC guaranteed all payments due Westinghouse under this license agreement. As of October 1, 2017, STRATTEC has a recorded liability related to this guarantee of $250,000, which amount is equal to the amount of future payments required under the license agreement and the estimated fair value of the guarantee as of October 1, 2017. See further discussion under Equity Earnings (Loss) of Joint Ventures included in Notes to Condensed Consolidated Financial Statements herein.

Inflation and Other Changes in Prices

Inflation Related Items:  Over the past several years, we have been impacted by rising health care costs, which have increased our cost of associate medical coverage. A portion of these increases have been offset by plan design changes and associate wellness initiatives. We have also been impacted by increases in the market price of zinc and brass and inflation in Mexico, which impacts the U. S. dollar costs of our Mexican operations. We have negotiated raw material price adjustment clauses with certain, but not all, of our customers to offset some of the market price fluctuations in the cost of zinc. We have contracts with Bank of Montreal that provide for bi-weekly and monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. Refer to discussion under Item 3 Quantitative and Qualitative Disclosures About Market Risk included herein.

Joint Ventures and Majority Owned Subsidiaries

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 automotive 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 Agreements include 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 each company’s products in areas of the world outside of North America and Europe.  

22

VAST LLC has investments in Sistema de Acesso Veicular Ltda, VAST Fuzhou, VAST Great Shanghai, VAST Shanghai Co. and Minda-VAST Access Systems. Sistema de Acesso Veicular Ltda is located in Brazil and services customers in South America. VAST Fuzhou, VAST Great Shanghai and VAST Shanghai Co. (collectively known as VAST China), provide a base of operations to service our automotive customers in the Asian market. VAST LLC also maintains branch offices in South Korea and Japan in support of customer sales and engineering requirements.

Effective April 30, 2015, VAST LLC executed an agreement with Minda Management Services Limited to become a 50:50 joint venture partner in the former Minda-Valeo Security Systems joint venture entity, based in Pune, India.  This joint venture entity was renamed Minda-VAST Access Systems (“Minda-VAST”). Minda Management Services Limited is an affiliate of both Minda Corporation Limited and Spark Minda, Ashok Minda Group of New Delhi, India (collectively “Minda”). Minda and its affiliates cater to the needs of all major car, motorcycle, commercial vehicle, tractor and off-road vehicle manufacturers in India.  They are a leading manufacturer in the Indian marketplace of security & access products, handles, automotive safety, restraint systems, driver information and telematics systems for both OEMs and the aftermarket.

The VAST LLC investments are accounted for using the equity method of accounting. The activities related to the VAST LLC joint ventures resulted in equity earnings of joint ventures to STRATTEC of $1.1 million during the three months ended October 1, 2017 and $390,000 during the three months ended October 2, 2016. During the three months ended October 1, 2017 and October 2, 2016, no capital contributions were made to VAST LLC.

ADAC-STRATTEC LLC, a Delaware limited liability company, was formed in fiscal year 2007 to support injection molding and door handle assembly operations in Mexico. ADAC-STRATTEC LLC was 51 percent owned by STRATTEC and 49 percent owned by ADAC for all periods presented in this report. An additional Mexican entity, ADAC-STRATTEC de Mexico, is wholly owned by ADAC-STRATTEC LLC. ADAC-STRATTEC LLC’s financial results are consolidated with the financial results of STRATTEC and resulted in increased net income to STRATTEC of approximately $416,000 during the three months ended October 1, 2017 and approximately $479,000 during the three months ended October 2, 2016. In accordance with the provisions of the ADAC-STRATTEC Credit Facility a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC was completed during the three month period ended October 2, 2016. STRATTEC’s portion of this capital contribution totaled $3.06 million. No capital contributions to ADAC-STRATTEC LLC were made during the three month period ended October 1, 2017.

STRATTEC POWER ACCESS LLC (“SPA”) was formed in fiscal year 2009 to supply the North American portion of the power sliding door, lift gate and deck lid system access control products which were acquired from Delphi Corporation. SPA was 80 percent owned by STRATTEC and 20 percent owned by WITTE for all periods presented in this report. The financial results of SPA are consolidated with the financial results of STRATTEC and resulted in increased net income to STRATTEC of approximately $623,000 during the three months ended October 1, 2017 and approximately $35,000 during the three months ended October 2, 2016.  

SAL LLC was formed in fiscal 2013 to introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner and the owner of the remaining ownership interest. SAL LLC was 51 percent owned by STRATTEC for all periods presented in this report. Our investment in SAL LLC, for which we exercise significant influence but do not control and are not the primary beneficiary, is accounted for using the equity method. The activities related to SAL LLC resulted in an equity loss of joint ventures to STRATTEC of approximately $9,000 during the three months ended October 1, 2017 and approximately $328,000 during the three months ended October 2, 2016. During all periods presented in this report, 100 percent of the funding for SAL LLC was being made through loans from STRATTEC to SAL LLC. Therefore, for all periods presented in this report, even though STRATTEC maintains a 51 percent ownership interest in SAL LLC, STRATTEC recognized 100 percent of the losses of SAL LLC up to our committed financial support through Equity Earnings (Loss) of Joint Ventures in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. Currently, we, along with our joint venture partner, are winding down and discontinuing operating the business of SAL LLC. See further discussion under Equity Earnings (Loss) of Joint Ventures included in Notes to Condensed Consolidated Financial Statements herein.

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Item 3 Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is limited to fluctuations in raw material commodity prices, interest rate fluctuations on borrowings under our secured revolving credit facilities and foreign currency exchange rate risk associated with STRATTEC’s foreign operations. We do not utilize financial instruments for trading purposes.

Interest Rates: We are subject to interest rate fluctuations on borrowings under our revolving credit facilities. At October 1, 2017, we had $40 million of outstanding borrowings under our credit facilities. The interest expense related to borrowings under the credit facilities during the three months ended October 1, 2017 was $203,000. A 10% increase or decrease in the interest rate on our borrowings would not have a material effect on our financial position, results of operations or cash flows.

Foreign Currency: We are subject to foreign currency exchange rate exposure related to the U.S. dollar costs of our manufacturing operations in Mexico. A portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate. We have executed contracts with Bank of Montreal that provide for bi-weekly and monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. The current peso currency forward contracts include settlement dates that began on October 16, 2015 and end on June 15, 2018. Our objective in entering into these currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges.  As a result, all currency forward contracts are recognized in our accompanying condensed consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other Income (expense), net.

The following table quantifies the outstanding Mexican peso forward contracts as of October 1, 2017 (thousands of dollars, except average forward contract exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 13, 2017 - June 15, 2018	$	9,000		20.37	$	862

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Condensed Consolidated Balance Sheets was as follows (thousands of dollars):

	October 1, 2017		July 2, 2017
Not Designated as Hedging Instruments:
Other Current Assets:
Mexican Peso Forward Contracts	$	862	$	1,121

The pre-tax effects of the Mexican peso forward contracts are included in Other Income (Expense), net on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income and consisted of the following (thousands of dollars):

	Three Months Ended
	October 1, 2017			October 2, 2016
Not Designated as Hedging Instruments:
Realized Gain (Loss)	$	458		$	(230	)
Unrealized Loss	$	(258	)	$	(899	)

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Raw Materials Commodity Prices: Our primary raw materials are high-grade zinc, brass, nickel silver, 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 effect on our financial results if the increased raw material costs cannot be recovered from our customers. Given the significant financial impact on us relating to changes in the cost of our primary raw materials, we now attempt to quote quarterly material price adjustments for changes in our zinc costs in our negotiations with our customers. Our success in obtaining these quarterly price adjustments in our customer contracts is dependent on separate negotiations with each customer. It is not a standard practice for our customers to include such price adjustments in their contracts. We have been successful in obtaining quarterly price adjustments in some of our customer contracts. However, we have not been successful in obtaining the adjustments with all of our customers.

25

Item 4 Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act are accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. 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 our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. 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 at reaching a level of reasonable assurance. 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.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

26

Part II

Other Information

Item 1 Legal Proceedings

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.

Item 1A—Risk Factors

There have been no material changes to the risk factors disclosed in our Form 10-K as filed with the Securities and Exchange Commission on September 7, 2017.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds—

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 for repurchase 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 October 1, 2017, a total of 3,655,322 shares have been repurchased at a cost of approximately $136.4 million. No shares were repurchased during the three month period ended October 1, 2017.

Item 3 Defaults Upon Senior Securities—None

Item 4 Mine Safety Disclosures—None

Item 5 Other Information—None

Item 6 Exhibits

(a)  Exhibits

31.1	Rule 13a-14(a) Certification for Frank J. Krejci, President and Chief Executive Officer
31.2	Rule 13a-14(a) Certification for Patrick J. Hansen, Chief Financial Officer
32 (1)	18 U.S.C. Section 1350 Certifications
101	The following materials from STRATTEC SECURITY CORPORATION's Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2017 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) Condensed Consolidated Statements of Income and Comprehensive Income; (ii) Condensed Consolidated Balance Sheets; (iii) Condensed Consolidated Statements of Cash Flows; and (iv) Notes to Condensed Consolidated Financial Statements

⁽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.

27

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 9, 2017	By:	/s/ Patrick J. Hansen
		Patrick J. Hansen
		Senior Vice President,
		Chief Financial Officer,
		Treasurer and Secretary
		(Principal Accounting and Financial Officer)

28

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Frank J. Krejci, certify that:

1.I have reviewed this quarterly report on Form 10-Q of STRATTEC SECURITY CORPORATION;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 9, 2017

/s/ Frank J. Krejci

Frank J. Krejci,

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Patrick J. Hansen, certify that:

1.I have reviewed this quarterly report on Form 10-Q of STRATTEC SECURITY CORPORATION;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 9, 2017

/s/ Patrick J. Hansen

Patrick J. Hansen,

Chief Financial Officer

EX-32

Exhibit 32

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of STRATTEC SECURITY CORPORATION (the "Company") certifies that the Quarterly Report on Form 10-Q of the Company for the quarter ended October 1, 2017 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 9, 2017 /s/ Frank J. Krejci

Frank J. Krejci,

Chief Executive Officer

Dated:  November 9, 2017 /s/ Patrick J. Hansen

Patrick J. Hansen,

Chief Financial Officer

This certification is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

XML

Document and Entity Information - shares	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	STRATTEC SECURITY CORP
Entity Central Index Key	0000933034
Document Type	10-Q
Document Period End Date	Oct. 01, 2017
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Trading Symbol	STRT
Current Fiscal Year End Date	--07-01
Entity Filer Category	Accelerated Filer
Entity Common Stock Shares Outstanding		3,671,252

XML

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Income Statement [Abstract]
Net sales	$ 102,460	$ 100,244
Cost of goods sold	88,997	85,441
Gross profit	13,463	14,803
Engineering, selling and administrative expenses	10,042	11,283
Income from operations	3,421	3,520
Interest income	4	41
Equity earnings (loss) of joint ventures	1,026	62
Interest expense	(203)	(78)
Other income (expense), net	87	(242)
Income before provision for income taxes and non- controlling interest	4,335	3,303
Provision for income taxes	1,066	898
Net income	3,269	2,405
Net income attributable to non-controlling interest	813	863
Net income attributable to STRATTEC SECURITY CORPORATION	2,456	1,542
Comprehensive Income:
Net income	3,269	2,405
Pension and postretirement plans, net of tax	278	475
Currency translation adjustments	297	(1,623)
Other comprehensive income (loss), net of tax	575	(1,148)
Comprehensive income	3,844	1,257
Comprehensive income attributable to non-controlling interest	735	753
Comprehensive income attributable to STRATTEC SECURITY CORPORATION	$ 3,109	$ 504
Earnings per share attributable to STRATTEC SECURITY CORPORATION:
Basic	$ 0.68	$ 0.43
Diluted	$ 0.67	$ 0.42
Average shares outstanding:
Basic	3,611	3,576
Diluted	3,681	3,661
Cash dividends declared per share	$ 0.14	$ 0.14

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 01, 2017	[1]	Jul. 02, 2017
Current Assets:
Cash and cash equivalents	$ 8,498		$ 8,361
Receivables, net	64,016		64,933
Inventories:
Finished products	10,375		9,976
Work in process	10,062		9,328
Purchased materials	23,401		20,682
Excess and obsolete reserve	(4,443)		(4,510)
Inventories, net	39,395		35,476
Other current assets	21,959		20,235
Total current assets	133,868		129,005
Investment in joint ventures	18,416		16,840
Deferred income taxes	241		256
Other long-term assets	16,665		16,022
Property, plant and equipment	257,081		251,519
Less: accumulated depreciation	(142,575)		(139,928)
Net property, plant and equipment	114,506		111,591
Total assets	283,696		273,714
Current Liabilities:
Accounts payable	39,908		39,679
Accrued Liabilities:
Payroll and benefits	12,049		13,055
Environmental	1,307		1,308
Warranty	5,535		5,550
Other	7,395		8,303
Total current liabilities	66,194		67,895
Borrowings under credit facility	40,000		30,000
Accrued pension obligations	1,521		1,492
Accrued postretirement obligations	934		1,003
Other long-term liabilities	618		610
Shareholders’ Equity:
Common stock, authorized 12,000,000 shares, $.01 par value, 7,246,503 issued shares at October 1, 2017 and 7,216,103 issued shares at July 2, 2017	72		72
Capital in excess of par value	94,198		93,813
Retained earnings	227,861		225,913
Accumulated other comprehensive loss	(32,235)		(32,888)
Less: treasury stock, at cost (3,618,751 shares at October 1, 2017 and 3,619,487 shares at July 2, 2017)	(135,811)		(135,822)
Total STRATTEC SECURITY CORPORATION shareholders’ equity	154,085		151,088
Non-controlling interest	20,344		21,626
Total shareholders’ equity	174,429		172,714
Total liabilities and shareholders' equity	$ 283,696		$ 273,714

[1] (Unaudited)

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 01, 2017	[1]	Jul. 02, 2017
Statement Of Financial Position [Abstract]
Common stock, shares authorized	12,000,000		12,000,000
Common stock, par value	$ 0.01		$ 0.01
Common stock, shares issued	7,246,503		7,216,103
Treasury stock, shares	3,618,751		3,619,487

[1] (Unaudited)

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017		Oct. 02, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 3,269		$ 2,405
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,095		2,760
Foreign currency transaction loss (gain)	137		(689)
Unrealized loss on peso forward contracts	258		899
Stock based compensation expense	371		428
Equity earnings of joint ventures	(1,026)		(62)
Change in operating assets and liabilities:
Receivables	1,200		(4,433)
Inventories	(3,919)		(3)
Other assets	(2,174)		(1,372)
Accounts payable and accrued liabilities	(852)		5,268
Other, net	(5)		(172)
Net cash provided by operating activities	354		5,029
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to joint ventures			(850)
Repayment from loan to joint ventures			75
Purchase of property, plant and equipment	(7,571)		(7,446)
Net cash used in investing activities	(7,571)		(8,221)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facility	12,000		8,000
Repayments of borrowings under credit facility	(2,000)		(4,000)
Contribution from non-controlling interest of subsidiaries			2,940
Dividends paid to non-controlling interests of subsidiaries	(2,017)		(1,764)
Dividends paid	(508)		(503)
Exercise of stock options and employee stock purchases	25		74
Net cash provided by financing activities	7,500		4,747
Foreign currency impact on cash	(146)		37
NET INCREASE IN CASH AND CASH EQUIVALENTS	137		1,592
CASH AND CASH EQUIVALENTS
Beginning of period	8,361		15,477
End of period	8,498	[1]	17,069
Cash paid during the period for:
Income taxes	615		487
Interest	183		86
Non-cash investing activities:
Change in capital expenditures in accounts payable	$ (1,337)		$ (1,714)

[1] (Unaudited)

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Basis of Financial Statements

3 Months Ended

Oct. 01, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Financial Statements

Basis of Financial Statements

STRATTEC SECURITY CORPORATION designs, develops, manufactures and markets automotive access control products including mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings, latches, power sliding door systems, power lift gate systems, power deck lid systems, door handles and related products for primarily North American automotive customers. We also supply global automotive manufacturers through a unique strategic relationship with WITTE Automotive (“WITTE”) of Velbert, Germany, and ADAC Automotive (“ADAC”) of Grand Rapids, Michigan. Under this relationship, STRATTEC, WITTE and ADAC market the products of each company to global customers under the “VAST” brand name (as more fully described herein). STRATTEC products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea, China and India, and we provide full service and aftermarket support for each VAST partner’s products. We also maintain a 51 percent interest in a joint venture, STRATTEC Advanced Logic, LLC (“SAL LLC”), which exists to introduce a new generation of biometric security products based on the designs of Actuator Systems, our partner and the owner of the remaining ownership interest. Currently, we, along with our joint venture partner, are winding down and discontinuing operating the business of SAL LLC.

The accompanying condensed consolidated financial statements reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, STRATTEC de Mexico, and its majority owned subsidiaries, ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC. STRATTEC SECURITY CORPORATION is located in Milwaukee, Wisconsin. STRATTEC de Mexico is located in Juarez, Mexico. ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC have operations in El Paso, Texas and Juarez and Leon, Mexico. Equity investments in Vehicle Access Systems Technology LLC (“VAST LLC”) and SAL LLC, for which we exercise significant influence but do not control and are not the primary beneficiary, are accounted for using the equity method. VAST LLC consists primarily of three wholly owned subsidiaries in China, one wholly owned subsidiary in Brazil and one joint venture entity in India. SAL LLC is located in El Paso, Texas. We have only one reporting segment.

In the opinion of management, the accompanying condensed consolidated balance sheets as of October 1, 2017 and July 2, 2017, which have been derived from our audited financial statements, and the related unaudited interim condensed consolidated financial statements included herein 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”) and in accordance with Rule 10-01 of Regulation S-X. 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 the financial statements and notes thereto included in the STRATTEC SECURITY CORPORATION 2017 Annual Report, which was filed with the Securities and Exchange Commission as an exhibit to our Form 10-K on September 7, 2017.

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New Accounting Standards

3 Months Ended

Oct. 01, 2017

Accounting Changes And Error Corrections [Abstract]

New Accounting Standards

New Accounting Standards

In May 2014, the FASB issued an update to the accounting guidance for the recognition of revenue arising from contracts with customers. The update supersedes most current revenue recognition guidance and outlines a single comprehensive model for revenue recognition based on the principle that an entity should recognize revenue in an amount that reflects the expected consideration to be received in the exchange of goods and services. The guidance update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The guidance permits two methods of adoption: the full retrospective method, which requires retrospective restatement of each prior reporting period presented, or the modified retrospective method, which requires the cumulative effect of initially applying the guidance be recognized at the date of initial application. We currently do not expect any changes to how we account for reimbursable pre-production costs, which are currently accounted for as a cost reduction. In addition, we are continuing to evaluate our contracts with customers, analyzing the impact, if any, on revenue from the sale of production parts. Currently, we do not expect the adoption of this standard to have a material impact on our results of operations or financial position; however, we expect to expand disclosures in line with the requirements of the new standard. We will adopt this standard as of July 2, 2018, the first day of our 2019 fiscal year. We currently plan to adopt the new standard using the modified retrospective approach; however, we will decide which retrospective application to apply once our revenue standard assessment is finalized.

In August 2014, the FASB issued an update to the accounting guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new guidance requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. This accounting update is effective for annual and interim periods beginning on or after December 15, 2016, with early adoption permitted.  The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In July 2015, the FASB issued an accounting standard to simplify the measurement of inventory by changing the subsequent measurement guidance from the lower of cost or market to the lower of cost and net realizable value for inventory. The standard update is effective for fiscal years beginning after December 15, 2016 and interim periods within those years, and early adoption was permitted. The standard is to be applied prospectively. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued an update to the accounting guidance for leases. The update increases the transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. We do not expect that the adoption of this pronouncement will have a material impact on our consolidated financial statements.

In March 2016, the FASB issued an update to the accounting guidance for share-based payments. The update simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification of such items in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In August 2016, the FASB issued an update to the accounting guidance on the classification of certain cash receipts and cash payments. The update aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. We do not expect that the adoption of this pronouncement will have a material impact on our consolidated financial statements.

In March 2017, the FASB issued an update to the accounting guidance for the presentation of net periodic pension cost and net periodic postretirement benefit cost. The update requires the service cost component of net periodic benefit cost be reported in the same line items as other compensation costs arising from services rendered by the pertinent employees during the applicable period. The remaining components of net periodic benefit cost are required to be presented separately from the service cost component outside a subtotal of income from operations. Additionally, the update allows only the service cost component to be eligible for capitalization when applicable. The guidance requires retrospective restatement for each period presented for the presentation of the service cost component and the other components of net periodic benefit cost in the income statement and prospective application for the capitalization of the service cost component of net periodic benefit cost. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years, with early adoption permitted. We elected early adoption beginning with the interim periods of our fiscal 2018. The adoption of this guidance resulted in the reclassification of expense within our Condensed Consolidated Statements of Income and Comprehensive Income for the quarter ended October 2, 2016 of $198,000 from cost of goods sold and $87,000 from engineering, selling and administrative expenses to Other Income (Expense), net.      

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Subsequent Event

3 Months Ended

Oct. 01, 2017

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

In October 2017, we entered into additional contracts with Bank of Montreal that provide for monthly Mexican peso currency forward contracts covering the period January 12, 2018 through June 15, 2018. The contracts provide for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of $19.50. The notional amount over the contract periods totals $3 million. See further discussion of Mexican peso forward contracts under Derivative Instruments included in these Notes to Condensed Consolidated Financial Statements.

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Derivative Instruments

3 Months Ended

Oct. 01, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

We own and operate manufacturing operations in Mexico.  As a result, a portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate.  We executed contracts with Bank of Montreal that provide for bi-weekly and monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs. The peso currency forward contracts include settlement dates that began on October 16, 2015 and end on June 15, 2018. Additional contracts were executed subsequent to October 1, 2017. Refer to Subsequent Event included in these Notes to Condensed Consolidated Financial Statements. Our objective in entering into these currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges.  As a result, all currency forward contracts are recognized in our accompanying condensed consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other Income (Expense), net.

The following table quantifies the outstanding Mexican peso forward contracts as of October 1, 2017 (thousands of dollars, except average forward contractual exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 13, 2017 - June 15, 2018	$	9,000		20.37	$	862

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Condensed Consolidated Balance Sheets was as follows (thousands of dollars):

	October 1, 2017		July 2, 2017
Not Designated as Hedging Instruments:
Other Current Assets:
Mexican Peso Forward Contracts	$	862	$	1,121

The pre-tax effects of the Mexican peso forward contracts are included in Other Income (Expense), net on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income and consisted of the following (thousands of dollars):

	Three Months Ended
	October 1, 2017			October 2, 2016
Not Designated as Hedging Instruments:
Realized Gain (Loss)	$	458		$	(230	)
Unrealized Loss	$	(258	)	$	(899	)

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Fair Value of Financial Instruments

3 Months Ended

Oct. 01, 2017

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facility approximated book value as of October 1, 2017 and July 2, 2017. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of October 1, 2017 (in thousands):  

	Fair Value Inputs
	Level 1 Assets: Quoted Prices InActive Markets		Level 2 Assets: Observable Inputs Other Than Market Prices		Level 3 Assets: Unobservable Inputs
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	400	$	—	$	—
Mid Cap		404		—		—
Large Cap		542		—		—
International		573		—		—
Fixed Income Funds		766		—		—
Cash and Cash Equivalents		—		2		—
Mexican Peso Forward Contracts		—		862		—
Total Assets at Fair Value	$	2,685	$	864	$	—

The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan and are included in Other Long-term Assets in the accompanying Condensed Consolidated Balance Sheets. Refer to discussion of Mexican peso forward contracts under Derivative Instruments above. The fair value of the Mexican peso forward contracts considers the remaining term, current exchange rate, and interest rate differentials between the two currencies. There were no transfers between Level 1 and Level 2 assets during the three month period ended October 1, 2017.

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Equity Earnings (Loss) of Joint Ventures

3 Months Ended

Oct. 01, 2017

Equity Method Investments And Joint Ventures [Abstract]

Equity Earnings (Loss) of Joint Ventures

Equity Earnings (Loss) of Joint Ventures

We hold a one-third interest in a joint venture company, VAST LLC, with WITTE and ADAC. VAST LLC exists to seek opportunities to manufacture and sell all three companies’ products in areas of the world outside of North America and Europe. Our investment in VAST LLC, for which we exercise significant influence but do not control and are not the primary beneficiary, is accounted for using the equity method.

The following are summarized statements of operations for VAST LLC (in thousands):  

	Three Months Ended
	October 1, 2017		October 2, 2016
Net Sales	$	38,510	$	25,009
Cost of Goods Sold		29,013		20,093
Gross Profit		9,497		4,916
Engineering, Selling and Administrative Expenses		6,021		4,015
Income From Operations		3,476		901
Other Income, net		150		441
Income before Provision for Income Taxes		3,626		1,342
Provision for Income Taxes		522		172
Net Income	$	3,104	$	1,170
STRATTEC’s Share of VAST LLC Net Income	$	1,035	$	390
Intercompany Profit Elimination		—		—
STRATTEC’s Equity Earnings of VAST LLC	$	1,035	$	390

We hold a 51% ownership interest in a joint venture company, SAL LLC, which exists to introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner. SAL LLC is considered a variable interest entity based on loans from STRATTEC as discussed below. STRATTEC is not the primary beneficiary and does not control the entity. Accordingly, our investment in SAL LLC is accounted for using the equity method.

SAL LLC maintains a license agreement with Westinghouse allowing SAL LLC to do business as Westinghouse Security. Payments due Westinghouse under the license agreement were guaranteed by STRATTEC. As of October 1, 2017 and July 2, 2017, STRATTEC has a recorded liability equal to the estimated fair value of the future payments due under this guarantee of $250,000. The liability is included in Accrued Liabilities: Other in the accompanying Condensed Consolidated Balance Sheets.

Loans were made from STRATTEC to SAL LLC in support of operating expenses and working capital needs. The outstanding loan amounts totaled $2.6 million as of October 1, 2017 and July 2, 2017. As of each balance sheet date, the outstanding loan amount was eliminated against STRATTEC’s Investment in SAL LLC in the preparation of the consolidated financial statements.

Even though we maintain a 51 percent ownership interest in SAL LLC, effective with our fiscal 2015 fourth quarter, 100 percent of the funding for SAL LLC was being made by loans from STRATTEC to SAL LLC. Therefore, STRATTEC recognized 100 percent of the losses of SAL LLC up to our committed financial support through Equity (Loss) Earnings of Joint Ventures in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income for all periods presented in this report.

The following are summarized statements of operations for SAL, LLC (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2016
Net Sales	$	108		$	100
Cost of Goods Sold		152			87
Gross Profit		(44	)		13
Engineering, Selling and Administrative Expenses		(10	)		337
Loss From Operations		(34	)		(324	)
Other Expense, net		(65	)		(12	)
Net Loss	$	(99	)	$	(336	)
STRATTEC’s Equity Loss of SAL LLC	$	(9	)	$	(328	)

Currently, we, along with our joint venture partner, are winding down and discontinuing operating the business of SAL LLC.

We have sales of component parts to VAST LLC and SAL LLC, purchases of component parts from VAST LLC, expenses charged to VAST LLC for engineering and accounting services and expenses charged to us from VAST LLC for general headquarters expenses.  The following table summarizes these related party transactions with VAST LLC and SAL LLC for the periods indicated below (in thousands):

	Three Months Ended
	October 1, 2017		October 2, 2016
Sales to VAST LLC	$	596	$	50
Sales to SAL, LLC	$	35	$	75
Purchases from VAST LLC	$	45	$	31
Expenses Charged to VAST LLC	$	212	$	228
Expenses Charged from VAST LLC	$	218	$	409

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Credit Facilities and Guarantees

3 Months Ended

Oct. 01, 2017

Debt Disclosure [Abstract]

Credit Facilities and Guarantees

Credit Facilities and Guarantees

STRATTEC has a $30 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $25 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities both expire August 1, 2020. Borrowings under either credit facility are secured by our U.S. cash balances, accounts receivable, inventory, and fixed assets located in the U.S. Interest on borrowings under both credit facilities is at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. The ADAC-STRATTEC Credit Facility also required that a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC be completed by September 30, 2016. This capital contribution was completed as required. STRATTEC’s portion of the capital contribution totaled $3.06 million. As of October 1, 2017, we were in compliance with all financial covenants required by these credit facilities.

Outstanding borrowings under the credit facilities were as follows (in thousands):

	October 1, 2017		July 2, 2017
STRATTEC Credit Facility	$	20,000	$	16,000
ADAC-STRATTEC Credit Facility	$	20,000	$	14,000

Average outstanding borrowings and the weighted average interest rate under each credit facility referenced above were as follows for each period presented (in thousands):

	Three Months Ended
	AverageOutstanding Borrowings				Weighted Average Interest Rate
	October 1, 2017		October 2, 2016		October 1, 2017			October 2, 2016
STRATTEC Credit Facility	$	18,143	$	12,159		2.3	%		1.5	%
ADAC-STRATTEC Credit Facility	$	18,022	$	8,473		2.2	%		1.5	%

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Commitments and Contingencies

3 Months Ended

Oct. 01, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

We are from time to time subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, alleged breaches of contracts, product warranties, intellectual property matters and employment related matters. It is our opinion that the outcome of such matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. With respect to warranty matters, although we cannot ensure that future costs of warranty claims by customers will not be material, we believe our established reserves are adequate to cover potential warranty settlements.

In 1995, we recorded a provision of $3 million for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The facility was contaminated by a solvent spill, which occurred in 1985, from a former above ground solvent storage tank located on the east side of the facility. The reserve was originally established based on third party estimates to adequately cover the cost for active remediation of the contamination. Due to changing technology and related costs associated with active remediation of the contamination, in fiscal 2010, the reserve was adjusted based on updated third party estimates to adequately cover the cost for active remediation of the contamination. Additionally, in fiscal 2016, we obtained updated third party estimates for adequately covering the cost for active remediation of this contamination. Based upon the updated estimates, no further adjustment to the reserve was required. From 1995 through October 1, 2017, costs of approximately $568,000 have been incurred related to the installation of monitoring wells on the property and ongoing monitoring costs. We monitor and evaluate the site with the use of these groundwater monitoring wells. An environmental consultant samples these wells one or two times a year to determine the status of the contamination and the potential for remediation of the contamination by natural attenuation, the dissipation of the contamination over time to concentrations below applicable standards. If such sampling evidences a sufficient degree of and trend toward natural attenuation of the contamination at the site, we may be able to obtain a closure letter from the regulatory authorities resolving the issue without the need for active remediation. If a sufficient degree and trend toward natural attenuation is not evidenced by sampling, a more active form of remediation beyond natural attenuation may be required. The sampling has not yet satisfied all of the requirements for closure by natural attenuation. As a result, sampling continues and the reserve remains at an amount to reflect the estimated cost of active remediation. The reserve is not measured on a discounted basis. We believe, based on findings-to-date and known environmental regulations, that the remaining environmental reserve of $1.3 million at October 1, 2017 is adequate.

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Shareholders' Equity

3 Months Ended

Oct. 01, 2017

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

A summary of activity impacting shareholders’ equity for the three month period ended October 1, 2017 was as follows (in thousands):

	Total Shareholders’ Equity			Equity Attributable to STRATTEC			Equity Attributable toNon- Controlling Interest
Balance, July 2, 2017	$	172,714		$	151,088		$	21,626
Net Income		3,269			2,456			813
Dividend Declared		(508	)		(508	)		—
Dividend Declared – Non-controlling Interests of    Subsidiaries		(2,017	)		—			(2,017	)
Translation adjustments		297			375			(78	)
Stock Based Compensation		371			371			—
Pension and Postretirement Adjustment, Net of    tax		278			278			—
Employee Stock Purchases and Stock Option    Exercises		25			25			—
Balance, October 1, 2017	$	174,429		$	154,085		$	20,344

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Other Income (Expense), Net

3 Months Ended

Oct. 01, 2017

Other Income And Expenses [Abstract]

Other Income (Expense), Net

Other Income (Expense), net

Net other income (expense) included in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income primarily included foreign currency transaction gains and losses, realized and unrealized losses on our Mexican peso currency forward contracts, net periodic pension and postretirement benefit (costs) credits, other than the service cost component, and Rabbi Trust gains and losses. Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. We entered into the Mexican Peso currency forward contracts to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Pension and postretirement plan impacts include the components of net periodic benefit cost other than the service cost component. The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in this Trust are considered trading securities.

The impact of these items for each of the periods presented was as follows (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2016
Foreign Currency Transaction (Loss) Gain	$	(137	)	$	689
Unrealized Loss on Peso Forward Contracts		(258	)		(899	)
Realized Gain (Loss) on Peso Forward Contracts		458			(230	)
Pension and Postretirement Plans		112			(285	)
Rabbi Trust Gain		89			83
Other		(177	)		400
	$	87		$	(242	)

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Income Taxes

3 Months Ended

Oct. 01, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax provisions for the three month periods ended October 1, 2017 and October 2, 2016 were affected by the non-controlling interest portion of our pre-tax income. The non-controlling interest impacts the effective tax rate as ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes. The reduction in our effective tax rate in the current year period as compared to the prior year period was due to a larger anticipated research and development tax credit for Federal tax purposes.

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Earnings Per Share (''EPS'')

3 Months Ended

Oct. 01, 2017

Earnings Per Share [Abstract]

Earnings Per Share (''EPS'')

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 applicable period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the potential dilutive common shares outstanding during the applicable period using the treasury stock method. Potential dilutive common shares include outstanding stock options and unvested 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
			October 1, 2017							October 2, 2016
	Net income		Shares		Per-Share Amount		Net income			Shares		Per-Share Amount
Basic Earnings Per Share	$	2,456		3,611	$	0.68	$	1,542			3,576	$	0.43
Stock Option and Restricted    Stock Awards		—		70				(1	)		85
Diluted Earnings Per Share	$	2,456		3,681	$	0.67	$	1,541			3,661	$	0.42

The calculation of earnings per share excluded 63,550 and 14,010 share-based payment awards as of October 1, 2017 and October 2, 2016, respectively, because their inclusion would have been anti-dilutive.

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Stock-Based Compensation

3 Months Ended

Oct. 01, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

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. As of October 1, 2017, the Board of Directors had designated 1,850,000 shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of October 1, 2017 were 179,164. 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, outside directors and specified associates 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 10 years after the grant date unless an earlier expiration date is set at the time of grant. The options vest 1 to 4 years after the date of grant as determined by the Compensation Committee of the Board of Directors. 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 one year from the date of grant. Unvested restricted shares granted have voting rights, regardless of whether the shares are vested or unvested, but only have the right to receive cash dividends after such shares become vested. Prior to August 2016, the restricted stock grants issued vest 3 to 5 years after the date of grant. As of August 2016, restricted stock grants issued vest 1 to 5 years after the date of grant as determined by the Compensation Committee of the Board of Directors.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. 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 for fixed awards with graded vesting schedules is amortized on a straight line basis over the vesting period for the entire award.

There was no stock option activity under our stock incentive plan for the three months ended October 1, 2017. Options outstanding as of October 1, 2017 were as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding, July 2, 2017		138,508	$	29.23
Outstanding, October 1, 2017		138,508	$	29.23		4.2	$	1,967
Exercisable, October 1, 2017		138,508	$	25.71		4.2	$	1,967

The intrinsic value of stock options exercised and the fair value of stock options that vested during the three month periods presented below were as follows (in thousands):

	Three Months Ended
	October 1, 2017		October 2, 2016
Intrinsic Value of Options Exercised	$	—	$	71
Fair Value of Stock Options Vesting	$	315	$	596

No options were granted during the three month period ended October 1, 2017 or October 2, 2016.  

A summary of restricted stock activity under our omnibus stock incentive plan for the three months ended October 1, 2017 was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Balance, July 2, 2017		75,850		$	60.61
Granted		27,950		$	33.30
Vested		(30,400	)	$	62.99
Forfeited		(2,175	)	$	56.91
Nonvested Balance, October 1, 2017		71,225		$	48.99

As of October 1, 2017, all compensation cost related to outstanding stock options granted under our omnibus stock incentive plan has been recognized. As of October 1, 2017, there was approximately $1.9 million of total unrecognized compensation cost related to unvested restricted stock grants outstanding under the plan. This cost is expected to be recognized over a remaining 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 our omnibus stock incentive plan.

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Pension and Postretirement Benefits

3 Months Ended

Oct. 01, 2017

Compensation And Retirement Disclosure [Abstract]

Pension and Postretirement Benefits

Pension and Postretirement Benefits

We have a qualified, noncontributory defined benefit pension plan (“Qualified Pension Plan”) covering substantially all U.S. associates employed by us prior to January 1, 2010. Benefits under the Qualified Pension Plan are based on credited years of service and final average compensation. Our policy is to fund the Qualified Pension Plan with 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. Effective December 31, 2009, the Board of Directors amended the Qualified Pension Plan to freeze benefit accruals and future eligibility. The Board of Directors has approved the termination of the Qualified Pension Plan with a proposed termination date of December 31, 2017. The termination of the Qualified Pension Plan is contingent upon receipt of an IRS determination letter that the Qualified Pension Plan was qualified upon termination and approval by the Pension Benefit Guaranty Corporation (“PBGC”). The date the termination will be approved and benefits can be distributed will not be known until we receive all required regulatory approvals. On or about October 13, 2017, we submitted a request to the IRS for a determination letter that the Qualified Pension Plan is qualified upon termination prior to the end of the 2017 calendar year. Depending on the time receipt of IRS and PBGC approval, we intend to distribute Qualified Pension Plan assets prior to the end of the 2018 calendar year.  Additionally, in connection with preparing for the termination of the Qualified Pension Plan, we have amended the plan to provide that participants are 100 percent vested in their accrued benefits as of the effective date of the plan termination, to adopt a new standard for disability benefits that will apply when the plan’s assets are distributed due to the termination, to add a lump sum distribution for employees and terminated vested participants who are not in payment status when Qualified Pension Plan assets are distributed due to the termination and to make certain other conforming amendments to the Qualified Pension Plan to comply with applicable laws that may be required by the IRS or may be deemed necessary or advisable to improve the administration of the Qualified Pension Plan or facilitate its termination and liquidation.  We will contribute to the Trust Fund for the Qualified Pension Plan as necessary to ensure there are sufficient assets to provide all Qualified Pension Plan benefits as required by the PBGC.  The financial impact of the Qualified Pension Plan termination will be recognized as a settlement of the Qualified Pension Plan liabilities.  The settlement date and related financial impact have not yet been determined.

We have historically had in place a noncontributory supplemental executive retirement plan (“SERP”), which prior to January 1, 2014 was a nonqualified defined benefit plan that essentially mirrored the Qualified Pension Plan, but provided benefits in excess of certain limits placed on our Qualified Pension Plan by the Internal Revenue Code.  As noted above, we froze our Qualified Pension Plan effective as of December 31, 2009 and the SERP provided benefits to participants as if the Qualified Pension Plan had not been frozen.  Because the Qualified Pension Plan was frozen and because new employees were not eligible to participate in the Qualified Pension Plan, our Board of Directors adopted amendments to the SERP on October 8, 2013 that were effective as of December 31, 2013 to simplify the SERP calculation.  The SERP is funded through a Rabbi Trust with BMO Harris Bank N.A.  Under the amended SERP, participants received an accrued lump-sum benefit as of December 31, 2013 which was credited to each participant’s account.  Subsequent to December 31, 2013, each eligible participant receives a supplemental retirement benefit equal to the foregoing lump sum benefit, plus an annual benefit accrual equal to 8 percent of the participant’s base salary and cash bonus, plus annual credited interest on the participant’s account balance.  All then current participants as of December 31, 2013 are fully vested in their account balances with any new individuals participating in the SERP effective on or after January 1, 2014 being subject to a five year vesting period.  The SERP, which is considered a defined benefit plan under applicable rules and regulations of the Internal Revenue Code, will continue to be funded through use of a Rabbi Trust to hold investment assets to be used in part to fund any future required lump sum benefit payments to participants.  The Rabbi Trust assets had a value of $2.7 million at October 1, 2017 and $2.6 million at July 2, 2017, respectively, and are included in Other Long-Term Assets in the accompanying Condensed Consolidated Balance Sheets.

We also sponsor a postretirement health care plan for all U.S. associates hired prior to June 1, 2001. The expected cost of retiree health care benefits is recognized during the years the associates who are covered under the plan render service. Effective January 1, 2010, an amendment to the postretirement health care plan limited the benefit for future eligible retirees to $4,000 per plan year and the benefit is further subject to a maximum five year coverage period based on the associate’s retirement date and age. The postretirement health care plan is unfunded.

The service cost component of the net periodic benefit costs under these plans is allocated between Cost of Goods Sold and Engineering, Selling and Administrative Expenses while the remaining components of the net periodic benefit costs are included in Other Income (Expense), net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

The following table summarizes the net periodic benefit cost recognized for each of the periods indicated under these plans (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Service cost	$	17		$	14		$	3		$	3
Interest cost		964			981		11				14
Expected return on plan assets		(1,528	)		(1,464	)		—			—
Amortization of prior service cost (credit)	3				3			(191	)		(191	)
Amortization of unrecognized net loss	509				807		120				135
Net periodic benefit cost (credit)	$	(35	)	$	341		$	(57	)	$	(39	)

No voluntary contributions were made to the Qualified Pension Plan during the three month period ended October 1, 2017. Voluntary contributions of $3 million were made to the Qualified Pension Plan during the three month period ended October 2, 2016. Additional contributions totaling $3 million are anticipated to be made during the remainder of fiscal 2018.

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Accumulated Other Comprehensive Loss

3 Months Ended

Oct. 01, 2017

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The following tables summarize the changes in accumulated other comprehensive loss (“AOCL”) for each period presented (in thousands):

	Three Months Ended October 1, 2017
	Foreign Currency Translation Adjustments			Retirement and Postretirement Benefit Plans			Total
Balance, July 2, 2017	$	14,138		$	18,750		$	32,888
Other comprehensive loss before reclassifications		(297	)		—			(297	)
Income tax		—			—			—
Net other comprehensive loss before       reclassifications		(297	)		—			(297	)
Reclassifications:
Prior service credits (A)		—			188			188
Actuarial gains (A)		—			(629	)		(629	)
Total reclassifications before tax		—			(441	)		(441	)
Income tax		—			163			163
Net reclassifications		—			(278	)		(278	)
Other comprehensive loss (income)		(297	)		(278	)		(575	)
Other comprehensive loss attributable to non-    controlling interest		78			—			78
Balance, October 1, 2017	$	13,763		$	18,472		$	32,235

	Three Months Ended October 2, 2016
	Foreign Currency Translation Adjustments		Retirement and Postretirement Benefit Plans			Total
Balance, July 3, 2016	$	13,155	$	24,518		$	37,673
Other comprehensive loss before reclassifications		1,623		—			1,623
Income tax		—		—			—
Net other comprehensive loss before       Reclassifications		1,623		—			1,623
Reclassifications:
Prior service credits (A)		—		188			188
Unrecognized net loss (A)		—		(941	)		(941	)
Total reclassifications before tax		—		(753	)		(753	)
Income tax		—		278			278
Net reclassifications		—		(475	)		(475	)
Other comprehensive loss (income)		1,623		(475	)		1,148
Other comprehensive loss attributable to non-    controlling interest		110		—			110
Balance, October 2, 2016	$	14,668	$	24,043		$	38,711

(A) Amounts reclassified are included in the computation of net periodic benefit cost, which is included in Other Income (Expense), net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. See Pension and Postretirement Benefits note to these Notes to Condensed Consolidated Financial Statements above.

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Derivative Instruments (Tables)

3 Months Ended

Oct. 01, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Quantification of Outstanding Mexican Peso Forward Contracts

The following table quantifies the outstanding Mexican peso forward contracts as of October 1, 2017 (thousands of dollars, except average forward contractual exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 13, 2017 - June 15, 2018	$	9,000		20.37	$	862

Fair Market Value of All Outstanding Peso Forward Contracts

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Condensed Consolidated Balance Sheets was as follows (thousands of dollars):

	October 1, 2017		July 2, 2017
Not Designated as Hedging Instruments:
Other Current Assets:
Mexican Peso Forward Contracts	$	862	$	1,121

Pre-Tax Effects of the Peso Forward Contracts

The pre-tax effects of the Mexican peso forward contracts are included in Other Income (Expense), net on the accompanying Condensed Consolidated Statements of Income and Comprehensive Income and consisted of the following (thousands of dollars):

	Three Months Ended
	October 1, 2017			October 2, 2016
Not Designated as Hedging Instruments:
Realized Gain (Loss)	$	458		$	(230	)
Unrealized Loss	$	(258	)	$	(899	)

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Oct. 01, 2017

Fair Value Disclosures [Abstract]

Summary of Financial Assets and Liabilities at Fair Value on Recurring Basis

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of October 1, 2017 (in thousands):  

	Fair Value Inputs
	Level 1 Assets: Quoted Prices InActive Markets		Level 2 Assets: Observable Inputs Other Than Market Prices		Level 3 Assets: Unobservable Inputs
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	400	$	—	$	—
Mid Cap		404		—		—
Large Cap		542		—		—
International		573		—		—
Fixed Income Funds		766		—		—
Cash and Cash Equivalents		—		2		—
Mexican Peso Forward Contracts		—		862		—
Total Assets at Fair Value	$	2,685	$	864	$	—

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Equity Earnings (Loss) of Joint Ventures (Tables)

3 Months Ended

Oct. 01, 2017

VAST LLC

Summarized Statements of Operations

The following are summarized statements of operations for VAST LLC (in thousands):  

	Three Months Ended
	October 1, 2017		October 2, 2016
Net Sales	$	38,510	$	25,009
Cost of Goods Sold		29,013		20,093
Gross Profit		9,497		4,916
Engineering, Selling and Administrative Expenses		6,021		4,015
Income From Operations		3,476		901
Other Income, net		150		441
Income before Provision for Income Taxes		3,626		1,342
Provision for Income Taxes		522		172
Net Income	$	3,104	$	1,170
STRATTEC’s Share of VAST LLC Net Income	$	1,035	$	390
Intercompany Profit Elimination		—		—
STRATTEC’s Equity Earnings of VAST LLC	$	1,035	$	390

SAL, LLC

Summarized Statements of Operations

The following are summarized statements of operations for SAL, LLC (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2016
Net Sales	$	108		$	100
Cost of Goods Sold		152			87
Gross Profit		(44	)		13
Engineering, Selling and Administrative Expenses		(10	)		337
Loss From Operations		(34	)		(324	)
Other Expense, net		(65	)		(12	)
Net Loss	$	(99	)	$	(336	)
STRATTEC’s Equity Loss of SAL LLC	$	(9	)	$	(328	)

VAST LLC and SAL LLC

Summarize of Related Party Transaction

The following table summarizes these related party transactions with VAST LLC and SAL LLC for the periods indicated below (in thousands):

	Three Months Ended
	October 1, 2017		October 2, 2016
Sales to VAST LLC	$	596	$	50
Sales to SAL, LLC	$	35	$	75
Purchases from VAST LLC	$	45	$	31
Expenses Charged to VAST LLC	$	212	$	228
Expenses Charged from VAST LLC	$	218	$	409

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Credit Facilities and Guarantees (Tables)

3 Months Ended

Oct. 01, 2017

Debt Disclosure [Abstract]

Schedule of Outstanding Borrowings Under the Credit Facilities

Outstanding borrowings under the credit facilities were as follows (in thousands):

	October 1, 2017		July 2, 2017
STRATTEC Credit Facility	$	20,000	$	16,000
ADAC-STRATTEC Credit Facility	$	20,000	$	14,000

Schedule of Average Outstanding Borrowings and the Weighted Average Interest Rate

Average outstanding borrowings and the weighted average interest rate under each credit facility referenced above were as follows for each period presented (in thousands):

	Three Months Ended
	AverageOutstanding Borrowings				Weighted Average Interest Rate
	October 1, 2017		October 2, 2016		October 1, 2017			October 2, 2016
STRATTEC Credit Facility	$	18,143	$	12,159		2.3	%		1.5	%
ADAC-STRATTEC Credit Facility	$	18,022	$	8,473		2.2	%		1.5	%

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Shareholders' Equity (Tables)

3 Months Ended

Oct. 01, 2017

Equity [Abstract]

Summary of Activity Impacting Shareholders' Equity

A summary of activity impacting shareholders’ equity for the three month period ended October 1, 2017 was as follows (in thousands):

	Total Shareholders’ Equity			Equity Attributable to STRATTEC			Equity Attributable toNon- Controlling Interest
Balance, July 2, 2017	$	172,714		$	151,088		$	21,626
Net Income		3,269			2,456			813
Dividend Declared		(508	)		(508	)		—
Dividend Declared – Non-controlling Interests of    Subsidiaries		(2,017	)		—			(2,017	)
Translation adjustments		297			375			(78	)
Stock Based Compensation		371			371			—
Pension and Postretirement Adjustment, Net of    tax		278			278			—
Employee Stock Purchases and Stock Option    Exercises		25			25			—
Balance, October 1, 2017	$	174,429		$	154,085		$	20,344

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Other Income (Expense), Net (Tables)

3 Months Ended

Oct. 01, 2017

Other Income And Expenses [Abstract]

Summary of Other Income (Expense), Net

The impact of these items for each of the periods presented was as follows (in thousands):

	Three Months Ended
	October 1, 2017			October 2, 2016
Foreign Currency Transaction (Loss) Gain	$	(137	)	$	689
Unrealized Loss on Peso Forward Contracts		(258	)		(899	)
Realized Gain (Loss) on Peso Forward Contracts		458			(230	)
Pension and Postretirement Plans		112			(285	)
Rabbi Trust Gain		89			83
Other		(177	)		400
	$	87		$	(242	)

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Earnings Per Share (''EPS'') (Tables)

3 Months Ended

Oct. 01, 2017

Earnings Per Share [Abstract]

Reconciliation of the Components of Basic and Diluted Per Share

A reconciliation of the components of the basic and diluted per-share computations follows (in thousands, except per share amounts):

	Three Months Ended
			October 1, 2017							October 2, 2016
	Net income		Shares		Per-Share Amount		Net income			Shares		Per-Share Amount
Basic Earnings Per Share	$	2,456		3,611	$	0.68	$	1,542			3,576	$	0.43
Stock Option and Restricted    Stock Awards		—		70				(1	)		85
Diluted Earnings Per Share	$	2,456		3,681	$	0.67	$	1,541			3,661	$	0.42

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Stock-Based Compensation (Tables)

3 Months Ended

Oct. 01, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Option Activity Under Our Stock Incentive Plan

There was no stock option activity under our stock incentive plan for the three months ended October 1, 2017. Options outstanding as of October 1, 2017 were as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding, July 2, 2017		138,508	$	29.23
Outstanding, October 1, 2017		138,508	$	29.23		4.2	$	1,967
Exercisable, October 1, 2017		138,508	$	25.71		4.2	$	1,967

Intrinsic Value of Stock Options Exercised and the Fair Value of Stock Options Vested

The intrinsic value of stock options exercised and the fair value of stock options that vested during the three month periods presented below were as follows (in thousands):

	Three Months Ended
	October 1, 2017		October 2, 2016
Intrinsic Value of Options Exercised	$	—	$	71
Fair Value of Stock Options Vesting	$	315	$	596

Summary of Restricted Stock Activity Under Our Stock Incentive Plan

A summary of restricted stock activity under our omnibus stock incentive plan for the three months ended October 1, 2017 was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Balance, July 2, 2017		75,850		$	60.61
Granted		27,950		$	33.30
Vested		(30,400	)	$	62.99
Forfeited		(2,175	)	$	56.91
Nonvested Balance, October 1, 2017		71,225		$	48.99

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Pension and Postretirement Benefits (Tables)

3 Months Ended

Oct. 01, 2017

Compensation And Retirement Disclosure [Abstract]

Summary of Net Periodic Benefit Cost Recognized

The following table summarizes the net periodic benefit cost recognized for each of the periods indicated under these plans (in thousands):

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Service cost	$	17		$	14		$	3		$	3
Interest cost		964			981		11				14
Expected return on plan assets		(1,528	)		(1,464	)		—			—
Amortization of prior service cost (credit)	3				3			(191	)		(191	)
Amortization of unrecognized net loss	509				807		120				135
Net periodic benefit cost (credit)	$	(35	)	$	341		$	(57	)	$	(39	)

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Oct. 01, 2017

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Summary of Changes in Accumulated Other Comprehensive Loss

The following tables summarize the changes in accumulated other comprehensive loss (“AOCL”) for each period presented (in thousands):

	Three Months Ended October 1, 2017
	Foreign Currency Translation Adjustments			Retirement and Postretirement Benefit Plans			Total
Balance, July 2, 2017	$	14,138		$	18,750		$	32,888
Other comprehensive loss before reclassifications		(297	)		—			(297	)
Income tax		—			—			—
Net other comprehensive loss before       reclassifications		(297	)		—			(297	)
Reclassifications:
Prior service credits (A)		—			188			188
Actuarial gains (A)		—			(629	)		(629	)
Total reclassifications before tax		—			(441	)		(441	)
Income tax		—			163			163
Net reclassifications		—			(278	)		(278	)
Other comprehensive loss (income)		(297	)		(278	)		(575	)
Other comprehensive loss attributable to non-    controlling interest		78			—			78
Balance, October 1, 2017	$	13,763		$	18,472		$	32,235

	Three Months Ended October 2, 2016
	Foreign Currency Translation Adjustments		Retirement and Postretirement Benefit Plans			Total
Balance, July 3, 2016	$	13,155	$	24,518		$	37,673
Other comprehensive loss before reclassifications		1,623		—			1,623
Income tax		—		—			—
Net other comprehensive loss before       Reclassifications		1,623		—			1,623
Reclassifications:
Prior service credits (A)		—		188			188
Unrecognized net loss (A)		—		(941	)		(941	)
Total reclassifications before tax		—		(753	)		(753	)
Income tax		—		278			278
Net reclassifications		—		(475	)		(475	)
Other comprehensive loss (income)		1,623		(475	)		1,148
Other comprehensive loss attributable to non-    controlling interest		110		—			110
Balance, October 2, 2016	$	14,668	$	24,043		$	38,711

(A) Amounts reclassified are included in the computation of net periodic benefit cost, which is included in Other Income (Expense), net in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. See Pension and Postretirement Benefits note to these Notes to Condensed Consolidated Financial Statements above.

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Basis of Financial Statements (Details Textual)	3 Months Ended
	Oct. 01, 2017 Subsidiary Joint_Venture Segment
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of reporting segments related to STRATTEC Security Corporation | Segment	1
SAL, LLC
Organization Consolidation And Presentation Of Financial Statements [Line Items]
STRATTEC's percentage ownership in joint venture	51.00%
VAST LLC
Organization Consolidation And Presentation Of Financial Statements [Line Items]
STRATTEC's percentage ownership in joint venture	33.33%
VAST LLC | CHINA
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of wholly owned subsidiaries	3
VAST LLC | BRAZIL
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of wholly owned subsidiaries	1
VAST LLC | INDIA
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of joint venture entities | Joint_Venture	1

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New Accounting Standards (Details Textual)	3 Months Ended
	Oct. 02, 2016 USD ($)
Cost of goods sold
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Reclassification of expense resulted from adoption of accounting guidance	$ 198,000
Engineering, selling and administrative expenses
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Reclassification of expense resulted from adoption of accounting guidance	$ 87,000

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Subsequent Event (Details Textual) - Mexican Peso Forward Contracts - Bank of Montreal - Subsequent Event	1 Months Ended
	Oct. 31, 2017 USD ($) $ / MXN
Subsequent Event [Line Items]
Notional amount | $	$ 3,000,000
Average forward contractual exchange rate | $ / MXN	19.50
Derivative contracts date, Beginning	Jan. 12, 2018
Derivative contracts date, Ending	Jun. 15, 2018

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Derivative Instruments - (Details Textual) - Mexican Peso Forward Contracts	3 Months Ended
	Oct. 01, 2017
Derivative [Line Items]
Forward contract settlement dates, beginning	Oct. 16, 2015
Forward contract settlement dates, ending	Jun. 15, 2018

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Derivative Instruments - Schedule of Quantification of Outstanding Mexican Peso Forward Contracts (Details) - Currency buy sell under contract one	3 Months Ended
	Oct. 01, 2017 USD ($) $ / MXN
Derivative [Line Items]
Effective Dates, Beginning	Oct. 13, 2017
Effective Dates, Ending	Jun. 15, 2018
Notional Amount	$ 9,000,000
Average Forward Contractual Exchange Rate | $ / MXN	20.37
Fair Value, Asset	$ 862,000

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Derivative Instruments - Fair Market Value of All Outstanding Peso Forward Contracts (Details) - USD ($) $ in Thousands	Oct. 01, 2017	Jul. 02, 2017
Other Current Assets | Mexican Peso Forward Contracts
Not Designated as Hedging Instruments:
Fair market value of derivative instruments	$ 862	$ 1,121

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Derivative Instruments - Pre-Tax Effects of the Peso Forward Contracts (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Pre-tax effects of the Mexican peso forward contracts
Realized Gain (Loss)	$ 458	$ (230)
Not Designated as Hedging Instrument | Other Income (Expense), Net
Pre-tax effects of the Mexican peso forward contracts
Realized Gain (Loss)	458	(230)
Unrealized Loss	$ (258)	$ (899)

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Fair Value of Financial Instruments (Details) $ in Thousands	Oct. 01, 2017 USD ($)
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	$ 2,685
Level 1 | Fixed Income Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	766
Level 1 | Stock Index Funds | Small Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	400
Level 1 | Stock Index Funds | Mid Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	404
Level 1 | Stock Index Funds | Large Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	542
Level 1 | Stock Index Funds | International
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	573
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	864
Level 2 | Cash and Cash Equivalents
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	2
Level 2 | Mexican Peso Forward Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	$ 862

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Fair Value of Financial Instruments (Details Textual)	Oct. 01, 2017 USD ($)
Fair Value Disclosures [Abstract]
Fair value, assets, level 1 to level 2 transfers, amount	$ 0

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Equity Earnings (Loss) of Joint Ventures (Details Textual) - USD ($)	3 Months Ended
	Oct. 01, 2017	Jun. 28, 2015	Jul. 02, 2017
VAST LLC
Schedule Of Equity Method Investments [Line Items]
STRATTEC's percentage ownership in joint venture	33.33%
SAL LLC
Schedule Of Equity Method Investments [Line Items]
STRATTEC's percentage ownership in joint venture	51.00%
Outstanding balance on loan from STRATTEC to equity method investment	$ 2,600,000		$ 2,600,000
Percentage of funding in joint venture through loans	100.00%	100.00%
Percentage of losses of joint venture, up to committed financial support, recognized by STRATTEC	100.00%	100.00%
SAL LLC | Westinghouse Agreement
Schedule Of Equity Method Investments [Line Items]
Guarantee liability	$ 250,000		$ 250,000

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Equity Earnings (Loss) of Joint Ventures (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Summarized statements of operations
Equity Earnings (Loss) of Joint Ventures	$ 1,026	$ 62
VAST LLC
Summarized statements of operations
Net Sales	38,510	25,009
Cost of Goods Sold	29,013	20,093
Gross Profit	9,497	4,916
Engineering, Selling and Administrative Expense	6,021	4,015
Income (Loss) From Operations	3,476	901
Other Income (Expense), net	150	441
Income before Provision for Income Taxes	3,626	1,342
Provision for Income Taxes	522	172
Net Income (Loss)	3,104	1,170
STRATTEC’s Share of VAST LLC Net Income	1,035	390
Equity Earnings (Loss) of Joint Ventures	1,035	390
SAL LLC
Summarized statements of operations
Net Sales	108	100
Cost of Goods Sold	152	87
Gross Profit	(44)	13
Engineering, Selling and Administrative Expense	(10)	337
Income (Loss) From Operations	(34)	(324)
Other Income (Expense), net	(65)	(12)
Net Income (Loss)	(99)	(336)
Equity Earnings (Loss) of Joint Ventures	$ (9)	$ (328)

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Equity Earnings (Loss) of Joint Ventures (Details 1) - Equity Method Investee - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
VAST LLC
Schedule Of Equity Method Investments [Line Items]
Sales to Joint Venture	$ 596	$ 50
Purchases from VAST LLC	45	31
Expenses Charged to VAST LLC	212	228
Expenses Charged from VAST LLC	218	409
SAL LLC
Schedule Of Equity Method Investments [Line Items]
Sales to Joint Venture	$ 35	$ 75

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Credit Facilities and Guarantees (Details Textual) - USD ($)		3 Months Ended
	Sep. 30, 2016	Oct. 01, 2017
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Secured revolving credit facility		$ 30,000,000
Credit facility maturity date		Aug. 01, 2020
Interest rate on borrowings under the credit facility		The London Interbank Offering Rate ("LIBOR") plus 1.0 percent or the banks prime rate.
Interest rate - percentage points added to LIBOR - on borrowings under credit facility		1.00%
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Secured revolving credit facility		$ 25,000,000
Credit facility maturity date		Aug. 01, 2020
Interest rate on borrowings under the credit facility		The London Interbank Offering Rate ("LIBOR") plus 1.0 percent or the banks prime rate.
Interest rate - percentage points added to LIBOR - on borrowings under credit facility		1.00%
Capital contribution from partners during the period as required under the credit agreement	$ 6,000,000
ADAC-STRATTEC Credit Facility | STRATTEC
Line Of Credit Facility [Line Items]
Capital contribution from registrant during the period as required under the credit agreement	$ 3,060,000

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Credit Facilities and Guarantees (Details) - USD ($) $ in Thousands	Oct. 01, 2017		Jul. 02, 2017
Line Of Credit Facility [Line Items]
Outstanding Borrowing	$ 40,000	[1]	$ 30,000
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Outstanding Borrowing	20,000		16,000
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Outstanding Borrowing	$ 20,000		$ 14,000

[1] (Unaudited)

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Credit Facilities and Guarantees (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Average Outstanding Borrowings	$ 18,143	$ 12,159
Weighted Average Interest Rate	2.30%	1.50%
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Average Outstanding Borrowings	$ 18,022	$ 8,473
Weighted Average Interest Rate	2.20%	1.50%

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Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended
	Oct. 01, 2017		Jul. 02, 2017
Commitments And Contingencies Disclosure [Abstract]
Environmental reserve originally established in 1995	$ 3,000,000
Environmental	1,307,000	[1]	$ 1,308,000
Cost incurred inception to date on installation and on-going monitoring of wells	$ 568,000

[1] (Unaudited)

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Shareholders' Equity (Details) - USD ($) $ in Thousands		3 Months Ended
		Oct. 01, 2017	Oct. 02, 2016
Summary of activity impacting shareholders' equity
Beginning Balance		$ 172,714
Net income		3,269	$ 2,405
Dividend Declared		(508)
Dividend Declared – Non-controlling Interests of Subsidiaries		(2,017)
Translation adjustments		297	(1,623)
Stock Based Compensation		371
Pension and postretirement plans, net of tax		278	$ 475
Employee Stock Purchases and Stock Option Exercises		25
Ending Balance	[1]	174,429
Equity Attributable to STRATTEC
Summary of activity impacting shareholders' equity
Beginning Balance		151,088
Net income		2,456
Dividend Declared		(508)
Translation adjustments		375
Stock Based Compensation		371
Pension and postretirement plans, net of tax		278
Employee Stock Purchases and Stock Option Exercises		25
Ending Balance		154,085
Equity Attributable to Non-Controlling Interest
Summary of activity impacting shareholders' equity
Beginning Balance		21,626
Net income		813
Dividend Declared – Non-controlling Interests of Subsidiaries		(2,017)
Translation adjustments		(78)
Ending Balance		$ 20,344

[1] (Unaudited)

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Other Income (Expense), Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Other Income And Expenses [Abstract]
Foreign Currency Transaction (Loss) Gain	$ (137)	$ 689
Unrealized Loss on Peso Forward Contracts	(258)	(899)
Realized Gain (Loss) on Peso Forward Contracts	458	(230)
Pension and Postretirement Plans	112	(285)
Rabbi Trust Gain	89	83
Other	(177)	400
Other income (expense), net	$ 87	$ (242)

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Earnings Per Share (''EPS'') (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Reconciliation of the components of the basic and diluted per share
Net income	$ 2,456	$ 1,542
Net income, Stock Option and Restricted Stock Awards		(1)
Net income, Diluted Earnings Per Share	$ 2,456	$ 1,541
Basic Earnings Per Share, Number of shares	3,611	3,576
Stock Option and Restricted Stock Awards, Number of shares	70	85
Diluted Earnings Per Share, Number of shares	3,681	3,661
Basic Earnings Per Share	$ 0.68	$ 0.43
Diluted Earnings Per Share	$ 0.67	$ 0.42

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Earnings Per Share (''EPS'') (Details Textual) - shares	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from earnings per share computation	63,550	14,010

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Stock-Based Compensation (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options, granted	0	0
Employee Stock Option
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options expires after date of grant	10 years
Employee Stock Option | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	1 year
Employee Stock Option | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	4 years
Restricted stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation cost related to unvested restricted stock grants	$ 1.9
Weighted average period over which unrecognized compensation is expected to be recognized	1 year 1 month 6 days
Restricted stock | Minimum | Prior to August 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	3 years
Restricted stock | Minimum | August 2016 and Thereafter
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	1 year
Restricted stock | Maximum | Prior to August 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	5 years
Restricted stock | Maximum | August 2016 and Thereafter
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	5 years
Omnibus Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation arrangement by share based payment award number of shares authorized	1,850,000
Shares of common stock available for grant	179,164

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Stock-Based Compensation (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Oct. 01, 2017 USD ($) $ / shares shares
Summary of stock option activity under our stock incentive plan
Shares, Beginning Balance | shares	138,508
Shares, Ending Balance | shares	138,508
Shares, Exercisable | shares	138,508
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 29.23
Weighted Average Exercise Price, Ending Balance | $ / shares	29.23
Weighted Average Exercise Price, Exercisable | $ / shares	$ 25.71
Weighted Average Remaining Contractual Term, Outstanding	4 years 2 months 12 days
Weighted Average Remaining Contractual Term, Exercisable, Outstanding	4 years 2 months 12 days
Aggregate Intrinsic Value, Outstanding | $	$ 1,967
Aggregate Intrinsic Value, Outstanding | $	$ 1,967

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Stock-Based Compensation (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Intrinsic value of stock options exercised and the fair value of stock options vested
Intrinsic Value of Options Exercised		$ 71
Fair Value of Stock Options Vesting	$ 315	$ 596

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Stock-Based Compensation (Details 2) - Restricted stock	3 Months Ended
	Oct. 01, 2017 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Nonvested, Shares Beginning Balance | shares	75,850
Granted, Shares | shares	27,950
Vested, Shares | shares	(30,400)
Forfeited, Shares | shares	(2,175)
Nonvested, Shares Ending Balance | shares	71,225
Nonvested, Weighted Average Grant Date Fair Value Beginning Balance | $ / shares	$ 60.61
Granted, Weighted Average Grant Date Fair Value | $ / shares	33.30
Vested, Weighted Average Grant Date Fair Value | $ / shares	62.99
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	56.91
Nonvested, Weighted Average Grant Date Fair Value Ending Balance | $ / shares	$ 48.99

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Pension and Postretirement Benefits (Details Textual) - USD ($)	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Jul. 02, 2017
Defined Benefit Plan Disclosure [Line Items]
Proposed date the Board of Directors approved to terminate the qualified retirement plan	Dec. 31, 2017
Qualified Retirement Plan participants' vesting percentage as of the final termination date of the plan	100.00%
Termination Of Qualified Pension Plan Description	The Board of Directors has approved the termination of the Qualified Pension Plan with a proposed termination date of December 31, 2017. The termination of the Qualified Pension Plan is contingent upon receipt of an IRS determination letter that the Qualified Pension Plan was qualified upon termination and approval by the Pension Benefit Guaranty Corporation (“PBGC”). The date the termination will be approved and benefits can be distributed will not be known until we receive all required regulatory approvals. On or about October 13, 2017, we submitted a request to the IRS for a determination letter that the Qualified Pension Plan is qualified upon termination prior to the end of the 2017 calendar year. Depending on the time receipt of IRS and PBGC approval, we intend to distribute Qualified Pension Plan assets prior to the end of the 2018 calendar year. Additionally, in connection with preparing for the termination of the Qualified Pension Plan, we have amended the plan to provide that participants are 100 percent vested in their accrued benefits as of the effective date of the plan termination, to adopt a new standard for disability benefits that will apply when the plan’s assets are distributed due to the termination, to add a lump sum distribution for employees and terminated vested participants who are not in payment status when Qualified Pension Plan assets are distributed due to the termination and to make certain other conforming amendments to the Qualified Pension Plan to comply with applicable laws that may be required by the IRS or may be deemed necessary or advisable to improve the administration of the Qualified Pension Plan or facilitate its termination and liquidation.
Rabbi Trust Assets - SERP	$ 2,700,000		$ 2,600,000
Postretirement plan annual benefit limit for future eligible retirees	$ 4,000
Other postretirement benefits maximum benefit period	5 years
Contributions to the qualified pension plan	$ 0	$ 3,000,000
Expected additional employer contributions during remainder of fiscal 2017	$ 3,000,000
Supplemental Employee Retirement Plan, Defined Benefit
Defined Benefit Plan Disclosure [Line Items]
Percentage of participant's base salary received as Supplemental Retirement Benefits	8.00%

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Pension and Postretirement Benefits (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Pension Benefits
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$ 17	$ 14
Interest cost	964	981
Expected return on plan assets	(1,528)	(1,464)
Amortization of prior service cost (credit)	3	3
Amortization of unrecognized net loss	509	807
Net periodic benefit cost (credit)	(35)	341
Postretirement Benefits
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	3	3
Interest cost	11	14
Amortization of prior service cost (credit)	(191)	(191)
Amortization of unrecognized net loss	120	135
Net periodic benefit cost (credit)	$ (57)	$ (39)

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands		3 Months Ended
		Oct. 01, 2017	Oct. 02, 2016
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		$ 172,714
Other comprehensive loss before reclassifications		(297)	$ 1,623
Net other comprehensive loss before reclassifications		(297)	1,623
Reclassifications:
Prior service credits		188	188
Unrecognized net loss		(629)	(941)
Total reclassifications before tax		(441)	(753)
Reclassifications, income tax		163	278
Net reclassifications		(278)	(475)
Other comprehensive loss (income)		(575)	1,148
Other comprehensive loss attributable to non- controlling interest		78	110
Ending Balance	[1]	174,429
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		14,138	13,155
Other comprehensive loss before reclassifications		(297)	1,623
Net other comprehensive loss before reclassifications		(297)	1,623
Reclassifications:
Other comprehensive loss (income)		(297)	1,623
Other comprehensive loss attributable to non- controlling interest		78	110
Ending Balance		13,763	14,668
Retirement and Postretirement Benefit Plans
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		18,750	24,518
Reclassifications:
Prior service credits		188	188
Unrecognized net loss		(629)	(941)
Total reclassifications before tax		(441)	(753)
Reclassifications, income tax		163	278
Net reclassifications		(278)	(475)
Other comprehensive loss (income)		(278)	(475)
Ending Balance		18,472	24,043
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		32,888	37,673
Reclassifications:
Ending Balance		$ 32,235	$ 38,711

[1] (Unaudited)