10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 2013.

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of exchange on which registered
Common Stock, $.01 par value	The NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨  Yes þ  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨  Yes þ  No

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. þ  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). þ  Yes ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.    ¨

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

Large accelerated filer ¨	Accelerated filer þ
Non-accelerated filer ¨ (do not check if a smaller reporting company)	Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨  Yes þ  No

The aggregate market value of the voting Common Stock held by non-affiliates of the registrant as of December 28, 2012 (the last business day of the Registrant’s most recently completed second quarter), was approximately $81,306,000 (based upon the last reported sale price of the Common Stock at December 28, 2012, on the NASDAQ Global Market).  Shares of common stock held by any executive officer or director of the registrant have been excluded from this computation because such persons may be deemed to be affiliates.  This determination of affiliate status is not a conclusive determination for other purposes.

On August 9, 2013, there were outstanding 3,432,946 shares of the Registrant’s $.01 par value Common Stock (which includes any unvested restricted shares previously awarded).

Documents Incorporated by Reference

Document	Part of the Form 10-K into which incorporated
Portions of the Annual Report to Shareholders for the fiscal year ended June 30, 2013	I, II, IV
Portions of the Proxy Statement dated September 9, 2013, for the Annual Meeting of Shareholders to be held on October 8, 2013	III

 1 

PROSPECTIVE INFORMATION

A number of the matters and subject areas discussed in this Form 10-K as well as in portions of the Company’s 2013 Annual Report to Shareholders and the Company’s Proxy Statement, dated September 9, 2013, which are incorporated herein by reference, 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 statements include 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, or otherwise incorporated herein by reference, in this Form 10-K.  The discussions of such matters and subject areas are 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, foreign currency fluctuations, fluctuations in costs of operations (including fluctuations in the cost of raw materials) and other matters described under “Risk Factors” in the Management’s Discussion and Analysis section of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference in Part I, Item 1A of this report and in the Company’s other filings with the Securities and Exchange Commission.

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-K 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-K.

 2 

PART I

Item 1.  Business

The information set forth under “Company Description” which appears on pages 5 through 12 of the Company’s 2013 Annual Report to Shareholders is incorporated herein by reference.  For information as to export sales, see the information set forth under “Notes to Financial Statements-Export Sales” included on page 46 of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference.

Emerging Technologies  

Automotive vehicle access systems, which are both theft deterrent and consumer friendly, are trending toward electro-mechanical devices.  Electronic companies are developing user identification systems such as bio-systems, card holder (transmitter) systems, etc., while mechanical locks, keys, housings, and latches are evolving to accommodate electronics.  The Company believes it is positioning itself as a vehicle access control supplier by building its product, engineering and manufacturing expertise in the required electro-mechanical products, which include vehicle access latches, keys with remote entry electronic systems, and ignition interface systems with passive start capabilities.

These technologies benefit the Company by increasing the potential customer base as a Tier 2 supplier while maintaining Tier 1 status on some product lines and adding additional product line availability.

Sources and Availability of Raw Materials

The Company’s primary raw materials are high-grade zinc, brass, nickel silver, steel, aluminum and plastic resins. These materials are generally available from a number of suppliers, but the Company has chosen to concentrate its sourcing with one primary vendor for each commodity.  The Company believes its sources for raw materials are very reliable and adequate for its needs.  The Company has not experienced any significant long term supply problems in its operations and does not anticipate any significant supply problems in the foreseeable future.  See further discussion under “Risk Factors-Sources of and Fluctuations in Market Prices of Raw Materials” included on page 25 of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference.

Patents, Trademarks and Other Intellectual Property

The Company believes that the success of its business will not only result from the technical competence, creativity and marketing abilities of its employees but also from the protection of its intellectual property through patents, trademarks and copyrights.  As part of its ongoing research, development and manufacturing activities, the Company has a policy of seeking patents on new products, processes and improvements when appropriate.

Although, in the aggregate, the intellectual property discussed herein are of considerable importance to the manufacturing and marketing of many of its access control products, the Company does not consider any single patent or trademark or group of patents or trademarks to be material to its business as a whole, except for the STRATTEC and STRATTEC with logo trademarks.

The Company also relies upon trade secret protection for its confidential and proprietary information.  The Company maintains confidentiality agreements with its key executives.  In addition, the Company enters into confidentiality agreements with selected suppliers, consultants and associates as appropriate to evaluate new products or business relationships pertinent to the success of the Company. However, there can be no assurance that others will not independently obtain similar information and techniques or otherwise gain access to the Company’s trade secrets or that the Company can effectively protect its trade secrets.

Dependence Upon Significant Customers

A very significant portion of the Company’s annual sales are to General Motors Company, Ford Motor Company, and Chrysler Group LLC.  These three customers accounted for approximately 66 percent of the Company’s net sales in 2013, 68 percent of the Company’s net sales in 2012 and 66 percent of the Company’s net sales in 2011.  Further information regarding sales to the Company’s largest customers is set forth under the caption “Risk Factors—Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share” and “Risk Factors – Production Slowdowns by Customers” included on pages 23 and 24 of the Company’s 2013 Annual Report to Shareholders and “Notes to Financial Statements-Sales and Receivable Concentration” included on page 46 of the Company’s 2013 Annual Report to Shareholders, all of which are incorporated herein by reference.  

 3 

The products sold to these customers are model specific, fitting only certain defined applications.  Consequently, the Company is highly dependent on its major customers for their business, and on these customers’ ability to produce and sell vehicles which utilize the Company’s products.  The Company has enjoyed good relationships with General Motors Company, Chrysler Group LLC, Ford Motor Company and other customers in the past, and expects to do so in the future. However, a significant change in the purchasing practices of, or a significant loss of volume from, one or more of these customers could have a detrimental effect on the Company’s financial performance.  We cannot provide any assurance that any lost sales volume could be replaced despite historical relationships with our customers.

Sales and Marketing  

The Company provides its customers with engineered access control products including locksets, fobs, push button ignition systems, steering column lock housings, seatback and secondary latches, power sliding door systems, power liftgate systems, power decklids, door handles, door handle components and trim and other access products which are unique to specific vehicles.  Any given vehicle will typically take 1 to 3 years of development and engineering design time prior to being offered to the public.  The access control products are designed concurrently with the vehicle.  Therefore, commitment to the Company as the production source for such products and components occurs 1 to 3 years prior to the start of production.  The Company employs an engineering staff that assists in providing design and technical solutions to its customers.  The Company believes that its engineering expertise is a competitive advantage and contributes toward its strong market position.  For example, the Company believes it regularly provides innovative design proposals for its product offerings to its customers that will improve customer access, vehicle security system quality, theft deterrence and system cost.

The typical process used by automotive manufacturers in selecting a supplier for access control products is to offer the business opportunity to the Company and several of the Company’s competitors.  Each competitor will pursue the opportunity, doing its best to provide the customer with the most attractive proposal.  Price pressure is strong during this process but once an agreement is reached, a commitment is made for each year of the product program. Typically, price reductions resulting from productivity improvement by the Company are included in the contract and are estimated in evaluating each of these opportunities by the Company. A blanket purchase order, a contract indicating a specified part will be supplied at a specified price during a defined time period, is issued by customers for each model year.  Production quantity releases or quantity commitments are made to that purchase order for weekly deliveries to the customer.  As a consequence and because the Company is a “Just-in-Time” supplier to the automotive industry, it does not maintain a backlog of orders in the classic sense for future production and shipment.

Competition  

The Company competes with domestic and foreign-based competitors on the basis of custom product design, engineering support, quality, delivery and price.  While the number of direct competitors is currently relatively small, the automotive manufacturers actively encourage competition between potential suppliers.  The Company has a large share of the North American market for its access control products because of its ability to provide optimal value, which is a beneficial combination of price, quality, technical support, program management, innovation and aftermarket support.  In order to reduce access control product production costs while still offering a wide range of technical support, the Company utilizes assembly operations and certain light manufacturing operations in Mexico, which results in lower labor costs as compared to the United States.

As locks and keys become more sophisticated and involve additional electronics, competitors with specific electronic expertise may emerge to challenge the Company.  To address this, the Company has strengthened its electrical engineering knowledge and service.  It is also working with several electronics suppliers to jointly develop and supply these advanced products.

The Company’s lockset, housing and power access competitors include Huf North America, Ushin/Valeo, Tokai-Rika, Alpha-Tech, Honda Lock, Shin Chang, Magna, Edscha, Stabilus, Aisin, Brose, Mitsuba, Ohi, Kiekert, Inteva, Key Plastics and Gecom.  For additional information related to competition, see the information set forth under “Risk Factors-Highly Competitive Automotive Supply Industry” included on page 26 of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference.

 4 

Research and Development  

The Company engages in research and development activities pertinent to automotive access control. A major area of focus for research is the expanding role of vehicle access via electronic interlocks and modes of communicating authorization data between consumers and vehicles. Development activities include new products, applications and product performance improvements. In addition, specialized data collection equipment is developed to facilitate increased product development efficiency and continuous quality improvements.  For fiscal years 2013, 2012, and 2011, the Company spent approximately $1.3 million, $1.2 million, and $1.5 million, respectively, on research and development.  The Company believes that, historically, it has committed sufficient resources to research and development and will continue to invest in the future as required to support additional product programs associated with both existing and new customers. Patents are pursued and will continue to be pursued as appropriate to protect the Company’s interests resulting from these activities.

Customer Tooling  

The Company incurs costs related to tooling used in component production and assembly.  Some of these costs are reimbursed by customers who then own the tools involved.  See the information set forth under “Notes to Financial Statements-Organization and Summary of Significant Accounting Policies-Customer Tooling in Progress” included on page 33 of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference.

Environmental Compliance  

As is the case with other manufacturers, the Company is subject to Federal, state, local and foreign laws and other legal requirements relating to the generation, storage, transport, treatment and disposal of materials as a result of its  manufacturing and assembly operations.  These laws include the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended), the Clean Water Act of 1990 (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended). The Company has an environmental management system that is ISO-14001 certified.  The Company believes that its existing environmental management system is adequate and it has no current plans for substantial capital expenditures in the environmental area.

As discussed in “Notes to Financial Statements-Commitments and Contingencies” included on page 40 of the Company’s 2013 Annual Report to Shareholders, a site at the Company’s Milwaukee facility is contaminated by a solvent spill from a former above-ground solvent storage tank located on the east side of the facility, which occurred in 1985. This situation is being monitored by the Company.

The Company does not currently anticipate any materially adverse impact on its financial statements or competitive position as a result of compliance with Federal, state, local and foreign environmental laws or other legal requirements. However, risk of environmental liability and charges associated with maintaining compliance with environmental laws is inherent in the nature of the Company’s business and there is no assurance that material liabilities or charges could not arise.

Employees  

At June 30, 2013, the Company had approximately 2,670 full-time employees, of which approximately 225 or 8.4 percent were represented by a labor union, which accounts for all production associates at the Company’s Milwaukee facility.  In October 2009, a new contract with the unionized associates was ratified and is effective through June 29, 2014.  During June 2001, there was a 16-day strike by the represented employees at the Company’s Milwaukee facility.  Further information regarding the strike, work stoppages and other labor matters are discussed under “Risk Factors-Disruptions Due to Work Stoppages and Other labor Matters” included on page 25 of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference.  

Available Information  

The Company maintains its corporate website at www.strattec.com and makes available, free of charge, through this website its code of business ethics, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports that the Company files with, or furnishes to, the Securities and Exchange Commission (the “Commission”) as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Commission.  The Company is not including all the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.  However, this report includes (or incorporates by reference) all material information about the Company that is included on the Company’s website which is otherwise required to be included in this report.

 5 

Item 1A.  Risk Factors  

The information set forth under “Risk Factors” which appears on pages 23 through 26 of the Company’s 2013 Annual Report to Shareholders is incorporated herein by reference.  The risks described in the section “Risk Factors” in the Company’s 2013 Annual Report to Shareholders are not the only risks the Company faces.  Additional risks that the Company does not yet know of or that it currently thinks are immaterial may also impair its business operations.  If any of the events or circumstances described in those risks actually occur, the Company’s business, financial condition or results of operations could be materially adversely affected.  In such cases, the trading price of the Company’s common stock could decline.

Item 1B.  Unresolved Staff Comments  

None.

Item 2.   Properties  

The Company has three manufacturing plants, one warehouse, and one sales office. These facilities are described as follows:

Location	Type	Sq. Ft.	Owned or Leased
Milwaukee, Wisconsin	Headquarters and General Offices; Component Manufacturing and Service Parts Distribution	352,000	Owned**
Juarez, Chihuahua Mexico	Subsidiary Offices and Assembly	97,000	Owned**
Juarez, Chihuahua Mexico	Subsidiary Offices, Key Finishing, Injection Molding and Assembly Operations	140,000	Owned**
El Paso, Texas	Finished Goods Warehouse	54,060	Leased**
Troy, Michigan	Sales and Engineering Office for Detroit Customer Area	18,900	Leased**
Troy, Michigan	Engineering Development Lab	7,450	Leased**

** Leased unit within a complex.

The Company believes that its production facilities will be adequate for the foreseeable future.

Item 3.   Legal Proceedings  

In the normal course of business the Company may be involved in various legal proceedings from time to time.  The Company does not believe it is currently involved in any claim or action the ultimate disposition of which would have a material adverse effect on the Company’s financial statements.

Item 4.   Mine Safety Disclosures  

None.

 6 

PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities  

The Company’s Board of Directors authorized a stock repurchase program on October 16, 1996, and the program was publicly announced on October 17, 1996.  Since inception of the stock repurchase program, the Board of Directors has periodically increased the number of shares authorized for repurchase under the program.  At June 30, 2013, the number of shares of the Company’s common stock authorized for repurchase under the program totaled 3,839,395.  The program currently authorizes the repurchase of the Company’s 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 June 30, 2013, a total of 3,655,322 shares have been repurchased at a cost of approximately $136.4 million.  No shares were repurchased during the quarter or year ended June 30, 2013.

The Company’s common stock is traded on the NASDAQ Global Market under the symbol “STRT.”  

The information set forth under “Financial Summary – Quarterly Financial Data (Unaudited)” included on page 51 of the Company’s 2013 Annual Report to Shareholders is incorporated herein by reference.

Item 6.   Selected Financial Data  

The information set forth under “Financial Summary – Five Year Financial Summary” which appears on page 50 of the Company’s 2013 Annual Report to Shareholders is incorporated herein by reference.  Such information should be read along with the Company’s financial statements and the notes to those financial statements and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference elsewhere herein.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information set forth under “Management’s Discussion and Analysis” which appears on pages 13 through 26 of the Company’s 2013 Annual Report to Shareholders is incorporated herein by reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is limited to interest rate fluctuations on borrowings under our secured revolving credit facilities, foreign currency exchange rate risk associated with our foreign operations, and fluctuations in raw material commodity prices.  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 June 30, 2013, we had $2.25 million of outstanding borrowings under our credit facilities.  The interest expense related to borrowings under the credit facilities during the year ended June 30, 2013 was $34,000.  A 10% increase or decrease in the interest rate on 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.  Our earnings and cash flows are subject to fluctuations as a result of changes in the U.S. dollar / Mexican peso exchange rate.  In January 2011 and August 2011, we entered into agreements with Bank of Montreal that provided for two weekly Mexican peso currency option contracts to cover a portion of our weekly estimated peso denominated operating costs.  The contracts with Bank of Montreal expired June 28, 2013.  The two weekly option contracts were for equivalent notional amounts.  The contracts that were effective during fiscal 2011 and 2012 expired July 6, 2012, and provided for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 11.85 if the spot rate at the weekly expiry date was below 11.85 or for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 12.85 if the spot rate at the weekly expiry date was above 12.85.  Additional contracts that were effective during fiscal 2013 expired June 28, 2013 and provided for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 12.40 if the spot rate at the weekly expiry date was below an average of 12.40 or for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 13.40 if the spot rate at the weekly expiry date was above an average of 13.40.  Our objective in entering into these currency option contracts was to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations.  The Mexican peso option contracts were not used for speculative purposes and were not designated as hedges.  As a result, all currency option contracts were recognized in our accompanying consolidated financial statements at fair value and changes in the fair value of the currency option contracts were reported in current earnings as part of Other Income, net.  The premiums paid and received under the weekly Mexican peso currency option contracts netted to zero.  As a result, premiums related to the contracts did not impact our earnings.  No Mexican peso currency option contracts were outstanding as of June 30, 2013.

 7 

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

	June 30, 2013		July 1, 2012
Not Designated as Hedging Instruments:
Other current liabilities:
Mexican peso option contracts	$	—	$	(395	)

The pre-tax effects of the Mexican peso option contracts on the accompanying Consolidated Statements of Income and Comprehensive Income (Loss) consisted of the following (thousands of dollars):

	Other Income, net
	June 30, 2013			July 1, 2012
Not Designated as Hedging Instruments:
Realized gain	$	27		$	18
Realized (loss)	$	(39	)	$	(438	)
Unrealized gain (loss)	$	395		$	(640	)

See “Risk Factors – Currency Exchange Rate Fluctuations” included on page 25 of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference, for more information.

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, commencing with fiscal 2008, we began quoting 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.  See “Risk Factors –Sources of and Fluctuations in Market Prices of Raw Materials” included on page 25 of the Company’s 2013 Annual Report to Shareholders, which is incorporated herein by reference, for more information.

Item 8.   Financial Statements and Supplementary Data

The financial statements, together with the report thereon of Deloitte & Touche LLP dated September 9, 2013, the report of management on internal control over financial reporting and the report of Deloitte & Touche LLP on internal control over financial reporting dated September 9, 2013, which appear on pages 27 through 49 of the Company’s 2013 Annual Report to Shareholders, are incorporated herein by reference.  

Our quarterly results of operations included under “Financial Summary-Quarterly Financial Data (Unaudited)” which appears on page 51 of the Company’s 2013 Annual Report to Shareholders is incorporated herein by reference.

Item 9.   Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

 8 

Item 9A.  Controls and Procedures

The Company maintains 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 by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the U.S. 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 is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  The Company carried out an evaluation as of the end of the period covered by this report, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report 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 was necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  The Company has designed its disclosure controls and procedures to reach a level of reasonable assurance of achieving the desired control objectives.

There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

The report of management required under this Item 9A is included on page 47 of the Company’s 2013 Annual Report to Shareholders under the heading “Report on Management’s Assessment of Internal Control over Financial Reporting” and is incorporated herein by reference.

The attestation report required under this Item 9A is included on page 48 of the Company’s 2013 Annual Report to Shareholders under the heading “Report of Independent Registered Public Accounting Firm” and is incorporated herein by reference.

Item 9B.  Other Information

Not applicable.

 9 

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

The information included in the Company’s Proxy Statement, dated September 9, 2013, under “Proposal 1: Election of Directors,” “Corporate Governance Matters-Code of Business Ethics,” “Audit Committee Matters-Audit Committee Financial Expert,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance”, and “Corporate Governance Matters-Director Nominations” is incorporated herein by reference.

The Audit Committee of the Company’s Board of Directors is an “audit committee” for purposes of Section 3(a)(58)(A) of the Securities Exchange Act of 1934.  The members of the Audit Committee consist of three outside independent Directors, David R. Zimmer, Audit Committee Chairman, Thomas W. Florsheim, Jr., and Michael J. Koss.

Item 11.   Executive Compensation

The information included in the Company’s Proxy Statement, dated September 9, 2013, under “Director Compensation” and “Executive Compensation” is incorporated herein by reference.  

The information incorporated by reference from “Report of the Compensation Committee” in the Company’s Proxy Statement, dated September 6, 2012, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information included in the Company’s Proxy Statement, dated September 9, 2013, under “Security Ownership” is incorporated herein by reference.

Equity Compensation Plan Information

The following table summarizes share information, as of June 30, 2013, for the Company’s Amended and Restated Stock Incentive Plan.

Plan Category	Number of common shares to be issued upon exercise of outstanding options, warrants, and rights		Weighted-average exercise price of outstanding options, warrants, and rights		Number of common shares available for future issuance under equity compensation plans
Equity compensation plans approved by shareholders		271,455	$	27.19		153,993
Equity compensation plans not approved by shareholders		—		—		—
Total		271,455	$	27.19		153,993

Item 13.  Certain Relationships and Related Transactions, and Director Independence

The information included in the Company’s Proxy Statement, dated September 9, 2013, under “Transactions With Related Persons” and “Corporate Governance Matters-Director Independence” is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information included in the Company’s Proxy Statement, dated September 9, 2013, under “Audit Committee Matters-Fees of Independent Registered Public Accounting Firm” is incorporated herein by reference.

 10 

PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)	The following documents are filed as part of this report:
	(1)	Financial Statements - The following financial statements of the Company, included on pages 27 through 49 of the Company’s 2013 Annual Report to Shareholders, are incorporated by reference in Item 8 of this Form 10-K annual report:
		Reports of Independent Registered Public Accounting Firm (Deloitte & Touche LLP)
		Consolidated Balance Sheets - as of June 30, 2013 and July 1, 2012
		Consolidated Statements of Operations and Comprehensive Income (Loss) - years ended June 30, 2013, July 1, 2012 and July 3, 2011
		Consolidated Statements of Shareholders’ Equity – years ended June 30, 2013, July 1, 2012 and July 3, 2011
		Consolidated Statements of Cash Flows - years ended June 30, 2013, July 1, 2012 and July 3, 2011
		Notes to Financial Statements
	(2)	Financial Statement Schedule
		All schedules have been omitted because they are not applicable or are not required, or because the required information has been included in the Financial Statements or Notes thereto.
	(3)	Exhibits.  See “Exhibit Index” beginning on page 13.
(b)	Exhibits
	See “Exhibit Index” and the exhibits attached hereto or previously filed as described in the “Exhibit Index” beginning on page 13.
(c)	Financial Statement Schedules
	None required.

 11 

SIGNATURES

Pursuant to the requirements of Section 13 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

By: /s/ Frank J. Krejci

Frank J. Krejci

President and Chief Executive Officer

Date:  September 9, 2013

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Frank J. Krejci	President, Chief Executive Officer, and Director (Principal Executive Officer)	September 9, 2013
Frank J. Krejci
/s/ Harold M. Stratton II	Chairman and Director	August 22, 2013
Harold M. Stratton II
/s/ Michael J. Koss	Director	August 22, 2013
Michael J. Koss
/s/ Thomas W. Florsheim, Jr.	Director	August 22, 2013
Thomas W. Florsheim, Jr.
/s/ David R. Zimmer	Director	August 22, 2013
David R. Zimmer
/s/ Patrick J. Hansen	Senior Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer)	September 9, 2013
Patrick J. Hansen

 12 

EXHIBIT INDEX TO ANNUAL REPORT

ON FORM 10-K

Exhibit
3.1 (1)	Amended and Restated Articles of Incorporation of the Company	*
3.2 (2)	By-laws of the Company	*
4.1 (4)	Credit Agreement, dated as of August 1, 2011, between STRATTEC SECURITY CORPORATION and BMO Harris Bank N.A., as lender	*
4.2 (4)	Security Agreement, dated as of August 1, 2011, made by STRATTEC SECURITY CORPORATION in favor of BMO Harris Bank N.A., as lender	*
10.1 (7)**	Amended and Restated STRATTEC SECURITY CORPORATION Stock Incentive Plan	*
10.2 (2) **	Form of Restricted Stock Grant Agreement with employees	*
10.3(7)**	Amended STRATTEC SECURITY CORPORATION Economic Value Added Bonus Plan for Executive Officers and Senior Managers	*
10.4 (6)**	Amended STRATTEC SECURITY CORPORATION Economic Value Added Bonus Plan for Non-employee Members of the Board of Directors	*
10.5 (5) **	Amended STRATTEC SECURITY CORPORATION Supplemental Executive Retirement Plan	*
10.6 (5)**	Employment Agreement between the Company and Frank J. Krejci, Patrick J. Hansen, Rolando J. Guillot, Kathryn E. Scherbarth, Dennis A. Kazmierski, Brian J. Reetz and Richard P. Messina made as of May 5, 2010.	*
10.7 (5)**	Change of Control Employment Agreement between the Company and Frank J. Krejci, Patrick J. Hansen, Rolando J. Guillot, Kathryn E. Scherbarth, Dennis A. Kazmierski, Brian J. Reetz and Richard P. Messina made as of May 5, 2010.	*
10.8 (7)**	Form of Restricted Stock Grant Agreement with non-employee directors	*
10.9 (8)**	Amended STRATTEC SECURITY CORPORATION Employee Stock Purchase Plan	*
10.10 (7)**	Letter Agreement between the Company and Harold M. Stratton II made as of September 1, 2012	*
13	Annual Report to Shareholders for the year ended June 30, 2013
21(3)	Subsidiaries of the Company	*
23	Consent of Independent Registered Public Accounting Firm dated September 5, 2013
31.1	Rule 13a-14(a) Certification for Frank J. Krejci, Chief Executive Officer
31.2	Rule 13a-14(a) Certification for Patrick J. Hansen, Chief Financial Officer
32 (9)	18 U.S.C. Section 1350 Certifications
101 ***	Interactive Data Files pursuant to Rule 405 of Regulation S-T

*	Previously filed
**	Management contract or compensatory plan or arrangement
***	Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
(1)	Incorporated by reference from Amendment No. 2 to the Form 10 filed on February 6, 1995.
(2)	Incorporated by reference from the exhibit to the Form 8-K filed on October 7, 2005.
(3)	Incorporated by reference from the exhibit to the June 29, 2008 Form 10-K filed on August 29, 2008.
(4)	Incorporated by reference from the exhibit to the Form 8-K filed on August 4, 2011.
(5)	Incorporated by reference from the exhibit to the March 28, 2010 Form 10-Q filed on May 6, 2010.
(6)	Incorporated by reference from the exhibit to the July 3, 2011 Form 10-K filed on September 8, 2011.
(7)	Incorporated by reference from the exhibit to the July 1, 2012 Form 10-K filed on September 6, 2012.
(8)	Incorporated by reference from the exhibit to the Form 8-K filed on January 2, 2013.
(9)	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.

   

 13 

EX-13

Exhibit 13

LETTER TO THE SHAREHOLDERS

Dear STRATTEC Shareholders,

On behalf of the over 2,600 STRATTEC Associates, I am pleased to outline the progress that we have made over the last fiscal year. While we are proud of our results, we must also recognize that the overall strength of the global automotive markets provided a welcomed tail wind.

Since STRATTEC was spun off from Briggs & Stratton in 1995, this is the first time that Harry Stratton is not signing this letter as CEO. It is an honor to follow him in a company that has both great tradition and opportunity. I am pleased to have access to Harry’s perspective in his continued role as Chairman of the Board.

In other governance, Thomas Florsheim replaced Robert Feitler, who had been a director since the creation of STRATTEC and provided valuable counsel over the years. Tom is Chairman & CEO of Weyco Group and brings significant experience in global business and successfully integrating complimentary acquisitions.

Operations:

Just before the end of our fiscal year, we won a Supplier of the Year award from Chrysler. As a Finalist in the Electrical Products category, we edged out two other companies, one based in Japan and one based in Korea. This award is a significant honor. I am very proud of the efforts of our employees in delivering current production as well as introducing new products.

Our Mexican assembly and distribution facilities were expanded this year, primarily to support the growth in our latch and door handle businesses. Both of these businesses grew out of our participation in VAST, our global strategic partnership.

VAST China made significant progress this year. The management team has been strengthened. Operations recently turned profitable again after incurring significant relocation and start-up costs related to increasing capacity and new product introductions.

Financial:

The bottom line for our shareholders is the return on investment that we generated. This fiscal year, a share of STRATTEC stock grew from $21.04 to $38.24 plus dividends of $.40 for a total annual return of 84%. That compares favorably to the NASDAQ return of 14% over the same period. Our dividends were all paid in calendar year 2012 in order to take advantage of lower federal income tax rates in 2012. The total return for STRATTEC stock was 1% in fiscal 2012, which compares unfavorably to the NASDAQ return of 6%.

Sales grew 7% to $298.2 million, a new sales record for STRATTEC. Operating income grew 16% to $19.0 million before a $2.1 million charge. While sales growth is important, our primary measure of success is EVA^® (Economic Value Added) which creates a disciplined approach to profitability and use of capital. After applying imputed costs of capital, economic value added increased from $.6 million in fiscal 2012 to $2.6 million during this past fiscal year.

We strengthened our balance sheet significantly through the reduction of our under funded pension obligations, a plan that was frozen in 2009. At the end of our last fiscal year, the underfunded defined benefit pension obligation amounted to $16.6 million or about $5.00 per share. On June 30, 2013, the plan was essentially fully funded. None the less, while this progress is not reflected on our income statement, it does impact our balance sheet.

VAST:

Our global partnership called VAST plays an increasingly important role in our future. VAST is an acronym for Vehicle Access Systems Technology. By working with our two privately held partners, WITTE Automotive of Velbert Germany and ADAC Automotive of

2013  STRATTEC  Annual  Report 2

LETTER TO THE SHAREHOLDERS

Grand Rapids, MI and jointly owning facilities in China and Brazil, we are strategically organized to support customers on global programs, including participating in the rapidly growing Chinese auto market.

VAST also opens growth opportunities in complementary products. Significant progress has been made in how we effectively work together as well as recognition by customers of the VAST brand. Together, with combined sales of over $1.2 billion, the VAST Group has been seeking and finding more ways to leverage our purchasing, engineering and manufacturing capabilities.

Through our VAST partners, we have seen increased involvement and ownership in the manufacture of automotive door handles. Through VAST, we are identifying growth opportunities in additional automotive access products.

Diversification:

At the time of the creation of STRATTEC SECURITY CORPORATION as a separate company, the name was appropriate. Virtually all of our business was related to locks and keys for the automotive market.

As we discussed last year, we are re-defining our business as access systems. In other words, efforts similar to VAST, without the dedicated focus on vehicles. Our thinking has considered motion control and access products in addition to our security products. We are also looking at our strong position with locksmiths in the aftermarket and at leveraging our technical manufacturing skills into contract business through our division, STRATTEC Component Solutions, a supplier of high quality parts and assemblies with a particular emphasis on zinc die casting.

In another step this year, we made a 51% investment in a joint venture called NextLock. It is a designer and marketer of biometric access devices. An advanced line of products for both residential and commercial applications should be available in early 2014. This partnership will result in opportunities for applications of new technology in both automotive and non-automotive markets.

Over the past year, we have received shareholder comments and suggestions for our business. We appreciate this evidence of interest and support. While suggestions are sometimes conflicting, we give careful consideration in management discussions about all ideas to improve the company and increase shareholder value.

Much of our current success is influenced by the global automotive markets. Many crystal balls still predict significant growth. Hopefully our efforts in further developing our global footprint, as well as diversification efforts, will result in continued profitable growth in the years to come.

Sincerely,

Frank J. Krejci

President & Chief Executive Officer

EVA^® is a registered trademark of Stern, Stewart & Co.

2013  STRATTEC  Annual  Report 3

FINANCIAL HIGHLIGHTS

(IN MILLIONS)

	2013		2012		2011
Net Sales	$	298.2	$	279.2	$	260.9
Gross Profit		53.9		50.3		42.2
Income from Operations		16.8		16.3		8.7
Net Income Attributable to STRATTEC		9.4		8.8		5.4
Total Assets		169.5		166.0		148.1
Total Debt		2.3		—		—
STRATTEC Shareholders’ Equity		104.2		80.6		86.2

ECONOMIC VALUE ADDED (EVA^®)

We believe that EVA^® represents an accurate measure of STRATTEC’s overall performance and shareholder value. All U.S. associates and many of our Mexico-based salaried associates participate in incentive plans that are based upon our ability to add economic value to the enterprise. The EVA^® performance for 2013 was a positive $2.6 million which represents a $2.0 million improvement from 2012. (For further explanation of our EVA^® Plan, see our 2013 definitive Proxy Statement.)

Net Operating Profit After Cash-Basis Taxes				$	11.5
Average Monthly Net Capital Employed	$	88.9
Cost of Capital		10	%
Capital Charge					8.9
Economic Value Added				$	2.6

EVA^® is not a traditional financial measurement under U.S. GAAP and may not be similar to EVA^® calculations used by other companies. However, STRATTEC believes the reporting of EVA^® provides investors with greater visibility of economic profit. The following is a reconciliation of the relevant GAAP financial measures to the non-GAAP measures used in the calculation of STRATTEC’s EVA^®.

Net Operating Profit After Cash-Basis Taxes:

2013 Net Income Attributable to STRATTEC as Reported	$	9.4
Deferred Tax Provision		3.8
Other		(1.7	)
Net Operating Profit After Cash-Basis Taxes	$	11.5

Average Monthly Net Capital Employed:

Total STRATTEC Shareholders’ Equity as Reported at June 30, 2013	$	104.2
Long-Term Liabilities		6.9
Deferred Tax Asset		(4.3	)
Other		(10.0	)
Net Capital Employed at June 30, 2013	$	96.8
Impact of 12 Month Average		(7.9	)
Average Monthly Net Capital Employed	$	88.9

EVA^® is a registered trademark of Stern, Stewart & Co.

2013  STRATTEC  Annual  Report 4

COMPANY DESCRIPTION

BASIC BUSINESS

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 side door systems, power lift gate systems, power deck lid systems, door handles and related products for North American automotive customers. We also supply global automotive manufacturers through a unique strategic relationship with WITTE Automotive of Velbert, Germany and ADAC Automotive of Grand Rapids, Michigan. Under this relationship STRATTEC, WITTE and ADAC market each company’s products to global customers under the “VAST” brand name. Our products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea and China, and we provide full service and aftermarket support.

STRATTEC received the 2013 Chrysler Supplier of the Year Award for Electrical Products

HISTORY

STRATTEC formerly was a division of Briggs & Stratton Corporation. In 1995, STRATTEC was spun off from Briggs & Stratton through a tax-free distribution to the then-existing Briggs & Stratton shareholders and has been an independent public company for eighteen years.

Our history in the automotive security business spans over 100 years. STRATTEC has been the world’s largest producer of automotive locks and keys since the late 1920s, and we currently maintain a dominant share of the North American markets for these products.

PRODUCTS

Our historically traditional products are lock sets (locks and keys) for cars and light trucks. Typically, two keys are provided with each vehicle lockset. Most of the vehicles we currently supply are using keys with sophisticated radio frequency identification technology for additional theft prevention. Keys with remote entry devices integrated into a single unit and bladeless electronic keys have been added to our product line and are gaining in popularity.

Ignition lock housings represent a growing access control product for us. These housings are the mating part for our ignition locks and typically are part of the steering column structure, although there are instrument panel-mounted versions for certain vehicle applications. These housings are either die cast from zinc or magnesium, or injection molded plastic and may include electronic components for theft deterrent systems.

We are also developing additional access control products, including trunk latches, liftgate latches, tailgate latches, hood latches, side door latches and related hardware. With our acquisition of Delphi Corporation’s Power Products Group in fiscal 2009, we are now supplying power access devices for sliding side doors, liftgates and trunk lids. Through

2013  STRATTEC  Annual  Report 5

COMPANY DESCRIPTION

a joint venture formed with ADAC Automotive during fiscal 2007, we also supply door handle components and related vehicle access hardware.

To maintain a strong focus on each of these access control products, we have Product Business Managers who oversee the product’s entire life cycle, including concept, application, manufacturing, warranty analysis, service/aftermarket, and financial/commercial issues. The Product Business Managers work closely with our sales organization, our engineering group, and our manufacturing operations to assure their products are receiving the right amount of quality attention so that their value to STRATTEC and the market place is enhanced.

MARKETS

We are a direct supplier to OEM automotive and light truck manufacturers as well as other transportation-related manufacturers. Our largest customers are Chrysler Group LLC, General Motors Company and Ford Motor Company. Our access control product mix varies by customer, but generally our overall sales tend to be highest in lock and key, followed by power access, ignition lock housings, the door handle and trim components produced by ADAC-STRATTEC de Mexico and latching mechanisms.

Direct sales to various OEMs represented approximately 72% of our total sales for fiscal 2013. The remainder of our revenue is received primarily through sales to the OEM service channels, the aftermarket, Tier 1 automotive supplier customers, and certain products to non-automotive commercial customers.

Sales to our major automotive customers, both OEM and Tier 1, are coordinated through direct sales personnel located in our Detroit-area office. Sales are also facilitated through daily interaction between our Program Managers, Application Engineers and other product engineering personnel. Sales to other OEM customers are accomplished through a combination of our sales personnel located in Detroit and personnel in our Milwaukee headquarters office.

The majority of our OEM products are sold in North America. While a modest amount of exporting is done to Tier 1 and automotive assembly plants in Europe, Asia and South America, we are in the process of expanding our presence in these markets and elsewhere through the Vehicle Access Systems Technology (VAST) brand we jointly own with WITTE Automotive and ADAC Automotive. VAST is described in more detail on pages 8 and 9.

OEM service and replacement parts are sold to the OEM’s own service operations. In addition, we distribute our components and security products to the automotive aftermarket through approximately 50 authorized wholesale distributors, as well as other marketers and users

2013  STRATTEC  Annual  Report 6

COMPANY DESCRIPTION

of component parts, including export customers. Increasingly, our products find their way into the retail channel, specifically the hardware store channel. Our ability to provide a full line of keys to that channel has been accomplished through the introduction of the STRATTEC “XL” key line. This extension to our line includes keys that we currently do not supply on an OE basis, including keys for Toyota, Honda and other popular domestic and import vehicles. This extended line of keys enables automotive repair specialists to satisfy consumer needs for repair or replacement parts. Our aftermarket activities are serviced through a warehousing operation in El Paso, Texas.

STRATTEC manufactures this Maserati electronic key fob.

CUSTOMER SALES FOCUS

To bring the proper focus to the relationships with our major customers, we have seven customer-focused teams, each with a Director of Sales, one or two Engineering Program Managers and Customer Application Engineers. In addition to customer teams for General Motors, Ford and Chrysler, we currently have teams for New Domestic Vehicle Manufacturers, Driver Control/Ignition Lock Housing customers, Tier 1 customers, and Service and Aftermarket customers. Sales and engineering for ADAC-STRATTEC LLC are supported by our JV partner, ADAC Automotive.

Each Sales Director is responsible for the overall relationship between STRATTEC and a specific customer group. Program Managers are responsible for coordinating cross functional activities while managing new product programs for their customers.

PRODUCT ENGINEERING FOCUS

To best serve our customers’ product needs, STRATTEC’s engineering resources are organized into groups which focus on specific access control applications. We currently have six engineering groups: Locks and Keys, Aftermarket, Latches, Power Access Devices, Driver Control/Ignition Lock Housings and Electrical. Each group has a Product Business Manager, an Engineering Manager and a complement of skilled engineers who design and develop products for specific applications. In doing this, each engineering group works closely with the Customer teams, Engineering Program Managers, and Application Engineers.

Underlying this organization is a formalized product development process to identify and meet customer needs in the shortest possible time. By following this

The Aston Martin DBS uses an electronic key fob and mating docking station developed by STRATTEC exclusively for Aston Martin.

2013  STRATTEC  Annual  Report 7

COMPANY DESCRIPTION

streamlined development system, we shorten product lead times, tighten our response to market changes and provide our customers with the optimum value solution to their security/access control requirements. STRATTEC is also ISO/TS 16949 and ISO 14001 certified. This means we embrace the philosophy that quality should exist not only in the finished product, but in every step of our processes as well.

OPERATIONS

A significant number of the components that go into our products are manufactured at our headquarters in Milwaukee, Wisconsin. This facility produces zinc die cast components, stampings and milled key blades. We have two owned production facilities in Juarez, Mexico operating as STRATTEC de Mexico. Plant No. 1 houses assembly operations for locksets, ignition lock housings, and our new NextLock biometric security products. Plant No. 2 was built during fiscal 2009 to replace a leased facility. It houses our key finishing and latch assembly operations, as well as dedicated space for the assembly operations of STRATTEC POWER ACCESS de Mexico and ADAC-STRATTEC de Mexico.

ADVANCED DEVELOPMENT

Research and development activities are centered around a dedicated research engineering staff we call our Advanced Development Group. This group has the responsibility for developing future products that will keep us in the forefront of the markets we serve. We primarily focus on electronic and mechanical access control products and modularization of related access/security control components. Once our Advanced Development Group establishes a proof-of-concept product utilizing new technology, further product development shifts to our engineering groups for commercialization and product applications.

VEHICLE ACCESS SYSTEMS TECHNOLOGY (VAST)

In fiscal 2001, we entered into a formal alliance with WITTE-Velbert GmbH, an automotive supplier based in Germany which designs, develops, manufactures and markets automotive access control products for European-based customers. This alliance consisted of two initiatives. The first was a set of legal agreements which allowed STRATTEC to manufacture and market WITTE’s core products in North America, and WITTE to manufacture and market STRATTEC’s core products in Europe. The second initiative was a 50-50 joint venture, WITTE-STRATTEC LLC, to invest in operations with local partners in strategic markets outside of Europe and North America.

2013  STRATTEC  Annual  Report 8

COMPANY DESCRIPTION

In February of 2006, we announced the expansion of this alliance and related joint venture with the addition of a third partner, ADAC Plastics, Inc. ADAC, of Grand Rapids, Michigan, adds North American expertise in door handles, a part of WITTE’s core product line that STRATTEC did not support, and an expertise in color-matched painting of these components.

With the expansion of the alliance, we can offer a full range of access control related products available on a global basis to support customer programs. To identify this powerful combination of independent companies focused on working together, we renamed the joint venture Vehicle Access Systems Technology LLC (VAST LLC). We now refer to the combination of the alliance structure and JV simply as “VAST”. WITTE is now called WITTE Automotive, and ADAC is now doing business as ADAC Automotive. We have adopted a common graphic image in which we share a logo mark and colors, and a specific VAST logo used on the partners’ printed and electronic presentation materials. VAST made investments with a local partner in Brazil in September, 2001, and local partners in China in March, 2002. VAST do Brasil remains a joint venture with the local partner there. However, during fiscal 2010, VAST LLC purchased the remaining 40 percent interest of its local partners in the China venture. VAST China is now wholly owned by VAST LLC. This was an important step which gives STRATTEC a one-third interest in VAST China’s activities in the important growing Chinese/Asia market.

VAST is the embodiment of STRATTEC’s, WITTE’s and ADAC’s globalization strategy. We are developing VAST as a global brand with which we are jointly pursuing business with identified global customers. Those identified customers are General Motors, Ford, Fiat/Chrysler, Volkswagen, Honda, Toyota, Renault/Nissan and Hyundai/Kia.

To manage our customer relationships and coordinate global ventures and activities, we have established a VAST Management Group led by a President. The Management Group includes three Vice Presidents, one each from WITTE, STRATTEC and ADAC. With the focus provided by this Management Group, VAST is able to manage global programs with a single point of contact for customers, with the added advantage of providing regional support from the partners’ operating entities. Combined with VAST LLC’s ventures in China and Brazil, and sales/engineering offices in Japan and Korea, this structure establishes our global footprint.

2013  STRATTEC  Annual  Report 9

COMPANY DESCRIPTION

ADAC-STRATTEC de MEXICO

During fiscal 2007, we formed a new entity with ADAC Automotive called ADAC-STRATTEC LLC including a wholly owned Mexican subsidiary ADAC-STRATTEC de Mexico (ASdM). The purpose of this joint venture is to produce certain ADAC and STRATTEC products utilizing ADAC’s plastic molding expertise and STRATTEC’s assembly capability. ASdM currently operates out of defined space in STRATTEC de Mexico Plant No. 2 located in Juarez, Mexico. Products from this joint venture include non-painted door handle components and exterior trim components for OEM customers producing in North America. STRATTEC owns 51% of this joint venture and its financial results are consolidated into STRATTEC’s financial statements. In our fiscal years ending 2013 and 2012, ASdM was profitable and represented $37.2 and $31.0 million, respectively, of our consolidated net sales.

STRATTEC has introduced the BOLT line of products, the world’s first codeable padlock. In a simple one-step process, users can code the padlock to their vehicle key. This provides significant convenience by reducing the number of keys users need to secure their lockers, storage sheds and vehicle accessories such as tool boxes, trailer hitches, etc. You can buy this product direct at www.boltlock.com.

STRATTEC POWER ACCESS LLC

During fiscal year 2009, we formed a new subsidiary with WITTE Automotive called STRATTEC POWER ACCESS LLC (SPA) to acquire the North American business of the Delphi Power Products Group. WITTE is a 20 percent minority owner. SPA in turn owns a Mexican subsidiary, STRATTEC POWER ACCESS de Mexico. The purpose of this subsidiary is to produce power access devices for sliding side doors, liftgates and trunk lids. STRATTEC POWER ACCESS de Mexico currently operates out of defined space in STRATTEC de Mexico Plant No. 2 located in Juarez, Mexico. Financial results for SPA are consolidated in STRATTEC’s financial statements. For fiscal years ending 2013 and 2012, SPA was profitable and represented $56.4 and $62.7 million, respectively, of our consolidated net sales.

NEXTLOCK LLC

During the fourth quarter of fiscal year 2013, we formed a new joint venture with Actuator Systems LLC called NextLock LLC. The initial capitalization of the joint venture was $1.5 million. The purpose of this joint venture is to assemble and sell the next generation of biometric security products based upon the designs of Actuator Systems. We expect that this joint venture will have minimal sales activity through calendar year 2013. STRATTEC owns 51% of this joint venture and its financial results will be accounted for on the equity method of accounting.

NextLock: Biometric Security Products

SEASONAL NATURE OF THE BUSINESS

The manufacturing of components used in automobiles is driven by the normal peaks and valleys associated with the automotive industry. Typically, the months of July and August are relatively slow as summer vacation shutdowns and model year changeovers occur at the automotive assembly plants. September volumes increase rapidly as each new model year

2013  STRATTEC  Annual  Report 10

COMPANY DESCRIPTION

begins. This volume strength continues through October and into early November. As the holiday and winter seasons approach, the demand for automobiles slows, as does production. March usually brings a major sales and production increase, which then continues through most of June. This results in our first fiscal quarter sales and operating results typically being our weakest, with the remaining quarters being more consistent. The recession of 2008-2009 abnormally altered this pattern resulting in dramatically reduced production levels throughout the period. We believe the more normal peaks and valleys have returned as the auto industry has emerged from the recession.

GLOBAL PRESENCE

1. STRATTEC — Milwaukee, Wisconsin¹

2. STRATTEC de Mexico — Juarez, Mexico¹

3. STRATTEC de Mexico — Key Finishing — Juarez, Mexico¹

4. ADAC-STRATTEC de Mexico — Juarez, Mexico

5. STRATTEC Power Access de Mexico — Juarez, Mexico

6. ADAC Automotive — Grand Rapids and Muskegon, Michigan¹

7. ADAC Automotive, STRATTEC and STRATTEC POWER ACCESS

(Sales/Engineering Offices — Detroit, Michigan)¹

8. WITTE Automotive — Velbert, Germany¹

9. WITTE Automotive — Nejdek, Czech Republic¹

10. VAST do Brasil — Sao Paulo, Brazil²

11. VAST Fuzhou — Fuzhou, China²

12. VAST China Co. Ltd. — Taicang, China²

13. VAST Japan — Tokyo, Japan (Branch Office)²

14. VAST Korea — Anyang, Korea (Branch Office)²

¹  Members of VAST. 2 Units of VAST LLC joint venture.

ECONOMIC VALUE COMMITMENT

The underlying philosophy of our business and the means by which we measure our performance is Economic Value Added (EVA^®). Simply stated, economic value is created when our business enterprise yields a return greater than the cost of capital we and our shareholders have invested in STRATTEC. The amount by which our return exceeds the cost of our capital is EVA^®. In line with this philosophy, EVA^® bonus plans are in effect for all our U.S. associates, outside directors and many of our Mexico-based salaried associates as an incentive to help positively drive the economic value of our business.

STRATTEC’s significant market presence is the result of over a 100-year commitment to creating quality products and systems that are responsive to changing needs. As technologies advance and markets grow, STRATTEC retains that commitment to meeting and exceeding the expectations of our customers, and providing economic value to our shareholders.

2013  STRATTEC  Annual  Report 11

2013  STRATTEC  Annual  Report 12

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following Discussion and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s accompanying Financial Statements and Notes thereto. Unless otherwise indicated, all references to years or quarters refer to fiscal years or fiscal quarters.

EXECUTIVE OVERVIEW

Historically, a significant portion of our total net sales are to domestic automotive OEMs (General Motors, Ford and Chrysler). During the past decade these customers lost North American market share to the New Domestic automotive manufacturers (primarily the Japanese and Korean automotive manufacturers). In addition to our customers’ market share, our financial performance depends in large part on conditions in the overall automotive industry, which in turn, is dependent upon the U.S. and global economies. During fiscal years 2013, 2012 and 2011, the domestic automotive OEMs together represented 66 percent, 68 percent and 66 percent, respectively, of our total sales.

Our financial results for fiscal year 2013 reflected continued improvement over the prior years. Fiscal 2013 net sales were $298 million compared to $279 million in 2012 and $261 million in 2011. Net income attributable to STRATTEC for fiscal 2013 was $9.4 million compared to $8.8 million in 2012 and $5.4 million in 2011. The financial health of our three largest customers continued to improve in fiscal year 2013. General Motors, Ford and Chrysler continued to report profitable results after implementing significant restructuring plans that modified their cost structures by closing manufacturing facilities, reducing benefits and wages and eliminating certain models and brands in 2009 and 2010.

As we look out into the future, the July 2013 projections from our third-party forecasting service indicate that North American light vehicle production will show steady improvement for the next five years. By model year, based on these projections we are expecting a 2013 build of 15.7 million vehicles, 16.3 million vehicles for 2014, 16.5 million vehicles for 2015, 17.3 million vehicles for 2016 and 17.9 million vehicles for 2017. As part of this third party projection, General Motors Company and Ford Motor Company are expected to experience modest increases in their production levels during this time period. Chrysler Group LLC is expected to decrease production in model years 2014 through 2017, primarily due to the forecasting uncertainty and risk in Fiat’s future vehicle product plans for the Chrysler Group. Of course, all of these forecasts are subject to variability based on what happens in the overall North American and global economies, especially as it relates to the current levels of employment, availability of consumer credit, home equity values, fluctuating fuel prices and other key factors that we believe could determine whether consumers can or will purchase new vehicles.

Focus and Strategy Going Forward

STRATTEC’s long-term strategy is focused on maximizing long-term shareholder value by driving profitable growth. Our management believes productivity improvements and cost reductions are critical to our competitiveness, while enhancing the value we deliver to our customers. In order to accomplish this, we have been pursuing, and continue to pursue, the following objectives as summarized below:

• Streamline and standardize processes to increase productivity

• Maintain a disciplined and flexible cost structure to leverage scale and optimize asset utilization and procurement

• Maintain our strong financial position by deploying capital spending targeted for growth and productivity improvement

• Leverage the “VAST Brand” with customer relationships to generate organic growth from global programs

• Offer our customers innovative products and cost savings solutions to meet their changing demands

• Explore and execute targeted mergers and acquisitions with a disciplined due diligence approach and critical financial analysis to drive shareholder value

We use several key performance indicators to gauge progress toward achieving these objectives. These indicators include net sales growth, operating margin improvement, return on capital employed and cash flow from operations.

RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial position and results of operations for the years ended June 30, 2013 and July 1, 2012.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

2013 Compared to 2012

	Years Ended
	June 30, 2013		July 1, 2012
Net sales (in millions)	$	298.2	$	279.2

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

	Years Ended
	June 30, 2013		July 1, 2012
Chrysler Group LLC	$	95.5	$	90.8
General Motors Company		57.0		64.6
Ford Motor Company		44.8		33.9
Tier 1 Customers		57.4		45.8
Commercial and Other OEM Customers		33.2		29.7
Hyundai / Kia		10.3		14.4
Total	$	298.2	$	279.2

Increased sales to Chrysler Group LLC and Ford Motor Company in the current year were primarily due to increased customer vehicle production volumes on models for which we supply components. New product content also contributed to the increased sales to Ford Motor Company. The reduction in sales to General Motors Company in the current year was primarily attributed to business we lost to other suppliers during the latter half of the 2012 model year, partially offset by higher production on other General Motors vehicles for which we continue to supply components. Increased sales to Tier 1, Commercial and Other OEM customers in the current year primarily related to market growth and the increasing impact of other vehicle access control products, such as latches, fobs and driver controls, which we have developed in recent years to complement our historic core lock and key access control products. The reduction in sales to Hyundai / Kia in the current year was principally due to lower customer vehicle production volumes on models for which we supply components and the discontinuation of a vehicle model for which we had been supplying components.

	Years Ended
	June 30, 2013			July 1, 2012
Gross profit as a percentage of net sales		18.1	%		18.0	%

During 2013, we experienced favorable overhead absorption of our fixed manufacturing costs resulting from favorable customer production volumes of most of the vehicles for which we supply components and reduced warranty expense. These favorable impacts on our gross profit margin were mostly offset by a less favorable product content sales mix, higher expense provisions for our pension plan during 2013 as compared to 2012 and an unfavorable Mexican peso to U.S. dollar exchange rate affecting the U.S. dollar cost of our Mexican operations. Warranty provision credits totaled $400,000 in 2013 compared to warranty provisions of $2.1 million in 2012. The current year warranty provision credits included the impact of favorable adjustments for warranty claims settled during the year. Historically, we had experienced relatively low warranty charges from our customers due to our contractual arrangements and improvements in the quality, reliability and durability of our products. In recent fiscal periods, our largest customers extended the warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers, including STRATTEC. The 2012 warranty provisions included additional accruals to address the warranty exposure related to the demand for higher warranty cost sharing. We froze our defined benefit pension plan for future benefit accruals effective January 1, 2010. Expense provisions for our pension plan increased approximately $2.1 million during the current year as compared to the prior year due to to lower bond returns which resulted in a lower discount rate and lower expected return on invested assets as of the end of fiscal 2013 in comparison to the same measurements at the end of fiscal year 2012. Approximately $1.5 million of this $2.1 million increase impacted overhead costs. The average U.S. dollar/Mexican peso exchange rate decreased to approximately 12.82 pesos to the dollar in the current year from approximately 13.12 pesos to the dollar in the prior year. This resulted in increased U.S. dollar costs related to our Mexican operations of approximately $756,000 in the current year compared to the prior year.

Engineering, Selling and Administrative Expenses in the current year and prior year were as follows:

	Years Ended
	June 30, 2013			July 1, 2012
Expenses (in millions)	$	34.9		$	33.9
Expenses as a percentage of net sales		11.7	%		12.1	%

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MANAGEMENT’S DISCUSSION AND ANALYSIS

The major contributor to the increase in engineering, selling and administrative expenses was a higher expense provision for our frozen defined benefit pension plan as discussed above. Expense provisions for our pension plan increased engineering, selling and administrative costs approximately $630,000 in the current year as compared to the prior year.

During 2013, SERP benefits of approximately $5.8 million were cash settled using Rabbi trust assets and current cash balances. We incurred a related pre-tax settlement charge to operations of approximately $2.1 million as a result of the requirement to expense a portion of the unrealized actuarial losses in connection with the settlement of the SERP obligation. The charge had no effect on our aggregate equity balance because the unrealized actuarial losses were previously recognized during prior periods in accumulated other comprehensive loss. Accordingly, the effect of the settlement charge on our retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss.

Income from operations in the current year was $16.8 million compared to $16.3 million in the prior year. This change was the result of the increase in sales and gross profit margin in the current year over the prior year as discussed above, partially offset by the $2.1 million SERP settlement charge discussed above.

Equity loss of joint ventures was $225,000 in the current year compared to $1.1 million in the prior year. During 2012 our joint ventures in China and Brazil incurred relocation costs associated with moves to new facilities and start-up costs associated with a new product line. These relocation costs and start-up costs continued for VAST China primarily during the first half of 2013 and, accordingly, these costs resulted in STRATTEC incurring an equity loss of joint ventures in both 2013 and 2012. The facility moves have been completed. In addition, the 2012 equity loss also included a goodwill impairment charge relating to VAST China. STRATTEC’s portion of this impairment charge totaled $284,000.

Included in other income, net in the current year and prior year were the following items (in thousands):

	Years Ended
	June 30, 2013			July 1, 2012
Foreign currency transaction (loss) gain	$	(395	)	$	1,369
Rabbi Trust gain		164			24
Unrealized gain (loss) on Mexican peso option contracts		395			(640	)
Realized loss on Mexican peso option contracts		(12	)		(420	)
Other		177			249
	$	329		$	582

Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. In the prior fiscal year, the Mexican peso devalued to the U.S. dollar creating both foreign currency transaction gains and unrealized losses on our Mexican peso currency option contracts. In the current year, the Mexican peso appreciated to the U.S. dollar resulting in foreign currency transaction losses. Our Rabbi Trust funds our supplemental executive retirement plan. The investments held in the Trust are considered trading securities.

Our effective income tax rate for 2013 was 31.8 percent compared to 22.7 percent in 2012. Both the 2013 and 2012 tax rates were impacted by a lower effective tax rate for income subject to tax in Mexico as compared to the effective tax rate for income subject to tax in the U.S. The major contributors to the change in the effective rate between years were an increase in income subject to tax in the U.S. and the impact of the non-controlling interest. The non-controlling interest impacts the effective tax rate as the ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are partnerships for U.S. tax purposes.

2012 Compared to 2011

	Years Ended
	July 1, 2012		July 3, 2011
Net sales (in millions)	$	279.2	$	260.9

Our 2012 fiscal year was the typical 52 weeks while our 2011 fiscal year was 53 weeks. The impact of the additional week of customer shipments increased sales during our 2011 fiscal year by approximately $4.5 million. The 2011 net sales were reduced by $650,000 resulting from an adjustment for certain agreed upon customer price concessions. Net sales to each of our customers or customer groups in 2012 and 2011 were as follows (in millions):

	Years Ended
	July 1, 2012		July 3, 2011
Chrysler Group LLC	$	90.8	$	80.9
General Motors Company		64.6		63.6
Ford Motor Company		33.9		26.9
Tier 1 Customers		45.8		38.2
Commercial and Other OEM Customers		29.7		35.6
Hyundai / Kia		14.4		15.7
Total	$	279.2	$	260.9

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Increased sales to Chrysler Group LLC and Ford Motor Company in 2012 were primarily due to increased customer vehicle production volumes on models for which we supply components. New product content also contributed to the increased sales to Ford Motor Company. Included in the 2011 sales to General Motors were $3.0 million of Sales to Nexteer Automotive, formerly a unit of Delphi Corporation, which was owned by General Motors through December 2, 2010. 2011 sales to Nexteer Automotive subsequent to December 2, 2010 totaled $4.6 million. Sales to Nexteer Automotive in 2012 totaled $5.7 million and are included in sales to Tier 1 customers. Increased sales to Tier 1 customers in 2012 primarily related to market growth in latches, fobs and driver controls, which we developed in recent years to complement our historic core lock and key access control products. The decrease in sales to commercial and other OEM customers in 2012 represents programs for which we no longer supply products. The reduction in sales to Hyundai / Kia in 2012 was principally due to lower customer vehicle production volumes of the vehicles for which we supply components.

	Years Ended
	July 1, 2012			July 3, 2011
Gross profit as a percentage of net sales		18.0	%		16.2	%

The higher gross profit margin in 2012 was primarily the result of favorable customer vehicle production volumes which resulted in more favorable absorption of our fixed manufacturing costs, a favorable Mexican Peso to U.S. dollar exchange rate affecting the U.S. dollar cost of our Mexican operations, a reduction in warranty expense and ongoing cost reduction initiatives. These favorable impacts were partially offset by a less favorable product content sales mix and higher purchased raw material costs for zinc and brass during 2012 as compared to 2011. The 2011 gross profit margins were also negatively impacted by a $650,000 adjustment we made in connection with certain agreed upon customer price concessions. The average U.S. dollar/Mexican peso exchange rate increased to approximately 13.12 pesos to the dollar in 2012 from approximately 12.25 pesos to the dollar in 2011. This resulted in decreased U.S. dollar costs related to our Mexican operations of approximately $2.3 million in 2012 compared to 2011. Warranty provisions totaled $2.1 million in 2012 compared to $2.8 million in 2011. Historically, we had experienced relatively low warranty charges from our customers due to our contractual arrangements and improvements in the quality, reliability and durability of our products. In recent fiscal periods, our largest customers extended the warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers, including STRATTEC. The 2012 and 2011 warranty provisions included additional accruals to address the warranty exposure related to the demand for higher warranty cost sharing. The 2011 provision also included $1.15 million related to our share of costs associated with a customer’s specific warranty claim involving one of our products. The average zinc price paid per pound increased to $1.06 in 2012 from $1.02 in 2011. 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. During 2012, we used approximately 10.8 million pounds of zinc. Increased zinc costs, net of raw material price adjustments received from certain customers, totaled approximately $250,000 in 2012 compared to 2011. The average brass price paid per pound increased to $4.11 in 2012 from $3.93 in 2011. During 2012, we used approximately 905,000 pounds of brass. This resulted in increased brass costs of approximately $170,000 in 2012 compared to 2011.

	Years Ended
	July 1, 2012		July 3, 2011
Engineering, selling and administrative expenses (in millions)	$	33.9	$	33.4

Increased operating expenses due to higher expense provisions for the accrual of bonuses earned under our EVA^® Incentive Bonus Plans in 2012 as compared to 2011 were offset by an additional week of expense in 2011 as a result of a 53 week fiscal year.

Income from operations in 2012 was $16.3 million compared to $8.7 million in 2011. This improvement was primarily the result of the increase in sales and gross profit margin as discussed above.

Equity loss of joint ventures was $1.1 million in 2012 compared to equity earnings of $1.2 million in 2011. During 2012 our joint ventures in China and Brazil both incurred relocation costs associated with moves to new facilities and start-up costs associated with a new product line. Both of these items resulted in STRATTEC incurring an equity loss of joint ventures in 2012 compared to 2011 in which STRATTEC had equity earnings from joint ventures. In addition, the 2012 equity loss also included a goodwill impairment charge relating to VAST China. STRATTEC’s portion of this impairment charge amounted to $284,000.

2013  STRATTEC  Annual  Report 16

Included in other income, net in 2012 and 2011 were the following items (in thousands):

	Years Ended
	July 1, 2012			July 3, 2011
Foreign currency transaction gain (loss)	$	1,369		$	(836	)
Rabbi Trust gain		24			384
Unrealized (loss) gain on Mexican peso option contracts		(640	)		245
Realized (loss) gain on Mexican peso option contracts		(420	)		33
Other		249			394
	$	582		$	220

Foreign currency transaction gains and losses resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. In 2012, the Mexican peso devalued to the U.S. dollar creating both foreign currency transaction gains and unrealized losses on our Mexican peso currency option contracts which we entered into in January and August 2011. Our objective in entering into these currency option contracts was to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Unrealized losses recognized as a result of mark-to-market adjustments as of July 1, 2012 totaled approximately $395,000. Our Rabbi Trust funds our supplemental executive retirement plan. The investments held in the Trust are considered trading securities.

Our effective income tax rate for 2012 was 22.7 percent compared to 25.1 percent in 2011. Both the 2012 and 2011 tax rates were impacted by a lower effective tax rate for income subject to tax in Mexico as compared to the effective tax rate for income subject to tax in the U.S. As of July 1, 2012, we had a valuation allowance of $177,000 related to our assessment of the future realization of certain capital loss carry-forward benefits.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of cash flow is from our major customers, which include Chrysler Group LLC, General Motors Company and Ford Motor Company. As of the date of filing this Annual Report with the Securities and Exchange Commission, all of our 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 June 30, 2013 was as follows (in millions of dollars):

Chrysler	$	15.7
General Motors	$	8.7
Ford	$	6.5

We earn a portion of our operating income in Mexico, which is deemed to be permanently reinvested. As of June 30, 2013, $9.2 million of our $20.3 million cash and cash equivalents balance was held by our foreign subsidiaries in Mexico. Cash balances in Mexico will be used for future capital expenditures and future plant expansion in Mexico. We currently do not intend nor foresee a need to repatriate these funds. We expect existing domestic cash and cash equivalents and cash flows from operations to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as regular quarterly dividends and capital expenditures, for at least the next 12 months and thereafter for the foreseeable future. Should we require more capital in the U.S. than is generated by our operations domestically, for example to fund significant discretionary activities, such as acquisitions of businesses and share repurchases, we could elect to repatriate future earnings from foreign jurisdictions or raise capital in the U.S. through borrowings under our revolving credit facility. These alternatives could result in higher effective tax rates, increased interest expense, or other dilution of our earnings.

Cash flow provided by operating activities was $15.7 million in 2013 compared to $17.2 million in 2012. Cash flows from operating activities decreased in the current year compared to the prior year primarily due to increased working capital requirements in the current year as compared to the prior year and the cash settlement of SERP benefits in the current year. Net income and the impact of non-cash items such as depreciation, unrealized gains and losses on foreign currency contracts, foreign currency transaction gains and losses and loss on settlement of pension obligations, as detailed in the Statements of Cash Flows, increased approximately $6.0 million in the current year as compared to the prior year. Cash used for working capital requirements increased approximately $7.6 million in the current year as compared to the prior year. The major contributors to the current year increased working capital requirements were increased inventory balances, the cash settlement of SERP benefits and payments made under our incentive bonus

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MANAGEMENT’S DISCUSSION AND ANALYSIS

plans. Inventory balances increased approximately $3.1 million during the current year due to new program launches and related purchased content with longer supply chain lead times. The cash settlement of SERP benefits totaled approximately $5.8 million resulting in a reduction of accrued payroll and benefit balances. $3.0 million of the Rabbi trust assets were utilized for the cash settlement resulting in a reduction of other current asset balances. Current year operating cash flow was also impacted by an August 2012 payment of approximately $5.2 million in bonuses, which were earned during fiscal 2012 under our incentive bonus plans. Bonus payments in August 2011, which were earned during fiscal 2011 under our incentive bonus plans, totaled approximately $4.3 million. Contributions made to our qualified pension plan totaled $3.0 million in 2013 and $2.0 million in 2012.

The accrued pension obligations balance at June 30, 2013 includes only our SERP while the balance at July 1, 2012 includes our qualified plan and our SERP. Our qualified plan balance at June 30, 2013 is included in other long-term assets. The change in the accrued pension obligations balance during 2013 is the result of the net impact of pension contributions, the actuarially calculated pension expense and the impact of the change in the funded status of the plans due to stronger than projected returns on plan assets and an increase in the discount rate between periods. The 2013 pre-tax changes in plan assets and benefit obligations recognized in other comprehensive income decreased our accrued pension obligation balance by approximately $18.8 million and increased our other long-term assets balance by approximately $2.0 million at June 30, 2013 compared to July 1, 2012. The resulting tax impact decreased our deferred income tax asset balance by $7.9 million at our 2013 year end in comparison to the end of our prior year.

During 2013, our portion of capital contributions made to VAST LLC in support of general operating expenses totaled $200,000. During both the current year and prior year, the VAST joint venture in China incurred relocation costs associated with moves to a new facility and start-up costs associated with a new product line. These relocation costs and start-up costs have been financed by operating cash flow from VAST China along with external financing secured from three local Chinese banks. We currently anticipate VAST China has adequate debt facilities in place over the next fiscal year to cover future operating and capital requirements.

Capital expenditures were $12.5 million in 2013 compared to $13.6 million in 2012. Expenditures were primarily in support of requirements for new product programs, expansion of our Juarez, Mexico facility, and the upgrade and replacement of existing equipment. We anticipate capital expenditures will be approximately $9 million to $10 million in fiscal 2014 in support of requirements for new product programs and the upgrade and replacement of existing equipment.

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 June 30, 2013. A total of 3,655,322 shares have been repurchased over the life of the program through June 30, 2013, at a cost of approximately $136.4 million. No shares were repurchased during fiscal 2013 or 2012. 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. At this time, we anticipate minimal or no stock repurchase activity in fiscal year 2014.

STRATTEC has a $25 million secured revolving credit facility (“STRATTEC Credit Facility”) with BMO Harris Bank N.A. The STRATTEC Credit Facility expires August 1, 2014. ADAC-STRATTEC LLC has a $5 million secured revolving credit facility (“ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A, which is guaranteed by STRATTEC. The ADAC-STRATTEC Credit Facility expires June 28, 2015. Any borrowings under either of the credit facilities will be secured by our U.S. cash balances, accounts receivable, inventory and fixed assets located in the U.S. Interest on borrowings under these credit facilities is at varying rates based, at our option, on the London Interbank Offering Rate plus 1.0 to 1.75 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the maintenance of 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. There were no outstanding borrowings under the STRATTEC Credit Facility at June 30, 2013 or July 1, 2012. There were no borrowings under the STRATTEC Credit Facility during 2013, 2012 or 2011. Borrowings under the ADAC-STRATTEC Credit Facility totaled $2.25 million at June 30, 2013. The average outstanding borrowings and weighted average interest rate on the ADAC-STRATTEC Credit Facility loans were approximately $1.7 million and 1.99 percent, respectively, during fiscal 2013. There were no borrowings under the ADAC-STRATTEC Credit Facility during 2012 or 2011. We believe that the credit facilities are adequate, along with existing cash balances and cash flow from operations, to meet our anticipated capital expenditure, working capital, dividend and operating expenditure requirements.

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 fluctuations 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. Moreover, in January 2011 and August 2011, we entered into agreements with Bank of

2013  STRATTEC  Annual  Report 18

MANAGEMENT’S DISCUSSION AND ANALYSIS

Montreal that provided for two weekly Mexican peso currency option contracts to cover a portion of our weekly estimated peso denominated operating costs. The contracts with Bank of Montreal expired June 28, 2013. The two weekly option contracts were for equivalent notional amounts. The contracts that were effective during fiscal 2011 and 2012 expired July 6, 2012, and provided for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 11.85 if the spot rate at the weekly expiry date was below 11.85 or for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 12.85 if the spot rate at the weekly expiry date was above 12.85. Additional contracts that were effective during fiscal 2013 expired June 28, 2013 and provided for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 12.40 if the spot rate at the weekly expiry date was below an average of 12.40 or for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 13.40 if the spot rate at the weekly expiry date was above an average of 13.40. Our objective in entering into these currency option contracts was to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso option contracts were not used for speculative purposes and were not designated as hedges. As a result, all currency option contracts were recognized in our accompanying consolidated financial statements at fair value and changes in the fair value of the currency option contracts were reported in current earnings as part of Other Income, net. The premiums paid and received under the weekly Mexican peso currency option contracts netted to zero. As a result, premiums related to the contracts did not impact our earnings. No Mexican peso currency option contracts were outstanding as of June 30, 2013.

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

	June 30, 2013		July 1, 2012
Not Designated as Hedging Instruments:
Other Current Liabilities:
Mexican Peso Option Contracts	$	—	$	(395	)

The pre-tax effects of the Mexican peso option contracts on the accompanying Consolidated Statements of Income and Comprehensive Income (Loss) consisted of the following (thousands of dollars):

	Other Income, net
	June 30, 2013			July 1, 2012
Not Designated as Hedging Instruments:
Realized Gain	$	27		$	18
Realized (Loss)	$	(39	)	$	(438	)
Unrealized Gain (Loss)	$	395		$	(640	)

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Contractual obligations are as follows as of June 30, 2013 (thousands of dollars):

	Payments Due By Period
Contractual Obligation	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Operating Leases	$	828	$	526	$	302	$	—	$	—
Other Purchase Obligations		22,496		11,546		8,772		2,178		—
Pension and Postretirement Obligations(a)		3,823		3,823		—		—		—
Total	$	27,147	$	15,895	$	9,074	$	2,178	$	—

^(a)  As disclosed in our Notes to Financial Statements, estimated cash funding related to our pension and postretirement benefit plans is expected to total $3.8 million in 2014. Because the timing of funding related to these plans beyond 2014 is uncertain, and is dependent on future movements in interest rates and investment returns, changes in laws and regulations, and other variables, pension and postretirement outflows beyond 2014 have not been included in the table above.

Liabilities recognized for uncertain tax benefits of $1.7 million are not presented in the table above due to uncertainty as to amounts and timing regarding future payments.

STRATTEC has a $25 million secured revolving credit facility with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $5 million secured revolving credit facility with BMO Harris Bank N.A., which is guaranteed by STRATTEC. There were no borrowings under STRATTEC’s credit facility at June 30, 2013. Borrowings under ADAC-STRATTEC’s credit facility totaled $2.25 million at June 30, 2013.

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

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MANAGEMENT’S DISCUSSION AND ANALYSIS

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 the companies’ products in areas of the world outside of North America and Europe.

VAST do Brasil, a joint venture between VAST LLC and Ifer do Brasil Ltda., services customers in South America. VAST Fuzhou, VAST Great Shanghai and VAST China Co. (collectively known as VAST China), provides 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.

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 loss of joint ventures to STRATTEC of approximately $147,000 during 2013 and $1.1 million during 2012, and equity earnings of joint ventures to STRATTEC of approximately $1.2 million during 2011. During 2012 our joint ventures in China and Brazil continued to incur relocation costs associated with moves to new facilities and start-up costs associated with a new product line. These relocation costs and start-up costs continued for VAST China primarily during the first half of 2013. These items resulted in STRATTEC incurring an equity loss from joint ventures in both 2013 and 2012. In addition, the 2012 equity loss also included a goodwill impairment charge relating to VAST China. STRATTEC’s portion of this impairment charge amounted to $284,000. Effective November 20, 2009, VAST LLC purchased the 40 percent non-controlling interest owned by its former partners in the joint ventures in China. Initially, a loan of $2.5 million was made by each partner, STRATTEC, WITTE and ADAC, to fund a portion of the purchase price. In December 2009, $1 million of each partner’s loan balance was repaid. During 2012, each partner’s outstanding principal and accrued interest balance of $1.5 million and $112,000, respectively, were terminated and converted to additional capital contributions by each partner in VAST LLC. During each of 2013 and 2012, cash capital contributions totaling $600,000 were made to VAST LLC in support of general operating expenses. STRATTEC’s portion of the cash capital contributions during each year totaled $200,000.

In fiscal year 2007, we established a new entity with ADAC forming ADAC-STRATTEC LLC, a Delaware limited liability company. The joint venture was created to establish injection molding and door handle assembly operations in Mexico. STRATTEC holds a 51 percent interest in ADAC-STRATTEC LLC. A Mexican entity, ADAC-STRATTEC de Mexico, exists and 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 $1.1 million in 2013, approximately $1.7 million in 2012, and approximately $910,000 in 2011.

Effective November 30, 2008, STRATTEC established a new entity, STRATTEC POWER ACCESS LLC (“SPA”), which is 80 percent owned by STRATTEC and 20 percent owned by WITTE. SPA supplies the North American portion of the power sliding door, lift gate and deck lid system access control products which were acquired from Delphi Corporation. The financial results of SPA are consolidated with the financial results of STRATTEC and resulted in increased net income to STRATTEC of approximately $1.0 million in 2013, approximately $2.6 million in 2012, and approximately $2.5 million in 2011.

On April 5, 2013, we acquired a 51 percent ownership interest in NextLock LLC, a newly formed joint venture which will introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner and the owner of the remaining 49 percent interest. The initial capitalization of the NextLock joint venture totaled $1.5 million. STRATTEC’s portion of the initial capitalization totaled $765,000. During the first half of fiscal 2014, we anticipate the NextLock joint venture will incur start-up costs and losses. We anticipate shipments of the new biometric security products to begin during the second half of fiscal 2014. The equity investment in NextLock 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 NextLock resulted in equity loss of joint ventures to STRATTEC of approximately $78,000 during 2013.

OTHER MATTERS

Health care reform legislation was recently enacted by the Federal government. Changes to this legislation and modifications on effective dates for this legislation are ongoing. We are

2013  STRATTEC  Annual  Report 20

currently evaluating the legislation to determine its effects on our plan structure, future operating results and financial position.

MANAGEMENT’S DISCUSSION AND ANALYSIS

CRITICAL ACCOUNTING POLICIES

We believe the following represents our critical accounting policies:

Pension and Postretirement Health Benefits—Pension and postretirement health obligations and costs are developed from actuarial valuations. The determination of the obligation and expense for pension and postretirement health benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in the Notes to Financial Statements and include, among others, the discount rate, expected long-term rate of return on plan assets, retirement age, rates of increase in compensation and health care costs. We evaluate and update all of the assumptions annually on June 30, the measurement date. Refer to Notes to Financial Statements for the impact of the pension and postretirement plans on our financial statements.

We determine the discount rate used to measure plan liabilities using prevailing market rates of a large population of high-quality, non-callable, corporate bonds currently available that, if the obligation was settled at the measurement date, would provide the necessary future cash flows to pay the benefit obligation when due. Using this methodology, we determined a discount rate of 5.02 percent to be appropriate as of June 30, 2013, which is an increase of 0.46 percentage points from the rate of 4.56 percent used at June 30, 2012. The impact of this change decreased our year-end 2013 projected pension benefit obligations by approximately $5.2 million, the year-end 2013 accumulated pension benefit obligations by approximately $5.1 million and the year-end 2013 accumulated postretirement obligation by approximately $55,000. This change is also expected to decrease our 2014 pension expense by $455,000 and increase our postretirement expense by $4,000. Our pension expense increases as the discount rate decreases. Lowering our 2013 discount rate assumption by 50 basis points would have increased our 2013 pension expense by approximately $580,000.

A significant element in determining the pension expense is the expected return on plan assets. Our assumption for the expected return on plan assets is based on historical results for similar allocations among asset classes and was 8.0 percent for 2011, 7.8 percent for 2012 and 7.5 percent for 2013. This assumption remained at 7.5 percent for 2014. The changes to this assumption had no impact on the expected return on plan assets in 2011 and reduced the expected return on plan assets by approximately $165,000 in 2012 and $245,000 in 2013. Refer to Notes to Financial Statements for additional information on how this rate was determined. Pension expense increases as the expected rate of return on plan assets decreases. Lowering the 2013 expected rate of return assumption for our plan assets by 50 basis points would have increased our 2013 pension expense by approximately $410,000.

The difference between the expected return and actual return on plan assets is deferred and, under certain circumstances, amortized over future years of service. Therefore, the deferral of past asset gains and losses ultimately affects future pension expense. This is also the case with changes to actuarial assumptions, including discount rate assumptions, pay rate assumptions, mortality assumptions, turnover assumptions and other demographic assumptions. As of June 30, 2013, we had $28 million of net unrecognized pension actuarial losses, which included deferred asset gains of $2 million. As of June 30, 2013, we had unrecognized postretirement actuarial losses of $7 million. These amounts represent potential future pension and postretirement expenses that would be amortized over average future service periods. The average remaining service period is about 8 years for the pension and postretirement plans.

During fiscal years 2013, 2012 and 2011, we contributed $3 million, $2 million and $2 million, respectively, to our qualified pension plan. Future pension contributions are expected to be approximately $3 million annually depending on market conditions. We have evaluated the potential impact of the Pension Protection Act including provisions of MAP-21 (Moving Ahead for Progress in the 21st Century Act) (the “Acts”), which was passed into law on August 17, 2006 and July 6, 2012 respectively, on future pension plan funding requirements based on current market conditions. The Acts have not had and are not anticipated to have in future periods a material effect on our level of future funding requirements or on our liquidity and capital resources.

A significant element in determining the postretirement health expense is the health care cost trend rates. We develop these rates based on historical cost data, the near-term outlook and an assessment of likely long-term trends. Changes in the health care cost trend rate assumption will have a significant effect on the postretirement benefit amounts reported. As of January 1, 2011, we updated the health care cost trend assumption. The impact of this change increased our year-end 2011 accumulated postretirement obligation by approximately $139,000. This change also increased our 2012 postretirement expense by approximately $20,000. Refer to Notes to Financial

2013  STRATTEC  Annual  Report 21

Statements for an analysis of the impact of a one percent change in the trend rate.

MANAGEMENT’S DISCUSSION AND ANALYSIS

As of January 1, 2010, the postretirement health care benefit plan was amended to limit future eligible retirees’ benefits under the plan to $4,000 per year for a maximum of five years. This change decreased 2011 postretirement expense by approximately $645,000.

While we believe that the assumptions used to determine our pension and postretirement health obligations and expenses are appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect the amounts of these obligations and the related future expense.

Liability for Uncertain Tax Positions—We are subject to income taxation in many jurisdictions around the world. Significant management judgment is required in the accounting for income tax contingencies because the outcomes are often difficult to determine. We are required to measure and recognize uncertain tax positions that we have taken or expect to take in our income tax returns. The benefit of an uncertain tax position can only be recognized in the financial statements if management concludes that it is more likely than not that the position will be sustained with the tax authorities. For a position that is likely to be sustained, the benefit recognized in the financial statements is measured at the largest amount that is greater than 50 percent likely of being realized. A reserve is established for the difference between a position taken in an income tax return and the amount recognized in the financial statements. Refer to the discussion of Income Taxes included in the Notes to Financial Statements included within this 2013 Annual Report.

Other Reserves—We have reserves such as an environmental reserve, a warranty reserve, an incurred but not reported claim reserve for self-insured health plans, an allowance for doubtful accounts related to trade accounts receivable, an excess and obsolete inventory reserve and a repair and maintenance supply parts reserve. These reserves require the use of estimates and judgment with regard to risk exposure, ultimate liability and net realizable value.

Environmental Reserve—We have a liability recorded related to the estimated costs to remediate a site at our Milwaukee facility, which was contaminated by a solvent spill from a former above ground solvent storage tank occurring in 1985. The recorded environmental liability balance involves judgment and estimates. Our reserve estimate is based on a third party assessment of the costs to adequately cover the cost of active remediation of the contamination at this site. Actual costs might vary from this estimate for a variety of reasons including changes in laws and changes in the assessment of the level of remediation actually required at this site. Therefore, future changes in laws or the assessment of the level of remediation required could result in changes in our estimate of the required liability. Refer to the discussion of Commitments and Contingencies included in the Notes to Financial Statements included within this 2013 Annual Report.

Warranty Reserve—We have a warranty liability recorded related to our exposure to warranty claims in the event our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension of their warranty programs. Actual warranty costs might vary from estimates due to the level of actual claims varying from our claims experience and estimates. Therefore, future actual claims experience could result in changes in our estimates of the required liability. Refer to the discussion of Warranty Reserve under Organization and Summary of Significant Accounting Policies included in the Notes to Financial Statements included within this 2013 Annual Report.

Incurred But Not Reported Claim Reserve for Self-Insured Health Plans—We have self-insured medical and dental plans covering all eligible U.S. associates. The expected ultimate cost of claims incurred under these plans is subject to judgment and estimation. We estimate the ultimate expected cost of claims incurred under these plans based upon the aggregate liability for reported claims and an estimated additional liability for claims incurred but not reported. Our estimate of claims incurred but not reported is based on an analysis of historical data, current trends related to claims and health care costs and information available from our third-party administrator. Actual ultimate costs may vary from estimates due to variations in actual claims experience from past trends and large unexpected claims being filed. Therefore, changes in claims experience and large unexpected claims could result in changes to our estimate of the claims incurred but not reported liabilities. Refer to the discussion of Self Insurance Plans under Organization and Summary of Significant Accounting Policies included in the Notes to Financial Statements included within this 2013 Annual Report.

Allowance for Doubtful Accounts Related to Trade Accounts Receivable—Our trade accounts receivable consist primarily of receivables due from Original Equipment Manufacturers in the automotive industry and locksmith distributors relating to our service and aftermarket business. Our evaluation of the collectability of our trade accounts receivable involves judgment and estimates and includes a review of past due items, general economic conditions and the economic climate of the industry as a whole. The estimate of the required reserve involves uncertainty as to future collectability of receivable balances. Refer to the discussion of Receivables under Organization and Summary of Significant Accounting Policies included in the Notes to Financial Statements included

2013  STRATTEC  Annual  Report 22

within this 2013 Annual Report.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Excess and Obsolete Inventory Reserve—We record a reserve for excess and obsolete inventory based on historical and estimated future demand and market conditions. The reserve level is determined by comparing inventory levels of individual materials and parts to historical usage and estimated future sales by analyzing the age of the inventory, in order to identify specific material and parts that are unlikely to be sold. Technical obsolescence and other known factors are also considered in evaluating the reserve level. Actual future write-offs of inventory may differ from estimates and calculations used to determine reserve levels due to changes in customer demand, changes in technology and other factors. Refer to the discussion of Inventories under Organization and Summary of Significant Accounting Policies included in the Notes to Financial Statements included within this 2013 Annual Report.

Repair and Maintenance Supply Parts Reserve—We maintain an inventory of repair and maintenance parts in support of operations. This inventory includes critical repair parts for all production equipment as well as general maintenance items. The inventory of critical repair parts is required to avoid disruptions in our customers’ just-in-time production schedules due to lack of spare parts when equipment break-downs occur. Depending on maintenance requirements during the life of the equipment, excess quantities of repair parts arise. A repair and maintenance supply parts reserve is maintained to recognize the normal adjustment of inventory for obsolete and slow-moving repair and maintenance supply parts. Our evaluation of the reserve level involves judgment and estimates, which are based on a review of historical obsolescence and current inventory levels. Actual obsolescence may differ from estimates due to actual maintenance requirements differing from historical levels. This could result in changes to our estimated required reserve. Refer to the discussion of Repair and Maintenance Supply Parts under Organization and Summary of Significant Accounting Policies included in the Notes to Financial Statements included within this 2013 Annual Report.

We believe the reserves discussed above are estimated using consistent and appropriate methods. However, changes to the assumptions could materially affect the recorded reserves.

Stock-Based Compensation—Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating future volatility of our stock, the amount of stock-based awards that are expected to be forfeited and the expected term of awards granted. We estimate the fair value of stock options granted using the Black-Scholes option valuation model. We amortize the fair value of all awards on a straight-line basis over the vesting periods. The expected term of awards granted represents the period of time they are expected to be outstanding. We determine the expected term based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules. We estimate the expected volatility of our common stock at the date of grant based on the historical volatility of our common stock. The volatility factor used in the Black-Scholes option valuation model is based on our historical stock prices over the most recent period commensurate with the estimated expected term of the award. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. We use historical data to estimate pre-vesting option forfeitures. We record stock-based compensation only for those awards that are expected to vest. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

NEW ACCOUNTING STANDARD

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”). The Update is effective for annual reporting periods beginning after December 15, 2012 and requires that we present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of AOCI based on its source and the income statement line items affected by the reclassification. We do not expect these new disclosure requirements to have a significant impact on our Consolidated Financial Statements.

RISK FACTORS

We recognize we are subject to the following risk factors based on our operations and the nature of the automotive industry in which we operate:

Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share—Sales to General Motors Company, Ford Motor Company and Chrysler Group LLC represented approximately 66 percent of our annual net sales (based on fiscal 2013 results) and, accordingly, these

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MANAGEMENT’S DISCUSSION AND ANALYSIS

customers account for a significant percentage of our outstanding accounts receivable. The contracts with these customers provide for supplying the customer’s requirements for a particular model. The contracts do not specify a specific quantity of parts. The contracts typically cover the life of a model, which averages approximately four to five years. Components for certain customer models may also be “market tested” annually. Therefore, the loss of any one of these customers, the loss of a contract for a specific vehicle model, a reduction in vehicle content, the early cancellation of a specific vehicle model, technological changes or a significant reduction in demand for certain key models could occur, and if so, could have a material adverse effect on our existing and future revenues and net income.

Our major customers also have significant under-funded legacy liabilities related to pension and postretirement health care obligations. The loss in our major customers’ North American automotive market share to the New Domestic automotive manufacturers (primarily the Japanese and Korean automotive manufacturers) and/or a significant decline in the overall market demand for new vehicles may ultimately result in severe financial difficulty for these customers, including bankruptcy. If our major customers cannot fund their operations, we may incur significant write-offs of accounts receivable, incur impairment charges or require additional restructuring actions.

Production Slowdowns by Customers—Our major customers and many of their suppliers were significantly impacted by the recession of 2008/2009. Many of our major customers instituted production cuts during our fiscal 2009 and 2010. While production subsequently increased after the cuts made in 2009, additional economic slowdowns could bring about new production cuts which could have a material adverse effect on our existing and future revenues and net income.

Financial Distress of Automotive Supply Base—During calendar years 2009 and 2010, deteriorating automotive industry conditions adversely affected STRATTEC and our supply base. Lower production levels at our major customers, volatility in certain raw material and energy costs and the global credit market crisis resulted in severe financial distress among many companies within the automotive supply base. During the above time frame, several automotive suppliers filed for bankruptcy protection or ceased operations. The potential continuation or renewal of financial distress within the supply base and suppliers’ inability to obtain credit from lending institutions could lead to commercial disputes and possible supply chain interruptions. In addition, the potential for future and/or continued adverse industry conditions may require us to provide financial assistance or other measures to ensure uninterrupted production. The continuation or renewal of these industry conditions could have a material adverse effect on our existing and future revenues and net income.

Shortage of Raw Materials or Components Supply—In the event of catastrophic acts of nature such as fires, tsunamis, hurricanes and earthquakes or a rapid increase in production demands, either we or our customers or other suppliers may experience supply shortages of raw materials or components. This could be caused by a number of factors, including a lack of production line capacity or manpower or working capital constraints. In order to manage and reduce the costs of purchased goods and services, we and others within our industry have been rationalizing and consolidating our supply base. As a result, there is greater dependence on fewer sources of supply for certain components and materials used in our products, which could increase the possibility of a supply shortage of any particular component. If any of our customers experience a material supply shortage, either directly or as a result of supply shortages at another supplier, that customer may halt or limit the purchase of our products. Similarly, if we or one of our own suppliers experience a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source. Such production interruptions could impede a ramp-up in vehicle production and could have a material adverse effect on our business, results of operations and financial condition.

We consider the production capacities and financial condition of suppliers in our selection process, and expect that they will meet our delivery requirements. However, there can be no assurance that strong demand, capacity limitations, shortages of raw materials, labor disputes or other problems will not result in any shortages or delays in the supply of components to us.

Cost Reduction—There is continuing pressure from our major customers to reduce the prices we charge for our products. This requires us to generate cost reductions, including reductions in the cost of components purchased from outside suppliers. If we are unable to generate sufficient production cost savings in the future to offset pre-programmed price reductions, our gross margin and profitability will be adversely affected.

Cyclicality and Seasonality in the Automotive Market—The automotive market is cyclical and is dependent on consumer spending, on the availability of consumer credit and to a certain extent, on customer sales incentives. Economic factors adversely affecting consumer demand for automobiles and automotive production, such as rising fuel costs, could adversely impact our net sales and net income. We typically experience decreased sales and operating income during the first fiscal quarter of each year due to the impact of scheduled customer plant shut-downs in July and new model changeovers during that period.

Foreign Operations—We own and operate manufacturing operations in Mexico. As discussed under “Joint Ventures”, we also have joint venture investments in Mexico, Brazil and China. As these operations continue to expand, their success will depend, in part, on our and our partners’ ability to

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MANAGEMENT’S DISCUSSION AND ANALYSIS

anticipate and effectively manage certain risks inherent in international operations, including: enforcing agreements and collecting receivables through certain foreign legal systems, payment cycles of foreign customers, compliance with foreign tax laws, general economic and political conditions in these countries and compliance with foreign laws and regulations. The success of these joint venture operations may be impacted by our two partners’ ability to influence business decisions and therefore operating results of the joint ventures. These influences, as well as conflicts or disagreements with our joint venture partners, could negatively impact the operations and financial results of our joint venture investments, which could have an adverse impact on our financial results. In addition, failure of our partners to be able to continue to fund their portion of the joint venture operations could have a material adverse effect on the financial condition and financial results of our joint venture investments, which could have a material adverse effect on our financial results. The joint venture investments in China generated losses in 2012 and 2013 due to relocation costs associated with moves to a new facility and start-up costs associated with a new product line. These relocation costs and start-up costs have been financed internally and externally by VAST China. The impact of any future VAST China losses, along with planned capital expenditures in China, may result in the need for additional future capital contributions to fund the operations of these joint venture investments.

Currency Exchange Rate Fluctuations—Our sales are denominated in U.S. dollars. We have manufacturing operations in Mexico, and as a result, a portion of our manufacturing costs are incurred in Mexican pesos. Therefore, fluctuations in the U.S. dollar / Mexican peso exchange rate may have a material effect on our profitability, cash flows, financial position, and may significantly affect the comparability of our results between financial periods. Any depreciation in the value of the U.S. dollar in relation to the value of the Mexican peso will adversely affect the cost of our Mexican operations when translated into U.S. dollars. Similarly, any appreciation in the value of the U.S. dollar in relation to the value of the Mexican peso will decrease the cost of our Mexican operations when translated into U.S. dollars.

Sources of and Fluctuations in Market Prices of Raw Materials—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, commencing with fiscal 2008, we began quoting 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.

Disruptions Due to Work Stoppages and Other Labor Matters—Our major customers and many of their suppliers have unionized work forces. Work stoppages or slow-downs experienced by our customers or their suppliers could result in slow-downs or closures of assembly plants where our products are included in assembled vehicles. For example, strikes by a critical supplier called by the United Auto Workers led to extended shut-downs of most of General Motors’ North American assembly plants in February 2008 and in 1998. A material work stoppage experienced by one or more of our customers could have an adverse effect on our business and our financial results. In addition, all production associates at our Milwaukee facility are unionized. A sixteen-day strike by these associates in June 2001 resulted in increased costs as all salaried associates worked with additional outside resources to produce the components necessary to meet customer requirements. The current contract with our unionized associates is effective through June 29, 2014. We may encounter further labor disruption after the expiration date of this contract and may also encounter unionization efforts in our other plants or other types of labor conflicts, any of which could have an adverse effect on our business and our financial results. Labor contracts between General Motors Company, Ford Motor Company and Chrysler Group LLC and their unionized associates under the United Auto Workers expire in September and October 2015. In addition, their respective labor agreements with the Canadian auto workers union expire in September 2016. Labor disruptions encountered during the contract period could have an adverse effect on our business and our financial results.

Environmental and Safety Regulations—We are subject to Federal, state, local and foreign laws and other legal requirements related to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations. These laws include the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended). We have an

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MANAGEMENT’S DISCUSSION AND ANALYSIS

environmental management system that is ISO-14001 certified. We believe that our existing environmental management system is adequate for current and anticipated operations and we have no current plans for substantial capital expenditures in the environmental area. An environmental reserve was established in 1995 for estimated costs to remediate a site at our Milwaukee facility. The site was contaminated from a former above-ground solvent storage tank, located on the east side of the facility. The contamination occurred in 1985 and is being monitored in accordance with Federal, state and local requirements. We do not currently anticipate any material adverse impact on our results of operations, financial condition or competitive position as a result of compliance with Federal, state, local and foreign environmental laws or other related legal requirements. However, risk of environmental liability and changes associated with maintaining compliance with environmental laws is inherent in the nature of our business and there is no assurance that material liabilities or changes could not arise.

Highly Competitive Automotive Supply Industry—The automotive component supply industry is highly competitive. Some of our competitors are companies, or divisions or subsidiaries of companies, that are larger than STRATTEC and have greater financial and technology capabilities. Our products may not be able to compete successfully with the products of these other companies, which could result in loss of customers and, as a result, decreased sales and profitability. Some of our major customers have previously announced that they will be reducing their supply base. This could potentially result in the loss of these customers and consolidation within the supply base. The loss of any of our major customers could have a material adverse effect on our existing and future net sales and net income.

In addition, our competitive position in the North American automotive component supply industry could be adversely affected in the event that we are unsuccessful in making strategic investments, acquisitions or alliances or in establishing joint ventures that would enable us to expand globally. We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by our major customers. New model development generally begins two to five years prior to the marketing of such new models to the public. The failure to obtain new business on new models or to retain or increase business on redesigned existing models could adversely affect our business and financial results. In addition, as a result of relatively long lead times for many of our components, it may be difficult in the short-term for us to obtain new sales to replace any unexpected decline in the sale of existing products. Finally, we may incur significant product development expense in preparing to meet anticipated customer requirements which may not be recovered.

Program Volume and Pricing Fluctuations—We incur costs and make capital expenditures for new program awards based upon certain estimates of production volumes over the anticipated program life for certain vehicles. While we attempt to establish the price of our products for variances in production volumes, if the actual production of certain vehicle models is significantly less than planned, our net sales and net income may be adversely affected. We cannot predict our customers’ demands for the products we supply either in the aggregate or for particular reporting periods.

Investments in Customer Program Specific Assets—We make investments in machinery and equipment used exclusively to manufacture products for specific customer programs. This machinery and equipment is capitalized and depreciated over the expected useful life of each respective asset. Therefore, the loss of any one of our major customers, the loss of specific vehicle models or the early cancellation of a vehicle model could result in impairment in the value of these assets which may have a material adverse effect on our financial results.

Warranty Claims—We are exposed to warranty claims in the event that our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. Our largest customers have recently extended their warranty protection for their vehicles. Other automotive OEMs have similarly extended their warranty programs. We are engaged in ongoing discussions with our customers regarding warranty information and potential claims. The results of these discussions could result in additional warranty charges / claims in future periods. Depending on the nature of and the volume of vehicles involved in the potential warranty claims, these charges could be material to the financial statements. The extended warranty trend may also result in higher cost recovery claims by OEMs from suppliers whose products incur a higher rate of warranty claims above an OEM derived nominal level. Prior to fiscal 2010, we had experienced relatively low warranty charges from our customers due to our commercial arrangements and improvements in the quality, reliability and durability of our products. Due to our largest customers’ extension of their warranty protection programs and demands for higher warranty cost sharing arrangements from their suppliers, including STRATTEC, we increased our provision to cover warranty exposures during fiscal years 2010, 2011 and 2012. Moreover, in 2011 and 2012, our increased warranty provision was the result of our share of the cost associated with a specific warranty claim involving a product we supplied to one of our largest customers. If our customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a material adverse impact on our results of operations and financial condition.

2013  STRATTEC  Annual  Report 26

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Years Ended
	June 30, 2013			July 1, 2012			July 3, 2011
NET SALES	$	298,179		$	279,234		$	260,933
Cost of goods sold		244,313			228,971			218,770
GROSS PROFIT		53,866			50,263			42,163
Engineering, selling, and administrative expenses		34,934			33,920			33,443
Loss on settlement of pension obligation		2,144			—			—
INCOME FROM OPERATIONS		16,788			16,343			8,720
Interest income		21			69			119
Equity (loss) income of joint ventures		(225	)		(1,071	)		1,246
Interest expense		(34	)		(81	)		(175	)
Other income, net		329			582			220
INCOME BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST		16,879			15,842			10,130
Provision for income taxes		5,366			3,589			2,540
NET INCOME		11,513			12,253			7,590
Net income attributable to non-controlling interest		2,138			3,460			2,172
NET INCOME ATTRIBUTABLE TO STRATTEC SECURITY CORPORATION	$	9,375		$	8,793		$	5,418
COMPREHENSIVE INCOME (LOSS):
NET INCOME	$	11,513		$	12,253		$	7,590
Change in cumulative translation adjustments		736			(2,080	)		1,777
Pension and postretirement plan funded status adjustment, net of tax		12,818			(11,990	)		8,450
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		13,554			(14,070	)		10,227
COMPREHENSIVE INCOME (LOSS)		25,067			(1,817	)		17,817
Comprehensive income attributable to non-controlling interest		2,147			3,397			2,208
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO STRATTEC SECURITY CORPORATION	$	22,920		$	(5,214	)	$	15,609
EARNINGS PER SHARE:
BASIC	$	2.77		$	2.66		$	1.65
DILUTED	$	2.72		$	2.64		$	1.63
AVERAGE SHARES OUTSTANDING:
BASIC		3,327			3,300			3,285
DILUTED		3,379			3,330			3,323

The accompanying Notes to Financial Statements are an integral part of these Consolidated Statements of Income and Comprehensive Income (Loss).

2013  STRATTEC  Annual  Report 27

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE AMOUNTS)

	June 30, 2013			July 1, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	20,307		$	17,487
Receivables, less allowance for doubtful accounts of $500 at June 30, 2013 and July 1, 2012		47,514			44,496
Inventories, net		24,312			21,236
Customer tooling in progress, net		2,278			4,434
Deferred income taxes		4,267			5,219
Other current assets		7,821			8,419
Total current assets		106,499			101,291
DEFERRED INCOME TAXES		—			9,742
INVESTMENT IN JOINT VENTURES		9,166			8,139
OTHER LONG-TERM ASSETS		2,420			536
PROPERTY, PLANT AND EQUIPMENT, NET		51,415			46,330
	$	169,500		$	166,038
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	25,543		$	24,149
Borrowings under credit facility		2,250			—
Accrued liabilities:
Payroll and benefits		13,993			19,233
Environmental		1,414			1,436
Warranty		2,500			4,958
Income taxes		—			2,934
Other		5,025			4,263
Total current liabilities		50,725			56,973
COMMITMENTS AND CONTINGENCIES—see note on page 40
DEFERRED INCOME TAXES		1,009			—
ACCRUED PENSION OBLIGATIONS		1,464			18,202
ACCRUED POSTRETIREMENT OBLIGATIONS		2,717			3,465
OTHER LONG-TERM LIABILITIES		1,705			—
SHAREHOLDERS’ EQUITY:
Common stock, authorized 12,000,000 shares, $.01 par value, issued 6,998,702 shares at June 30, 2013 and 6,932,457 shares at July 1, 2012		70			69
Capital in excess of par value		82,684			80,621
Retained earnings		179,614			171,590
Accumulated other comprehensive loss		(22,212	)		(35,757	)
Less: Treasury stock at cost (3,626,673 shares at June 30, 2013 and 3,628,673 shares at July 1, 2012)		(135,938	)		(135,971	)
Total STRATTEC SECURITY CORPORATION shareholders’ equity		104,218			80,552
Non-controlling interest		7,662			6,846
Total shareholders’ equity		111,880			87,398
	$	169,500		$	166,038

The accompanying Notes to Financial Statements are an integral part of these Consolidated Balance Sheets.

2013  STRATTEC  Annual  Report 28

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	Total			Common Stock		Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Non-controlling Interest
BALANCE June 27, 2010	$	75,789		$	69	$	79,339	$	162,706		$	(31,941	)	$	(136,047	)	$	1,663
Net income		7,590			—		—		5,418			—			—			2,172
Translation adjustments		1,777			—		—		—			1,741			—			36
Pension and postretirement funded status adjustment, net of tax of $5,178		8,450			—		—		—			8,450			—			—
Cash dividends declared ($1.20 per share)		(3,986	)		—		—		(3,986	)		—			—			—
Purchase of Additional Interest in Majority Owned Subsidiary		(22	)		—		—		—			—			—			(22	)
Stock-based compensation and shortfall tax benefit, including tax benefit on restricted stock dividends of $15		364			—		364		—			—			—			—
Stock Option Exercises		40			—		40		—			—			—			—
Employee stock purchases		62			—		24		—			—			38			—
BALANCE July 3, 2011	$	90,064		$	69	$	79,767	$	164,138		$	(21,750	)	$	(136,009	)	$	3,849
Net income		12,253			—		—		8,793			—			—			3,460
Translation adjustments		(2,080	)		—		—		—			(2,017	)		—			(63	)
Pension and postretirement funded status adjustment, net of tax of $7,348		(11,990	)		—		—		—			(11,990	)		—			—
Cash dividends declared ($0.40 per share)		(1,341	)		—		—		(1,341	)		—			—			—
Cash dividends paid to non-controlling interests of subsidiaries		(400	)		—		—		—			—			—			(400	)
Stock-based compensation and shortfall tax benefit, including tax benefit on restricted stock dividends of $7		806			—		806		—			—			—			—
Stock Option Exercises		33			—		33		—			—			—			—
Employee stock purchases		53			—		15		—			—			38			—
BALANCE July 1, 2012	$	87,398		$	69	$	80,621	$	171,590		$	(35,757	)	$	(135,971	)	$	6,846
Net income		11,513			—		—		9,375			—			—			2,138
Translation adjustments		736			—		—		—			727			—			9
Pension and postretirement funded status adjustment, net of tax of $7,857		12,818			—		—		—			12,818			—			—
Cash dividends declared ($0.40 per share)		(1,351	)		—		—		(1,351	)		—			—			—
Cash dividends paid to non-controlling interests of subsidiaries		(1,331	)		—		—		—			—			—			(1,331	)
Stock-based compensation and shortfall tax benefit, including tax benefit on restricted stock dividends of $8		1,273			—		1,273		—			—			—			—
Stock Option Exercises		770			1		769		—			—			—			—
Employee stock purchases		54			—		21		—			—			33			—
BALANCE June 30, 2013	$	111,880		$	70	$	82,684	$	179,614		$	(22,212	)	$	(135,938	)	$	7,662

The accompanying Notes to Financial Statements are an integral part of these Consolidated Statements of Shareholders’ Equity.

2013  STRATTEC  Annual  Report 29

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

	Years Ended
	June 30, 2013			July 1, 2012			July 3, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	11,513		$	12,253		$	7,590
Adjustments to reconcile net income to net cash provided by operating activities:
Equity loss (income) of joint ventures		225			1,071			(1,246	)
Depreciation and amortization		7,490			6,809			6,619
Foreign currency transaction loss (gain)		395			(1,369	)		836
Unrealized (gain) loss on peso option contracts		(395	)		640			(245	)
Loss (gain) on disposition of property, plant and equipment		100			30			(6	)
Deferred income taxes		3,847			54			(177	)
Stock based compensation expense		1,062			825			621
Provision for doubtful accounts		—			116			—
Loss on settlement of pension obligation		2,144			—			—
Change in operating assets and liabilities:
Receivables		(2,923	)		(5,394	)		(3,309	)
Inventories		(3,076	)		899			(5,049	)
Other assets		2,809			(2,130	)		(183	)
Accounts payable and accrued liabilities		(7,553	)		3,437			2,902
Other, net		27			—			18
Net cash provided by operating activities		15,665			17,241			8,371
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in joint ventures		(965	)		(200	)		(450	)
Restricted cash		—			—			2,100
Additions to property, plant and equipment		(12,515	)		(13,558	)		(9,531	)
Purchase of additional interest in majority owned subsidiary		—			—			(22	)
Proceeds received on sale of property, plant and equipment		91			19			111
Net cash used in investing activities		(13,389	)		(13,739	)		(7,792	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facility		3,250			—			—
Repayments under credit facility		(1,000	)		—			—
Exercise of stock options and employee stock purchases		823			82			90
Excess tax benefits from stock-based compensation		270			4			12
Dividends paid to non-controlling interests of subsidiaries		(1,331	)		(400	)		—
Dividends paid		(1,352	)		(1,341	)		(3,989	)
Repayment of loan from related parties		—			(1,850	)		(1,150	)
Net cash provided by (used in) financing activities		660			(3,505	)		(5,037	)
FOREIGN CURRENCY IMPACT ON CASH		(116	)		240			(159	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,820			237			(4,617	)
CASH AND CASH EQUIVALENTS
Beginning of year		17,487			17,250			21,867
End of year	$	20,307		$	17,487		$	17,250
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	$	3,701		$	2,721		$	1,394
Interest paid	$	42		$	115		$	188

The accompanying Notes to Financial Statements are an integral part of these Consolidated Statements of Cash Flows.

During the year ended July 1, 2012, a non-cash event was recorded whereby the outstanding loan to joint venture principal and accrued interest amounts of $1.5 million and $112,000, respectively, were terminated and converted into additional capital contributions in the joint venture investment.

2013  STRATTEC  Annual  Report 30

NOTES TO FINANCIAL STATEMENTS

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 side 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 of Velbert, Germany and ADAC Automotive 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). During 2013, we acquired a 51 percent ownership interest in NextLock LLC, a newly formed joint venture which will introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner and the owner of the remaining 49 percent interest. We anticipate shipment of new biometric security products to begin in the second half of our 2014 fiscal year through this new NextLock joint venture.STRATTEC products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea and China, and we provide full service and aftermarket support for our products.

The accompanying 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, Mexico. Equity investments in Vehicle Access Systems Technology LLC (“VAST LLC”) and NextLock 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 and one joint venture in Brazil. NextLock LLC is located in El Paso, Texas. We have only one reporting segment.

The significant accounting policies followed in the preparation of these financial statements, as summarized in the following paragraphs, are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Principles of Consolidation and Presentation: The accompanying consolidated financial statements include the accounts of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, and its majority owned subsidiaries. Equity investments for which STRATTEC exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. All significant inter-company transactions and balances have been eliminated.

New Accounting Standard: In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”). The Update is effective for annual reporting periods beginning after December 15, 2012 and requires that we present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of AOCI based on its source and the income statement line items affected by the reclassification. We do not expect these new disclosure requirements to have a significant impact on our Consolidated Financial Statements.

Fiscal Year: Our fiscal year ends on the Sunday nearest June 30. The years ended June 30, 2013, July 1, 2012 and July 3, 2011 are comprised of 52, 52 and 53 weeks, respectively.

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods presented. These estimates and assumptions could also affect the disclosure of contingencies. Actual results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents: Cash and cash equivalents include all short-term investments with an original maturity of three months or less due to the short-term nature of the instruments. Excess cash balances are placed in a money market account at a high quality financial institution. As of June 30, 2013, $9.2 million of our $20.3 million cash and cash equivalents balance was held by our foreign subsidiaries in Mexico and is deemed to be permanently reinvested.

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 as a result of changes in the U.S. dollar / Mexican peso exchange rate. In January, 2011 and August, 2011, we entered into agreements with Bank of Montreal that provided for two weekly Mexican peso currency option contracts to cover a portion of our weekly estimated peso denominated operating costs. The contracts with Bank of Montreal expired June 28, 2013. The two weekly option contracts were for equivalent notional amounts. The contracts that were effective during fiscal 2011 and 2012 expired July 6, 2012, and provided for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 11.85 if the spot rate at the weekly expiry date was below 11.85 or for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 12.85 if the spot rate at the weekly expiry date was above 12.85. Additional contracts that were effective during fiscal 2013 expired June 28, 2013 and provided for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate

2013  STRATTEC  Annual  Report 31

NOTES TO FINANCIAL STATEMENTS

of 12.40 if the spot rate at the weekly expiry date was below an average of 12.40 or for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 13.40 if the spot rate at the weekly expiry date was above an average of 13.40. Our objective in entering into these currency option contracts was to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso option contracts were not used for speculative purposes and were not designated as hedges. As a result, all currency option contracts were recognized in our accompanying consolidated financial statements at fair value and changes in the fair value of the currency option contracts were reported in current earnings as part of Other Income, net. The premiums paid and received under the weekly Mexican peso currency option contracts netted to zero. As a result, premiums related to the contracts did not impact our earnings. No Mexican peso currency option contracts were outstanding as of June 30, 2013.

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

	June 30, 2013		July 1, 2012
Not Designated as Hedging Instruments:
Other current liabilities:
Mexican peso option contracts	$	—	$	(395	)

The pre-tax effects of the Mexican peso option contracts on the accompanying Consolidated Statements of Income and Comprehensive Income (Loss) consisted of the following (thousands of dollars):

	Other Income, net
	June 30,2013			July 1, 2012
Not Designated as Hedging Instruments:
Realized Gain	$	27		$	18
Realized (loss)	$	(39	)	$	(438	)
Unrealized gain (loss)	$	395		$	(640	)

Fair Value of Financial Instruments: The fair value of our cash and cash equivalents, accounts receivable, accounts payable, and borrowings under credit facility approximated book value as of June 30, 2013 and July 1, 2012. 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 for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is an established fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. Level 1—Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2—Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments. Level 3—Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 and July 1, 2012 (thousands of dollars):

	June 30, 2013								July 1, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	115	$	—	$	—	$	115	$	209	$	—	$	—	$	209
Mid Cap		114		—		—		114		206		—		—		206
Large Cap		115		—		—		115		640		—		—		640
U.S. Treasury Securities		—		—		—		—		2,512		—		—		2,512
Cash and Cash Equivalents		1,193		—		—		1,193		806		—		—		806
Mexican peso option contracts		—		—		—		—		—		80		—		80
Total assets at fair value	$	1,537	$	—	$	—	$	1,537	$	4,373	$	80	$	—	$	4,453
Liabilities:
Mexican peso option contracts	$	—	$	—	$	—	$	—	$	—	$	475	$	—	$	475

2013  STRATTEC  Annual  Report 32

NOTES TO FINANCIAL STATEMENTS

The Rabbi Trust assets fund our supplemental executive retirement plan and are included in Other Current Assets in the accompanying Consolidated Balance Sheets. The Rabbi Trust assets are classified as Level 1 assets. Refer to discussion of Mexican peso option contracts under Derivative Instruments above. The fair value of the Mexican Peso option contracts are based on an option pricing model that considers the remaining term, current exchange rate and volatility of the underlying foreign currency base. There were no transfers between Level 1 and Level 2 assets during 2013.

Receivables: Receivables consist primarily of trade receivables due from Original Equipment Manufacturers in the automotive industry and locksmith distributors relating to our service and aftermarket sales. We evaluate the collectability of receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items, general economic conditions and the industry as a whole. Changes in the allowance for doubtful accounts were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision for Doubtful Accounts		Net (Write-Offs) Recoveries			Balance, End of Year
Year ended June 30, 2013	$	500	$	—	$	—		$	500
Year ended July 1, 2012	$	400	$	116	$	(16	)	$	500
Year ended July 3, 2011	$	400	$	—	$	—		$	400

Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market using the first-in, first-out (“FIFO”) cost method of accounting. Inventories consisted of the following (thousands of dollars):

	June 30, 2013			July 1, 2012
Finished products	$	6,966		$	5,313
Work in process		6,164			5,659
Purchased materials		12,682			11,564
		25,812			22,536
Excess and obsolete reserve		(1,500	)		(1,300	)
Inventories, net	$	24,312		$	21,236

We record a reserve for excess and obsolete inventory based on historical and estimated future demand and market conditions. The reserve level is determined by comparing inventory levels of individual materials and parts to historical usage and estimated future sales by analyzing the age of the inventory in order to identify specific materials and parts that are unlikely to be sold. Technical obsolescence and other known factors are also considered in evaluating the reserve level. The activity related to the excess and obsolete inventory reserve was as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Amounts Written Off		Balance, End of Year
Year ended June 30, 2013	$	1,300	$	511	$	311	$	1,500
Year ended July 1, 2012	$	1,200	$	385	$	285	$	1,300
Year ended July 3, 2011	$	1,418	$	334	$	552	$	1,200

Customer Tooling in Progress: We incur costs related to tooling used in component production and assembly. Costs for development of certain tooling, which will be directly reimbursed by the customer whose parts are produced from the tool, are accumulated on the balance sheet and are then billed to the customer. The accumulated costs are billed upon formal acceptance by the customer of products produced with the individual tool. Other tooling costs are not directly reimbursed by the customer. These costs are capitalized and amortized over the life of the related product based on the fact that the related tool will be used over the life of the supply arrangement. To the extent that estimated costs exceed expected reimbursement from the customer we will recognize a loss.

2013  STRATTEC  Annual  Report 33

NOTES TO FINANCIAL STATEMENTS

Repair and Maintenance Supply Parts: We maintain an inventory of repair and maintenance supply parts in support of operations. This inventory includes critical repair parts for all production equipment as well as general maintenance items. The inventory of critical repair parts is required to avoid disruptions in our customers’ just-in-time production schedules due to a lack of spare parts when equipment break-downs occur. All required critical repair parts are on hand when the related production equipment is placed in service and maintained to satisfy the customer model life production and service requirements, which may be 12 to 15 years. As repair parts are used, additional repair parts are purchased to maintain a minimum level of spare parts inventory. Depending on maintenance requirements during the life of the equipment, excess quantities of repair parts arise. Excess quantities are kept on hand and are not disposed of until the equipment is no longer in service. A repair and maintenance supply parts reserve is maintained to recognize the normal adjustment of inventory for obsolete and slow moving supply and maintenance parts. The adequacy of the reserve is reviewed periodically in relation to the repair parts inventory balances. The gross balance of the repair and maintenance supply parts inventory was approximately $2.0 million at June 30, 2013 and $1.9 million at July 1, 2012. The repair and maintenance supply parts inventory balance is included in Other Current Assets in the accompanying Consolidated Balance Sheets. The activity related to the repair and maintenance supply parts reserve was as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Amounts Written Off		Balance, End of Year
Year ended June 30, 2013	$	500	$	195	$	195	$	500
Year ended July 1, 2012	$	695	$	200	$	395	$	500
Year ended July 3, 2011	$	680	$	78	$	63	$	695

Intangibles: Intangible assets that have defined useful lives acquired in the purchase of the Delphi Power Products business in 2009 consist of patents, engineering drawings and software. The intangible assets balance is included in Other Long-term Assets in the accompanying Consolidated Balance Sheets. The carrying value and accumulated amortization were as follows (thousands of dollars):

	June 30, 2013			July 1, 2012
Patents, engineering drawings and software	$	890		$	890
Less: accumulated amortization		(453	)		(354	)
	$	437		$	536

The remaining useful life of the intangible assets in the table above is approximately 4.4 years. Intangible amortization expense was $99,000 for each of the years ended June 30, 2013, July 1, 2012 and July 3, 2011. Intangible amortization expense is expected to be $99,000 in each of fiscal year 2014 through 2017 and $41,000 in fiscal 2018.

Property, Plant and Equipment: Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	Expected Useful Lives
Land improvements	20 years
Buildings and improvements	20 to 35 years
Machinery and equipment	3 to 10 years

Property, plant and equipment consisted of the following (thousands of dollars):

	June 30, 2013			July 1, 2012
Land and improvements	$	3,417		$	2,809
Buildings and improvements		19,371			18,522
Machinery and equipment		140,649			130,683
		163,437			152,014
Less: accumulated depreciation		(112,022	)		(105,684	)
	$	51,415		$	46,330

Depreciation expense for the years ended June 30, 2013, July 1, 2012 and July 3, 2011 totaled approximately $7.4 million, $6.7 million and $6.5 million, respectively.

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	June 30, 2013		July 1, 2012
Gross book value	$	70,809	$	62,497
Net book value	$	25,777	$	20,434

2013  STRATTEC  Annual  Report 34

NOTES TO FINANCIAL STATEMENTS

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment recognized is measured by the excess of the carrying amount of the asset over the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less estimated costs to sell. There were no impairments recorded in the years ended June 30, 2013, July 1, 2012 or July 3, 2011.

Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income.

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted:

Fiscal Year	Percentage of Inventory Purchases			Number of Suppliers
2013		38	%		7
2012		41	%		14
2011		40	%		11

We have long-term contracts or arrangements with most of our suppliers to guarantee the availability of raw materials and component parts.

Labor Concentrations: We had approximately 2,670 full-time associates of which approximately 225 or 8.4 percent were represented by a labor union at June 30, 2013. The associates represented by a labor union account for all production associates at our Milwaukee facility. The current contract with the unionized associates is effective through June 29, 2014.

Revenue Recognition: Revenue is recognized upon the shipment of products, which is when title passes, payment terms are final, we have no remaining obligations and the customer is required to pay. Revenue is recognized net of estimated returns and discounts, which is recognized as a deduction from revenue at the time of the shipment.

Research and Development Costs: Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development expenditures were approximately $1.3 million in 2013, $1.2 million in 2012, and $1.5 million in 2011.

Other Income, Net: Net other income included in the accompanying Consolidated Statements of Income and Comprehensive Income (Loss) primarily includes foreign currency transaction gains and losses, realized and unrealized gains and losses on Mexican peso option contracts and Rabbi Trust gains. 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 option contracts to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Rabbi Trust funds our supplemental executive retirement plan. The investments held in the Trust are considered trading securities. The impact of these items for the periods presented was as follows (thousands of dollars):

	Years Ended
	June 30, 2013			July 1, 2012			July 3, 2011
Foreign currency transaction (loss) gain	$	(395	)	$	1,369		$	(836	)
Rabbi Trust gain		164			24			384
Unrealized gain (loss) on Mexican peso option contracts		395			(640	)		245
Realized (loss) gain on Mexican peso option contracts		(12	)		(420	)		33
Other		177			249			394
	$	329		$	582		$	220

Self Insurance Plans: We have self-insured medical and dental plans covering all eligible U.S. associates. The claims handling process for the self-insured plans are managed by a third party administrator. Stop-loss insurance coverage limits our liability on a per individual per calendar year basis. The per individual per calendar year stop-loss limit was $150,000 in each calendar year 2010 through 2013. Prior to January 1, 2011, each covered individual could receive up to $2 million in total benefits during his or her lifetime. Effective January 1, 2011, under Health Care Reform, there is no lifetime maximum for overall benefits.

2013  STRATTEC  Annual  Report 35

NOTES TO FINANCIAL STATEMENTS

The expected ultimate cost for claims incurred under the self-insured medical and dental plans as of the balance sheet date is not discounted and is recognized as an expense. The expected ultimate cost of claims is estimated based upon the aggregate liability for reported claims and an estimated liability for claims incurred but not reported, which is based on analysis of historical data, current trends and information available from our third-party administrator. The expected ultimate cost for claims incurred under the self-insured medical and dental plans that has not been paid as of the balance sheet date is included in the accrued payroll and benefits liabilities amount in our accompanying Consolidated Balance Sheets.

Changes in the balance sheet amounts for self-insured plans were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged to Expense		Payments		Balance, End of Year
Year ended June 30, 2013	$	320	$	3,948	$	3,848	$	420
Year ended July 1, 2012	$	320	$	4,148	$	4,148	$	320
Year ended July 3, 2011	$	320	$	3,077	$	3,077	$	320

Warranty Reserve: We have a warranty liability recorded related to our exposure to warranty claims in the event our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension of their warranty programs. In recent fiscal periods, our largest customers have extended their warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers, including STRATTEC. As a result of these actions, during 2012, and 2011 we increased our provision to cover these exposures. Moreover, in 2011, the warranty provision was increased by $1.15 million as a result of our share of the cost associated with a customer’s specific warranty claim involving our product. The current year warranty provision credit includes the impact of favorable adjustments for warranty claims settled during the year.

Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged (Credited) to Expense			Payments		Balance, End of Year
Year ended June 30, 2013	$	4,958	$	(404	)	$	2,054	$	2,500
Year ended July 1, 2012	$	3,856	$	2,050		$	948	$	4,958
Year ended July 3, 2011	$	1,718	$	2,807		$	669	$	3,856

Foreign Currency Translation: The financial statements of our foreign subsidiaries and equity investees are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the average exchange rate for each applicable period for sales, costs and expenses. Foreign currency translation adjustments are included as a component of other accumulated comprehensive loss. Foreign currency transaction gains and losses are included in other income, net in the accompanying Consolidated Statement of Income and Comprehensive Income (loss).

Accumulated Other Comprehensive Loss: Accumulated other comprehensive loss is comprised of the following (thousands of dollars):

	June 30, 2013		July 1, 2012		July 3, 2011
Unrecognized pension and postretirement benefit liabilities, net of tax	$	18,944	$	31,762	$	19,772
Foreign currency translation		3,268		3,995		1,978
	$	22,212	$	35,757	$	21,750

Deferred taxes have not been provided for the foreign currency translation adjustments.

Accounting For 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. The Board of Directors has designated 1,700,000 shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of June 30, 2013 were 153,993. Awards that expire or are cancelled 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 the stock incentive plan. Stock options

2013  STRATTEC  Annual  Report 36

NOTES TO FINANCIAL STATEMENTS

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 our Board of Directors. The options expire 5 to 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. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of our Board of Directors at the time the shares are granted and have a minimum vesting period of three years from the date of grant. Restricted shares granted have voting and dividend rights, regardless of whether the shares are vested or unvested. The restricted stock grants issued to date vest 3 years after the date of grant.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. 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. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules. The expected volatility is determined based on our historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based primarily on historical data. 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 is amortized on a straight line basis over the vesting period. We record stock based compensation only for those awards that are expected to vest.

As of June 30, 2013, there was $550,000 of total unrecognized compensation cost related to stock options granted under the plan. This cost is expected to be recognized over a weighted average period of 10 months. As of June 30, 2013, there was $479,000 of total unrecognized compensation cost related to unvested restricted stock grants outstanding under the plan. This cost is expected to be recognized over a weighted average period of 11 months. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.

Cash received from option exercises was $770,000 in 2013 and $28,000 in each of fiscal year 2012 and 2011. The related income tax benefit was $421,000 in 2013, $9,000 in 2012 and $18,000 in 2011, respectively.

The intrinsic value of stock options exercised and the fair value of stock options vested were as follows (in thousands of dollars):

	Years Ended
	June 30, 2013		July 1, 2012		July 3, 2011
Intrinsic value of options exercised	$	1,110	$	26	$	44
Fair value of stock options vested	$	266	$	268	$	293

The grant date fair values and assumptions used to determine compensation expense were as follows:

Options Granted During	2013			2012			2011
Weighted average grant date fair value:
Options issued at grant date market value		n/a			n/a			n/a
Options issued above grant date market value	$	10.48		$	10.29		$	7.48
Assumptions:
Risk free interest rates		0.95	%		1.23	%		1.08	%
Expected volatility		57.58	%		59.88	%		59.89	%
Expected dividend yield		1.69	%		1.74	%		1.54	%
Expected term (in years)		6.0			6.0			4.0

The range of options outstanding as of June 30, 2013 was as follows:

	Number of Options Outstanding/Exercisable	Weighted Average  Exercise Price Outstanding/Exercisable		Weighted Average  Remaining Contractual Life Outstanding (In Years)
$ 10.92-$ 25.64	224,955/93,455	$	20.34/$14.84		6.3
$ 56.08-$ 63.25	46,500/46,500	$	60.33/$60.33		1.2
		$	27.19/$29.95

Income Taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary

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NOTES TO FINANCIAL STATEMENTS

differences and operating loss carryforwards are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We recognize the benefit of an income tax position only if it is more likely than not (greater than 50 percent) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties on uncertain tax positions are classified in the Provision for Income Taxes in the Consolidated Statements of Income and Comprehensive Income (Loss).

INVESTMENT IN 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 the companies’ products in areas of the world outside of North America and Europe.

VAST do Brasil, a joint venture between VAST LLC and Ifer do Brasil Ltda., services customers in South America. VAST Fuzhou, VAST Great Shanghai and VAST China Co. (collectively known as VAST China), provides 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.

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 loss of joint ventures to STRATTEC of approximately $147,000 during 2013 and $1.1 million during 2012, and equity earnings of joint ventures to STRATTEC of approximately $1.2 million during 2011. During 2012 our joint ventures in China and Brazil continued to incur relocation costs associated with moves to new facilities and start-up costs associated with a new product line. These relocation costs and start-up costs continued for VAST China primarily during the first half of 2013. These items resulted in STRATTEC incurring an equity loss of joint ventures in both 2013 and 2012. In addition, the 2012 equity loss also included a goodwill impairment charge relating to VAST China. STRATTEC’s portion of this impairment charge amounted to $284,000. Effective November 20, 2009, VAST LLC purchased the 40 percent non-controlling interest owned by its former partners in the joint ventures in China. Initially, a loan of $2.5 million was made by each partner, STRATTEC, WITTE and ADAC, to fund a portion of the purchase price. In December 2009, $1 million of each partner’s loan balance was repaid. During 2012, each partner’s outstanding principal and accrued interest balance of $1.5 million and $112,000, respectively, were terminated and converted to additional capital contributions by each partner in VAST LLC. During each of 2013 and 2012, cash capital contributions totaling $600,000 were made to VAST LLC in support of general operating expenses. STRATTEC’s portion of the cash capital contributions during each year totaled $200,000.

In fiscal year 2007, we established a new entity with ADAC forming ADAC-STRATTEC LLC, a Delaware limited liability company. The joint venture was created to establish injection molding and door handle assembly operations in Mexico. STRATTEC holds a 51 percent interest in ADAC-STRATTEC LLC. A Mexican entity, ADAC-STRATTEC de Mexico, exists and 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 $1.1 million in 2013, approximately $1.7 million in 2012, and approximately $910,000 in 2011.

Effective November 30, 2008, STRATTEC established a new entity, STRATTEC POWER ACCESS LLC (“SPA”), which is 80 percent owned by STRATTEC and 20 percent owned by WITTE. SPA supplies the North American portion of the power sliding door, lift gate and deck lid system access control products which were acquired from Delphi Corporation. The financial results of SPA are consolidated with the financial results of STRATTEC and resulted in increased net income to STRATTEC of approximately $1.0 million in 2013, approximately $2.6 million in 2012, and approximately $2.5 million in 2011.

2013  STRATTEC  Annual  Report 38

NOTES TO FINANCIAL STATEMENTS

On April 5, 2013, we acquired a 51 percent ownership interest in NextLock LLC, a newly formed joint venture which will introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner and the owner of the remaining 49 percent interest. The initial capitalization of the NextLock joint venture totaled $1.5 million. STRATTEC’s portion of the initial capitalization totaled $765,000. During the first half of fiscal 2014, we anticipate the NextLock joint venture will incur start-up costs and losses. We anticipate shipments of the new biometric security products to begin during the second half of fiscal 2014. The equity investment in NextLock 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 NextLock resulted in equity loss of joint ventures to STRATTEC of approximately $78,000 during 2013.

Investment in Joint Ventures in the accompanying Consolidated Balance Sheets consisted of the following (in thousands of dollars):

	June 30, 2013		July 1, 2012
Investment in VAST LLC	$	8,479	$	8,139
Investment in NextLock LLC		687		—
	$	9,166	$	8,139

EQUITY (LOSS) EARNINGS OF JOINT VENTURE

As discussed under Investment in Joint Ventures and Majority Owned Subsidiaries, we hold a one-third interest in VAST LLC, for which we exercise significant influence but do not control and are not the primary beneficiary. Our investment in VAST LLC is accounted for using the equity method. The following are summarized statements of operations and summarized balance sheet data for VAST LLC (thousands of dollars):

	Years Ended
	June 30, 2013			July 1, 2012			July 3, 2011
Net sales	$	92,388		$	76,373		$	78,002
Cost of goods sold		76,759			65,211			63,286
Gross profit		15,629			11,162			14,716
Engineering, selling and administrative expense		17,270			14,930			9,527
(Loss) income from operations		(1,641	)		(3,768	)		5,189
Other income (expense), net		497			246			(247	)
(Loss) income before provision for Income taxes		(1,144	)		(3,522	)		4,942
(Benefit) provision for income taxes		(690	)		(297	)		1,202
Net (loss) income	$	(454	)	$	(3,225	)	$	3,740
STRATTEC’s share of VAST LLC net (loss) income	$	(151	)	$	(1,075	)	$	1,247
Intercompany profit eliminations		4			4			(1	)
STRATTEC’s equity (loss) earnings of VAST LLC	$	(147	)	$	(1,071	)	$	1,246

	June 30, 2013		July 1, 2012
Cash and cash equivalents	$	3,801	$	5,622
Receivables, net		23,594		16,025
Inventories, net		10,693		17,756
Other current assets		7,892		10,207
Total current assets		45,980		49,610
Property, plant and equipment, net		23,470		20,753
Other long-term assets		4,218		3,585
Total assets	$	73,668	$	73,948
Current liabilities	$	36,128	$	37,843
Long-term liabilities		11,808		11,381
Total liabilities	$	47,936	$	49,224
Net assets	$	25,732	$	24,724
STRATTEC’s share of net assets	$	8,577	$	8,241

2013  STRATTEC  Annual  Report 39

NOTES TO FINANCIAL STATEMENTS

CREDIT FACILITIES AND GUARANTEES

STRATTEC has a $25 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. The STRATTEC Credit Facility expires August 1, 2014. ADAC-STRATTEC LLC has a $5 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A, which is guaranteed by STRATTEC. The ADAC-STRATTEC Credit Facility expires June 28, 2015. Any borrowings under either of the credit facilities will be secured by our U.S. cash balances, accounts receivable, inventory and fixed assets located in the U.S. Interest on borrowings under these credit facilities is at varying rates based, at our option, on the London Interbank Offering Rate plus 1.0 to 1.75 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the maintenance of 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. There were no outstanding borrowings under the STRATTEC Credit Facility at June 30, 2013 or July 1, 2012. There were no borrowings under the STRATTEC Credit Facility during 2013, 2012 or 2011. Borrowings under the ADAC-STRATTEC Credit Facility totaled $2.25 million at June 30, 2013. The average outstanding borrowings and weighted average interest rate on the ADAC-STRATTEC Credit Facility loans were approximately $1.7 million and 1.99 percent, respectively, during fiscal 2013. There were no borrowings under the ADAC-STRATTEC Credit Facility during 2012 or 2011. We believe that the credit facilities are adequate, along with existing cash balances and cash flow from operations, to meet our anticipated capital expenditure, working capital, dividend and operating expenditure requirements.

COMMITMENTS AND CONTINGENCIES

We have a reserve for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The site 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 initially established in 1995. Due to changing technology and related costs associated with active remediation of the site, in fiscal 2010 the reserve was adjusted based on updated third party estimates to adequately cover the cost for active remediation of the contamination. From 1995 through June 30, 2013, costs of approximately $460,000 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 groundwater monitoring wells that are installed on the property. 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, 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 environmental reserve of $1.4 million at June 30, 2013, is adequate.

At June 30, 2013, we had purchase commitments for zinc, aluminum, other purchased parts and natural gas totaling approximately $11.5 million payable in 2014, $8.8 million payable in 2015 and $2.2 million payable in 2016. Minimum rental commitments under all non-cancelable operating leases with a term in excess of one year are payable as follows: 2014-$526,000; 2015-$302,000. Rental expense under all non-cancelable operating leases totaled approximately $604,000 in 2013, $723,000 in 2012 and $783,000 in 2011.

INCOME TAXES

The provision for income taxes consisted of the following (thousands of dollars):

	2013			2012		2011
Currently payable
Federal	$	(561	)	$	2,116	$	1,181
State		185			219		167
Foreign		1,895			1,200		1,369
		1,519			3,535		2,717
Deferred tax provision (benefit)		3,847			54		(177	)
	$	5,366		$	3,589	$	2,540

2013  STRATTEC  Annual  Report 40

NOTES TO FINANCIAL STATEMENTS

The items accounting for the difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes were as follows:

	2013			2012			2011
U.S. statutory rate		34.0	%		34.1	%		34.0	%
State taxes, net of Federal tax benefit		2.0			(0.1	)		0.4
Foreign subsidiaries		(2.2	)		(3.7	)		(1.9	)
Non-controlling interest		(3.1	)		(7.3	)		(7.2	)
Valuation allowance		(1.0	)		—			0.5
Other		2.1			(0.3	)		(0.7	)
		31.8	%		22.7	%		25.1	%

The components of deferred tax assets and (liabilities) were as follows (thousands of dollars):

	June 30, 2013			July 1, 2012
Deferred income taxes-current:
Repair and maintenance supply parts reserve	$	185		$	190
Payroll-related accruals		1,789			1,589
Environmental reserve		523			546
Inventory reserve		486			437
Allowance for doubtful accounts		185			190
Accrued warranty		703			1,663
Other		396			781
		4,267			5,396
Valuation allowance		—			(177	)
	$	4,267		$	5,219
Deferred income taxes-noncurrent:
Accrued pension obligations	$	(10,572	)	$	(9,482	)
Unrecognized pension and postretirement benefit plan liabilities		11,305			19,467
Accumulated depreciation		(4,256	)		(3,023	)
Stock-based compensation		854			842
Postretirement obligations		325			728
NOL/credit carry-forwards		159			153
Other		1,176			1,057
	$	(1,009	)	$	9,742

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

State operating loss and credit carry-forwards at June 30, 2013 resulted in future benefits of approximately $159,000. These operating loss carry-forwards expire starting 2014 through 2024. We believe that it is more likely than not that the results of future operations will generate sufficient taxable income and foreign source income to realize the deferred tax assets.

Foreign income before the provision for income taxes was $6.0 million in 2013, $5.3 million in 2012 and $3.6 million in 2011. No provision for Federal income taxes was made on earnings of foreign subsidiaries and joint ventures that are considered permanently invested or that would be offset by foreign tax credits upon distribution. Such undistributed earnings at June 30, 2013 were approximately $26.6 million.

The total liability for unrecognized tax benefits was $1.7 million as of June 30, 2013 and was included in Other Long-term Liabilities in the accompanying Consolidated Balance Sheets, and $1.7 million as of July 1, 2012 and was included in Accrued Liabilities: Income Taxes in the accompanying Consolidated Balance Sheets. This liability includes approximately $1.5 million of unrecognized tax benefits at June 30, 2013 and $1.5 million at July 1, 2012 and approximately $195,000 of accrued interest at June 30, 2013 and $187,000 at July 1, 2012. This liability does not include an amount for accrued penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was approximately $1.0 million at June 30, 2013 and $1.2 million at July 1, 2012. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.

2013  STRATTEC  Annual  Report 41

NOTES TO FINANCIAL STATEMENTS

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended June 30, 2013 and July 1, 2012 (thousands of dollars):

	Year Ended
	June 30, 2013			July 1, 2012
Unrecognized tax benefits, beginning of year	$	1,541		$	1,500
Gross increases—tax positions in prior years		—			—
Gross decreases—tax positions in prior years		(47	)		(2	)
Gross increases—current period tax positions		51			43
Tax Years Closed		(35	)		—
Unrecognized tax benefits, end of year	$	1,510		$	1,541

We or one of our subsidiaries files income tax returns in the United States (Federal), Wisconsin (state), Michigan (state) and various other states, Mexico and other foreign jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal 2006 through 2013 for Federal, fiscal 2009 through 2013 for most states and calendar 2008 through 2012 for foreign jurisdictions.

RETIREMENT PLANS AND POSTRETIREMENT COSTS

We have a qualified, noncontributory defined benefit pension plan covering substantially all U.S. associates. Benefits are based on years of service and final average compensation. Our policy is to fund 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 January 1, 2010, an amendment to the qualified defined benefit pension plan discontinued the benefit accruals for salary increases and credited service rendered after December 31, 2009.

We have a noncontributory supplemental executive retirement plan (“SERP”), which is a nonqualified defined benefit plan that essentially mirrors the qualified plan, but provides benefits in excess of certain limits placed on our qualified retirement plan by the Internal Revenue Code. The SERP will pay supplemental pension benefits to certain key associates upon retirement based upon the associates’ years of service and compensation. The SERP is being funded through a Rabbi Trust with BMO Harris Bank N.A. During fiscal 2013, SERP benefits of approximately $5.8 million were cash settled using Rabbi Trust assets and current cash balances. We incurred a settlement charge to operations of approximately $2.1 million pre-tax as a result of a requirement to expense a portion of the unrealized actuarial losses due to the settlement of the SERP obligation. The charge had no effect on our aggregate equity balance because the unrealized actuarial losses were previously recognized during prior periods in accumulated other comprehensive loss. Accordingly, the effect of the settlement charge on our retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss. The Rabbi Trust assets had a value of $1.5 million at June 30, 2013 and $4.4 million at July 1, 2012. The Rabbi Trust assets are included in Other Current Assets in the accompanying Consolidated Balance Sheets. The projected benefit obligation was $1.5 million at June 30, 2013 and $7.2 million at July 1, 2012. The SERP liabilities are included in the pension tables below. However, the Rabbi Trust assets are excluded from the table as they do not qualify as plan assets.

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 is subject to a maximum five year coverage period based on the associate’s retirement date and age. The postretirement health care plan is unfunded.

Amounts included in accumulated other comprehensive loss, net of tax, at June 30, 2013, which have not yet been recognized in net periodic benefit cost are as follows (thousands of dollars):

	Pension and SERP Benefits		Postretirement Benefits
Prior service cost (credit)	$	37	$	(2,662	)
Net actuarial loss		17,256		4,313
	$	17,293	$	1,651

Included in accumulated other comprehensive loss at June 30, 2013 are prior service costs of $12,000 ($7,000 net of tax) and unrecognized net actuarial losses of $2.7 million ($1.7 million net of tax) which are expected to be recognized in pension and SERP net periodic benefit cost during fiscal 2014.

Included in accumulated other comprehensive loss at June 30, 2013 are prior service credits of $764,000 ($474,000 net of tax) and unrecognized net actuarial losses of $847,000 ($525,000 net of tax) which are expected to be recognized in postretirement net periodic benefit cost during fiscal 2014.

The following tables summarize the pension, SERP and postretirement plans’ income and expense, funded status and actuarial assumptions for the years indicated (thousands of dollars). We use a June 30 measurement date for our pension and postretirement plans.

2013  STRATTEC  Annual  Report 42

NOTES TO FINANCIAL STATEMENTS

	Pension and SERP Benefits									Postretirement Benefits
	2013			2012			2011			2013			2012			2011
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$	216		$	150		$	70		$	15		$	11		$	10
Interest cost		4,447			4,784			4,692			181			227			275
Expected return on plan assets		(6,126	)		(6,411	)		(6,445	)		—			—			—
Amortization of prior service cost (credit)		12			12			12			(764	)		(764	)		(764	)
Amortization of unrecognized net loss		4,453			2,414			2,504			898			673			645
Settlement loss		2,144			—			—			—			—			—
Net periodic benefit cost	$	5,146		$	949		$	833		$	330		$	147		$	166

	Pension and SERP Benefits						Postretirement Benefits
	June 30, 2013			July 1, 2012			June 30, 2013			July 1, 2012
WEIGHTED-AVERAGE ASSUMPTIONS:
Benefit Obligations:
Discount rate		5.02	%		4.56	%		5.02	%		4.56	%
Expected return on plan assets		7.5	%		7.5	%		n/a			n/a
Rate of compensation increases—SERP		3.0	%		3.0	%		n/a			n/a
Net Periodic Benefit Cost:
Discount rate		4.56	%		5.57	%		4.56	%		5.57	%
Expected return on plan assets		7.5	%		7.8	%		n/a			n/a
Rate of compensation increases—SERP		3.0	%		3.0	%		n/a			n/a
	Pension and SERP Benefits						Postretirement Benefits
	2013			2012			2013			2012
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	103,383		$	89,609		$	4,475		$	4,586
Service cost		216			150			15			11
Interest cost		4,447			4,784			181			227
Actuarial (gain) loss		(8,381	)		12,663			239			917
Benefits paid		(9,750	)		(3,823	)		(1,370	)		(1,266	)
Benefit obligation at end of year	$	89,915		$	103,383		$	3,540		$	4,475
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	79,517		$	83,023		$	—		$	—
Actual return on plan assets		11,914			(1,683	)		—			—
Employer contribution		8,753			2,000			1,370			1,266
Benefits paid		(9,750	)		(3,823	)		(1,370	)		(1,266	)
Fair value of plan assets at end of year	$	90,434		$	79,517		$	—		$	—
Funded status-prepaid (accrued) benefit obligations	$	519		$	(23,866	)	$	(3,540	)	$	(4,475	)
AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS:
Other long-term assets	$	1,983		$	—		$	—		$	—
Accrued payroll and benefits (current liabilities)		—			(5,664	)		(823	)		(1,010	)
Accrued benefit obligations (long-term liabilities)		(1,464	)		(18,202	)		(2,717	)		(3,465	)
Net amount recognized	$	519		$	(23,866	)	$	(3,540	)	$	(4,475	)
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME:
Net periodic benefit cost	$	5,146		$	949		$	330		$	147
Net actuarial (gain) loss		(14,170	)		20,756			238			917
Amortization of prior service (cost) credits		(12	)		(12	)		764			764
Amortization of unrecognized net loss		(6,597	)		(2,414	)		(898	)		(673	)
Total recognized in other comprehensive income, before tax		(20,779	)		18,330			104			1,008
Total recognized in net periodic benefit cost and other comprehensive income	$	(15,633	)	$	19,279		$	434		$	1,155

2013  STRATTEC  Annual  Report 43

NOTES TO FINANCIAL STATEMENTS

The pension benefits have a separately determined accumulated benefit obligation, which is the actuarial present value of benefits based on service rendered and current and past compensation levels. This differs from the projected benefit obligation in that it includes no assumptions about future compensation levels. The following table summarizes the accumulated benefit obligations and projected benefit obligations for the pension and SERP (thousands of dollars):

	Pension				SERP
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Accumulated benefit obligation	$	88,451	$	96,167	$	1,020	$	6,629
Projected benefit obligation	$	88,451	$	96,167	$	1,464	$	7,216

For measurement purposes, a 7.5 percent annual rate increase in the per capita cost of covered health care benefits was assumed for fiscal 2014; the rate was assumed to decrease gradually to 5 percent by the year 2018 and remain at that level thereafter relating to retirees prior to January 1, 2010.

The health care cost trend assumption has a significant effect on the postretirement benefit amounts reported. A 1% change in the health care cost trend rates would have the following effects (thousands of dollars):

	1% Increase		1% Decrease
Effect on total of service and interest cost components in fiscal 2013	$	3	$	(3	)
Effect on postretirement benefit obligation as of June 30, 2013	$	59	$	(57	)

We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of short and long-term plan liabilities, plan funded status and corporate financial condition. The investment portfolio primarily contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth and value style managers, and small, mid and large market capitalizations. The investment portfolio does not include any real estate holdings, but has a small allocation to hedge funds. The investment policy of the plan prohibits investment in STRATTEC stock. Investment risk is measured and monitored on an ongoing basis through periodic investment portfolio reviews, annual liability measurements and periodic asset/liability studies. The pension plan weighted-average asset allocations by asset category are as follows:

	Target Allocation			June 30, 2013			July 1, 2012
Equity investments		70	%		64	%		64	%
Fixed-income investments		30			30			32
Other		—			6			4
Total		100	%		100	%		100	%

The following is a summary, by asset category, of the fair value of pension plan assets at the June 30, 2013 and June 30, 2012 measurement dates (thousands of dollars):

	June 30, 2013								June 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Asset Category
Cash and cash equivalents	$	—	$	4,572	$	—	$	4,572	$	3,411	$	—	$	—	$	3,411
Equity Securities/Funds:
Small Cap		13,681		—		—		13,681		10,707		—		—		10,707
Mid Cap		9,048		—		—		9,048		8,404		—		—		8,404
Large Cap		18,039		—		—		18,039		17,872		—		—		17,872
International		17,600		—		—		17,600		13,650		—		—		13,650
Fixed Income Bond Funds/Bonds		1,024		21,383		—		22,407		22,313		—		—		22,313
Hedge Funds		—		—		5,087		5,087		—		—		3,160		3,160
Total	$	59,392	$	25,955	$	5,087	$	90,434	$	76,357	$	—	$	3,160	$	79,517

The following table summarizes the changes in Level 3 investments for the pension plan assets (thousands of dollars):

	Fair Value June 30,  2012		Net Purchases and Sales		Realized and Unrealized Gain, net		Fair Value June 30,  2013
Hedge Funds	$	3,160	$	1,420	$	507	$	5,087

There were no transfers in or out of Level 3 investments during the year ended June 30, 2013.

The expected long-term rate of return on U.S. pension plan assets used to calculate the year-end 2013 projected benefit obligation was 7.5 percent. The target asset allocation is 70 percent public equity and 30 percent fixed income. The 7.5 percent is approximated by applying returns of 9.5 percent on public equity and 3 percent on fixed income to the target allocation. The actual historical returns are also relevant. Annualized returns for periods ended June 30, 2013 were 5.33 percent for 5 years, 7.28 percent for 10 years, 5.65 percent for 15 years, 7.53 percent for 20 years, 8.26 percent for 25 years and 9.32 percent for 30 years.

We expect to contribute approximately $3 million to our qualified pension plan and $823,000 to our postretirement health care plan in fiscal 2014. We do not expect to make contributions to our SERP in fiscal 2014. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (thousands of dollars):

2013  STRATTEC  Annual  Report 44

NOTES TO FINANCIAL STATEMENTS

	Pension and SERP Benefits		Postretirement Benefits
2014	$	4,318	$	823
2015	$	5,269	$	724
2016	$	5,030	$	594
2017	$	5,240	$	491
2018	$	5,463	$	392
2019-2023	$	30,903	$	797

All U.S. associates may participate in our 401(k) Plan. We contribute 100 percent up to the first 5 percent of eligible compensation that a participant contributes to the plan. Our contributions to the 401(k) Plan totaled approximately $1.5 million in 2013, $1.4 million in 2012 and $1.3 million in 2011.

SHAREHOLDERS’ EQUITY

We have 12,000,000 shares of authorized common stock, par value $.01 per share, with 3,372,029 and 3,303,784 shares outstanding at June 30, 2013 and July 1, 2012, respectively. Holders of our common stock are entitled to one vote for each share on all matters voted on by shareholders.

Our Board of Directors authorized a stock repurchase program to buy back up to 3,839,395 outstanding shares as of June 30, 2013. As of June 30, 2013, 3,655,322 shares have been repurchased under this program at a cost of approximately $136.4 million.

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 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 period using the treasury stock method. Potential dilutive common shares include outstanding stock options and restricted stock awards. A reconciliation of the components of the basic and diluted per share computations follows (in thousands, except per share amounts):

	2013		2012		2011
Net Income Attributable to STRATTEC	$	9,375	$	8,793	$	5,418
Less: Income Attributable to Participating Securities		171		—		—
Net Income Attributable to Common Shareholders	$	9,204	$	8,793	$	5,418
Weighted Average Shares of Common Stock Outstanding		3,327		3,300		3,285
Incremental Shares—Stock based Compensation		52		30		38
Diluted Weighted Average Shares of Common Stock Outstanding		3,379		3,330		3,323
Basic Earnings Per Share	$	2.77	$	2.66	$	1.65
Diluted Earnings Per Share	$	2.72	$	2.64	$	1.63

Net earnings available to participating securities were not significant in 2012 and 2011. We consider unvested restricted stock that provides the holder with a non-forfeitable right to receive dividends to be a participating security.

As of June 30, 2013, options to purchase 248,000 shares of common stock were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. As of July 1, 2012, options to purchase 248,000 shares of common stock were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. As of July 3, 2011, options to purchase 142,000 shares of common stock were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

STOCK OPTION AND PURCHASE PLANS

A summary of stock option activity under our stock incentive plan was as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balance at June 27, 2010		297,650		$	33.01
Granted		40,000		$	22.47
Exercised		(2,600	)	$	10.92
Expired		(37,650	)	$	60.36
Balance at July 3, 2011		297,400		$	28.32
Granted		40,000		$	26.53
Exercised		(2,600	)	$	10.92
Expired		(2,000	)	$	37.58
Balance at July 1, 2012		332,800		$	28.19
Granted		40,000		$	25.64
Exercised		(55,845	)	$	13.78
Expired		(41,500	)	$	52.68
Terminated		(4,000	)	$	17.59
Balance at June 30, 2013		271,455		$	27.19		5.4	$	3,830
Exercisable as of:
June 30, 2013		139,955		$	29.95		4.4	$	2,104
July 1, 2012		192,700		$	33.69		4.5	$	702
July 3, 2011		155,800		$	38.37		4.8	$	479
Available for grant as of June 30, 2013		153,993

2013  STRATTEC  Annual  Report 45

NOTES TO FINANCIAL STATEMENTS

Options granted at a price greater than the market value on the date of grant included in the table above totaled 40,000 at an exercise price of $25.64 in 2013, 40,000 at an exercise price of $26.53 in 2012 and 40,000 at an exercise price of $22.47 in 2011.

A summary of restricted stock activity under our stock incentive plan was as follows:

				Weighted Average Grant Date
	Shares			Fair Value
Nonvested Balance at June 27, 2010		27,500		$	29.90
Granted		20,000		$	20.66
Vested		(8,600	)	$	47.78
Nonvested Balance at July 3, 2011		38,900		$	21.19
Granted		20,000		$	23.01
Vested		(9,300	)	$	29.00
Forfeited		(200	)	$	23.01
Nonvested Balance at July 1, 2012		49,400		$	20.45
Granted		24,150		$	23.69
Vested		(10,400	)	$	15.44
Forfeited		(1,900	)	$	25.49
Nonvested Balance at June 30, 2013		61,250		$	22.42

We have an Employee Stock Purchase Plan to provide substantially all U.S. full-time associates an opportunity to purchase shares of STRATTEC common stock through payroll deductions. A participant may contribute a maximum of $5,200 per calendar year to the plan. On the last day of each month or if such date is not a trading day on the most recent previous trading day, participant account balances are used to purchase shares of our common stock at the average of the highest and lowest reported sales prices of a share of STRATTEC common stock on the NASDAQ Global Market. A total of 100,000 shares may be issued under the plan. Shares issued from treasury stock under the plan totaled 2,000 at an average price of $26.88 during 2013, 2,406 at an average price of $22.17 during 2012 and 2,323 at an average price of $26.78 during 2011. A total of 71,351 shares are available for purchase under the plan as of June 30, 2013.

EXPORT SALES

Export sales are summarized below (thousands of dollars):

	2013			2012			2011
Export Sales	$	111,159		$	102,022		$	103,232
Percent of Net Sales		37	%		37	%		40	%

These sales were primarily to automotive manufacturing assembly plants in Canada, China, Mexico and Korea.

SALES AND RECEIVABLE CONCENTRATION

Sales to our largest customers were as follows (thousands of dollars and percent of total net sales):

	2013					2012					2011
	Sales		%			Sales		%			Sales		%
General Motors Company	$	56,972		19	%	$	64,588		23	%	$	63,617		24	%
Ford Motor Company		44,773		15	%		33,854		12	%		26,930		10	%
Chrysler Group LLC		95,476		32	%		90,796		33	%		80,889		31	%
	$	197,221		66	%	$	189,238		68	%	$	171,436		66	%

Receivables from our largest customers were as follows (thousands of dollars and percent of gross receivables):

	June 30, 2013					July 1, 2012
	Receivables		%			Receivables		%
General Motors Company	$	8,672		18	%	$	10,230		23	%
Ford Motor Company		6,533		14	%		5,738		13	%
Chrysler Group LLC		15,698		33	%		14,157		31	%
	$	30,903		65	%	$	30,125		67	%

2013  STRATTEC  Annual  Report 46

REPORTS

REPORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL

CONTROL OVER FINANCIAL REPORTING

STRATTEC SECURITY CORPORATION is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements and notes included in this annual report have been prepared in conformity with accounting principles generally accepted in the United States of America and necessarily include some amounts that are based on management’s best estimates and judgments.

We, as management of STRATTEC SECURITY CORPORATION, are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

The Audit Committee of the Company’s Board of Directors, consisting entirely of independent directors, meets regularly with management and the independent registered public accounting firm, and reviews audit plans and results, as well as management’s actions taken in discharging responsibilities for accounting, financial reporting, and internal control. Deloitte & Touche LLP, independent registered public accounting firm, has direct and confidential access to the Audit Committee at all times to discuss the results of their examinations.

Management assessed the Corporation’s system of internal control over financial reporting as of June 30, 2013, in relation to criteria for effective internal control over financial reporting as described in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management concluded that, as of June 30, 2013, its system of internal control over financial reporting was effective and met the criteria of the Internal Control – Integrated Framework. Deloitte & Touche LLP, independent registered public accounting firm, has issued an attestation report on the Corporation’s internal control over financial reporting, which is included herein.

Frank J. Krejci	Patrick J. Hansen
President and	Senior Vice President and
Chief Executive Officer	Chief Financial Officer

2013  STRATTEC  Annual  Report 47

REPORTS

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of STRATTEC SECURITY CORPORATION:

We have audited the internal control over financial reporting of STRATTEC SECURITY CORPORATION and subsidiaries (the “Company”) as of June 30, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report on Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2013, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended June 30, 2013 of the Company and our report dated September 9, 2013 expressed an unqualified opinion on those consolidated financial statements.

Deloitte & Touche LLP

Milwaukee, Wisconsin

September 9, 2013

2013  STRATTEC  Annual  Report 48

REPORTS

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of STRATTEC SECURITY CORPORATION:

We have audited the accompanying consolidated balance sheets of STRATTEC SECURITY CORPORATION and subsidiaries (the “Company”) as of June 30, 2013 and July 1, 2012, and the related consolidated statements of income and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of STRATTEC SECURITY CORPORATION and subsidiaries as of June 30, 2013 and July 1, 2012, and the results of their operations and their cash flows for the three years in the period ended June 30, 2013, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of June 30, 2013, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 9, 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Deloitte & Touche LLP

Milwaukee, Wisconsin

September 9, 2013

2013  STRATTEC  Annual  Report 49

FINANCIAL SUMMARY

FIVE-YEAR FINANCIAL SUMMARY

The financial data for each period presented below reflects the consolidated results of STRATTEC SECURITY CORPORATION and its wholly owned Mexican subsidiary and its majority owned subsidiaries. Fiscal year 2009 has been retrospectively adjusted for the adoption of a new accounting standard issued by the Financial Accounting Standards Board (FASB) related to non-controlling interests in consolidated financial statements. The information below should be read in conjunction with “Management’s Discussion and Analysis,” and the Financial Statements and Notes thereto included elsewhere herein. The following data are in thousands of dollars except per share amounts.

	Fiscal Years
	2013			2012			2011			2010			2009
INCOME STATEMENT DATA
Net sales	$	298,179		$	279,234		$	260,933		$	207,964		$	126,097
Gross profit		53,866			50,263			42,163			33,042			13,240
Engineering, selling, and administrative expenses		34,934			33,920			33,443			29,939			25,480
Loss on settlement of pension obligation		2,144			—			—			—			—
Impairment charge		—			—			—			223			—
Environmental reserve adjustment		—			—			—			(1,125	)		—
Provision for (recovery of) doubtful accounts		—			—			—			(421	)		500
Income (loss) from operations		16,788			16,343			8,720			4,426			(12,740	)
Interest income		21			69			119			86			731
Equity (loss) earnings of joint ventures		(225	)		(1,071	)		1,246			1,008			245
Interest expense		(34	)		(81	)		(175	)		(225	)		(164	)
Other income, net		329			582			220			312			804
Income (loss) before taxes and non-controlling interest		16,879			15,842			10,130			5,607			(11,124	)
Provision (benefit) for income taxes		5,366			3,589			2,540			1,666			(4,222	)
Net income (loss)		11,513			12,253			7,590			3,941			(6,902	)
Net income (loss) attributable to non-controlling interest		2,138			3,460			2,172			520			(780	)
Net income (loss) attributable to STRATTEC SECURITY CORPORATION	$	9,375		$	8,793		$	5,418		$	3,421		$	(6,122	)
Earnings (Loss) per share:
Basic	$	2.77		$	2.66		$	1.65		$	1.05		$	(1.87	)
Diluted	$	2.72		$	2.64		$	1.63		$	1.04		$	(1.86	)
Cash dividends declared per share	$	0.40		$	0.40		$	1.20		$	—		$	0.30
BALANCE SHEET DATA
Net working capital	$	55,774		$	44,318		$	43,414		$	43,777		$	41,710
Total assets	$	169,500		$	166,038		$	148,088		$	145,002		$	128,189
Long-term liabilities	$	6,895		$	21,667		$	7,036		$	22,982		$	24,784
Total STRATTEC SECURITY CORPORATION
Shareholders’ equity	$	104,218		$	80,552		$	86,215		$	74,126		$	71,418

2013  STRATTEC  Annual  Report 50

FINANCIAL SUMMARY / PERFORMANCE GRAPH

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following data are in thousands of dollars except per share amounts.

						Net Income Attributable to		Earnings Per Share				Cash Dividends Declared		Market Price Per Share
	Quarter	Net Sales		Gross Profit		STRATTEC		Basic		Diluted		Per Share		High		Low
2013	First	$	70,807	$	13,713	$	2,670	$	0.79	$	0.78	$	0.10	$	24.50	$	20.20
	Second		72,243		12,307		2,394		0.71		0.70		0.30	$	25.00	$	21.06
	Third		74,658		13,221		1,094		0.32		0.32		—	$	31.83	$	25.00
	Fourth		80,471		14,625		3,217		0.94		0.92		—	$	42.30	$	28.00
	TOTAL	$	298,179	$	53,866	$	9,375	$	2.77	$	2.72	$	0.40
2012	First	$	66,377	$	11,504	$	1,282	$	0.39	$	0.39	$	0.10	$	27.37	$	20.69
	Second		65,886		11,240		1,548		0.47		0.47		0.10	$	25.71	$	19.18
	Third		70,608		13,052		2,728		0.83		0.82		0.10	$	24.73	$	18.87
	Fourth		76,363		14,467		3,235		0.98		0.97		0.10	$	23.24	$	19.40
	TOTAL	$	279,234	$	50,263	$	8,793	$	2.66	$	2.64	$	0.40

Registered shareholders of record at June 30, 2013, were 1,654.

PERFORMANCE GRAPH

The chart below shows a comparison of the cumulative return since June 29, 2008 had $100 been invested at the close of business on June 29, 2008 in STRATTEC Common Stock, the NASDAQ Composite Index (all issuers), and the Dow Jones U.S. Auto Parts Index.

	6/29/08		6/28/09		6/27/10		7/3/11		7/1/12		6/30/13
STRATTEC**		100.00		40.34		63.87		63.71		64.58		116.19
NASDAQ Composite Index		100.00		80.56		93.30		124.28		132.47		155.74
Dow Jones U.S. Auto Parts Index		100.00		73.09		93.50		157.44		121.47		174.25

* $100 invested on 6/29/08 in stock or index-including reinvestment of dividends. Indexes calculated on a month-end basis.

** The Friday fiscal year end closing price of STRATTEC Common Stock on June 27, 2008 was $34.99, the closing price on June 26, 2009 was $13.90, the closing price on June 25, 2010 was $22.01, the closing price on July 1, 2011 was $21.13, the closing price on June 29, 2012 was $21.04 and the closing price on June 28, 2013 was $37.36.

2013  STRATTEC  Annual  Report 51

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-103219, 333-31002, 333-45221, 333-4300, and 333-140715 on Form S-8 of our reports dated September 9, 2013, relating to the consolidated financial statements of STRATTEC SECURITY CORPORATION, and the effectiveness of STRATTEC SECURITY CORPORATION’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of STRATTEC SECURITY CORPORATION for the year ended June 30, 2013.

/s/ DELOITTE & TOUCHE LLP

Milwaukee, Wisconsin September 9, 2013

EX-31

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 annual report on Form 10-K 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:  September 9, 2013
	/s/ Frank J. Krejci
	Frank J. Krejci
	Chief Executive Officer

       

EX-31

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 annual report on Form 10-K 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:  September 9, 2013
	/s/ Patrick J. Hansen
	Patrick J. Hansen
	Chief Executive 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 Annual Report on Form 10-K of the Company for the year ended June 30, 2013 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and information contained in that Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  September 9, 2013
	/s/ Frank J. Krejci
	Frank J. Krejci
	Chief Executive Officer

Date:  September 9, 2013
	/s/ Patrick J. Hansen
	Patrick J. Hansen
	Chief Executive 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

Stock Option and Purchase Plans (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Stock Option And Purchase Plans (Additional Textual) [Abstract]
Options granted at price greater than market value	40,000	40,000	40,000
Exercise price of options granted at price greater than market value	$ 25.64	$ 26.53	$ 22.47
Employee Stock Purchase Plan
Stock Option And Purchase Plans (Textual) [Abstract]
Maximum Contribution per participant per calendar year	$ 5,200
Maximum number of shares authorized for issuance from treasury under the Employee Stock Purchase Plan	100,000
Shares issued from treasury stock under Employee Stock Purchase Plan	2,000	2,406	2,323
Employee stock purchase plan average price of shares purchased during period	$ 26.88	$ 22.17	$ 26.78
Shares available for issuance from treasury under the Employee Stock Purchase plan	71,351

XML

Sales and Receivable Concentration (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Sales to largest customers
Sales to largest customers, Amount	$ 197,221	$ 189,238	$ 171,436
Sales to largest customers, Percentage of net sales	66.00%	68.00%	66.00%
General Motors Company
Sales to largest customers
Sales to largest customers, Amount	56,972	64,588	63,617
Sales to largest customers, Percentage of net sales	19.00%	23.00%	24.00%
Ford Motor Company
Sales to largest customers
Sales to largest customers, Amount	44,773	33,854	26,930
Sales to largest customers, Percentage of net sales	15.00%	12.00%	10.00%
Chrysler Group LLC
Sales to largest customers
Sales to largest customers, Amount	$ 95,476	$ 90,796	$ 80,889
Sales to largest customers, Percentage of net sales	32.00%	33.00%	31.00%

XML

Earnings Per Share (''EPS'')

12 Months Ended

Jun. 30, 2013

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 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 period using the treasury stock method. Potential dilutive common shares include outstanding stock options and restricted stock awards.

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

	2013		2012			2011
Net Income Attributable to STRATTEC	$	9,375	$	8,793	$		5,418
Less: Income Attributable to Participating Securities		171		—			—
Net Income Attributable to Common Shareholders	$	9,204	$	8,793	$		5,418
Weighted Average Shares of Common Stock Outstanding		3,327		3,300			3,285
Incremental Shares – Stock based Compensation		52		30			38
Diluted Weighted Average Shares of Common Stock Outstanding		3,379		3,330			3,323
Basic Earnings Per Share	$	2.77	$	2.66	$		1.65
Diluted Earnings Per Share	$	2.72	$	2.64	$		1.63

Net earnings available to participating securities were not significant in 2012 and 2011. We consider unvested restricted stock that provides the holder with a non-forfeitable right to receive dividends to be a participating security.

As of June30, 2013, options to purchase248,000shares of common stock were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. As of July1, 2012, options to purchase 248,000 shares of common stock were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. As of July3, 2011, options to purchase 142,000 shares of common stock were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

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Equity (Loss) Earnings of Joint Venture (Details) (USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Summarized statements of operations
STRATTEC’s equity (loss) earnings of VAST LLC	$ (225,000)	$ (1,071,000)	$ 1,246,000
Vehicle Access Systems Technology Llc
Summarized statements of operations
Net sales	92,388,000	76,373,000	78,002,000
Cost of goods sold	76,759,000	65,211,000	63,286,000
Gross profit	15,629,000	11,162,000	14,716,000
Engineering, selling and administrative expense	17,270,000	14,930,000	9,527,000
(Loss) income from operations	(1,641,000)	(3,768,000)	5,189,000
Other income (expense), net	497,000	246,000	(247,000)
(Loss) income before provision for Income taxes	(1,144,000)	(3,522,000)	4,942,000
(Benefit) provision for income taxes	(690,000)	(297,000)	1,202,000
Net (loss) income	(454,000)	(3,225,000)	3,740,000
STRATTEC’s share of VAST LLC net (loss) income	(151,000)	(1,075,000)	1,247,000
Intercompany profit eliminations	4,000	4,000	(1,000)
STRATTEC’s equity (loss) earnings of VAST LLC	$ (147,000)	$ (1,071,000)	$ 1,246,000

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2013	Jul. 01, 2012
Allowance for doubtful accounts receivable	$ 500	$ 500
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	12,000,000	12,000,000
Common stock, shares issued	6,998,702	6,932,457
Treasury stock, shares	3,626,673	3,628,673

XML

Investment in Joint Ventures and Majority Owned Subsidiaries

12 Months Ended

Jun. 30, 2013

Investment in Joint Ventures and Majority Owned Subsidiaries

INVESTMENT IN JOINT VENTURES ANDMAJORITYOWNEDSUBSIDIARIES

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 the companies’ products in areas of the world outside of North America and Europe.

VAST do Brasil, a joint venture between VAST LLC and Ifer do Brasil Ltda., services customers in South America. VAST Fuzhou, VAST Great Shanghai and VAST China Co. (collectively known as VAST China), provides 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.

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 loss of joint ventures to STRATTEC of approximately $147,000 during 2013 and $1.1 million during 2012, and equity earnings of joint ventures to STRATTEC of approximately $1.2 million during 2011. During 2012 our joint ventures in China and Brazil continued to incur relocation costs associated with moves to new facilities and start-up costs associated with a new product line. These relocation costs and start-up costs continued for VAST China primarily during the first half of 2013. These items resulted in STRATTEC incurring an equity loss of joint ventures in both 2013 and 2012. In addition, the 2012 equity loss also included a goodwill impairment charge relating to VAST China. STRATTEC’s portion of this impairment charge amounted to $284,000. Effective November20, 2009, VAST LLC purchased the 40 percent non-controlling interest owned by its former partners in the joint ventures in China. Initially, a loan of $2.5 million was made by each partner, STRATTEC, WITTE and ADAC, to fund a portion of the purchase price. In December 2009, $1 million of each partner’s loan balance was repaid. During 2012, each partner’s outstanding principal and accrued interest balance of $1.5 million and $112,000, respectively, were terminated and converted to additional capital contributions by each partner in VAST LLC. During each of 2013 and 2012, cash capital contributions totaling $600,000 were made to VAST LLC in support of general operating expenses. STRATTEC’s portion of the cash capital contributions during each year totaled $200,000In fiscal year 2007, we established a new entity with ADAC forming ADAC-STRATTEC LLC, a Delaware limited liability company. The joint venture was created to establish injection molding and door handle assembly operations in Mexico. STRATTEC holds a 51 percent interest in ADAC-STRATTEC LLC. A Mexican entity, ADAC-STRATTEC de Mexico, exists and 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 $1.1 million in 2013, approximately $1.7 million in 2012, and approximately $910,000 in 2011.

Effective November30, 2008, STRATTEC established a new entity, STRATTEC POWER ACCESS LLC (“SPA”), which is 80 percent owned by STRATTEC and 20 percent owned by WITTE. SPA supplies the North American portion of the powerslidingdoor,liftgateanddecklidsystemaccesscontrolproducts which were acquired from Delphi Corporation. The financial results of SPA are consolidated with the financial results of STRATTEC and resulted in increased net income to STRATTEC of approximately $1.0 million in 2013, approximately $2.6 million in 2012, and approximately $2.5 million in 2011.

On April5, 2013, we acquired a 51 percent ownership interest in NextLock LLC, a newly formed joint venture which will introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner and the owner of the remaining 49 percent interest.  The initial capitalization of the NextLock joint venture totaled $1.5 million.  STRATTEC’s portion of the initial capitalization totaled $765,000During the first half of fiscal 2014, we anticipate the NextLock joint venture will incur start-up costs and losses.  We anticipate shipments of the new biometric security products to begin during the second half of fiscal 2014. The equity investment in NextLock 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 NextLock resulted in equity loss of joint ventures to STRATTEC of approximately $78,000 during 2013.

Investment in Joint Ventures in the accompanying Consolidated Balance Sheets consisted of the following (in thousands of dollars):

		June30,2013		July1,2012
Investment in VASTLLC	$	8,479	$	8,139
Investment in NextLock LLC		687		—
	$	9,166	$	8,139

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Equity (Loss) Earnings of Joint Venture (Tables)

12 Months Ended

Jun. 30, 2013

Summarized Statements of Operations

	Years Ended
	June30,2013			July1,2012			July3,2011
Net sales	$	92,388		$	76,373		$	78,002
Cost of goods sold		76,759			65,211			63,286
Gross profit		15,629			11,162			14,716
Engineering, selling and administrative expense		17,270			14,930			9,527
(Loss) income from operations		(1,641	)		(3,768	)		5,189
Other income (expense), net		497			246			(247	)
(Loss) income before provision for Income taxes		(1,144	)		(3,522	)		4,942
(Benefit) provision for income taxes		(690	)		(297	)		1,202
Net (loss) income		(454	)		(3,225	)		3,740
STRATTEC’s share of VAST LLC net (loss) income	$	(151	)	$	(1,075	)	$	1,247
Intercompany profit eliminations		4			4			(1	)
STRATTEC’s equity (loss) earnings of VAST LLC	$	(147	)	$	(1,071	)	$	1,246

Summarized Balance Sheets

	June30,2013		July1,2012
Cash and cash equivalents	$	3,801	$	5,622
Receivables, net		23,594		16,025
Inventories, net		10,693		17,756
Other current assets		7,892		10,207
Total current assets		45,980		49,610
Property, plant and equipment, net		23,470		20,753
Other long-term assets		4,218		3,585
Total assets	$	73,668	$	73,948
Current liabilities	$	36,128	$	37,843
Long-term liabilities		11,808		11,381
Total liabilities	$	47,936	$	49,224
Net assets	$	25,732	$	24,724
STRATTEC’s share of net assets	$	8,577	$	8,241

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Retirement Plans and Postretirement Costs (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jun. 30, 2012
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	$ 90,434	$ 79,517
Level 1
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	59,392	76,357
Level 2
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	25,955
Level 3
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	5,087	3,160
Equity investments | Small Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	13,681	10,707
Equity investments | Mid Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	9,048	8,404
Equity investments | Large Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	18,039	17,872
Equity investments | International Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	17,600	13,650
Equity investments | Level 1 | Small Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	13,681	10,707
Equity investments | Level 1 | Mid Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	9,048	8,404
Equity investments | Level 1 | Large Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	18,039	17,872
Equity investments | Level 1 | International Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	17,600	13,650
Equity investments | Level 2 | Small Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Equity investments | Level 2 | Mid Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Equity investments | Level 2 | Large Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Equity investments | Level 2 | International Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Equity investments | Level 3 | Small Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Equity investments | Level 3 | Mid Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Equity investments | Level 3 | Large Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Equity investments | Level 3 | International Cap
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Fixed Income Bond Funds/Bonds
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	22,407	22,313
Fixed Income Bond Funds/Bonds | Level 1
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	1,024	22,313
Fixed Income Bond Funds/Bonds | Level 2
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	21,383
Fixed Income Bond Funds/Bonds | Level 3
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Hedge Funds
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	5,087	3,160
Hedge Funds | Level 1
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Hedge Funds | Level 2
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets
Hedge Funds | Level 3
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	5,087	3,160
Cash and Cash Equivalents
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	4,572	3,411
Cash and Cash Equivalents | Level 1
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets		3,411
Cash and Cash Equivalents | Level 2
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets	4,572
Cash and Cash Equivalents | Level 3
Summary, by asset category, of the fair value of pension plan assets
Fair value of pension plan assets

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Commitments and Contingencies (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Commitments and Contingencies (Textual) [Abstract]
Cost incurred inception to date on installation and on-going monitoring of wells	$ 460,000
Environmental	1,414,000	1,436,000
Amount purchased for zinc, aluminum, other purchased parts and natural gas year 1	11,500,000
Amount purchased for zinc, aluminum, other purchased parts and natural gas year 2	8,800,000
Amount purchased for zinc, aluminum, other purchased parts and natural gas year 3	2,200,000
Minimum rental commitments under all non-cancelable operating leases year 1	526,000
Minimum rental commitments under all non-cancelable operating leases year 2	302,000
Rental expense under all non-cancelable operating leases	$ 604,000	$ 723,000	$ 783,000

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Stock Option and Purchase Plans

12 Months Ended

Jun. 30, 2013

Stock Option and Purchase Plans

Stock Option and Purchase Plans

A summary of stock option activity under our stock incentive plan was as follows:

	Shares			WeightedAverage Exercise Price		WeightedAverage Remaining Contractual Term (in years)		Aggregate Intrinsic Value (inthousands)
Balance at June27, 2010		297,650		$	33.01
Granted		40,000		$	22.47
Exercised		(2,600	)	$	10.92
Expired		(37,650	)	$	60.36
Balance at July3, 2011		297,400		$	28.32
Granted		40,000		$	26.53
Exercised		(2,600	)	$	10.92
Expired		(2,000	)	$	37.58
Balance at July1, 2012		332,800		$	28.19
Granted		40,000		$	25.64
Exercised		(55,845	)	$	13.78
Expired		(41,500	)	$	52.68
Terminated		(4,000	)	$	17.59
Balance at June30, 2013		271,455		$	27.19		5.4	$	3,830
Exercisable as of:
June30, 2013		139,955		$	29.95		4.4	$	2,104
July1, 2012		192,700		$	33.69		4.5	$	702
July3, 2011		155,800		$	38.37		4.8	$	479
Available for grant as of June30, 2013		153,993

Options granted at a price greater than the market value on the date of grant included in the table above totaled 40,000 at an exercise price of $25.64in 2013, 40,000 at an exercise price of $26.53 in 2012 and 40,000 at an exercise price of $22.47 in 2011.

A summary of restricted stock activity under our stock incentive plan was as follows:

	Shares			WeightedAverage GrantDate FairValue
Nonvested Balance at June27, 2010		27,500			$	29.90
Granted		20,000			$	20.66
Vested		(8,600	)		$	47.78
Nonvested Balance at July3, 2011		38,900			$	21.19
Granted		20,000			$	23.01
Vested		(9,300	)		$	29.00
Forfeited		(200	)		$	23.01
Nonvested Balance at July1, 2012		49,400			$	20.45
Granted		24,150			$	23.69
Vested		(10,400	)		$	15.44
Forfeited		(1,900	)		$	25.49
Nonvested Balance at June30, 2013		61,250			$	22.42

We have an Employee Stock Purchase Plan to provide substantially all U.S. full-time associates an opportunity to purchase shares of STRATTEC common stock through payroll deductions. A participant may contribute a maximum of $5,200 per calendar year to the plan. On the last day of each month or if such date is not a trading day on the most recent previous trading day, participant account balances are used to purchase shares of our common stock at the average of the highest and lowest reported sales prices of a share of STRATTEC common stock on the NASDAQ Global Market. A total of 100,000 shares may be issued under the plan. Shares issued from treasury stock under the plan totaled 2,000 at an average price of $26.88 during 2013, 2,406 at an average price of $22.17 during 2012 and 2,323 at an average price of $26.78 during 2011. A total of 71,351 shares are available for purchase under the plan as of June30, 2013.

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Organization and Summary of Significant Accounting Policies (Details 17) (USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Weighted average grant date fair value:
Options issued at grant date market value
Options issued above grant date market value	$ 10.48	$ 10.29	$ 7.48
Assumptions:
Risk free interest rates	0.95%	1.23%	1.08%
Expected volatility	57.58%	59.88%	59.89%
Expected dividend yield	1.69%	1.74%	1.54%
Expected term (in years)	6 years	6 years	4 years

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Currently payable:
Federal	$ (561)	$ 2,116	$ 1,181
State	185	219	167
Foreign	1,895	1,200	1,369
Total current income tax expense	1,519	3,535	2,717
Deferred tax (benefit) provision	3,847	54	(177)
Total tax provision (benefit)	$ 5,366	$ 3,589	$ 2,540

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Organization and Summary of Significant Accounting Policies (Details 7) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Intangible assets carrying value and accumulated amortization
Patents, engineering drawings and software	$ 890	$ 890
Less: accumulated amortization	(453)	(354)
Total	$ 437	$ 536

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

12 Months Ended

Jun. 30, 2013

Reconciliation of the Components of the 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):

	2013		2012			2011
Net Income Attributable to STRATTEC	$	9,375	$	8,793	$		5,418
Less: Income Attributable to Participating Securities		171		—			—
Net Income Attributable to Common Shareholders	$	9,204	$	8,793	$		5,418
Weighted Average Shares of Common Stock Outstanding		3,327		3,300			3,285
Incremental Shares – Stock based Compensation		52		30			38
Diluted Weighted Average Shares of Common Stock Outstanding		3,379		3,330			3,323
Basic Earnings Per Share	$	2.77	$	2.66	$		1.65
Diluted Earnings Per Share	$	2.72	$	2.64	$		1.63

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Retirement Plans and Postretirement Costs (Tables)

12 Months Ended

Jun. 30, 2013

Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax

Amounts included in accumulated other comprehensive loss, net of tax, at June30, 2013, which have not yet been recognized in net periodic benefit cost are as follows (thousands of dollars):

	PensionandSERPBenefits		PostretirementBenefits
Prior service cost (credit)	$	37	$	(2,662	)
Net actuarial loss		17,256		4,313
	$	17,293	$	1,651

Summary of Pension Supplemental Executive Retirement Plan and Postretirement Plans Income and Expense

The following tables summarize the pension, SERP and postretirement plans’ income and expense, funded status and actuarial assumptions for the years indicated (thousands of dollars). We use a June30 measurement date for our pension and postretirement plans.

	Pension and SERP Benefits									Postretirement Benefits
	2013			2012			2011			2013			2012			2011
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$	216		$	150		$	70		$	15		$	11		$	10
Interest cost		4,447			4,784			4,692			181			227			275
Expected return on plan assets		(6,126	)		(6,411	)		(6,445	)		—			—			—
Amortization of prior service cost (credit)		12			12			12			(764	)		(764	)		(764	)
Amortization of unrecognized net loss		4,453			2,414			2,504			898			673			645
Settlement loss		2,144			—			—			—			—			—
Net Periodic benefit cost	$	5,146		$	949		$	833		$	330		$	147		$	166

	PensionandSERPBenefits							PostretirementBenefits
	June30, 2013			July1, 2012			June30, 2013				July1, 2012
WEIGHTED-AVERAGE ASSUMPTIONS
Benefit Obligations:
Discount rate		5.02	%		4.56	%			5.02	%		4.56	%
Expected return on plan assets		7.5	%		7.5	%			n/a			n/a
Rate of compensation increases—SERP		3.0	%		3.0	%			n/a			n/a
Net Periodic Benefit Cost:
Discount rate		4.56	%		5.57	%			4.56	%		5.57	%
Expected return on plan assets		7.5	%		7.8	%			n/a			n/a
Rate of compensation increases—SERP		3.0	%		3.0	%			n/a			n/a

	Pension and SERP Benefits							Postretirement Benefits
	2013			2012			2013					2012
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	103,383		$	89,609		$		4,475		$		4,586
Service cost		216			150				15				11
Interest cost		4,447			4,784				181				227
Actuarial loss (gain)		(8,381	)		12,663				239				917
Benefits paid		(9,750	)		(3,823	)			(1,370	)			(1,266	)
Benefit obligation at end of year	$	89,915		$	103,383		$		3,540		$		4,475
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	79,517		$	83,023		$		—		$		—
Actual return on plan assets		11,914			(1,683	)			—				—
Employer contribution		8,753			2,000				1,370				1,266
Benefits paid		(9,750	)		(3,823	)			(1,370	)			(1,266	)
Fair value of plan assets at end of year		90,434			79,517				—				—
Funded status – prepaid(accrued) benefit obligations	$	519		$	(23,866	)	$		(3,540	)	$		(4,475	)
AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS:
Other long-term assets	$	1,983		$	—		$		—		$		—
Accrued payroll and benefits (current liabilities)		—			(5,664	)			(823	)			(1,010	)
Accrued benefit obligations (long-term liabilities)		(1,464	)		(18,202	)			(2,717	)			(3,465	)
Net amount recognized	$	519		$	(23,866	)	$		(3,540	)	$		(4,475	)
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME:
Net periodic benefit cost	$	5,146		$	949		$		330		$		147
Net actuarial (gain) loss		(14,170	)		20,756				238				917
Amortization of prior service (cost) credits		(12	)		(12	)			764				764
Amortization of unrecognized net loss		(6,597	)		(2,414	)			(898	)			(673	)
Total recognized in other comprehensive income, before tax		(20,779	)		18,330				104				1,008
Total recognized in net periodic benefit cost and other comprehensive income	$	(15,633	)	$	19,279		$		434		$		1,155

The Accumulated Benefit Obligations and Projected Benefit Obligations for the Pension and SERP

The following table summarizes the accumulated benefit obligations and projected benefit obligations for the pension and SERP (thousands of dollars):

	Pension					SERP
	June30,2013		July1,2012			June30,2013			July 1,2012
Accumulated benefit obligation	$	88,451		$	96,167		$	1,020		$	6,629
Projected benefit obligation	$	88,451		$	96,167		$	1,464		$	7,216

Significant Effect of Health Care Trend on the Postretirement Benefit

The health care cost trend assumption has a significant effect on the postretirement benefit amounts reported. A 1% change in the health care cost trend rates would have the following effects (thousands of dollars):

	1%Increase		1%Decrease
Effect on total of service and interest cost components in fiscal 2013	$	3	$	(3	)
Effect on postretirement benefit obligation as of June30, 2013	$	59	$	(57	)

Pension Plan Weighted-Average Asset Allocations by Asset Category

The pension plan weighted-average asset allocations by asset category are as follows:

	TargetAllocation			June30,2013			July1,2012
Equity investments		70	%		64	%		64	%
Fixed-income Investments		30	%		30	%		32	%
Other		—			6	%		4	%
Total		100	%		100	%		100	%

Summary, by Asset Category, of the Fair Value of Pension Plan Assets

The following is a summary, by asset category, of the fair value of pension plan assets at the June30, 2013 and June30, 2012 measurement dates (thousands of dollars):

	June30, 2013												June30, 2012
Asset Category	Level1			Level2			Level3			Total				Level 1			Level2			Level3			Total
Cash and cash equivalents	$	—	$		4,572	$		—	$		4,572	$			3,411	$		—	$		—	$		3,411
Equity Securities/Funds:
Small Cap		13,681			—			—			13,681				10,707			—			—			10,707
Mid Cap		9,048			—			—			9,048				8,404			—			—			8,404
Large Cap		18,039			—			—			18,039				17,872			—			—			17,872
International		17,600			—			—			17,600				13,650			—			—			13,650
Fixed Income Bond Funds/Bonds		1,024			21,383			—			22,407				22,313			—			—			22,313
Hedge Funds		—			—			5,087			5,087				—			—			3,160			3,160
Total	$	59,392	$		25,955	$		5,087	$		90,434	$			76,357	$		—	$		3,160	$		79,517

Changes in Level 3 Investments for the Pension Plan Assets

The following table summarizes the changes in Level 3 investments for the pension plan assets (thousands of dollars):

	FairValue June30,2012		NetPurchases and Sales			Realizedand Unrealized Gain, net			FairValue June30,2013
Hedge Funds	$	3,160		$	1,420		$	507	$	5,087

Expected Future Benefit Payments

Wedonotexpecttomakecontributions toourSERPinfiscal2014.The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (thousands of dollars):

	PensionandSERPBenefits		PostretirementBenefits
2014	$	4,318		$	823
2015	$	5,269		$	724
2016	$	5,030		$	594
2017	$	5,240		$	491
2018	$	5,463		$	392
2019-2023	$	30,903		$	797

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Organization and Summary of Significant Accounting Policies (Details 15) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Accumulated other comprehensive loss
Unrecognized pension and postretirement benefit liabilities, net of tax	$ 18,944	$ 31,762	$ 19,772
Foreign currency translation	3,268	3,995	1,978
Accumulated other comprehensive loss, total	$ 22,212	$ 35,757	$ 21,750

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Organization and Summary of Significant Accounting Policies (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Changes in the allowance for doubtful accounts
Balance, Beginning of Year	$ 500	$ 400	$ 400
Provision for Doubtful Accounts		116
Net (Write-Offs) Recoveries		(16)
Balance, End of Year	$ 500	$ 500	$ 400

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Organization and Summary of Significant Accounting Policies (Details 9) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Property, plant and equipment
Gross	$ 163,437	$ 152,014
Less: accumulated depreciation	(112,022)	(105,684)
Total	51,415	46,330
Land and improvements
Property, plant and equipment
Gross	3,417	2,809
Buildings and improvements
Property, plant and equipment
Gross	19,371	18,522
Machinery and equipment
Property, plant and equipment
Gross	$ 140,649	$ 130,683

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Organization and Summary of Significant Accounting Policies (Details 18) (USD $)	12 Months Ended
	Jun. 30, 2013
Exercise Price Range One
Range of options outstanding
Number of Options Outstanding	224,955
Number of Options Exercisable	93,455
Weighted Average Exercise Price Outstanding	$ 20.34
Weighted Average Exercise Price Exercisable	$ 14.84
Weighted Average Remaining Contractual Life Outstanding (In Years)	6 years 3 months 18 days
Exercise Price Range, Lower Range Limit	$ 10.92
Exercise Price Range, Upper Range Limit	$ 25.64
Exercise Price Range Two
Range of options outstanding
Number of Options Outstanding	46,500
Number of Options Exercisable	46,500
Weighted Average Exercise Price Outstanding	$ 60.33
Weighted Average Exercise Price Exercisable	$ 60.33
Weighted Average Remaining Contractual Life Outstanding (In Years)	1 year 2 months 12 days
Exercise Price Range, Lower Range Limit	$ 56.08
Exercise Price Range, Upper Range Limit	$ 63.25
Total all ranges
Range of options outstanding
Weighted Average Exercise Price Outstanding	$ 27.19
Weighted Average Exercise Price Exercisable	$ 29.95

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Organization and Summary of Significant Accounting Policies (Details) (Mexican peso option contracts, Not Designated as Hedging Instruments, Other current liabilities, USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Mexican peso option contracts | Not Designated as Hedging Instruments | Other current liabilities
Fair market value of all outstanding Mexican peso option contracts
Not designated as hedging instruments, current liabilities, at fair value		$ (395)

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Retirement Plans and Postretirement Costs (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Pension
Accumulated Benefit Obligations and Projected Benefit Obligations
Accumulated benefit obligation	$ 88,451	$ 96,167
Projected benefit obligation	88,451	96,167
SERP
Accumulated Benefit Obligations and Projected Benefit Obligations
Accumulated benefit obligation	1,020	6,629
Projected benefit obligation	$ 1,464	$ 7,216

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Earnings Per Share (''EPS'') (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Reconciliation of the components of the basic and diluted per share
Net Income Attributable to STRATTEC	$ 9,375	$ 8,793	$ 5,418
Less: Income Attributable to Participating Securities	171
Net Income Attributable to Common Shareholders	$ 9,204	$ 8,793	$ 5,418
Weighted Average Shares of Common Stock Outstanding	3,327	3,300	3,285
Incremental Shares – Stock based Compensation	52	30	38
Diluted Weighted Average Shares of Common Stock Outstanding	3,379	3,330	3,323
Basic Earnings Per Share	$ 2.77	$ 2.66	$ 1.65
Diluted Earnings Per Share	$ 2.72	$ 2.64	$ 1.63

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Retirement Plans and Postretirement Costs (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Pension and SERP Benefits	Jul. 01, 2012 Pension and SERP Benefits	Jul. 03, 2011 Pension and SERP Benefits	Jun. 30, 2013 Postretirement Benefits	Jul. 01, 2012 Postretirement Benefits	Jul. 03, 2011 Postretirement Benefits
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost			$ 216	$ 150	$ 70	$ 15	$ 11	$ 10
Interest cost			4,447	4,784	4,692	181	227	275
Expected return on plan assets			(6,126)	(6,411)	(6,445)
Amortization of prior service cost (credit)			12	12	12	(764)	(764)	(764)
Amortization of unrecognized net loss			4,453	2,414	2,504	898	673	645
Settlement loss	(2,144)		2,144
Net Periodic benefit cost			5,146	949	833	330	147	166
Benefit Obligations:
Benefit obligations, Discount rate			5.02%	4.56%		5.02%	4.56%
Benefit obligations, expected return on plan assets	7.50%		7.50%	7.50%
Benefit Obligations, Rate of compensation increases - SERP			3.00%	3.00%
Net Periodic Benefit Cost:
Net Periodic Benefit Cost, Discount rate			4.56%	5.57%		4.56%	5.57%
Net Periodic Benefit Cost, Expected return on plan assets			7.50%	7.80%
Net Periodic Benefit Cost, Rate of compensation increases - SERP			3.00%	3.00%
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year			103,383	89,609		4,475	4,586
Service cost			216	150	70	15	11	10
Interest cost			4,447	4,784	4,692	181	227	275
Actuarial (gain) loss			(8,381)	12,663		239	917
Benefits paid			(9,750)	(3,823)		(1,370)	(1,266)
Benefit obligation at end of year			89,915	103,383	89,609	3,540	4,475	4,586
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year		79,517	79,517	83,023
Actual return on plan assets			11,914	(1,683)
Employer contribution			8,753	2,000		1,370	1,266
Benefits paid			(9,750)	(3,823)		(1,370)	(1,266)
Fair value of plan assets at end of year	90,434	79,517	90,434	79,517	83,023
Funded status – prepaid (accrued) benefit obligations			519	(23,866)		(3,540)	(4,475)
AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS:
Other long-term assets			1,983
Accrued payroll and benefits (current liabilities)				(5,664)		(823)	(1,010)
Accrued benefit obligations (long-term liabilities)			(1,464)	(18,202)		(2,717)	(3,465)
Net amount recognized			519	(23,866)		(3,540)	(4,475)
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME:
Net periodic benefit cost			5,146	949	833	330	147	166
Net actuarial (gain) loss			(14,170)	20,756		238	917
Amortization of prior service (cost) credits			(12)	(12)		764	764
Amortization of unrecognized net loss			(6,597)	(2,414)		(898)	(673)
Total recognized in other comprehensive income, before tax			(20,779)	18,330		104	1,008
Total recognized in net periodic benefit cost and other comprehensive income			$ (15,633)	$ 19,279		$ 434	$ 1,155

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Organization and Summary of Significant Accounting Policies (Details 12) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Detail of items impacting other income, net
Foreign currency transaction (loss) gain	$ (395)	$ 1,369	$ (836)
Rabbi Trust gain	164	24	384
Unrealized (loss) gain on Mexican peso option contracts	395	(640)	245
Realized (loss) gain on Mexican peso option contracts, net	(12)	(420)	33
Other	177	249	394
Total	$ 329	$ 582	$ 220

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Retirement Plans and Postretirement Costs (Details 7) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Pension and SERP Benefits
Expected future benefit payments
2014	$ 4,318
2015	5,269
2016	5,030
2017	5,240
2018	5,463
2019-2023	30,903
Postretirement Benefits
Expected future benefit payments
2014	823
2015	724
2016	594
2017	491
2018	392
2019-2023	$ 797

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Income Taxes (Tables)

12 Months Ended

Jun. 30, 2013

Provision (Benefit) for Income Taxes

The provision for income taxes consisted of the following (thousands of dollars):

	2013			2012		2011
Currently payable:
Federal	$	(561	)	$	2,116	$	1,181
State		185			219		167
Foreign		1,895			1,200		1,369
		1,519			3,535		2,717
Deferred tax provision (benefit)		3,847			54		(177	)
	$	5,366		$	3,589	$	2,540

Difference between Income Taxes Computed at the Federal Statutory Tax Rate and the Provision for Income taxes

The items accounting for the difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes were as follows:

	2013				2012				2011
US statutory rate		34.0		%		34.1		%		34.0		%
State taxes, net of Federal tax benefit		2.0				(0.1	)			0.4
Foreign subsidiaries		(2.2	)			(3.7	)			(1.9	)
Non-controlling interest		(3.1	)			(7.3	)			(7.2	)
Valuation allowance		(1.0	)			—				0.5
Other		2.1				(0.3	)			(0.7	)
		31.8		%		22.7		%		25.1		%

Components of Deferred Tax Assets and (Liabilities)

The components of deferred tax assets and (liabilities) were as follows (thousands of dollars):

	June30,2013			July1,2012
Deferred income taxes-current:
Repair and maintenance supply parts reserve	$	185		$	190
Payroll-related accruals		1,789			1,589
Environmental reserve		523			546
Inventory Reserve		486			437
Allowance for Doubtful Accounts		185			190
Accrued Warranty		703			1,663
Other		396			781
		4,267			5,396
Valuation allowance		—			(177	)
	$	4,267		$	5,219
Deferred income taxes-noncurrent:
Accrued pension obligations	$	(10,572	)	$	(9,482	)
Unrecognized pension and postretirement benefit plan liabilities		11,305			19,467
Accumulated depreciation		(4,256	)		(3,023	)
Stock-based compensation		854			842
Postretirement obligations		325			728
NOL/credit carry-forwards		159			153
Other		1,176			1,057
	$	(1,009	)	$	9,742

Reconciliation of the Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended June30, 2013 and July1, 2012 (thousands of dollars):

	Year Ended
	June30,2013			July1,2012
Unrecognized tax benefits, beginning of year	$	1,541		$	1,500
Gross increases – tax positions in prior years		—			—
Gross decreases – tax positions in prior years		(47	)		(2	)
Gross increases – current period tax positions		51			43
Tax Years Closed		(35	)		—
Unrecognized tax benefits, end of year	$	1,510		$	1,541

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Consolidated Statements of Shareholders' Equity (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Pension and postretirement funded status adjustment tax impact	$ 7,857	$ 7,348	$ 5,178
Cash dividends declared per share	$ 0.40	$ 0.40	$ 1.20
Tax benefits on restricted stock dividends	8	7	15
Accumulated Other Comprehensive Loss
Pension and postretirement funded status adjustment tax impact	7,857	7,348	5,178
Retained Earnings
Cash dividends declared per share	$ 0.40	$ 0.40	$ 1.20
Capital in Excess of Par Value
Tax benefits on restricted stock dividends	$ 8	$ 7	$ 15

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Consolidated Statements of Cash Flows (Parenthetical) (USD $)	12 Months Ended
	Jul. 01, 2012
Principal amount on outstanding loan terminated and converted to additional capital contributions in joint venture investment	$ 1,500,000
Accrued interest amounts terminated and converted to additional capital contributions in the joint venture investment	$ 112,000

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Equity (Loss) Earnings of Joint Venture

12 Months Ended

Jun. 30, 2013

Equity (Loss) Earnings of Joint Venture

EQUITY (LOSS) EARNINGS OF JOINT VENTURE

As discussed under Investment in Joint VenturesandMajorityOwnedSubsidiaries, we hold a one-third interest in VAST LLC, for which we exercise significant influence but do not control and are not the primary beneficiary. Our investment in VAST LLC is accounted for using the equity method.

The following are summarized statements of operations and summarized balance sheet data for VAST LLC (thousands of dollars):

	Years Ended
	June30,2013			July1,2012			July3,2011
Net sales	$	92,388		$	76,373		$	78,002
Cost of goods sold		76,759			65,211			63,286
Gross profit		15,629			11,162			14,716
Engineering, selling and administrative expense		17,270			14,930			9,527
(Loss) income from operations		(1,641	)		(3,768	)		5,189
Other income (expense), net		497			246			(247	)
(Loss) income before provision for Income taxes		(1,144	)		(3,522	)		4,942
(Benefit) provision for income taxes		(690	)		(297	)		1,202
Net (loss) income		(454	)		(3,225	)		3,740
STRATTEC’s share of VAST LLC net (loss) income	$	(151	)	$	(1,075	)	$	1,247
Intercompany profit eliminations		4			4			(1	)
STRATTEC’s equity (loss) earnings of VAST LLC	$	(147	)	$	(1,071	)	$	1,246

	June30,2013		July1,2012
Cash and cash equivalents	$	3,801	$	5,622
Receivables, net		23,594		16,025
Inventories, net		10,693		17,756
Other current assets		7,892		10,207
Total current assets		45,980		49,610
Property, plant and equipment, net		23,470		20,753
Other long-term assets		4,218		3,585
Total assets	$	73,668	$	73,948
Current liabilities	$	36,128	$	37,843
Long-term liabilities		11,808		11,381
Total liabilities	$	47,936	$	49,224
Net assets	$	25,732	$	24,724
STRATTEC’s share of net assets	$	8,577	$	8,241

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Earnings Per Share (''EPS'') (Details Textual) (Stock Options)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Stock Options
Earnings per share (Textual) [Abstract]
Antidilutive options excluded from earnings per share computation	248,000	248,000	142,000

XML

Organization and Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2013

Organization and Summary of Significant Accounting Policies

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 side 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 of Velbert, Germany and ADAC Automotive 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). During 2013, we acquired a 51percent ownership interest in NextLock LLC, a newly formed joint venture which will introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner and the owner of the remaining 49 percent interest. We anticipate shipment of new biometric security products to begin in the second half of our 2014 fiscal year through this new NextLock joint venture. STRATTEC products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea and China, and we provide full service and aftermarket support for our products.

The accompanying 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, Mexico. Equity investments in Vehicle Access Systems Technology LLC (“VAST LLC”) and NextLockLLC 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 and one joint venture in Brazil.NextLock LLC is located in El Paso, Texas. We have only one reporting segment.

The significant accounting policies followed in the preparation of these financial statements, as summarized in the following paragraphs, are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Principles of Consolidation and Presentation: The accompanying consolidated financial statements include the accounts of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, and its majority owned subsidiaries. Equity investments for which STRATTEC exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. All significant inter-company transactions and balances have been eliminated.

New Accounting Standard: In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”). The Update is effective for annual reporting periods beginning after December15, 2012 and requires that we present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of AOCI based on its source and the income statement line items affected by the reclassification. We do not expect these new disclosure requirements to have a significant impact on our Consolidated Financial Statements.

Fiscal Year: Our fiscal year ends on the Sunday nearest June30. The years ended June30, 2013,July1, 2012 and July3, 2011 are comprised of 52, 52 and 53 weeks, respectively.

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods presented. These estimates and assumptions could also affect the disclosure of contingencies. Actual results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents: Cash and cash equivalents include all short-term investments with an original maturity of three months or less due to the short-term nature of the instruments. Excess cash balances are placed in a money market account at a high quality financial institution.As of June 30,2013,$9.2millionofour$20.3millioncashandcashequivalentsbalancewasheldbyourforeignsubsidiariesinMexicoandisdeemedtobepermanentlyreinvested.

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 as a result of changes in the U.S. dollar / Mexican peso exchange rate. In January 2011 and August 2011, we entered into agreements with Bank of Montreal that provided for two weekly Mexican peso currency option contracts to cover a portion of our weekly estimated peso denominated operating costs. The contracts with Bank of Montreal expired June28, 2013. The two weekly option contracts were for equivalent notional amounts. The contracts that were effective during fiscal 2011 and 2012 expired July6, 2012, and provided for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 11.85 if the spot rate at the weekly expiry date was below 11.85 or for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 12.85 if the spot rate at the weekly expiry date was above 12.85. Additional contracts that were effective during fiscal 2013 expired June28, 2013 and provided for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 12.40 if the spot rate at the weekly expiry date was below an average of 12.40 or for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 13.40 if the spot rate at the weekly expiry date was above an average of 13.40. Our objective in entering into these currency option contracts was to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso option contracts were not used for speculative purposes and were not designated as hedges. As a result, all currency option contracts were recognized in our accompanying consolidated financial statements at fair value and changes in the fair value of the currency option contracts were reported in current earnings as part of Other Income, net. The premiums paid and received under the weekly Mexican peso currency option contracts netted to zero. As a result, premiums related to the contracts did not impact our earnings. No Mexican peso currency option contracts were outstanding as of June30, 2013.

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

	June30,2013		July1,2012
Not Designated as Hedging Instruments:
Other current liabilities:
Mexican peso option contracts	$	—	$	(395	)

The pre-tax effects of the Mexican peso option contracts on the accompanying Consolidated Statements of Income and Comprehensive Income (Loss) consisted of the following (thousands of dollars):

	Other Income, net
	June30,2013			July1,2012
Not Designated as Hedging Instruments:
Realized gain	$	27		$	18
Realized (loss)	$	(39	)	$	(438	)
Unrealized gain (loss)	$	395		$	(640	)

Fair Value of Financial Instruments: The fair value of our cash and cash equivalents, accounts receivable, accounts payable, and borrowings under credit facility approximated book value as of June30, 2013 and July1, 2012. 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 for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is an established fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. Level 1 – Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 – Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments. Level 3 – Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of June30, 2013 and July1, 2012 (thousands of dollars):

	June30, 2013											July1, 2012
	Level1		Level2			Level3			Total			Level1		Level2		Level3		Total
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	115		$	—		$	—		$	115	$	209	$	—	$	—	$	209
Mid Cap		114			—			—			114		206		—		—		206
Large Cap		115			—			—			115		640		—		—		640
U.S. Treasury Securities		—			—			—			—		2,512		—		—		2,512
Cash and Cash Equivalents		1,193			—			—			1,193		806		—		—		806
Mexican peso option contracts		—			—			—			—		—		80		—		80
Total assets at fair value	$	1,537		$	—		$	—		$	1,537	$	4,373	$	80	$	—	$	4,453
Liabilities:
Mexican peso option contracts	$	—		$	—		$	—		$	—	$	—	$	475	$	—	$	475

The Rabbi Trust assets fund our supplemental executive retirement plan and are included in Other Current Assets in the accompanying Consolidated Balance Sheets. The Rabbi Trust assets are classified as Level 1 assets. Refer to discussion of Mexican peso option contracts under Derivative Instruments above. The fair value of the Mexican Peso option contracts are based on an option pricing model that considers the remaining term, current exchange rate and volatility of the underlying foreign currency base. There were no transfers between Level 1 and Level 2 assets during 2013.

Receivables: Receivables consist primarily of trade receivables due from Original Equipment Manufacturers in the automotive industry and locksmith distributors relating to our service and aftermarket sales. We evaluate the collectability of receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items, general economic conditions and the industry as a whole.

Changes in the allowance for doubtful accounts were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision for Doubtful Accounts		Net(Write- Offs) Recoveries			Balance, EndofYear
Year ended June30, 2013	$	500	$	—	$	—		$	500
Year ended July1, 2012	$	400	$	116	$	(16	)	$	500
Year ended July3, 2011	$	400	$	—	$	—		$	400

Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market using the first-in, first-out (“FIFO”) cost method of accounting. Inventories consisted of the following (thousands of dollars):

	June30,2013			July1,2012
Finished products	$	6,966		$	5,313
Work in process		6,164			5,659
Purchased materials		12,682			11,564
		25,812			22,536
Excess and obsolete reserve		(1,500	)		(1,300	)
Inventories, net	$	24,312		$	21,236

We record a reserve for excess and obsolete inventory based on historical and estimated future demand and market conditions. The reserve level is determined by comparing inventory levels of individual materials and parts to historical usage and estimated future sales by analyzing the age of the inventory in order to identify specific materials and parts that are unlikely to be sold. Technical obsolescence and other known factors are also considered in evaluating the reserve level.

The activity related to the excess and obsolete inventory reserve wasas follows (thousands of dollars):

	Balance, Beginning of Year		Provision Chargedto Expense			Amounts WrittenOff			Balance, EndofYear
Year ended June30, 2013	$	1,300	$	511	$		311	$		1,500
Year ended July1, 2012	$	1,200	$	385	$		285	$		1,300
Year ended July3, 2011	$	1,418	$	334	$		552	$		1,200

Customer Tooling in Progress: We incur costs related to tooling used in component production and assembly. Costs for development of certain tooling, which will be directly reimbursed by the customer whose parts are produced from the tool, are accumulated on the balance sheet and are then billed to the customer. The accumulated costs are billed upon formal acceptance by the customer of products produced with the individual tool. Other tooling costs are not directly reimbursed by the customer. These costs are capitalized and amortized over the life of the related product based on the fact that the related tool will be used over the life of the supply arrangement. To the extent that estimated costs exceed expected reimbursement from the customer we will recognize a loss.

Repair and Maintenance Supply Parts: We maintain an inventory of repair and maintenance supply parts in support of operations. This inventory includes critical repair parts for all production equipment as well as general maintenance items. The inventory of critical repair parts is required to avoid disruptions in our customers’ just-in-time production schedules due to a lack of spare parts when equipment break-downs occur. All required critical repair parts are on hand when the related production equipment is placed in service and maintained to satisfy the customer model life production and service requirements, which may be 12 to 15 years. As repair parts are used, additional repair parts are purchased to maintain a minimum level of spare parts inventory. Depending on maintenance requirements during the life of the equipment, excess quantities of repair parts arise. Excess quantities are kept on hand and are not disposed of until the equipment is no longer in service. A repair and maintenance supply parts reserve is maintained to recognize the normal adjustment of inventory for obsolete and slow moving supply and maintenance parts. The adequacy of the reserve is reviewed periodically in relation to the repair parts inventory balances. The gross balance of the repair and maintenance supply parts inventory was approximately $2.0 million at June30, 2013 and $1.9 million at July1, 2012. The repair and maintenance supply parts inventory balance is included in Other Current Assets in the accompanying Consolidated Balance Sheets.

The activity related to the repair and maintenance supply parts reserve was as follows (thousands of dollars):

	Balance, Beginning of Year			Provision Chargedto Expense			Amounts WrittenOff			Balance, EndofYear
Year ended June30, 2013	$	500	$		195	$		195	$		500
Year ended July1, 2012	$	695	$		200	$		395	$		500
Year ended July3, 2011	$	680	$		78	$		63	$		695

Intangibles: Intangible assets that have defined useful lives acquired in the purchase of the Delphi Power Products business in 2009 consist of patents, engineering drawings and software. The intangible assets balance is included in Other Long-term Assets in the accompanying Consolidated Balance Sheets.

The carrying value and accumulated amortization were as follows (thousands of dollars):

	June30,2013			July1,2012
Patents, engineering drawings and software	$	890		$	890
Less: accumulated amortization		(453	)		(354	)
	$	437		$	536

The remaining useful life of the intangible assets in the table above is approximately 4.4 years. Intangible amortization expense was $99,000 for each of the years ended June30, 2013,July1, 2012 and July3, 2011. Intangible amortization expense is expected to be $99,000 in each of fiscalyear 2014 through 2017 and $41,000 in fiscal 2018.

Property, Plant and Equipment:

Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	ExpectedUsefulLives
Land improvements		20years
Buildings and improvements		20to35years
Machinery and equipment		3 to 10 years

Property, plant and equipment consisted of the following (thousands of dollars):

	June30,2013			July1, 2012
Land and improvements	$	3,417		$	2,809
Buildings and improvements		19,371			18,522
Machinery and equipment		140,649			130,683
		163,437			152,014
Less: accumulated depreciation		(112,022	)		(105,684	)
	$	51,415		$	46,330

Depreciation expense for the years ended June30, 2013,July1, 2012 and July3, 2011 totaled approximately $7.4 million, $6.7 million and $6.5 million, respectively.

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	June30,2013		July1,2012
Gross book value	$	70,809	$	62,497
Net book value	$	25,777	$	20,434

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment recognized is measured by the excess of the carrying amount of the asset over the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less estimated costs to sell. There were no impairments recorded in the years ended June30, 2013,July1, 2012 orJuly3, 2011.

Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income.

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted:

Fiscal Year	Percentage of Inventory Purchases		Number of Suppliers
2013	38	%	7
2012	41	%	14
2011	40	%	11

We have long-term contracts or arrangements with most of our suppliers to guarantee the availability of raw materials and component parts.

Labor Concentrations: We had approximately 2,670 full-time associates of which approximately 225 or 8.4 percent were represented by a labor union at June30, 2013. The associates represented by a labor union account for all production associates at our Milwaukee facility. The current contract with the unionized associates is effective through June29, 2014.

Revenue Recognition: Revenue is recognized upon the shipment of products, which is when title passes, payment terms are final, we have no remaining obligations and the customer is required to pay. Revenue is recognized net of estimated returns and discounts, which is recognized as a deduction from revenue at the time of the shipment.

Research and Development Costs: Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development expenditures were approximately $1.3 million in 2013, $1.2 million in 2012, and $1.5 million in 2011.

Other Income, Net: Net other income included in the accompanying Consolidated Statements of Income and Comprehensive Income(Loss) primarily includes foreign currency transaction gains and losses, realized and unrealized gains and losses on Mexican peso option contracts and Rabbi Trust gains. Foreign currency transaction gains and losses resultedfromactivityassociatedwith foreign denominatedassetsheld by our Mexican subsidiaries. We entered into the Mexican peso currency option contracts to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Rabbi Trust funds our supplemental executive retirement plan. The investments held in the Trust are considered trading securities.

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

	June30,2013			YearsEnded July1,2012			July3,2011
Foreign currency transaction (loss) gain	$	(395	)	$	1,369		$	(836	)
Rabbi Trust gain		164			24			384
Unrealized (loss) gain on Mexican peso option contracts		395			(640	)		245
Realized(loss) gain on Mexican peso option contracts, net		(12	)		(420	)		33
Other		177			249			394
	$	329		$	582		$	220

Self Insurance Plans: We have self-insured medical and dental plans covering all eligible U.S. associates. The claims handling process for the self-insured plans are managed by a third party administrator. Stop-loss insurance coverage limits our liability on a per individual per calendar year basis. The per individual per calendar year stop-loss limit was $150,000 in each calendar year 2010 through 2013. Prior to January1, 2011, each covered individual could receive up to $2 million in total benefits during his or her lifetime. Effective January1, 2011, under Health Care Reform, there is no lifetime maximum for overall benefits.

The expected ultimate cost for claims incurred under the self-insured medical and dental plans as of the balance sheet date is not discounted and is recognized as an expense. The expected ultimate cost of claims is estimated based upon the aggregate liability for reported claims and an estimated liability for claims incurred but not reported, which is based on analysis of historical data, current trends and information available from ourthird-partyadministrator. The expected ultimate cost for claims incurred under the self-insured medical and dental plans that has not been paid as of the balance sheet date is included in the accrued payroll and benefits liabilities amount in our accompanying Consolidated Balance Sheets.

Changes in the balance sheet amounts for self-insured plans were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Chargedto Expense		Payments		Balance, EndofYear
Year ended June30, 2013	$	320	$	3,948	$	3,848	$	420
Year ended July1, 2012	$	320	$	4,148	$	4,148	$	320
Year ended July3, 2011	$	320	$	3,077	$	3,077	$	320

Warranty Reserve: We have a warranty liability recorded related to our exposure to warranty claims in the event our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension of their warranty programs.Inrecentfiscalperiods, our largest customers have extended their warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers, including STRATTEC. As a result of these actions, during 2012, and 2011 we increased our provision to cover these exposures. Moreover, in 2011, the warranty provision was increased by $1.15 million as a result of our share of the cost associated with a customer’s specific warranty claim involving our product. The current year warranty provision credit includes the impact of favorable adjustments for warranty claims settled during the year.

Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged (Credited) toExpense			Payments		Balance, EndofYear
Year ended June30, 2013	$	4,958	$	(404	)	$	2,054	$	2,500
Year ended July1, 2012	$	3,856	$	2,050		$	948	$	4,958
Year ended July3, 2011	$	1,718	$	2,807		$	669	$	3,856

Foreign Currency Translation: The financial statements of our foreign subsidiaries and equity investees are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the average exchange rate for each applicable period for sales, costs and expenses. Foreign currency translation adjustments are included as a component of other accumulated comprehensive loss. Foreign currency transaction gains and losses are included in other income, net in the accompanying Consolidated Statement of Income and Comprehensive Income (loss).

Accumulated Other Comprehensive Loss: Accumulated other comprehensive loss is comprised of the following (thousands of dollars):

	June30,2013		July1,2012		July3,2011
Unrecognized pension and postretirement benefit liabilities, net of tax	$	18,944	$	31,762	$	19,772
Foreign currency translation		3,268		3,995		1,978
	$	22,212	$	35,757	$	21,750

Deferred taxes have not been provided for the foreign currency translation adjustments.

Accounting For 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. The Board of Directors has designated 1,700,000shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of June30, 2013 were 153,993. Awards that expire or are cancelled 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 the 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 our Board of Directors. The options expire 5 to 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. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of our Board of Directors at the time the shares are granted and have a minimum vesting period of three years from the date of grant. Restricted shares granted have voting and dividend rights, regardless of whether the shares are vested or unvested. The restricted stock grants issued to date vest 3 years after the date of grant.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. 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. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules. The expected volatility is determined based on our historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based primarily on historical data. 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 is amortized on a straight line basis over the vesting period. We record stock based compensation only for those awards that are expected to vest.

As of June30, 2013, there was $550,000 of total unrecognized compensation cost related to stock options granted under the plan. This cost is expected to be recognized over a weighted average period of 10 months. As of June30, 2013, there was $479,000 of total unrecognized compensation cost related to unvested restricted stock grants outstanding under the plan. This cost is expected to be recognized over a weighted average period of 11 months. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.

Cash received from option exercises was $770,000 in 2013 and $28,000 in each of fiscal year 2012 and 2011. The related income tax benefit was $421,000 in 2013, $9,000 in 2012 and $18,000 in 2011, respectively.

The intrinsic value of stock options exercised and the fair value of stock options vested were as follows (in thousands of dollars):

	Years Ended
	June30,2013		July1,2012		July3,2011
Intrinsic value of options exercised	$	1,110	$	26	$	44
Fair value of stock options vested	$	266	$	268	$	293

The grant date fair values and assumptions used to determine compensation expense were as follows:

Options Granted During	2013				2012				2011
Weighted average grant date fair value:
Options issued at grant date market value		n/a				n/a				n/a
Options issued above grant date market value	$	10.48		$		10.29		$		7.48
Assumptions:
Risk free interest rates		0.95	%			1.23	%			1.08	%
Expected volatility		57.58	%			59.88	%			59.89	%
Expected dividend yield		1.69	%			1.74	%			1.54	%
Expected term (in years)		6.0				6.0				4.0

The range of options outstanding as of June30, 2013 was as follows:

	Number of Options Outstanding/ Exercisable			Weighted Average ExercisePrice Outstanding/ Exercisable		Weighted Average Remaining Contractual LifeOutstanding(InYears)
$10.92-$25.64		224,955/93,455	$		20.34/$14.84		6.3
$56.08-$63.25		46,500/46,500	$		60.33/$60.33		1.2
			$		27.19/$29.95

Income Taxes:Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and operating loss carryforwards are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We recognize the benefit of an income tax position only if it is more likely than not (greater than 50 percent) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties on uncertain tax positions are classified in the Provision for IncomeTaxes in the Consolidated Statements of Income and Comprehensive Income (Loss).

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Organization and Summary of Significant Accounting Policies (Details 10) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Gross and net book value of property plant and equipment
Property, plant and equipment, gross	$ 163,437	$ 152,014
Property, plant and equipment, net	51,415	46,330
MEXICO
Gross and net book value of property plant and equipment
Property, plant and equipment, gross	70,809	62,497
Property, plant and equipment, net	$ 25,777	$ 20,434

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Stock Option and Purchase Plans (Tables)

12 Months Ended

Jun. 30, 2013

Summary of Stock Option Activity under our Stock Incentive Plan

A summary of stock option activity under our stock incentive plan was as follows:

	Shares			WeightedAverage Exercise Price		WeightedAverage Remaining Contractual Term (in years)		Aggregate Intrinsic Value (inthousands)
Balance at June27, 2010		297,650		$	33.01
Granted		40,000		$	22.47
Exercised		(2,600	)	$	10.92
Expired		(37,650	)	$	60.36
Balance at July3, 2011		297,400		$	28.32
Granted		40,000		$	26.53
Exercised		(2,600	)	$	10.92
Expired		(2,000	)	$	37.58
Balance at July1, 2012		332,800		$	28.19
Granted		40,000		$	25.64
Exercised		(55,845	)	$	13.78
Expired		(41,500	)	$	52.68
Terminated		(4,000	)	$	17.59
Balance at June30, 2013		271,455		$	27.19		5.4	$	3,830
Exercisable as of:
June30, 2013		139,955		$	29.95		4.4	$	2,104
July1, 2012		192,700		$	33.69		4.5	$	702
July3, 2011		155,800		$	38.37		4.8	$	479
Available for grant as of June30, 2013		153,993

Summary of Restricted Stock Activity under our Stock Incentive Plan

A summary of restricted stock activity under our stock incentive plan was as follows:

	Shares			WeightedAverage GrantDate FairValue
Nonvested Balance at June27, 2010		27,500			$	29.90
Granted		20,000			$	20.66
Vested		(8,600	)		$	47.78
Nonvested Balance at July3, 2011		38,900			$	21.19
Granted		20,000			$	23.01
Vested		(9,300	)		$	29.00
Forfeited		(200	)		$	23.01
Nonvested Balance at July1, 2012		49,400			$	20.45
Granted		24,150			$	23.69
Vested		(10,400	)		$	15.44
Forfeited		(1,900	)		$	25.49
Nonvested Balance at June30, 2013		61,250			$	22.42

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Organization and Summary of Significant Accounting Policies (Details 1) (Not Designated as Hedging Instruments, Mexican peso option contracts, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012
Not Designated as Hedging Instruments | Mexican peso option contracts
Pre-tax effects of the peso option contracts
Realized gain	$ 27	$ 18
Realized (loss)	(39)	(438)
Unrealized gain (loss)	$ 395	$ (640)

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Shareholders' Equity (Details Textual) (USD $) In Millions, except Share data, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Shareholders Equity (Textual) [Abstract]
Common stock, shares authorized	12,000,000	12,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares outstanding	3,372,029	3,303,784
Number of shares authorized to be repurchased	3,839,395
Number of shares repurchased to date	3,655,322
Cost of shares repurchased to date	$ 136.4

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Organization and Summary of Significant Accounting Policies (Details 6) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Activity related to the repair and maintenance supply parts reserve
Balance, Beginning of Year	$ 500	$ 695	$ 680
Provision Charged to Expense	195	200	78
Amounts Written Off	195	395	63
Balance, End of Year	$ 500	$ 500	$ 695

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Retirement Plans and Postretirement Costs (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Retirement Plans and Postretirement Costs (Textual) [Abstract]
Loss on settlement of pension obligation	$ (2,144,000)
Rabbi Trust Assets - SERP	1,500,000	4,400,000
Postretirement plan annual benefit limit for future eligible retirees	4,000
Defined benefit plan benefit for future eligible retirees period	5 years
Health care cost trend rate for next fiscal year	7.50%
Ultimate health care cost trend rate	5.00%
Benefit obligations, expected return on plan assets	7.50%
Percentage target asset allocation	100.00%
Public equity return applied to target allocation in determining expected long term rate of return	7.50%
Actual Historical Annualized Returns Using Target Allocation - 5 Years	5.33%
Actual Historical Annualized Returns Using Target Allocation - 10 Years	7.28%
Actual Historical Annualized Returns Using Target Allocation - 15 Years	5.65%
Actual Historical Annualized Returns Using Target Allocation - 20 Years	7.53%
Actual Historical Annualized Returns Using Target Allocation - 25 Years	8.26%
Actual Historical Annualized Returns Using Target Allocation - 30 Years	9.32%
Employer contribution defined contribution plan	1,500,000	1,400,000	1,300,000
Percent of each dollar of eligible employee contributions matched by employer	100.00%
Employer matching contribution to employee up to participant's eligible contribution	5.00%
Supplemental Employee Retirement Plans, Defined Benefit
Retirement Plans and Postretirement Costs (Textual) [Abstract]
SERP benefit obligation cash settlement	5,800,000
Loss on settlement of pension obligation	2,100,000
Projected benefit obligation	1,464,000	7,216,000
Expected employer contributions during fiscal 2014
Pension and SERP Benefits
Retirement Plans and Postretirement Costs (Textual) [Abstract]
Loss on settlement of pension obligation	2,144,000
Projected benefit obligation	89,915,000	103,383,000	89,609,000
Prior service costs included in accumulated other comprehensive loss before tax to be recognized during fiscal 2014	12,000
Prior service costs included in accumulated other comprehensive loss after tax to be recognized during fiscal 2014	7,000
Net actuarial loss included in accumulated other comprehensive loss before tax expense to be recognized during fiscal 2014	2,700,000
Net actuarial loss included in accumulated other comprehensive loss after tax to be recognized during fiscal 2014	1,700,000
Benefit obligations, expected return on plan assets	7.50%	7.50%
Postretirement Benefits
Retirement Plans and Postretirement Costs (Textual) [Abstract]
Loss on settlement of pension obligation
Projected benefit obligation	3,540,000	4,475,000	4,586,000
Prior service costs included in accumulated other comprehensive loss before tax to be recognized during fiscal 2014	764,000
Prior service costs included in accumulated other comprehensive loss after tax to be recognized during fiscal 2014	474,000
Net actuarial loss included in accumulated other comprehensive loss before tax expense to be recognized during fiscal 2014	847,000
Net actuarial loss included in accumulated other comprehensive loss after tax to be recognized during fiscal 2014	525,000
Benefit obligations, expected return on plan assets
Expected employer contributions during fiscal 2014	823,000
Public equity
Retirement Plans and Postretirement Costs (Textual) [Abstract]
Percentage target asset allocation	70.00%
Public equity return applied to target allocation in determining expected long term rate of return	9.50%
Fixed income
Retirement Plans and Postretirement Costs (Textual) [Abstract]
Percentage target asset allocation	30.00%
Public equity return applied to target allocation in determining expected long term rate of return	3.00%
Qualified Pension Plan
Retirement Plans and Postretirement Costs (Textual) [Abstract]
Expected employer contributions during fiscal 2014	$ 3,000,000

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Credit Facilities and Guarantees (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Strattec
Credit Facilities and Guarantees (Textual) [Abstract]
Secured revolving credit facility	$ 25,000,000
Expiry date of credit facility	Aug. 01, 2014
Interest rate on borrowings under the credit facility	London Interbank Offering Rate plus 1.0 to 1.75 percent or the bank’s prime rate
Outstanding borrowing	0	0
Average borrowings under the credit facility during the period	0	0	0
ADAC-STRATTEC credit facility
Credit Facilities and Guarantees (Textual) [Abstract]
Secured revolving credit facility	5,000,000
Expiry date of credit facility	Jun. 28, 2015
Interest rate on borrowings under the credit facility	London Interbank Offering Rate plus 1.0 to 1.75 percent or the bank’s prime rate
Outstanding borrowing	2,250,000
Average borrowings under the credit facility during the period	$ 1,700,000	$ 0	$ 0
Weighted average interest rate	1.99%

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Organization and Summary of Significant Accounting Policies (Details Textual) (USD $)	12 Months Ended					12 Months Ended			12 Months Ended			12 Months Ended
	Jun. 30, 2013 Segment Associates	Jul. 01, 2012	Jul. 03, 2011	Jun. 27, 2010	Dec. 31, 2010	Jun. 30, 2013 Vehicle Access Systems Technology Llc Joint_Venture Subsidiary	Apr. 05, 2013 NextLock LLC	Apr. 05, 2013 Actuator Systems LLC	Jun. 30, 2013 Restricted stock	Jun. 30, 2013 Stock Options	Jun. 30, 2013 Omnibus Stock Incentive Plan	Jun. 30, 2013 Minimum	Jun. 30, 2013 Minimum Stock Options	Jun. 30, 2013 Maximum	Jun. 30, 2013 Maximum Stock Options	Jun. 30, 2013 MEXICO	Jul. 01, 2012 Currency buy sell under contract one	Jul. 03, 2011 Currency buy sell under contract one	Jul. 01, 2012 Currency buy sell under contract two	Jul. 03, 2011 Currency buy sell under contract two	Jun. 30, 2013 Currency buy sell under contract three	Jun. 30, 2013 Currency buy sell under contract four
Organization and Summary of Significant Accounting Policies (Textual) [Abstract]
Mexican peso contract: contract end date	Jun. 28, 2013
Effective period of additional Mexican peco contract	Additional contracts that were effective during fiscal 2013 expired June 28, 2013
Mexican Peso Option Contract - Contractual Exchange Rate																	11.85	11.85	12.85	12.85	12.40	13.40
Currency Option Contracts Net Premium Payable Receivable	$ 0
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0
Maximum maturity of short-term investments classified as cash equivalents	3 months
Cash and cash equivalents	20,307,000	17,487,000	17,250,000	21,867,000												9,200,000
Customer model life production for which production equipment spare parts need to be maintained												12 years		15 years
Gross balance of the repair and maintenance supply parts inventory	2,000,000	1,900,000
Remaining useful life of intangible assets	4 years 4 months 24 days
Intangible amortization expense	99,000	99,000	99,000
Estimated intangible amortization expense Year one	99,000
Estimated intangible amortization expense Year two	99,000
Estimated intangible amortization expense Year three	99,000
Estimated intangible amortization expense Year four	99,000
Estimated intangible amortization expense Year five	41,000
Depreciation expense	7,400,000	6,700,000	6,500,000
Property, plant and equipment impairment	0	0	0
Number of full time associates	2,670
Number of associates represented by labor union	225
Research and development expenditures	1,300,000	1,200,000	1,500,000
Per individual per calendar year health coverage stop loss limit	150,000	150,000	150,000	150,000
Maximum life-time health insurance benefit per individual					2,000,000
Warranty provision resulting from specific customer warranty claim			1,150,000
Percentage of associate represent by labor union	8.40%
Share Based Compensation Arrangement By Share Based Payment Award Number Of Shares Authorized											1,700,000
Shares of common stock available for grant	153,993										153,993
Options expires after date of grant													5 years		10 years
Stock options vest after date of grant									3 years				1 year		4 years
Unrecognized compensation cost related to restricted stock grants									479,000
Weighted average period over which unrecognized compensation is expected to be recognized									11 months	10 months
Unrecognized compensation cost related to stock options										550,000
Cash received from option exercises	770,000	28,000	28,000
Income tax benefit from options exercised	$ 421,000	$ 9,000	$ 18,000
Percentage ownership interest in joint venture							51.00%
Joint venture partner's ownership interest								49.00%
Number of wholly owned subsidiaries						3
Number of equity method joint ventures						1
Number of reporting segments related to STRATTEC Security Corporation	1
Uncertain tax positions - Percentage likelihood that a recognized tax will be realized up on ultimate settlement	50.00%

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Organization and Summary of Significant Accounting Policies (Details 14) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Changes in warranty reserve
Balance, Beginning of Year	$ 4,958	$ 3,856	$ 1,718
Provision Charged (Credited) to Expense	(404)	2,050	2,807
Payments	2,054	948	669
Balance, End of Year	$ 2,500	$ 4,958	$ 3,856

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 20,307	$ 17,487
Receivables, less allowance for doubtful accounts of $500 at June 30, 2013 and July 1, 2012	47,514	44,496
Inventories, net	24,312	21,236
Customer tooling in progress, net	2,278	4,434
Deferred income taxes	4,267	5,219
Other current assets	7,821	8,419
Total current assets	106,499	101,291
DEFERRED INCOME TAXES		9,742
INVESTMENT IN JOINT VENTURES	9,166	8,139
OTHER LONG-TERM ASSETS	2,420	536
PROPERTY, PLANT AND EQUIPMENT, NET	51,415	46,330
Total assets	169,500	166,038
CURRENT LIABILITIES:
Accounts payable	25,543	24,149
Borrowings under credit facility	2,250
Accrued liabilities:
Payroll and benefits	13,993	19,233
Environmental	1,414	1,436
Warranty	2,500	4,958
Income taxes		2,934
Other	5,025	4,263
Total current liabilities	50,725	56,973
Commitments and Contingencies – see note on page 40
DEFERRED INCOME TAXES	1,009
ACCRUED PENSION OBLIGATIONS	1,464	18,202
ACCRUED POSTRETIREMENT OBLIGATIONS	2,717	3,465
OTHER LONG-TERM LIABILITIES	1,705
SHAREHOLDERS’ EQUITY:
Common stock, authorized 12,000,000 shares, $.01 par value, issued 6,998,702 shares at June 30, 2013 and 6,932,457 shares at July 1, 2012	70	69
Capital in excess of par value	82,684	80,621
Retained earnings	179,614	171,590
Accumulated other comprehensive loss	(22,212)	(35,757)
Less: Treasury stock at cost (3,626,673 shares at June 30, 2013 and 3,628,673 shares at July 1, 2012)	(135,938)	(135,971)
Total STRATTEC SECURITY CORPORATION shareholders’ equity	104,218	80,552
Non-controlling interest	7,662	6,846
Total shareholders’ equity	111,880	87,398
Total liabilities and shareholders' equity	$ 169,500	$ 166,038

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Income Taxes

12 Months Ended

Jun. 30, 2013

Income Taxes

Income Taxes

The provision for income taxes consisted of the following (thousands of dollars):

	2013			2012		2011
Currently payable:
Federal	$	(561	)	$	2,116	$	1,181
State		185			219		167
Foreign		1,895			1,200		1,369
		1,519			3,535		2,717
Deferred tax provision (benefit)		3,847			54		(177	)
	$	5,366		$	3,589	$	2,540

The items accounting for the difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes were as follows:

	2013				2012				2011
US statutory rate		34.0		%		34.1		%		34.0		%
State taxes, net of Federal tax benefit		2.0				(0.1	)			0.4
Foreign subsidiaries		(2.2	)			(3.7	)			(1.9	)
Non-controlling interest		(3.1	)			(7.3	)			(7.2	)
Valuation allowance		(1.0	)			—				0.5
Other		2.1				(0.3	)			(0.7	)
		31.8		%		22.7		%		25.1		%

The components of deferred tax assets and (liabilities) were as follows (thousands of dollars):

	June30,2013			July1,2012
Deferred income taxes-current:
Repair and maintenance supply parts reserve	$	185		$	190
Payroll-related accruals		1,789			1,589
Environmental reserve		523			546
Inventory Reserve		486			437
Allowance for Doubtful Accounts		185			190
Accrued Warranty		703			1,663
Other		396			781
		4,267			5,396
Valuation allowance		—			(177	)
	$	4,267		$	5,219
Deferred income taxes-noncurrent:
Accrued pension obligations	$	(10,572	)	$	(9,482	)
Unrecognized pension and postretirement benefit plan liabilities		11,305			19,467
Accumulated depreciation		(4,256	)		(3,023	)
Stock-based compensation		854			842
Postretirement obligations		325			728
NOL/credit carry-forwards		159			153
Other		1,176			1,057
	$	(1,009	)	$	9,742

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

State operating loss and credit carry-forwards at June30, 2013 resulted in future benefits of approximately $159,000. These operating loss carry-forwards expire starting 2014 through 2024. We believe that it is more likely than not that the results of future operations will generate sufficient taxable income and foreign source income to realize the deferred tax assets.

Foreign income before the provision for income taxes was $6.0 million in 2013, $5.3 million in 2012 and $3.6 million in 2011. No provision for Federal income taxes was made on earnings of foreign subsidiaries and joint ventures that are considered permanently invested or that would be offset by foreign tax credits upon distribution. Such undistributed earnings at June30, 2013 were approximately $26.6 million.

The total liability for unrecognized tax benefits was $1.7 million as of June30, 2013 and was included in Other Long-term Liabilities in the accompanying Consolidated Balance Sheets and $1.7 million as of July1, 2012and was included in Accrued Liabilities: Income Taxes in the accompanying Consolidated Balance Sheets. This liability includes approximately $1.5 million of unrecognized tax benefits at June30, 2013 and $1.5 million at July1, 2012 and approximately $195,000 of accrued interest at June30, 2013 and $187,000 at July1, 2012. This liability does not include an amount for accrued penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was approximately $1.0 million at June30, 2013 and $1.2 million at July1, 2012. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows for the years ended June30, 2013 and July1, 2012 (thousands of dollars):

	Year Ended
	June30,2013			July1,2012
Unrecognized tax benefits, beginning of year	$	1,541		$	1,500
Gross increases – tax positions in prior years		—			—
Gross decreases – tax positions in prior years		(47	)		(2	)
Gross increases – current period tax positions		51			43
Tax Years Closed		(35	)		—
Unrecognized tax benefits, end of year	$	1,510		$	1,541

We or one of our subsidiaries files income tax returns in the United States (Federal), Wisconsin (state), Michigan (state) and various other states, Mexico and other foreign jurisdictions. Tax years open to examination by tax authorities under the statute of limitations include fiscal 2006 through 2013 for Federal, fiscal 2009 through 2013 for most states and calendar 2008 through 2012 for foreign jurisdictions.

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Consolidated Statements of Shareholders' Equity (USD $) In Thousands	Total	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Non-controlling interest
Beginning balance at Jun. 27, 2010	$ 75,789	$ 69	$ 79,339	$ 162,706	$ (31,941)	$ (136,047)	$ 1,663
NET INCOME	7,590			5,418			2,172
Translation adjustments	1,777				1,741		36
Pension and postretirement plan funded status adjustment, net of tax	8,450				8,450
Cash dividends declared ($1.20, $0.40 and $0.40 per share for the twelve months ended 2011, 2012 and 2013 respectively)	(3,986)			(3,986)
Purchase of Additional Interest in Majority Owned Subsidiary	(22)						(22)
Stock-based compensation and shortfall tax benefit	364		364
Stock Option Exercises	40		40
Employee stock purchases	62		24			38
Ending balance at Jul. 03, 2011	90,064	69	79,767	164,138	(21,750)	(136,009)	3,849
NET INCOME	12,253			8,793			3,460
Translation adjustments	(2,080)				(2,017)		(63)
Pension and postretirement plan funded status adjustment, net of tax	(11,990)				(11,990)
Cash dividends declared ($1.20, $0.40 and $0.40 per share for the twelve months ended 2011, 2012 and 2013 respectively)	(1,341)			(1,341)
Stock-based compensation and shortfall tax benefit	806		806
Stock Option Exercises	33		33
Employee stock purchases	53		15			38
Cash dividends paid to non-controlling interests of subsidiaries	(400)						(400)
Ending balance at Jul. 01, 2012	87,398	69	80,621	171,590	(35,757)	(135,971)	6,846
NET INCOME	11,513			9,375			2,138
Translation adjustments	736				727		9
Pension and postretirement plan funded status adjustment, net of tax	12,818				12,818
Cash dividends declared ($1.20, $0.40 and $0.40 per share for the twelve months ended 2011, 2012 and 2013 respectively)	(1,351)			(1,351)
Stock-based compensation and shortfall tax benefit	1,273		1,273
Stock Option Exercises	770	1	769
Employee stock purchases	54		21			33
Cash dividends paid to non-controlling interests of subsidiaries	(1,331)						(1,331)
Ending balance at Jun. 30, 2013	$ 111,880	$ 70	$ 82,684	$ 179,614	$ (22,212)	$ (135,938)	$ 7,662

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Income Taxes (Details 1)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Difference between income taxes computed at the Federal statutory tax rate and the provision for income taxes
US statutory rate	34.00%	34.10%	34.00%
State taxes, net of Federal tax benefit	2.00%	(0.10%)	0.40%
Foreign subsidiaries	(2.20%)	(3.70%)	(1.90%)
Non-controlling interest	(3.10%)	(7.30%)	(7.20%)
Valuation allowance	(1.00%)		0.50%
Other	2.10%	(0.30%)	(0.70%)
Total	31.80%	22.70%	25.10%

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Consolidated Statements of Income and Comprehensive Income (Loss) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
NET SALES	$ 298,179	$ 279,234	$ 260,933
Cost of goods sold	244,313	228,971	218,770
GROSS PROFIT	53,866	50,263	42,163
Engineering, selling, and administrative expenses	34,934	33,920	33,443
Loss on settlement of pension obligation	2,144
INCOME FROM OPERATIONS	16,788	16,343	8,720
Interest income	21	69	119
Equity (loss) income of joint ventures	(225)	(1,071)	1,246
Interest expense	(34)	(81)	(175)
Other income, net	329	582	220
INCOME BEFORE PROVISION FOR INCOME TAXES AND NON-CONTROLLING INTEREST	16,879	15,842	10,130
Provision for income taxes	5,366	3,589	2,540
NET INCOME	11,513	12,253	7,590
Net income attributable to non-controlling interest	2,138	3,460	2,172
NET INCOME ATTRIBUTABLE TO STRATTEC SECURITY CORPORATION	9,375	8,793	5,418
COMPREHENSIVE INCOME (LOSS):
NET INCOME	11,513	12,253	7,590
Change in cumulative translation adjustments	736	(2,080)	1,777
Pension and postretirement plan funded status adjustment, net of tax	12,818	(11,990)	8,450
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	13,554	(14,070)	10,227
COMPREHENSIVE INCOME (LOSS)	25,067	(1,817)	17,817
Comprehensive income attributable to non-controlling interest	2,147	3,397	2,208
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO STRATTEC SECURITY CORPORATION	$ 22,920	$ (5,214)	$ 15,609
EARNINGS PER SHARE:
Basic	$ 2.77	$ 2.66	$ 1.65
Diluted	$ 2.72	$ 2.64	$ 1.63
AVERAGE SHARES OUTSTANDING:
Basic	3,327	3,300	3,285
Diluted	3,379	3,330	3,323

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Investment in Joint Ventures and Majority Owned Subsidiaries (Details Textual) (USD $)	12 Months Ended							1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended		0 Months Ended	12 Months Ended		12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011	Jun. 30, 2013 Vehicle Access Systems Technology Llc	Jul. 01, 2012 Vehicle Access Systems Technology Llc	Jul. 03, 2011 Vehicle Access Systems Technology Llc	Nov. 20, 2009 Vehicle Access Systems Technology Llc	Dec. 31, 2009 Strattec	Jul. 01, 2012 Strattec	Jun. 27, 2010 Strattec	Dec. 31, 2009 WITTE	Jul. 01, 2012 WITTE	Jun. 27, 2010 WITTE	Dec. 31, 2009 ADAC	Jul. 01, 2012 ADAC	Jun. 27, 2010 ADAC	Apr. 05, 2013 NextLock LLC	Jun. 30, 2013 NextLock LLC	Apr. 05, 2013 Actuator Systems LLC	Jun. 30, 2013 ADAC-STRATTEC LLC.	Jul. 01, 2012 ADAC-STRATTEC LLC.	Jul. 03, 2011 ADAC-STRATTEC LLC.	Jun. 30, 2013 Strattec Power Access Llc	Jul. 01, 2012 Strattec Power Access Llc	Jul. 03, 2011 Strattec Power Access Llc	Nov. 30, 2008 Strattec Power Access Llc
Investment in Joint Ventures (Textual) [Abstract]
VAST China noncontrolling interest purchased by VAST LLC							40.00%
Equity (Loss) earnings of joint ventures	$ (225,000)	$ (1,071,000)	$ 1,246,000	$ (147,000)	$ (1,071,000)	$ 1,246,000												$ (78,000)
Goodwill impairment charge					284,000
Proceeds from repayment of loan to joint venture								1,000,000			1,000,000			1,000,000
Loan to joint venture		0	1,500,000							2,500,000			2,500,000			2,500,000
Principal amount converted to additional capital		1,500,000							1,500,000			1,500,000			1,500,000
Accrued interest converted to additional capital		112,000							112,000			112,000			112,000
Initial capitalization in joint venture, total				600,000													1,500,000
Cash contributions to joint ventures from Strattec	965,000	200,000	450,000	200,000													765,000
Percentage ownership interest in less than wholly owned consolidated subsidiary																				51.00%	51.00%	51.00%	80.00%	80.00%	80.00%	80.00%
Less than wholly owned consolidated subsidiary impact on STRATTEC's net income																				$ 1,100,000	$ 1,700,000	$ 910,000	$ 1,000,000	$ 2,600,000	$ 2,500,000
Percentage non-controlling ownership interest in less than wholly owned consolidated subsidiary																							20.00%	20.00%	20.00%	20.00%
Percentage ownership interest in joint venture																	51.00%
Joint venture partner's ownership interest																			49.00%

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Sales and Receivable Concentration (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Receivables from largest customers
Receivables from largest customers, amount	$ 30,903	$ 30,125
Receivables from largest customers, percentage of gross receivables	65.00%	67.00%
General Motors Company
Receivables from largest customers
Receivables from largest customers, amount	8,672	10,230
Receivables from largest customers, percentage of gross receivables	18.00%	23.00%
Ford Motor Company
Receivables from largest customers
Receivables from largest customers, amount	6,533	5,738
Receivables from largest customers, percentage of gross receivables	14.00%	13.00%
Chrysler Group LLC
Receivables from largest customers
Receivables from largest customers, amount	$ 15,698	$ 14,157
Receivables from largest customers, percentage of gross receivables	33.00%	31.00%

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Stock Option and Purchase Plans (Details 1) (Restricted stock, USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Restricted stock
Summary of restricted stock activity under our stock incentive plan
Nonvested, Shares Beginning Balance	49,400	38,900	27,500
Granted, Shares	24,150	20,000	20,000
Vested, Shares	(10,400)	(9,300)	(8,600)
Nonvested, Shares Ending Balance	61,250	49,400	38,900
Forfeited, Shares	(1,900)	(200)
Nonvested, Weighted Average Grant Date Fair Value Beginning Balance	$ 20.45	$ 21.19	$ 29.90
Granted, Weighted Average Grant Date Fair Value	$ 23.69	$ 23.01	$ 20.66
Vested, Weighted Average Grant Date Fair Value	$ 15.44	$ 29.00	$ 47.78
Nonvested, Weighted Average Grant Date Fair Value Ending Balance	$ 22.42	$ 20.45	$ 21.19
Forfeited, Weighted Average Grant Date Fair Value	$ 25.49	$ 23.01

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Export Sales (Tables)

12 Months Ended

Jun. 30, 2013

Summary of export sales

Export sales are summarized below (thousands of dollars):

	2013			2012			2011
Export Sales	$	111,159		$	102,022		$	103,232
Percent of Net Sales		37	%		37	%		40	%

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Investment in Joint Ventures and Majority Owned Subsidiaries (Tables)

12 Months Ended

Jun. 30, 2013

Investment in Joint Ventures and Majority Owned Subsidiaries

Investment in Joint Ventures in the accompanying Consolidated Balance Sheets consisted of the following (in thousands of dollars):

		June30,2013		July1,2012
Investment in VASTLLC	$	8,479	$	8,139
Investment in NextLock LLC		687		—
	$	9,166	$	8,139

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Organization and Summary of Significant Accounting Policies (Details 13) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Changes in balance sheet amounts under self insured plans
Balance, Beginning of Year	$ 320	$ 320	$ 320
Provision Charged to Expense	3,948	4,148	3,077
Payments	3,848	4,148	3,077
Balance, End of Year	$ 420	$ 320	$ 320

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Export Sales (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Summary of export sales
Export Sales	$ 111,159	$ 102,022	$ 103,232
Export sales as a percent of net sales	37.00%	37.00%	40.00%

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Equity (Loss) Earnings of Joint Venture (Details 1) (Vehicle Access Systems Technology Llc, USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Vehicle Access Systems Technology Llc
Summarized balance sheets
Cash and cash equivalents	$ 3,801	$ 5,622
Receivables, net	23,594	16,025
Inventories, net	10,693	17,756
Other current assets	7,892	10,207
Total current assets	45,980	49,610
Property, plant and equipment, net	23,470	20,753
Other long-term assets	4,218	3,585
Total assets	73,668	73,948
Current liabilities	36,128	37,843
Long-term liabilities	11,808	11,381
Total liabilities	47,936	49,224
Net assets	25,732	24,724
STRATTEC’s share of net assets	$ 8,577	$ 8,241

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Retirement Plans and Postretirement Costs (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013
Significant Effect of Health Care Trend on the Postretirement Benefit
Effect on total of service and interest cost components in fiscal 2013, 1% Increase	$ 3
Effect on total of service and interest cost components in fiscal 2013, 1% Decrease	(3)
Effect on postretirement benefit obligation as of June 30, 2013, 1% Increase	59
Effect on postretirement benefit obligation as of June 30, 2013, 1% Decrease	$ (57)

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Organization and Summary of Significant Accounting Policies (Details 8)	12 Months Ended
	Jun. 30, 2013
Land and improvements
Estimated useful lives of the assets
Expected Useful Lives	20 years
Buildings and improvements | Minimum
Estimated useful lives of the assets
Expected Useful Lives	20 years
Buildings and improvements | Maximum
Estimated useful lives of the assets
Expected Useful Lives	35 years
Machinery and equipment | Minimum
Estimated useful lives of the assets
Expected Useful Lives	3 years
Machinery and equipment | Maximum
Estimated useful lives of the assets
Expected Useful Lives	10 years

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Organization and Summary of Significant Accounting Policies (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011	Jun. 27, 2010
Inventories
Finished products	$ 6,966	$ 5,313
Work in process	6,164	5,659
Purchased materials	12,682	11,564
Inventory, Gross, Total	25,812	22,536
Excess and obsolete reserve	(1,500)	(1,300)	(1,200)	(1,418)
Inventories, net	$ 24,312	$ 21,236

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Organization and Summary of Significant Accounting Policies (Details 5) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Activity related to the excess and obsolete inventory reserve
Balance, Beginning of Year	$ 1,300	$ 1,200	$ 1,418
Provision Charged to Expense	511	385	334
Amounts Written Off	311	285	552
Balance, End of Year	$ 1,500	$ 1,300	$ 1,200

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Commitments and Contingencies

12 Months Ended

Jun. 30, 2013

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

We have a reserve for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The site 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 initially established in 1995. Due to changing technology and related costs associated with active remediation of the site, in fiscal 2010 the reserve was adjusted based on updated third party estimates to adequately cover the cost for active remediation of the contamination. From 1995 through June30, 2013, costs of approximately $460,000 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 groundwater monitoring wells that are installed on the property. 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, 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 environmental reserve of $1.4 million at June30, 2013, is adequate.

At June30, 2013, we had purchase commitments for zinc, aluminum, other purchased parts and natural gas totaling approximately $11.5 million payable in 2014, $8.8 million payable in 2015 and $2.2 million payable in 2016. Minimum rental commitments under all non-cancelable operating leases with a term in excess of one year are payable as follows: 2014-$526,000; 2015-$302,000. Rental expense under all non-cancelable operating leases totaled approximately $604,000in 2013, $723,000 in 2012and $783,000 in 2011.

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Retirement Plans and Postretirement Costs (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Pension and SERP Benefits
Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax
Prior service cost (credit)	$ 37
Net actuarial loss	17,256
Total	17,293
Postretirement Benefits
Amounts Included in Accumulated Other Comprehensive Loss, Net of Tax
Prior service cost (credit)	(2,662)
Net actuarial loss	4,313
Total	$ 1,651

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Sales and Receivable Concentration (Tables)

12 Months Ended

Jun. 30, 2013

Sales to Largest Customers

Sales to our largest customers were as follows (thousands of dollars and percent of total net sales):

	2013							2012					2011
	Sales			%			Sales				%		Sales				%
General Motors Company	$	56,972	19		%	$			64,588	23	%	$		63,617	24	%
Ford Motor Company		44,773	15		%				33,854	12	%			26,930	10	%
Chrysler Group LLC		95,476	32		%				90,796	33	%			80,889	31	%
	$	197,221	66		%	$			189,238	68	%	$		171,436	66	%

Receivables from Largest Customers

Receivables from our largest customers were as follows (thousands of dollars and percent of gross receivables):

	June30, 2013					July1, 2012
	Receivables		%			Receivables		%
General Motors Company	$	8,672		18	%	$	10,230		23	%
Ford Motor Company		6,533		14	%		5,738		13	%
Chrysler Group LLC		15,698		33	%		14,157		31	%
	$	30,903		65	%	$	30,125		67	%

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Organization and Summary of Significant Accounting Policies (Details 11)	12 Months Ended
	Jun. 30, 2013 Supplier	Jul. 01, 2012 Supplier	Jul. 03, 2011 Supplier
Supplier Concentrations
Percentage of inventory purchases from major suppliers	38.00%	41.00%	40.00%
Number of major Suppliers	7	14	11

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Shareholders' Equity

12 Months Ended

Jun. 30, 2013

Shareholders' Equity

Shareholders’ Equity

We have 12,000,000 shares of authorized common stock, par value $.01 per share, with 3,372,029and 3,303,784 shares outstanding at June30, 2013 and July1, 2012, respectively. Holders of our common stock are entitled to one vote for each share on all matters voted on by shareholders.

Our Board of Directors authorized a stock repurchase program to buy back up to 3,839,395 outstanding shares as of June30, 2013. As of June30, 2013, 3,655,322 shares have been repurchased under this program at a cost of approximately $136.4 million.

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Stock Option and Purchase Plans (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Summary of stock option activity under our stock incentive plan
Shares, Beginning Balance	332,800	297,400	297,650
Shares, Granted	40,000	40,000	40,000
Shares, Exercised	(55,845)	(2,600)	(2,600)
Shares, Expired	(41,500)	(2,000)	(37,650)
Shares, Terminated	(4,000)
Shares, Ending Balance	271,455	332,800	297,400
Weighted Average Exercise Price, Beginning Balance	$ 28.19	$ 28.32	$ 33.01
Weighted Average Exercise Price, Granted	$ 25.64	$ 26.53	$ 22.47
Weighted Average Exercise Price, Exercised	$ 13.78	$ 10.92	$ 10.92
Weighted Average Exercise Price, Expired	$ 52.68	$ 37.58	$ 60.36
Weighted Average Exercise Price, Terminated	$ 17.59
Weighted Average Exercise Price, Ending Balance	$ 27.19	$ 28.19	$ 28.32
Weighted Average Remaining Contractual Term, Balance at June 30, 2013	5 years 4 months 24 days
Aggregate Intrinsic Value, Balance at June 30, 2013	$ 3,830
Exercisable Shares	139,955	192,700	155,800
Shares of common stock available for grant	153,993
Weighted Average Exercise Price, Exercisable	$ 29.95	$ 33.69	$ 38.37
Weighted Average Remaining Contractual Term, Exercisable	4 years 4 months 24 days	4 years 6 months	4 years 9 months 18 days
Aggregate Intrinsic Value, Exercisable	$ 2,104	$ 702	$ 479

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Credit Facilities and Guarantees

12 Months Ended

Jun. 30, 2013

Credit Facilities and Guarantees

CREDIT FACILITIES AND GUARANTEES

STRATTEC has a $25 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. The STRATTEC Credit Facility expires August1, 2014. ADAC-STRATTEC LLC has a $5 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A, which is guaranteed by STRATTEC. The ADAC-STRATTEC Credit Facility expires June28, 2015. Any borrowings under either of the credit facilities will be secured by our U.S. cash balances, accounts receivable, inventory and fixed assets located in the U.S. Interest on borrowings underthese credit facilities is at varying rates based, at our option, on the London Interbank Offering Rate plus 1.0 to 1.75 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the maintenance of 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. There were no outstanding borrowings under the STRATTEC Credit Facility at June30, 2013 or July1, 2012. There were no borrowings under the STRATTEC Credit Facility during 2013, 2012 or 2011. Borrowings under the ADAC-STRATTEC Credit Facility totaled $2.25 million at June30, 2013. The average outstanding borrowings and weighted average interest rate on the ADAC-STRATTEC Credit Facility loans were approximately $1.7 million and 1.99 percent, respectively, during fiscal 2013. There were no borrowings under the ADAC-STRATTEC Credit Facility during 2012 or 2011. We believe that the credit facilities are adequate, along with existing cash balances and cash flow from operations, to meet our anticipated capital expenditure, working capital, dividend and operating expenditure requirements.

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 11,513	$ 12,253	$ 7,590
Adjustments to reconcile net income to net cash provided by operating activities:
Equity loss (income) of joint ventures	225	1,071	(1,246)
Depreciation and amortization	7,490	6,809	6,619
Foreign currency transaction loss (gain)	395	(1,369)	836
Unrealized (gain) loss on peso option contracts	(395)	640	(245)
Loss (gain) on disposition of property, plant and equipment	100	30	(6)
Deferred income taxes	3,847	54	(177)
Stock based compensation expense	1,062	825	621
Provision for doubtful accounts		116
Loss on settlement of pension obligation	2,144
Change in operating assets and liabilities:
Receivables	(2,923)	(5,394)	(3,309)
Inventories	(3,076)	899	(5,049)
Other assets	2,809	(2,130)	(183)
Accounts payable and accrued liabilities	(7,553)	3,437	2,902
Other, net	27		18
Net cash provided by operating activities	15,665	17,241	8,371
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in joint ventures	(965)	(200)	(450)
Restricted Cash			2,100
Additions to property, plant and equipment	(12,515)	(13,558)	(9,531)
Purchase of additional interest in majority owned subsidiary			(22)
Proceeds received on sale of property, plant and equipment	91	19	111
Net cash used in investing activities	(13,389)	(13,739)	(7,792)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under credit facility	3,250
Repayments under credit facility	(1,000)
Exercise of stock options and employee stock purchases	823	82	90
Excess tax benefits from stock-based compensation	270	4	12
Dividends paid to non-controlling interests of subsidiaries	(1,331)	(400)
Dividends paid	(1,352)	(1,341)	(3,989)
Repayment of loan from related parties		(1,850)	(1,150)
Net cash provided by (used in) financing activities	660	(3,505)	(5,037)
FOREIGN CURRENCY IMPACT ON CASH	(116)	240	(159)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	2,820	237	(4,617)
CASH AND CASH EQUIVALENTS
Beginning of year	17,487	17,250	21,867
End of year	20,307	17,487	17,250
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	3,701	2,721	1,394
Interest paid	$ 42	$ 115	$ 188

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Investment in Joint Ventures And Majority Owned Subsidiaries (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Schedule Of Equity Method Investments [Line Items]
INVESTMENT IN JOINT VENTURES	$ 9,166	$ 8,139
Vehicle Access Systems Technology Llc
Schedule Of Equity Method Investments [Line Items]
INVESTMENT IN JOINT VENTURES	8,479	8,139
NextLock LLC
Schedule Of Equity Method Investments [Line Items]
INVESTMENT IN JOINT VENTURES	$ 687

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Organization and Summary of Significant Accounting Policies (Details 16) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Intrinsic value of stock options exercised and the fair value of stock options vested
Intrinsic value of options exercised	$ 1,110	$ 26	$ 44
Fair value of stock options vested	$ 266	$ 268	$ 293

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Organization and Summary of Significant Accounting Policies (Details 2) (Fair Value, Measurements, Recurring, USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Assets:
Total assets at fair value	$ 1,537	$ 4,453
Stock Index Funds | Small Cap
Assets:
Total assets at fair value	115	209
Stock Index Funds | Mid Cap
Assets:
Total assets at fair value	114	206
Stock Index Funds | Large Cap
Assets:
Total assets at fair value	115	640
U.S. Treasury Securities
Assets:
Total assets at fair value		2,512
Level 1
Assets:
Total assets at fair value	1,537	4,373
Level 1 | Stock Index Funds | Small Cap
Assets:
Total assets at fair value	115	209
Level 1 | Stock Index Funds | Mid Cap
Assets:
Total assets at fair value	114	206
Level 1 | Stock Index Funds | Large Cap
Assets:
Total assets at fair value	115	640
Level 1 | U.S. Treasury Securities
Assets:
Total assets at fair value		2,512
Level 2
Assets:
Total assets at fair value		80
Level 2 | Stock Index Funds | Small Cap
Assets:
Total assets at fair value
Level 2 | Stock Index Funds | Mid Cap
Assets:
Total assets at fair value
Level 2 | Stock Index Funds | Large Cap
Assets:
Total assets at fair value
Level 2 | U.S. Treasury Securities
Assets:
Total assets at fair value
Level 3
Assets:
Total assets at fair value
Level 3 | Stock Index Funds | Small Cap
Assets:
Total assets at fair value
Level 3 | Stock Index Funds | Mid Cap
Assets:
Total assets at fair value
Level 3 | Stock Index Funds | Large Cap
Assets:
Total assets at fair value
Level 3 | U.S. Treasury Securities
Assets:
Total assets at fair value
Cash and Cash Equivalents
Assets:
Total assets at fair value	1,193	806
Cash and Cash Equivalents | Level 1
Assets:
Total assets at fair value	1,193	806
Cash and Cash Equivalents | Level 2
Assets:
Total assets at fair value
Cash and Cash Equivalents | Level 3
Assets:
Total assets at fair value
Mexican peso option contracts
Assets:
Total assets at fair value		80
Liabilities:
Total liabilities at fair value		475
Mexican peso option contracts | Level 1
Assets:
Total assets at fair value
Liabilities:
Total liabilities at fair value
Mexican peso option contracts | Level 2
Assets:
Total assets at fair value		80
Liabilities:
Total liabilities at fair value		475
Mexican peso option contracts | Level 3
Assets:
Total assets at fair value
Liabilities:
Total liabilities at fair value

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Retirement Plans and Postretirement Costs (Details 4)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012
Pension plan weighted-average asset allocations by asset category
Target Allocation	100.00%
Plan assets - actual percentage	100.00%	100.00%
Equity investments
Pension plan weighted-average asset allocations by asset category
Target Allocation	70.00%
Plan assets - actual percentage	64.00%	64.00%
Fixed-income Investments
Pension plan weighted-average asset allocations by asset category
Target Allocation	30.00%
Plan assets - actual percentage	30.00%	32.00%
Other
Pension plan weighted-average asset allocations by asset category
Target Allocation
Plan assets - actual percentage	6.00%	4.00%

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Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Jul. 01, 2012
Deferred income taxes-current:
Repair and maintenance supply parts reserve	$ 185	$ 190
Payroll-related accruals	1,789	1,589
Environmental reserve	523	546
Inventory Reserve	486	437
Allowance for Doubtful Accounts	185	190
Accrued Warranty	703	1,663
Other	396	781
Deferred tax assets gross current	4,267	5,396
Valuation allowance		(177)
Deferred tax assets net current	4,267	5,219
Deferred income taxes-noncurrent:
Accrued pension obligations	(10,572)	(9,482)
Unrecognized pension and postretirement benefit plan liabilities	11,305	19,467
Accumulated depreciation	(4,256)	(3,023)
Stock-based compensation	854	842
Postretirement obligations	325	728
NOL/credit carry-forwards	159	153
Other	1,176	1,057
Deferred tax assets gross non current	$ (1,009)	$ 9,742

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Export Sales

12 Months Ended

Jun. 30, 2013

EXPORT SALES

EXPORT SALES

Export sales are summarized below (thousands of dollars):

	2013			2012			2011
Export Sales	$	111,159		$	102,022		$	103,232
Percent of Net Sales		37	%		37	%		40	%

These sales were primarily to automotive manufacturing assembly plants in Canada, China, Mexico and Korea.

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Retirement Plans and Postretirement Costs

12 Months Ended

Jun. 30, 2013

Retirement Plans and Postretirement Costs

RETIREMENT PLANS AND POSTRETIREMENT COSTS

We have a qualified, noncontributory defined benefit pension plan covering substantially all U.S. associates. Benefits are based on years of service and final average compensation. Our policy is to fund 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 January1, 2010, an amendment to the qualified defined benefit pension plan discontinued the benefit accruals for salary increases and credited service rendered after December31, 2009.

We have a noncontributory supplemental executive retirement plan (“SERP”), which is a nonqualified defined benefit plan that essentially mirrors the qualified plan, but provides benefits in excess of certain limits placed on our qualified retirement plan by the Internal Revenue Code. The SERP will pay supplemental pension benefits to certain key associates upon retirement based upon the associates’ years of service and compensation. The SERP is being funded through a Rabbi Trust with BMO Harris Bank N.A. During fiscal 2013, SERP benefits of approximately $5.8 million were cash settled using Rabbi Trust assets and current cash balances. We incurred a settlement charge to operations of approximately $2.1 million pre-tax as a result of a requirement to expense a portion of the unrealized actuarial losses due to the settlement of the SERP obligation. The charge had no effect on our aggregate equity balance because the unrealized actuarial losses were previously recognized during prior periods in accumulated other comprehensive loss. Accordingly, the effect of the settlement charge on our retained earnings was offset by a corresponding reduction in accumulated other comprehensive loss. The Rabbi Trust assets had a value of $1.5 million at June30, 2013 and $4.4 million at July1, 2012. The Rabbi Trust assets are included in Other Current Assets in the accompanying Consolidated Balance Sheets. The projected benefit obligation was $1.5 million at June30, 2013 and $7.2 million at July1, 2012. The SERP liabilities are included in the pension tables below. However, the Rabbi Trust assets are excluded from the table as they do not qualify as plan assets.

We also sponsor a postretirement health care plan for all U.S. associates hired prior to June1, 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 January1, 2010, an amendment to the postretirement health care plan limited the benefit for future eligible retirees to $4,000 per plan year and is subject to a maximum five year coverage period based on the associate’s retirement date and age. The postretirement health care plan is unfunded.

Amounts included in accumulated other comprehensive loss, net of tax, at June30, 2013, which have not yet been recognized in net periodic benefit cost are as follows (thousands of dollars):

	PensionandSERPBenefits		PostretirementBenefits
Prior service cost (credit)	$	37	$	(2,662	)
Net actuarial loss		17,256		4,313
	$	17,293	$	1,651

Included in accumulated other comprehensive loss at June30, 2013 are prior service costs of $12,000 ($7,000 net of tax) and unrecognized net actuarial losses of $2.7 million ($1.7 million net of tax) which are expected to be recognized in pension and SERP net periodic benefit cost during fiscal 2014.

Included in accumulated other comprehensive loss at June30, 2013 are prior service credits of $764,000 ($474,000 net of tax) and unrecognized net actuarial losses of $847,000 ($525,000 net of tax) which are expected to be recognized in postretirement net periodic benefit cost during fiscal 2014.

The following tables summarize the pension, SERP and postretirement plans’ income and expense, funded status and actuarial assumptions for the years indicated (thousands of dollars). We use a June30 measurement date for our pension and postretirement plans.

	Pension and SERP Benefits									Postretirement Benefits
	2013			2012			2011			2013			2012			2011
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$	216		$	150		$	70		$	15		$	11		$	10
Interest cost		4,447			4,784			4,692			181			227			275
Expected return on plan assets		(6,126	)		(6,411	)		(6,445	)		—			—			—
Amortization of prior service cost (credit)		12			12			12			(764	)		(764	)		(764	)
Amortization of unrecognized net loss		4,453			2,414			2,504			898			673			645
Settlement loss		2,144			—			—			—			—			—
Net Periodic benefit cost	$	5,146		$	949		$	833		$	330		$	147		$	166

	PensionandSERPBenefits							PostretirementBenefits
	June30, 2013			July1, 2012			June30, 2013				July1, 2012
WEIGHTED-AVERAGE ASSUMPTIONS
Benefit Obligations:
Discount rate		5.02	%		4.56	%			5.02	%		4.56	%
Expected return on plan assets		7.5	%		7.5	%			n/a			n/a
Rate of compensation increases—SERP		3.0	%		3.0	%			n/a			n/a
Net Periodic Benefit Cost:
Discount rate		4.56	%		5.57	%			4.56	%		5.57	%
Expected return on plan assets		7.5	%		7.8	%			n/a			n/a
Rate of compensation increases—SERP		3.0	%		3.0	%			n/a			n/a

	Pension and SERP Benefits							Postretirement Benefits
	2013			2012			2013					2012
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	103,383		$	89,609		$		4,475		$		4,586
Service cost		216			150				15				11
Interest cost		4,447			4,784				181				227
Actuarial loss (gain)		(8,381	)		12,663				239				917
Benefits paid		(9,750	)		(3,823	)			(1,370	)			(1,266	)
Benefit obligation at end of year	$	89,915		$	103,383		$		3,540		$		4,475
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	79,517		$	83,023		$		—		$		—
Actual return on plan assets		11,914			(1,683	)			—				—
Employer contribution		8,753			2,000				1,370				1,266
Benefits paid		(9,750	)		(3,823	)			(1,370	)			(1,266	)
Fair value of plan assets at end of year		90,434			79,517				—				—
Funded status – prepaid(accrued) benefit obligations	$	519		$	(23,866	)	$		(3,540	)	$		(4,475	)
AMOUNTS RECOGNIZED IN CONSOLIDATED BALANCE SHEETS:
Other long-term assets	$	1,983		$	—		$		—		$		—
Accrued payroll and benefits (current liabilities)		—			(5,664	)			(823	)			(1,010	)
Accrued benefit obligations (long-term liabilities)		(1,464	)		(18,202	)			(2,717	)			(3,465	)
Net amount recognized	$	519		$	(23,866	)	$		(3,540	)	$		(4,475	)
CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME:
Net periodic benefit cost	$	5,146		$	949		$		330		$		147
Net actuarial (gain) loss		(14,170	)		20,756				238				917
Amortization of prior service (cost) credits		(12	)		(12	)			764				764
Amortization of unrecognized net loss		(6,597	)		(2,414	)			(898	)			(673	)
Total recognized in other comprehensive income, before tax		(20,779	)		18,330				104				1,008
Total recognized in net periodic benefit cost and other comprehensive income	$	(15,633	)	$	19,279		$		434		$		1,155

The pension benefits have a separately determined accumulated benefit obligation, which is the actuarial present value of benefits based on service rendered and current and past compensation levels. This differs from the projected benefit obligation in that it includes no assumptions about future compensation levels.

The following table summarizes the accumulated benefit obligations and projected benefit obligations for the pension and SERP (thousands of dollars):

	Pension					SERP
	June30,2013		July1,2012			June30,2013			July 1,2012
Accumulated benefit obligation	$	88,451		$	96,167		$	1,020		$	6,629
Projected benefit obligation	$	88,451		$	96,167		$	1,464		$	7,216

For measurement purposes, a 7.5 percent annual rate increase in the per capita cost of covered health care benefits was assumed for fiscal 2014; the rate was assumed to decrease gradually to 5 percent by the year 2018 and remain at that level thereafter relating to retirees prior to January1, 2010.

The health care cost trend assumption has a significant effect on the postretirement benefit amounts reported. A 1% change in the health care cost trend rates would have the following effects (thousands of dollars):

	1%Increase		1%Decrease
Effect on total of service and interest cost components in fiscal 2013	$	3	$	(3	)
Effect on postretirement benefit obligation as of June30, 2013	$	59	$	(57	)

We employ a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of short and long-term plan liabilities, plan funded status and corporate financial condition. The investment portfolio primarily contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth and value style managers, and small, mid and large market capitalizations. The investment portfolio does not include any real estate holdings, but has a small allocation to hedge funds. The investment policy of the plan prohibits investment in STRATTEC stock. Investment risk is measured and monitored on an ongoing basis through periodic investment portfolio reviews, annual liability measurements and periodic asset/liability studies.

The pension plan weighted-average asset allocations by asset category are as follows:

	TargetAllocation			June30,2013			July1,2012
Equity investments		70	%		64	%		64	%
Fixed-income Investments		30	%		30	%		32	%
Other		—			6	%		4	%
Total		100	%		100	%		100	%

The following is a summary, by asset category, of the fair value of pension plan assets at the June30, 2013 and June30, 2012 measurement dates (thousands of dollars):

	June30, 2013												June30, 2012
Asset Category	Level1			Level2			Level3			Total				Level 1			Level2			Level3			Total
Cash and cash equivalents	$	—	$		4,572	$		—	$		4,572	$			3,411	$		—	$		—	$		3,411
Equity Securities/Funds:
Small Cap		13,681			—			—			13,681				10,707			—			—			10,707
Mid Cap		9,048			—			—			9,048				8,404			—			—			8,404
Large Cap		18,039			—			—			18,039				17,872			—			—			17,872
International		17,600			—			—			17,600				13,650			—			—			13,650
Fixed Income Bond Funds/Bonds		1,024			21,383			—			22,407				22,313			—			—			22,313
Hedge Funds		—			—			5,087			5,087				—			—			3,160			3,160
Total	$	59,392	$		25,955	$		5,087	$		90,434	$			76,357	$		—	$		3,160	$		79,517

The following table summarizes the changes in Level 3 investments for the pension plan assets (thousands of dollars):

	FairValue June30,2012		NetPurchases and Sales			Realizedand Unrealized Gain, net			FairValue June30,2013
Hedge Funds	$	3,160		$	1,420		$	507	$	5,087

There were no transfers in or out of Level 3 investments during the year ended June30, 2013.

The expected long-term rate of return on U.S. pension plan assets used to calculate the year-end 2013 projected benefit obligation was 7.5 percent. The target asset allocation is 70 percent public equity and 30 percent fixed income. The 7.5 percent is approximated by applying returns of 9.5 percent on public equity and 3 percent on fixed income to the target allocation. The actual historical returns are also relevant. Annualized returns for periods ended June30, 2013 were 5.33 percent for 5 years, 7.28 percent for 10 years, 5.65 percent for 15 years, 7.53 percent for 20 years, 8.26 percent for 25 years and 9.32 percent for 30 years.

We expect to contribute approximately $3million to our qualified pension plan and $823,000to our postretirement health care plan in fiscal 2014.

Wedonotexpecttomakecontributions toourSERPinfiscal2014.The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (thousands of dollars):

	PensionandSERPBenefits		PostretirementBenefits
2014	$	4,318		$	823
2015	$	5,269		$	724
2016	$	5,030		$	594
2017	$	5,240		$	491
2018	$	5,463		$	392
2019-2023	$	30,903		$	797

All U.S. associates may participate in our 401(k) Plan. We contribute 100 percent up to the first 5 percent of eligible compensation that a participant contributes to the plan. Our contributions to the 401 (k) Plan totaled approximately $1.5 million in 2013, $1.4 million in 2012 and $1.3 million in 2011.

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Retirement Plans and Postretirement Costs (Details 6) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CHANGE IN PLAN ASSETS:
Fair value of pension plan assets	$ 90,434	$ 79,517
Hedge Funds
CHANGE IN PLAN ASSETS:
Fair value of pension plan assets	5,087	3,160
Net Purchase and Sales	1,420
Realized and Unrealized Gain, net	$ 507

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Organization and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Jun. 30, 2013

Fair Market Value of all Outstanding Mexican Peso Option Contracts

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

	June30,2013		July1,2012
Not Designated as Hedging Instruments:
Other current liabilities:
Mexican peso option contracts	$	—	$	(395	)

Pre-Tax Effects of the Peso Option Contracts

The pre-tax effects of the Mexican peso option contracts on the accompanying Consolidated Statements of Income and Comprehensive Income (Loss) consisted of the following (thousands of dollars):

	Other Income, net
	June30,2013			July1,2012
Not Designated as Hedging Instruments:
Realized gain	$	27		$	18
Realized (loss)	$	(39	)	$	(438	)
Unrealized gain (loss)	$	395		$	(640	)

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 June30, 2013 and July1, 2012 (thousands of dollars):

	June30, 2013											July1, 2012
	Level1		Level2			Level3			Total			Level1		Level2		Level3		Total
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	115		$	—		$	—		$	115	$	209	$	—	$	—	$	209
Mid Cap		114			—			—			114		206		—		—		206
Large Cap		115			—			—			115		640		—		—		640
U.S. Treasury Securities		—			—			—			—		2,512		—		—		2,512
Cash and Cash Equivalents		1,193			—			—			1,193		806		—		—		806
Mexican peso option contracts		—			—			—			—		—		80		—		80
Total assets at fair value	$	1,537		$	—		$	—		$	1,537	$	4,373	$	80	$	—	$	4,453
Liabilities:
Mexican peso option contracts	$	—		$	—		$	—		$	—	$	—	$	475	$	—	$	475

Changes in the Allowance for Doubtful Accounts

Changes in the allowance for doubtful accounts were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision for Doubtful Accounts		Net(Write- Offs) Recoveries			Balance, EndofYear
Year ended June30, 2013	$	500	$	—	$	—		$	500
Year ended July1, 2012	$	400	$	116	$	(16	)	$	500
Year ended July3, 2011	$	400	$	—	$	—		$	400

Inventories

Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market using the first-in, first-out (“FIFO”) cost method of accounting. Inventories consisted of the following (thousands of dollars):

	June30,2013			July1,2012
Finished products	$	6,966		$	5,313
Work in process		6,164			5,659
Purchased materials		12,682			11,564
		25,812			22,536
Excess and obsolete reserve		(1,500	)		(1,300	)
Inventories, net	$	24,312		$	21,236

Activity Related to the Excess and Obsolete Inventory Reserve

The activity related to the excess and obsolete inventory reserve wasas follows (thousands of dollars):

	Balance, Beginning of Year		Provision Chargedto Expense			Amounts WrittenOff			Balance, EndofYear
Year ended June30, 2013	$	1,300	$	511	$		311	$		1,500
Year ended July1, 2012	$	1,200	$	385	$		285	$		1,300
Year ended July3, 2011	$	1,418	$	334	$		552	$		1,200

Schedule Of Activity Related To Repair And Maintenance Supply Parts Reserve Table Text Block

The activity related to the repair and maintenance supply parts reserve was as follows (thousands of dollars):

	Balance, Beginning of Year			Provision Chargedto Expense			Amounts WrittenOff			Balance, EndofYear
Year ended June30, 2013	$	500	$		195	$		195	$		500
Year ended July1, 2012	$	695	$		200	$		395	$		500
Year ended July3, 2011	$	680	$		78	$		63	$		695

Intangible Assets Carrying Value and Accumulated Amortization

The carrying value and accumulated amortization were as follows (thousands of dollars):

	June30,2013			July1,2012
Patents, engineering drawings and software	$	890		$	890
Less: accumulated amortization		(453	)		(354	)
	$	437		$	536

Property, Plant and Equipment, Useful Lives of Assets

Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	ExpectedUsefulLives
Land improvements		20years
Buildings and improvements		20to35years
Machinery and equipment		3 to 10 years

Property, Plant and Equipment

Property, plant and equipment consisted of the following (thousands of dollars):

	June30,2013			July1, 2012
Land and improvements	$	3,417		$	2,809
Buildings and improvements		19,371			18,522
Machinery and equipment		140,649			130,683
		163,437			152,014
Less: accumulated depreciation		(112,022	)		(105,684	)
	$	51,415		$	46,330

Inventory Purchase from Major Suppliers

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted:

Fiscal Year	Percentage of Inventory Purchases		Number of Suppliers
2013	38	%	7
2012	41	%	14
2011	40	%	11

Detail of Items Impacting other Income, Net

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

	June30,2013			YearsEnded July1,2012			July3,2011
Foreign currency transaction (loss) gain	$	(395	)	$	1,369		$	(836	)
Rabbi Trust gain		164			24			384
Unrealized (loss) gain on Mexican peso option contracts		395			(640	)		245
Realized(loss) gain on Mexican peso option contracts, net		(12	)		(420	)		33
Other		177			249			394
	$	329		$	582		$	220

Changes In Balance Sheet Amounts Under Self Insured Plans Table Text Block

Changes in the balance sheet amounts for self-insured plans were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Chargedto Expense		Payments		Balance, EndofYear
Year ended June30, 2013	$	320	$	3,948	$	3,848	$	420
Year ended July1, 2012	$	320	$	4,148	$	4,148	$	320
Year ended July3, 2011	$	320	$	3,077	$	3,077	$	320

Changes in Warranty Reserve

Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged (Credited) toExpense			Payments		Balance, EndofYear
Year ended June30, 2013	$	4,958	$	(404	)	$	2,054	$	2,500
Year ended July1, 2012	$	3,856	$	2,050		$	948	$	4,958
Year ended July3, 2011	$	1,718	$	2,807		$	669	$	3,856

Accumulated other Comprehensive Loss

Accumulated Other Comprehensive Loss: Accumulated other comprehensive loss is comprised of the following (thousands of dollars):

	June30,2013		July1,2012		July3,2011
Unrecognized pension and postretirement benefit liabilities, net of tax	$	18,944	$	31,762	$	19,772
Foreign currency translation		3,268		3,995		1,978
	$	22,212	$	35,757	$	21,750

Intrinsic Value Of Stock Options Exercised And Fair Value Of Stock Options Vested Table Text Block

The intrinsic value of stock options exercised and the fair value of stock options vested were as follows (in thousands of dollars):

	Years Ended
	June30,2013		July1,2012		July3,2011
Intrinsic value of options exercised	$	1,110	$	26	$	44
Fair value of stock options vested	$	266	$	268	$	293

Grant Date Fair Values and Assumptions

The grant date fair values and assumptions used to determine compensation expense were as follows:

Options Granted During	2013				2012				2011
Weighted average grant date fair value:
Options issued at grant date market value		n/a				n/a				n/a
Options issued above grant date market value	$	10.48		$		10.29		$		7.48
Assumptions:
Risk free interest rates		0.95	%			1.23	%			1.08	%
Expected volatility		57.58	%			59.88	%			59.89	%
Expected dividend yield		1.69	%			1.74	%			1.54	%
Expected term (in years)		6.0				6.0				4.0

Range of Options Outstanding

The range of options outstanding as of June30, 2013 was as follows:

	Number of Options Outstanding/ Exercisable			Weighted Average ExercisePrice Outstanding/ Exercisable		Weighted Average Remaining Contractual LifeOutstanding(InYears)
$10.92-$25.64		224,955/93,455	$		20.34/$14.84		6.3
$56.08-$63.25		46,500/46,500	$		60.33/$60.33		1.2
			$		27.19/$29.95

MEXICO

Property, Plant and Equipment

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	June30,2013		July1,2012
Gross book value	$	70,809	$	62,497
Net book value	$	25,777	$	20,434

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Sales and Receivable Concentration

12 Months Ended

Jun. 30, 2013

Sales and Receivable Concentration

Sales and receivable concentration

Sales to our largest customers were as follows (thousands of dollars and percent of total net sales):

	2013							2012					2011
	Sales			%			Sales				%		Sales				%
General Motors Company	$	56,972	19		%	$			64,588	23	%	$		63,617	24	%
Ford Motor Company		44,773	15		%				33,854	12	%			26,930	10	%
Chrysler Group LLC		95,476	32		%				90,796	33	%			80,889	31	%
	$	197,221	66		%	$			189,238	68	%	$		171,436	66	%

Receivables from our largest customers were as follows (thousands of dollars and percent of gross receivables):

	June30, 2013					July1, 2012
	Receivables		%			Receivables		%
General Motors Company	$	8,672		18	%	$	10,230		23	%
Ford Motor Company		6,533		14	%		5,738		13	%
Chrysler Group LLC		15,698		33	%		14,157		31	%
	$	30,903		65	%	$	30,125		67	%

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Document and Entity Information (USD $)	12 Months Ended
	Jun. 30, 2013	Aug. 09, 2013	Dec. 28, 2012
Document Document And Entity Information [Line Items]
Entity Registrant Name	STRATTEC SECURITY CORP
Entity Central Index Key	0000933034
Document Type	10-K
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--06-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 81,306,000
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		3,432,946

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Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Jun. 30, 2013

Principles of Consolidation and Presentation

Principles of Consolidation and Presentation: The accompanying consolidated financial statements include the accounts of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, and its majority owned subsidiaries. Equity investments for which STRATTEC exercises significant influence but does not control and is not the primary beneficiary are accounted for using the equity method. All significant inter-company transactions and balances have been eliminated.

New Accounting Standard

New Accounting Standard: In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “Update”) 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”). The Update is effective for annual reporting periods beginning after December15, 2012 and requires that we present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of AOCI based on its source and the income statement line items affected by the reclassification. We do not expect these new disclosure requirements to have a significant impact on our Consolidated Financial Statements.

Fiscal Year

Fiscal Year: Our fiscal year ends on the Sunday nearest June30. The years ended June30, 2013,July1, 2012 and July3, 2011 are comprised of 52, 52 and 53 weeks, respectively.

Use of Estimates

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods presented. These estimates and assumptions could also affect the disclosure of contingencies. Actual results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents

Cash and Cash Equivalents: Cash and cash equivalents include all short-term investments with an original maturity of three months or less due to the short-term nature of the instruments. Excess cash balances are placed in a money market account at a high quality financial institution.As of June 30,2013,$9.2millionofour$20.3millioncashandcashequivalentsbalancewasheldbyourforeignsubsidiariesinMexicoandisdeemedtobepermanentlyreinvested.

Derivatives 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 as a result of changes in the U.S. dollar / Mexican peso exchange rate. In January 2011 and August 2011, we entered into agreements with Bank of Montreal that provided for two weekly Mexican peso currency option contracts to cover a portion of our weekly estimated peso denominated operating costs. The contracts with Bank of Montreal expired June28, 2013. The two weekly option contracts were for equivalent notional amounts. The contracts that were effective during fiscal 2011 and 2012 expired July6, 2012, and provided for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 11.85 if the spot rate at the weekly expiry date was below 11.85 or for the purchase of Mexican pesos at a U.S. dollar / Mexican peso exchange rate of 12.85 if the spot rate at the weekly expiry date was above 12.85. Additional contracts that were effective during fiscal 2013 expired June28, 2013 and provided for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 12.40 if the spot rate at the weekly expiry date was below an average of 12.40 or for the purchase of Mexican pesos at an average U.S. dollar / Mexican peso exchange rate of 13.40 if the spot rate at the weekly expiry date was above an average of 13.40. Our objective in entering into these currency option contracts was to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso option contracts were not used for speculative purposes and were not designated as hedges. As a result, all currency option contracts were recognized in our accompanying consolidated financial statements at fair value and changes in the fair value of the currency option contracts were reported in current earnings as part of Other Income, net. The premiums paid and received under the weekly Mexican peso currency option contracts netted to zero. As a result, premiums related to the contracts did not impact our earnings. No Mexican peso currency option contracts were outstanding as of June30, 2013.

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

	June30,2013		July1,2012
Not Designated as Hedging Instruments:
Other current liabilities:
Mexican peso option contracts	$	—	$	(395	)

The pre-tax effects of the Mexican peso option contracts on the accompanying Consolidated Statements of Income and Comprehensive Income (Loss) consisted of the following (thousands of dollars):

	Other Income, net
	June30,2013			July1,2012
Not Designated as Hedging Instruments:
Realized gain	$	27		$	18
Realized (loss)	$	(39	)	$	(438	)
Unrealized gain (loss)	$	395		$	(640	)

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 credit facility approximated book value as of June30, 2013 and July1, 2012. 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 for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. There is an established fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. Level 1 – Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 – Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments. Level 3 – Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of June30, 2013 and July1, 2012 (thousands of dollars):

	June30, 2013											July1, 2012
	Level1		Level2			Level3			Total			Level1		Level2		Level3		Total
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	115		$	—		$	—		$	115	$	209	$	—	$	—	$	209
Mid Cap		114			—			—			114		206		—		—		206
Large Cap		115			—			—			115		640		—		—		640
U.S. Treasury Securities		—			—			—			—		2,512		—		—		2,512
Cash and Cash Equivalents		1,193			—			—			1,193		806		—		—		806
Mexican peso option contracts		—			—			—			—		—		80		—		80
Total assets at fair value	$	1,537		$	—		$	—		$	1,537	$	4,373	$	80	$	—	$	4,453
Liabilities:
Mexican peso option contracts	$	—		$	—		$	—		$	—	$	—	$	475	$	—	$	475

The Rabbi Trust assets fund our supplemental executive retirement plan and are included in Other Current Assets in the accompanying Consolidated Balance Sheets. The Rabbi Trust assets are classified as Level 1 assets. Refer to discussion of Mexican peso option contracts under Derivative Instruments above. The fair value of the Mexican Peso option contracts are based on an option pricing model that considers the remaining term, current exchange rate and volatility of the underlying foreign currency base. There were no transfers between Level 1 and Level 2 assets during 2013.

Receivables

Receivables: Receivables consist primarily of trade receivables due from Original Equipment Manufacturers in the automotive industry and locksmith distributors relating to our service and aftermarket sales. We evaluate the collectability of receivables based on a number of factors. An allowance for doubtful accounts is recorded for significant past due receivable balances based on a review of the past due items, general economic conditions and the industry as a whole.

Changes in the allowance for doubtful accounts were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision for Doubtful Accounts		Net(Write- Offs) Recoveries			Balance, EndofYear
Year ended June30, 2013	$	500	$	—	$	—		$	500
Year ended July1, 2012	$	400	$	116	$	(16	)	$	500
Year ended July3, 2011	$	400	$	—	$	—		$	400

Inventories

Inventories: Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market using the first-in, first-out (“FIFO”) cost method of accounting. Inventories consisted of the following (thousands of dollars):

	June30,2013			July1,2012
Finished products	$	6,966		$	5,313
Work in process		6,164			5,659
Purchased materials		12,682			11,564
		25,812			22,536
Excess and obsolete reserve		(1,500	)		(1,300	)
Inventories, net	$	24,312		$	21,236

We record a reserve for excess and obsolete inventory based on historical and estimated future demand and market conditions. The reserve level is determined by comparing inventory levels of individual materials and parts to historical usage and estimated future sales by analyzing the age of the inventory in order to identify specific materials and parts that are unlikely to be sold. Technical obsolescence and other known factors are also considered in evaluating the reserve level.

The activity related to the excess and obsolete inventory reserve wasas follows (thousands of dollars):

	Balance, Beginning of Year		Provision Chargedto Expense			Amounts WrittenOff			Balance, EndofYear
Year ended June30, 2013	$	1,300	$	511	$		311	$		1,500
Year ended July1, 2012	$	1,200	$	385	$		285	$		1,300
Year ended July3, 2011	$	1,418	$	334	$		552	$		1,200

Customer Tooling in Progress

Customer Tooling in Progress: We incur costs related to tooling used in component production and assembly. Costs for development of certain tooling, which will be directly reimbursed by the customer whose parts are produced from the tool, are accumulated on the balance sheet and are then billed to the customer. The accumulated costs are billed upon formal acceptance by the customer of products produced with the individual tool. Other tooling costs are not directly reimbursed by the customer. These costs are capitalized and amortized over the life of the related product based on the fact that the related tool will be used over the life of the supply arrangement. To the extent that estimated costs exceed expected reimbursement from the customer we will recognize a loss.

Repair and Maintenance Supply Parts

Repair and Maintenance Supply Parts: We maintain an inventory of repair and maintenance supply parts in support of operations. This inventory includes critical repair parts for all production equipment as well as general maintenance items. The inventory of critical repair parts is required to avoid disruptions in our customers’ just-in-time production schedules due to a lack of spare parts when equipment break-downs occur. All required critical repair parts are on hand when the related production equipment is placed in service and maintained to satisfy the customer model life production and service requirements, which may be 12 to 15 years. As repair parts are used, additional repair parts are purchased to maintain a minimum level of spare parts inventory. Depending on maintenance requirements during the life of the equipment, excess quantities of repair parts arise. Excess quantities are kept on hand and are not disposed of until the equipment is no longer in service. A repair and maintenance supply parts reserve is maintained to recognize the normal adjustment of inventory for obsolete and slow moving supply and maintenance parts. The adequacy of the reserve is reviewed periodically in relation to the repair parts inventory balances. The gross balance of the repair and maintenance supply parts inventory was approximately $2.0 million at June30, 2013 and $1.9 million at July1, 2012. The repair and maintenance supply parts inventory balance is included in Other Current Assets in the accompanying Consolidated Balance Sheets.

The activity related to the repair and maintenance supply parts reserve was as follows (thousands of dollars):

	Balance, Beginning of Year			Provision Chargedto Expense			Amounts WrittenOff			Balance, EndofYear
Year ended June30, 2013	$	500	$		195	$		195	$		500
Year ended July1, 2012	$	695	$		200	$		395	$		500
Year ended July3, 2011	$	680	$		78	$		63	$		695

Intangibles

Intangibles: Intangible assets that have defined useful lives acquired in the purchase of the Delphi Power Products business in 2009 consist of patents, engineering drawings and software. The intangible assets balance is included in Other Long-term Assets in the accompanying Consolidated Balance Sheets.

The carrying value and accumulated amortization were as follows (thousands of dollars):

	June30,2013			July1,2012
Patents, engineering drawings and software	$	890		$	890
Less: accumulated amortization		(453	)		(354	)
	$	437		$	536

The remaining useful life of the intangible assets in the table above is approximately 4.4 years. Intangible amortization expense was $99,000 for each of the years ended June30, 2013,July1, 2012 and July3, 2011. Intangible amortization expense is expected to be $99,000 in each of fiscalyear 2014 through 2017 and $41,000 in fiscal 2018.

Property, Plant and Equipment

Property, Plant and Equipment:

Property, plant and equipment are stated at cost. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets as follows:

Classification	ExpectedUsefulLives
Land improvements		20years
Buildings and improvements		20to35years
Machinery and equipment		3 to 10 years

Property, plant and equipment consisted of the following (thousands of dollars):

	June30,2013			July1, 2012
Land and improvements	$	3,417		$	2,809
Buildings and improvements		19,371			18,522
Machinery and equipment		140,649			130,683
		163,437			152,014
Less: accumulated depreciation		(112,022	)		(105,684	)
	$	51,415		$	46,330

Depreciation expense for the years ended June30, 2013,July1, 2012 and July3, 2011 totaled approximately $7.4 million, $6.7 million and $6.5 million, respectively.

The gross and net book value of property, plant and equipment located outside of the United States, primarily in Mexico, were as follows (thousands of dollars):

	June30,2013		July1,2012
Gross book value	$	70,809	$	62,497
Net book value	$	25,777	$	20,434

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment recognized is measured by the excess of the carrying amount of the asset over the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less estimated costs to sell. There were no impairments recorded in the years ended June30, 2013,July1, 2012 orJuly3, 2011.

Expenditures for repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments, which significantly extend the useful lives of existing plant and equipment, are capitalized and depreciated. Upon retirement or disposition of plant and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in income.

Supplier Concentrations

Supplier Concentrations: The following inventory purchases were made from major suppliers during each fiscal year noted:

Fiscal Year	Percentage of Inventory Purchases		Number of Suppliers
2013	38	%	7
2012	41	%	14
2011	40	%	11

We have long-term contracts or arrangements with most of our suppliers to guarantee the availability of raw materials and component parts.

Labor Concentrations

Labor Concentrations: We had approximately 2,670 full-time associates of which approximately 225 or 8.4 percent were represented by a labor union at June30, 2013. The associates represented by a labor union account for all production associates at our Milwaukee facility. The current contract with the unionized associates is effective through June29, 2014.

Revenue Recognition

Revenue Recognition: Revenue is recognized upon the shipment of products, which is when title passes, payment terms are final, we have no remaining obligations and the customer is required to pay. Revenue is recognized net of estimated returns and discounts, which is recognized as a deduction from revenue at the time of the shipment.

Research and Development Costs

Research and Development Costs: Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Research and development expenditures were approximately $1.3 million in 2013, $1.2 million in 2012, and $1.5 million in 2011.

Other Income Net

Other Income, Net: Net other income included in the accompanying Consolidated Statements of Income and Comprehensive Income(Loss) primarily includes foreign currency transaction gains and losses, realized and unrealized gains and losses on Mexican peso option contracts and Rabbi Trust gains. Foreign currency transaction gains and losses resultedfromactivityassociatedwith foreign denominatedassetsheld by our Mexican subsidiaries. We entered into the Mexican peso currency option contracts to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Rabbi Trust funds our supplemental executive retirement plan. The investments held in the Trust are considered trading securities.

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

	June30,2013			YearsEnded July1,2012			July3,2011
Foreign currency transaction (loss) gain	$	(395	)	$	1,369		$	(836	)
Rabbi Trust gain		164			24			384
Unrealized (loss) gain on Mexican peso option contracts		395			(640	)		245
Realized(loss) gain on Mexican peso option contracts, net		(12	)		(420	)		33
Other		177			249			394
	$	329		$	582		$	220

Self Insurance Plans

Self Insurance Plans: We have self-insured medical and dental plans covering all eligible U.S. associates. The claims handling process for the self-insured plans are managed by a third party administrator. Stop-loss insurance coverage limits our liability on a per individual per calendar year basis. The per individual per calendar year stop-loss limit was $150,000 in each calendar year 2010 through 2013. Prior to January1, 2011, each covered individual could receive up to $2 million in total benefits during his or her lifetime. Effective January1, 2011, under Health Care Reform, there is no lifetime maximum for overall benefits.

The expected ultimate cost for claims incurred under the self-insured medical and dental plans as of the balance sheet date is not discounted and is recognized as an expense. The expected ultimate cost of claims is estimated based upon the aggregate liability for reported claims and an estimated liability for claims incurred but not reported, which is based on analysis of historical data, current trends and information available from ourthird-partyadministrator. The expected ultimate cost for claims incurred under the self-insured medical and dental plans that has not been paid as of the balance sheet date is included in the accrued payroll and benefits liabilities amount in our accompanying Consolidated Balance Sheets.

Changes in the balance sheet amounts for self-insured plans were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Chargedto Expense		Payments		Balance, EndofYear
Year ended June30, 2013	$	320	$	3,948	$	3,848	$	420
Year ended July1, 2012	$	320	$	4,148	$	4,148	$	320
Year ended July3, 2011	$	320	$	3,077	$	3,077	$	320

Warranty Reserve

Warranty Reserve: We have a warranty liability recorded related to our exposure to warranty claims in the event our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products. The recorded warranty liability balance involves judgment and estimates. Our liability estimate is based on an analysis of historical warranty data as well as current trends and information, including our customers’ recent extension of their warranty programs.Inrecentfiscalperiods, our largest customers have extended their warranty protection for their vehicles and have since demanded higher warranty cost sharing arrangements from their suppliers, including STRATTEC. As a result of these actions, during 2012, and 2011 we increased our provision to cover these exposures. Moreover, in 2011, the warranty provision was increased by $1.15 million as a result of our share of the cost associated with a customer’s specific warranty claim involving our product. The current year warranty provision credit includes the impact of favorable adjustments for warranty claims settled during the year.

Changes in the warranty reserve were as follows (thousands of dollars):

	Balance, Beginning of Year		Provision Charged (Credited) toExpense			Payments		Balance, EndofYear
Year ended June30, 2013	$	4,958	$	(404	)	$	2,054	$	2,500
Year ended July1, 2012	$	3,856	$	2,050		$	948	$	4,958
Year ended July3, 2011	$	1,718	$	2,807		$	669	$	3,856

Foreign Currency Translation

Foreign Currency Translation: The financial statements of our foreign subsidiaries and equity investees are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the average exchange rate for each applicable period for sales, costs and expenses. Foreign currency translation adjustments are included as a component of other accumulated comprehensive loss. Foreign currency transaction gains and losses are included in other income, net in the accompanying Consolidated Statement of Income and Comprehensive Income (loss).

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss: Accumulated other comprehensive loss is comprised of the following (thousands of dollars):

	June30,2013		July1,2012		July3,2011
Unrecognized pension and postretirement benefit liabilities, net of tax	$	18,944	$	31,762	$	19,772
Foreign currency translation		3,268		3,995		1,978
	$	22,212	$	35,757	$	21,750

Deferred taxes have not been provided for the foreign currency translation adjustments.

Accounting For Stock-Based Compensation

Accounting For 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. The Board of Directors has designated 1,700,000shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of June30, 2013 were 153,993. Awards that expire or are cancelled 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 the 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 our Board of Directors. The options expire 5 to 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. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of our Board of Directors at the time the shares are granted and have a minimum vesting period of three years from the date of grant. Restricted shares granted have voting and dividend rights, regardless of whether the shares are vested or unvested. The restricted stock grants issued to date vest 3 years after the date of grant.

The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model. 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. The expected term of awards granted is determined based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules. The expected volatility is determined based on our historical stock prices over the most recent period commensurate with the expected term of the award. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. Expected pre-vesting option forfeitures are based primarily on historical data. 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 is amortized on a straight line basis over the vesting period. We record stock based compensation only for those awards that are expected to vest.

As of June30, 2013, there was $550,000 of total unrecognized compensation cost related to stock options granted under the plan. This cost is expected to be recognized over a weighted average period of 10 months. As of June30, 2013, there was $479,000 of total unrecognized compensation cost related to unvested restricted stock grants outstanding under the plan. This cost is expected to be recognized over a weighted average period of 11 months. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.

Cash received from option exercises was $770,000 in 2013 and $28,000 in each of fiscal year 2012 and 2011. The related income tax benefit was $421,000 in 2013, $9,000 in 2012 and $18,000 in 2011, respectively.

The intrinsic value of stock options exercised and the fair value of stock options vested were as follows (in thousands of dollars):

	Years Ended
	June30,2013		July1,2012		July3,2011
Intrinsic value of options exercised	$	1,110	$	26	$	44
Fair value of stock options vested	$	266	$	268	$	293

The grant date fair values and assumptions used to determine compensation expense were as follows:

Options Granted During	2013				2012				2011
Weighted average grant date fair value:
Options issued at grant date market value		n/a				n/a				n/a
Options issued above grant date market value	$	10.48		$		10.29		$		7.48
Assumptions:
Risk free interest rates		0.95	%			1.23	%			1.08	%
Expected volatility		57.58	%			59.88	%			59.89	%
Expected dividend yield		1.69	%			1.74	%			1.54	%
Expected term (in years)		6.0				6.0				4.0

The range of options outstanding as of June30, 2013 was as follows:

	Number of Options Outstanding/ Exercisable			Weighted Average ExercisePrice Outstanding/ Exercisable		Weighted Average Remaining Contractual LifeOutstanding(InYears)
$10.92-$25.64		224,955/93,455	$		20.34/$14.84		6.3
$56.08-$63.25		46,500/46,500	$		60.33/$60.33		1.2
			$		27.19/$29.95

Income Taxes

Income Taxes:Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and operating loss carryforwards are expected to be recovered, settled or utilized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We recognize the benefit of an income tax position only if it is more likely than not (greater than 50 percent) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit is recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Additionally, we accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties on uncertain tax positions are classified in the Provision for IncomeTaxes in the Consolidated Statements of Income and Comprehensive Income (Loss).

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Income Taxes (Details Textual) (USD $)	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012	Jul. 03, 2011
Income Tax (Textual) [Abstract]
State operating loss and credit carry-forwards	$ 159,000
Expiration date of state operating loss and credit carry-forwards	2014 through 2024
Foreign income before income taxes	6,000,000	5,300,000	3,600,000
Undistributed Earnings of Foreign Subsidiaries	26,600,000
Total liability for unrecognized tax benefits including interest	1,700,000	1,700,000
Unrecognized tax benefits	1,510,000	1,541,000	1,500,000
Unrecognized tax benefits, accrued interest	195,000	187,000
Unrecognized tax benefits, would effect tax rate	$ 1,000,000	$ 1,200,000

XML

Income Taxes (Details 3) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Jun. 30, 2013	Jul. 01, 2012
Reconciliation of the beginning and ending amount of unrecognized tax benefits
Unrecognized tax benefits, beginning of year	$ 1,541	$ 1,500
Gross increases – tax positions in prior years
Gross decreases – tax positions in prior years	(47)	(2)
Gross increases – current period tax positions	51	43
Tax Years Closed	(35)
Unrecognized tax benefits, end of year	$ 1,510	$ 1,541