Strattec Security Corp. Business Report FY2007

Business Highlights

Financial overview
(in million
FY2007 FY2006(*) Rate
of change
Sales 167.7 181.2 (7.5%) -Declining volume from the Company's largest customers
Gross profit 26.5 37.0 (28.4%) -Higher purchased raw material costs for zinc and brass.
Income from operations 6.3 13.4 (53.0%) -
Net income 8.2 12.5 (34.4%) -
*FY2006 : FY ended Jul. 2, 2006

-In FY2007, export sales represented 18.2% of the Company's net sales.

Sales to the Company's largest customers
(in million USD) FY2007 FY2006 FY2005
Sales % Sales % Sales %
GM 35.7 21.3% 32.9 18.2% 43.2 22.7%
Ford 21.0 12.5% 27.3 15.1% 32.0 16.8%
DaimlerChrysler 58.1 34.6% 58.6 32.3% 51.5 27.1%
Delphi 18.4 10.9% 26.7 14.7% 29.6 15.6%
Mitsubishi America 1.9 1.1.% 5.4 3.0% 4.5 2.4%
Others 32.7 19.6% 30.3 16.7% 29.5 15.4%
Total 167.7 100.0% 181.2 100.0% 190.3 100%

-Sales to General Motors Corporation were 35.7 million USD in 2007 compared to 32.9 million USD in 2006 due to a combination of higher product content on certain General Motors vehicles, takeover of certain passenger car lockset production from another supplier and price adjustments received to partially recover raw material cost increses.

-Sales to Ford Motor Company were 21.0 million USD in 2007 compared to 27.3 million USD in 2006 due to pre-programmed price reductions and lower Ford vehicle production volumes.

-Sales to DaimlerChrysler Corporation were essentially flat between years at 58.1 million USD in 2007 compared to 58.6 million USD in 2006.

-Sales to Delphi Corporation were 18.4 million USD in 2007 compared to 26.7 million USD in 2006 due primarily to lower levels of production and lower component content.

-Sales to Mitsubishi Motor Manufacturing of America, Inc. were 1.9 million USD in 2007 compared to 5.4 million USD in 2006 due to the previously announced phase-out of this customer relationship.

Joint Venture
-In Oct. 2006, the Company formed a joint venture with ADAC Automotive called ADAC-STRATTEC de Mexico (ASdM) in which the Company holds a 50.1% interest. The purpose of this joint venture is to produce certain ADAC and the Company's products utilizing ADAC's plastic molding expertise and the Company's assembly capability.Initial products from this joint venture include door handle components and exterior trim components for customers producing in Mexico.

-The Company established a sales and engineering branch office in Tokyo with VAST Alliance partners to promote business with New Domestics (Honda, Nissan, Toyota, etc) in North America and Europe. The branch became operational as of January, 2007.


R&D Structure
-Research and development activities are centered around research engineering staff called "Advanced Development Group". Projects focus on electronic and mechanical access control products, modularization of related access/security control components and new manufacturing processes to reduce costs for itself and its customers.

-The Company's engineering resources are organized by product type. It has four product groups: Locks and Keys, Latches, Driver Control/Ignition Lock Housings and Electrical.Each group has engineers who design and develop products for specific applications.

R&D Expenditure
(in million USD) FY2007 FY2006 FY2005
Amount 1.5 2.3 2.0
% of sales 0.9% 1.3% 1.1%