10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549  

FORM 10-Q

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

For the quarterly period ended October 2, 2016

or

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

For the transition period from to

Commission File Number 0-25150

STRATTEC SECURITY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Wisconsin	39-1804239
(State of Incorporation)	(I.R.S. Employer Identification No.)

3333 West Good Hope Road, Milwaukee, WI 53209

(Address of Principal Executive Offices)

(414) 247-3333

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     YES  ☒    NO  ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☒
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  ☐    NO  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Common stock, par value $0.01 per share: 3,587,921 shares outstanding as of October 3, 2016 (which number includes all restricted shares previously awarded that have not vested as of such date).

STRATTEC SECURITY CORPORATION

FORM 10-Q

October 2, 2016

INDEX

		Page
Part I - FINANCIAL INFORMATION
Item 1	Financial Statements
	Condensed Consolidated Statements of Income and Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6-17
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-24
Item 3	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4	Controls and Procedures	27
Part II - OTHER INFORMATION
Item 1	Legal Proceedings	28
Item 1A	Risk Factors	28
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3	Defaults Upon Senior Securities	28
Item 4	Mine Safety Disclosures	28
Item 5	Other Information	28
Item 6	Exhibits	28

PROSPECTIVE INFORMATION

A number of the matters and subject areas discussed in this Form 10-Q contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “would,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” and “could,” or the negative of these terms or words of similar meaning. These include statements regarding expected future financial results, product offerings, global expansion, liquidity needs, financing ability, planned capital expenditures, management's or the Company’s expectations and beliefs, and similar matters discussed in this Form 10-Q. The 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, changes in warranty provisions and customers’ product recall policies,  foreign currency fluctuations, costs of operations, the volume and scope of product returns and warranty claims and other matters described in the section titled “Risk Factors” in the Company’s Form 10-K report filed on September 8, 2016 with the Securities and Exchange Commission for the year ended July 3, 2016.

Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-Q and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this Form 10-Q.

Item 1 Financial Statements

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended
	October 2, 2016			September 27, 2015
Net sales	$	100,244		$	96,513
Cost of goods sold		85,639			80,014
Gross profit		14,605			16,499
Engineering, selling and administrative expenses		11,370			10,574
Income from operations		3,235			5,925
Interest income		41			7
Equity earnings (loss) of joint ventures		62			(293	)
Interest expense		(78	)		(21	)
Other income (expense), net		43			(32	)
Income before provision for income taxes and non-controlling interest		3,303			5,586
Provision for income taxes		898			1,754
Net income		2,405			3,832
Net income attributable to non-controlling interest		863			559
Net income attributable to STRATTEC SECURITY CORPORATION	$	1,542		$	3,273
Comprehensive Income:
Net income	$	2,405		$	3,832
Pension and postretirement plans, net of tax		475			364
Currency translation adjustments		(1,623	)		(2,867	)
Other comprehensive loss, net of tax		(1,148	)		(2,503	)
Comprehensive income		1,257			1,329
Comprehensive income attributable to non-controlling interest		753			400
Comprehensive income attributable to STRATTEC SECURITY CORPORATION	$	504		$	929
Earnings per share attributable to STRATTEC SECURITY CORPORATION:
Basic	$	0.43		$	0.92
Diluted	$	0.42		$	0.90
Average shares outstanding:
Basic		3,576			3,543
Diluted		3,661			3,617
Cash dividends declared per share	$	0.14		$	0.13

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

3

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Amounts)

	October 2, 2016			July 3, 2016
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	17,069		$	15,477
Receivables, net		68,060			63,726
Inventories:
Finished products		10,693			10,137
Work in process		8,788			8,291
Purchased materials		22,045			23,055
Excess and obsolete reserve		(2,840	)		(2,800	)
Inventories, net		38,686			38,683
Other current assets		14,985			16,565
Total current assets		138,800			134,451
Investment in joint ventures		14,419			14,168
Deferred income taxes		5,018			5,387
Other long-term assets		6,395			3,021
Property, plant and equipment		220,369			216,859
Less: accumulated depreciation		(133,385	)		(131,710	)
Net property, plant and equipment		86,984			85,149
	$	251,616		$	242,176
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	37,008		$	32,416
Accrued Liabilities:
Payroll and benefits		11,127			11,210
Environmental		1,359			1,365
Warranty		9,186			9,228
Other		8,385			9,996
Total current liabilities		67,065			64,215
Borrowings under credit facility		24,000			20,000
Accrued pension obligations		1,491			1,466
Accrued postretirement obligations		1,191			1,262
Other long-term liabilities		925			721
Shareholders’ Equity:
Common stock, authorized 12,000,000 shares, $.01 par value, 7,209,763    issued shares at October 2, 2016 and 7,188,363 issued shares at    July 3, 2016		72			72
Capital in excess of par value		92,567			92,076
Retained earnings		221,767			220,728
Accumulated other comprehensive loss		(38,711	)		(37,673	)
Less: treasury stock, at cost (3,621,842 shares at October 2, 2016 and    3,622,506 shares at July 3, 2016)		(135,860	)		(135,871	)
Total STRATTEC SECURITY CORPORATION shareholders’ equity		139,835			139,332
Non-controlling interest		17,109			15,180
Total shareholders’ equity		156,944			154,512
	$	251,616		$	242,176

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

4

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Three Months Ended
	October 2, 2016			September 27, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,405		$	3,832
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,760			2,396
Foreign currency transaction gain		(689	)		(957	)
Unrealized loss on peso forward contracts		899			896
Stock based compensation expense		428			498
Equity (earnings) loss of joint ventures		(62	)		293
Change in operating assets and liabilities:
Receivables		(4,433	)		1,998
Inventories		(3	)		(7,226	)
Other assets		(1,372	)		610
Accounts payable and accrued liabilities		5,268			1,636
Other, net		(172	)		35
Net cash provided by operating activities		5,029			4,011
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to joint ventures		(850	)		(150	)
Repayment from loan to joint ventures		75			—
Purchase of property, plant and equipment		(7,446	)		(3,865	)
Net cash used in investing activities		(8,221	)		(4,015	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facility		8,000			1,000
Repayments of borrowings under credit facility		(4,000	)		(4,500	)
Contribution from non-controlling interest of subsidiaries		2,940			—
Dividends paid to non-controlling interests of subsidiaries		(1,764	)		(1,568	)
Dividends paid		(503	)		(466	)
Exercise of stock options and employee stock purchases		74			483
Net cash provided by (used in) financing activities		4,747			(5,051	)
Foreign currency impact on cash		37			(673	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,592			(5,728	)
CASH AND CASH EQUIVALENTS
Beginning of period		15,477			25,695
End of period	$	17,069		$	19,967
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes	$	487		$	954
Interest	$	86		$	12
Non-cash investing activities:
Change in capital expenditures in accounts payable	$	(1,714	)	$	(35	)
Guarantee of joint venture revolving credit facility	$	—		$	55

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

5

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Basis of Financial Statements

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

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

In the opinion of management, the accompanying condensed consolidated balance sheets as of October 2, 2016 and July 3, 2016, which have been derived from our audited financial statements, and the related unaudited interim condensed consolidated financial statements included herein contain all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Rule 10-01 of Regulation S-X. All significant intercompany transactions have been eliminated.

Interim financial results are not necessarily indicative of operating results for an entire year. The information included in this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the STRATTEC SECURITY CORPORATION 2016 Annual Report, which was filed with the Securities and Exchange Commission as an exhibit to our Form 10-K on September 8, 2016.

New Accounting Standards

In May 2014, the FASB issued an update to the accounting guidance for the recognition of revenue arising from contracts with customers. The update supersedes most current revenue recognition guidance and outlines a single comprehensive model for revenue recognition based on the principle that an entity should recognize revenue in an amount that reflects the expected consideration to be received in the exchange of goods and services. The guidance update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The guidance update is effective for annual reporting periods beginning after December 15, 2017 and becomes effective for us at the beginning of our 2019 fiscal year. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

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

6

In February 2015, the FASB issued an update to the accounting guidance that amends current consolidation guidance by modifying the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, eliminating the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with variable interest entities. The update is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The adoption of this pronouncement did not havea material impact on our consolidated financial statements.

In April 2015 and August 2015, the FASB issued updates to the accounting guidance for debt issuance costs. The updated guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and allows an entity to defer and present debt issuance costs associated with a line of credit arrangement as an asset, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The guidance updates are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

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

In November 2015, the FASB issued an update to an accounting standard to simplify the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position, which would be a change from our historical presentation whereby certain of our deferred tax assets and liabilities were classified as current and the remainder were classified as non-current. The standard update is effective for fiscal years beginning after December 15, 2016 and interim periods within those years, and early adoption is permitted. The standard is to be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. We have elected to adopt this guidance effective July 3, 2016, and have applied the guidance retrospectively.

In February 2016, the FASB issued an update to the accounting guidance for leases. The update increases the transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

In March 2016, the FASB issued an update to the accounting guidance for share-based payments. The update simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification of such items in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

In August 2016, the FASB issued an update to the accounting guidance on the classification of certain cash receipts and cash payments. The update aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

Derivative Instruments

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

7

The following table quantifies the outstanding Mexican peso forward contracts as of October 2, 2016 (thousands of dollars, except average forward contractual exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 14, 2016 - June 15, 2017	$	18,000		17.95	$	(1,573	)
Buy MXP/Sell USD	July 14, 2017 - June 15, 2018	$	9,000		19.93	$	(215	)

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

	October 2, 2016		July 3, 2016
Not Designated as Hedging Instruments:
Other Current Liabilities:
Mexican Peso Forward Contracts	$	1,592	$	107
Other Long-term Liabilities:
Mexican Peso Forward Contracts	$	196	$	996

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Not Designated as Hedging Instruments:
Realized Loss	$	230	$	—
Unrealized Loss	$	899	$	896

Fair Value of Financial Instruments

The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facility approximated book value as of October 2, 2016 and July 3, 2016. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of October 2, 2016 (in thousands):

	Fair Value Inputs
	Level 1 Assets: Quoted Prices InActive Markets		Level 2 Assets: Observable Inputs Other Than Market Prices		Level 3 Assets: Unobservable Inputs
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	376	$	—	$	—
Mid Cap		374		—		—
Large Cap		516		—		—
International		414		—		—
Fixed Income Funds		704		—		—
Cash and Cash Equivalents		—		2		—
Total Assets at Fair Value	$	2,384	$	2	$	—
Liabilities:
Mexican Peso Forward Contracts	$	—	$	1,788	$	—

8

The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan and are included in Other Long-term Assets in the accompanying Condensed Consolidated Balance Sheets. Refer to discussion of Mexican peso forward contracts under Derivative Instruments above. The fair value of the Mexican peso forward contracts considers the remaining term, current exchange rate, and interest rate differentials between the two currencies. There were no transfers between Level 1 and Level 2 assets during the three month period ended October 2, 2016.

Equity Earnings (Loss) Earnings of Joint Ventures

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

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Net Sales	$	25,009	$	26,348
Cost of Goods Sold		20,093		21,914
Gross Profit		4,916		4,434
Engineering, Selling and Administrative Expenses		4,015		3,625
Income From Operations		901		809
Other Income (Expense), net		441		(312	)
Income before Provision for Income Taxes		1,342		497
Provision for Income Taxes		172		94
Net Income	$	1,170	$	403
STRATTEC’s Share of VAST LLC Net Income	$	390	$	134
Intercompany Profit Elimination		—		(1	)
STRATTEC’s Equity Earnings of VAST LLC	$	390	$	133

We hold a 51% ownership interest in a joint venture company, SAL LLC, which exists to introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner. SAL LLC had a $1.5 million revolving credit facility (the “SAL Credit Facility”) with BMO Harris Bank N.A., which was fully guaranteed by STRATTEC. The SAL Credit Facility had a maturity date of February 16, 2016. Outstanding borrowings under the SAL Credit Facility as of February 16, 2016 totaled $1.5 million. SAL LLC did not have cash available to pay the outstanding debt balance as of the maturity date. Therefore, STRATTEC made a payment of $1.5 million on its guarantee on February 16, 2016. SAL LLC is considered a variable interest entity based on the STRATTEC guarantee and additional loans from STRATTEC as discussed below. STRATTEC is not the primary beneficiary and does not control the entity. Accordingly, our investment in SAL LLC is accounted for using the equity method. Prior to making the guarantee payment, STRATTEC had a recorded liability related to the guarantee of $1.5 million at February 16, 2016, which amount was equal to the estimated fair value of the guarantee as of this date. STRATTEC’s proportionate share of the guarantee based on our ownership percentage in SAL LLC totaled $765,000 as of February 16, 2016, and accordingly, our investment in SAL LLC included this amount as of this date. Our joint venture partner did not guarantee their proportionate share of the SAL Credit Facility. As a result, we recorded a loss equal to our partner’s proportionate share of the fair value of the STRATTEC guarantee based upon our partner’s ownership interest in the joint venture during our fiscal years 2015 and 2016.

SAL LLC maintains a license agreement with Westinghouse allowing SAL LLC to do business as Westinghouse Security. Payments due Westinghouse under the license agreement were guaranteed by STRATTEC. As of October 2, 2016 and July 3, 2016, STRATTEC has a recorded liability equal to the estimated fair value of the future payments due under this guarantee of $250,000. The liability is included in Other Long-term Liabilities in the accompanying Condensed Consolidated Balance Sheets.

Loans were made from STRATTEC to SAL LLC in support of operating expenses and working capital needs. The outstanding loan amounts totaled $1.2 million and $325,000 as of October 2, 2016 and July 3, 2016, respectively. As of October 2, 2016, the outstanding loan amount was eliminated against STRATTEC’s Investment in SAL LLC in the preparation of the consolidated financial statements.

9

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

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Net Sales	$	100		$	60
Cost of Goods Sold		87			55
Gross Profit		13			5
Engineering, Selling and Administrative Expenses		337			246
Loss From Operations		(324	)		(241	)
Other Expense, net		(12	)		(8	)
Net Loss	$	(336	)	$	(249	)
STRATTEC’s Share of Equity Loss of SAL LLC	$	(328	)	$	(249	)
Loss on Loan to SAL LLC		—			(150	)
Loss on SAL LLC Credit Facility Guarantee		—			(27	)
STRATTEC’s Equity Loss of SAL LLC	$	(328	)	$	(426	)

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Sales to VAST LLC	$	50	$	138
Sales to SAL, LLC	$	75	$	17
Purchases from VAST LLC	$	31	$	25
Expenses Charged to VAST LLC	$	228	$	235
Expenses Charged from VAST LLC	$	409	$	392

Credit Facilities and Guarantees

STRATTEC has a $30 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $20 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities both expire August 1, 2019. Borrowings under either credit facility are secured by our cash balances, accounts receivable, inventory and fixed assets located in the U.S. Interest on borrowings under both credit facilities is at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. The ADAC-STRATTEC Credit Facility also required that a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC be completed by September 30, 2016. This capital contribution was completed as required. STRATTEC’s portion of the capital contribution totaled $3.06 million. As of October 2, 2016, we were in compliance with all financial covenants required by these credit facilities.

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

	October 2, 2016		July 3, 2016
STRATTEC Credit Facility	$	16,000	$	11,500
ADAC-STRATTEC Credit Facility	$	8,000	$	8,500

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

	Three Months Ended
	AverageOutstanding Borrowings				Weighted Average Interest Rate
	October 2, 2016		September 27, 2015		October 2, 2016			September 27, 2015
STRATTEC Credit Facility	$	12,159	$	3,747		1.5	%		1.2	%
ADAC-STRATTEC Credit Facility	$	8,473	$	3,137		1.5	%		1.2	%

Commitments and Contingencies

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

ADAC STRATTEC de Mexico (ASdM), a wholly owned subsidiary of ADAC-STRATTEC LLC, which is a joint venture between STRATTEC SECURITY CORPORATION and ADAC Automotive, is in the process of constructing a new manufacturing facility in Leon, Mexico. Total capital expenditures required for the land, facility, paint system, and assembly equipment is expected to total approximately $22 million. Capital expenditures made through October 2, 2016 for the land, facility and equipment totaled $10.7 million. We anticipate financing the required capital expenditures through a combination of current cash balances, bank loans, and current operating cash flow.

In 1995, we recorded a provision of $3 million for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The facility was contaminated by a solvent spill, which occurred in 1985, from a former above ground solvent storage tank located on the east side of the facility. The reserve was originally established based on third party estimates to adequately cover the cost for active remediation of the contamination. Due to changing technology and related costs associated with active remediation of the contamination, in fiscal 2010, the reserve was adjusted based on updated third party estimates to adequately cover the cost for active remediation of the contamination. Additionally, in fiscal 2016, we obtained updated third party estimates for adequately covering the cost for active remediation of this contamination. Based upon the updated estimates, no further adjustment to the reserve was required. From 1995 through October 2, 2016, costs of approximately $515,000 have been incurred related to the installation of monitoring wells on the property and ongoing monitoring costs. We monitor and evaluate the site with the use of these groundwater monitoring wells. An environmental consultant samples these wells one or two times a year to determine the status of the contamination and the potential for remediation of the contamination by natural attenuation, the dissipation of the contamination over time to concentrations below applicable standards. If such sampling evidences a sufficient degree of and trend toward natural attenuation of the contamination at the site, we may be able to obtain a closure letter from the regulatory authorities resolving the issue without the need for active remediation. If a sufficient degree and trend toward natural attenuation is not evidenced by sampling, a more active form of remediation beyond natural attenuation may be required. The sampling has not yet satisfied all of the requirements for closure by natural attenuation. As a result, sampling continues and the reserve remains at an amount to reflect the estimated cost of active remediation. The reserve is not measured on a discounted basis. We believe, based on findings-to-date and known environmental regulations, that the remaining environmental reserve of $1.4 million at October 2, 2016 is adequate.

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Shareholders’ Equity

A summary of activity impacting shareholders’ equity for the three month period ended October 2, 2016 was as follows (in thousands):

	Total Shareholders’ Equity			Equity Attributable to STRATTEC			Equity Attributable toNon- Controlling Interest
Balance, July 3, 2016	$	154,512		$	139,332		$	15,180
Net Income		2,405			1,542			863
Dividend Declared		(503	)		(503	)		—
Dividend Declared – Non-controlling Interests of    Subsidiaries		(1,764	)		—			(1,764	)
Contributions from Non-controlling Interests of    Subsidiaries		2,940			—			2,940
Translation adjustments		(1,623	)		(1,513	)		(110	)
Stock Based Compensation		428			428			—
Pension and Postretirement Adjustment, Net of    tax		475			475			—
Employee Stock Purchases and Stock Option    Exercises		74			74			—
Balance, October 2, 2016	$	156,944		$	139,835		$	17,109

Other Income (Expense), net

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

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Foreign Currency Transaction Gain	$	689		$	957
Unrealized Loss on Peso Forward Contracts		(899	)		(896	)
Realized Loss on Peso Forward Contracts		(230	)		—
Rabbi Trust Gain (Loss)		83			(164	)
Other		400			71
	$	43		$	(32	)

Income Taxes

The income tax provisions for the three months periods ended October 2, 2016 and September 27, 2015 were affected by the non-controlling interest portion of our pre-tax income. The reduction in our effective tax rate in the current year quarter as compared to the prior year quarter was due to the increased impact of the non-controlling interest in certain of our subsidiaries. The non-controlling interest impacts the effective tax rate as ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes.

Earnings Per Share (EPS)

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the potential dilutive common shares outstanding during the applicable period using the treasury stock method. Potential dilutive common shares include outstanding stock options and unvested restricted stock awards.

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Net Income Attributable to STRATTEC SECURITY    CORPORATION	$	1,542	$	3,273
Less: Income Attributable to Participating Securities		1		21
Net Income Attributable to Common Shareholders	$	1,541	$	3,252
Basic Weighted Average Shares of Common Stock    Outstanding		3,576		3,543
Incremental Shares – Stock based Compensation		85		74
Diluted Weighted Average Shares of Common Stock    Outstanding		3,661		3,617
Basic Earnings Per Share	$	0.43	$	0.92
Diluted Earnings Per Share	$	0.42	$	0.90

We consider unvested restricted stock that provides the holder with a non-forfeitable right to receive dividends to be a participating security.

The calculation of earnings per share excluded 14,010 and 10,000 share-based payment awards for the three month periods ended October 2, 2016 and September 27, 2015, respectively, because their inclusion would have been anti-dilutive.

Stock-based Compensation

We maintain an omnibus stock incentive plan. This plan provides for the granting of stock options, shares of restricted stock and stock appreciation rights. As of October 2, 2016, the Board of Directors had designated 1,850,000 shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of October 2, 2016 were 204,939. Awards that expire or are canceled without delivery of shares become available for re-issuance under the plan. We issue new shares of common stock to satisfy stock option exercises.

Nonqualified and incentive stock options and shares of restricted stock have been granted to our officers, outside directors and specified associates under our stock incentive plan. Stock options granted under the plan may not be issued with an exercise price less than the fair market value of the common stock on the date the option is granted. Stock options become exercisable as determined at the date of grant by the Compensation Committee of the Board of Directors. The options expire 10 years after the grant date unless an earlier expiration date is set at the time of grant. The options vest 1 to 4 years after the date of grant. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of the Board of Directors at the time the shares are granted and have a minimum vesting period of three years from the date of grant. Restricted shares granted prior to August 2014 have voting and dividend rights, regardless of whether the shares are vested or unvested. Restricted shares granted during August 2014 and thereafter have voting rights, regardless of whether the shares are vested or unvested, but only have the right to receive cash dividends after such shares become vested. Prior to August 2015, the restricted stock grants issued vest 3 years after the date of grant. As of August 2015, restricted stock grants issued vest 3 to 5 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 fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight line basis over the vesting period for the entire award.

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A summary of stock option activity under our stock incentive plan for the three months ended October 2, 2016 was as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding, July 3, 2016		144,998		$	28.86
Exercised		(2,200	)	$	10.92
Outstanding, October 2, 2016		142,798		$	29.13		5.2	$	1,391
Exercisable, October 2, 2016		133,788		$	25.73		5.0	$	1,391

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Intrinsic Value of Options Exercised	$	71	$	414
Fair Value of Stock Options Vesting	$	596	$	331

No options were granted during the three month period ended October 2, 2016 or September 27, 2015.  

A summary of restricted stock activity under our omnibus stock incentive plan for the three months ended October 2, 2016 was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Balance, July 3, 2016		71,750		$	60.05
Granted		27,150		$	43.87
Vested		(19,200	)	$	35.89
Forfeited		(1,800	)	$	58.24
Nonvested Balance, October 2, 2016		77,900		$	60.40

As of October 2, 2016, there was $92,375 of total unrecognized compensation cost related to outstanding stock options granted under our omnibus stock incentive plan. This cost is expected to be recognized over a remaining weighted average period of 0.5 years. As of October 2, 2016, there was approximately $2.5 million of total unrecognized compensation cost related to unvested restricted stock grants outstanding under the plan. This cost is expected to be recognized over a remaining weighted average period of 1.2 years. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures of awards granted under our omnibus stock incentive plan.

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Pension and Postretirement Benefits

We have a qualified, noncontributory defined benefit pension plan (“Qualified Pension Plan”) covering substantially all U.S. associates. Benefits under the Qualified Pension Plan are based on years of service and final average compensation. Our policy is to fund the Qualified Pension Plan with at least the minimum actuarially computed annual contribution required under the Employee Retirement Income Security Act of 1974 (ERISA). Plan assets consist primarily of listed equity and fixed income securities. Effective December 31, 2009, an amendment to the Qualified Pension Plan discontinued the benefit accruals for salary increases and credited service rendered after that date.  On April 2, 2014, our Board of Directors approved a resolution to terminate the Qualified Pension Plan.  The termination of the Qualified Pension Plan is subject to the Internal Revenue Service’s (“IRS”) determination that the Qualified Pension Plan is qualified on termination.  We believe it will take 18 to 24 months to finalize the complete termination of the Qualified Pension Plan after obtaining IRS approval.  We have not yet received IRS approval that the Qualified Pension Plan is qualified on termination. Additionally, we have amended the Qualified Pension Plan to provide that participants are 100 percent vested in their accrued benefits as of the effective date of the plan termination, to adopt a new standard for disability benefits that will apply when the plan’s assets are distributed due to the termination, to add a lump sum distribution for employees and terminated vested participants who are not in payment status when Qualified Pension Plan assets are distributed due to the termination and to make certain other conforming amendments to the Qualified Pension Plan to comply with applicable laws that may be required by the IRS or may be deemed necessary or advisable to improve the administration of the Qualified Pension Plan or facilitate its termination and liquidation.  We also intend to make contributions to the Trust Fund for the Qualified Pension Plan to ensure that there are sufficient assets to provide all Qualified Pension Plan benefits as of the anticipated distribution date.  The financial impact of the plan termination will be recognized as a settlement of the Qualified Pension Plan liabilities.  The settlement date and related financial impact have not yet been determined.

We have historically had in place a noncontributory supplemental executive retirement plan (“SERP”), which prior to January 1, 2014 was a nonqualified defined benefit plan that essentially mirrored the Qualified Pension Plan, but provided benefits in excess of certain limits placed on our Qualified Pension Plan by the Internal Revenue Code.  As noted above, we froze our Qualified Pension Plan effective as of December 31, 2009 and the SERP provided benefits to participants as if the Qualified Pension Plan had not been frozen.  Because the Qualified Pension Plan was frozen and because new employees were not eligible to participate in the Qualified Pension Plan, our Board of Directors adopted amendments to the SERP on October 8, 2013 that were effective as of December 31, 2013 to simplify the SERP calculation.  The SERP is funded through a Rabbi Trust with BMO Harris Bank N.A.  Under the amended SERP, participants received an accrued lump-sum benefit as of December 31, 2013 which was credited to each participant’s account.  Subsequent to December 31, 2013, each eligible participant receives a supplemental retirement benefit equal to the foregoing lump sum benefit, plus an annual benefit accrual equal to 8 percent of the participant’s base salary and cash bonus, plus annual credited interest on the participant’s account balance.  All then current participants as of December 31, 2013 are fully vested in their account balances with any new individuals participating in the SERP effective on or after January 1, 2014 being subject to a five year vesting period.  The SERP, which is considered a defined benefit plan under applicable rules and regulations of the Internal Revenue Code, will continue to be funded through use of a Rabbi Trust to hold investment assets to be used in part to fund any future required lump sum benefit payments to participants.  The Rabbi Trust assets had a value of $2.4 million at October 2, 2016 and $2.3 million at July 3, 2016, respectively, and are included in Other Long-Term Assets in the accompanying Condensed Consolidated Balance Sheets.

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

Net periodic benefit costs under these plans are allocated between Cost of Goods Sold and Engineering, Selling and Administrative Expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

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

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Service cost	$	14		$	12		$	3		$	3
Interest cost		981			1,076		14				21
Expected return on plan assets		(1,464	)		(1,351	)		—			—
Amortization of prior service cost (credit)	3				3			(191	)		(187	)
Amortization of unrecognized net loss	807				599		135				151
Net periodic benefit cost (credit)	$	341		$	339		$	(39	)	$	(12	)

Voluntary contributions of $3 million were made to the Qualified Pension Plan during the three month period ended October 2, 2016. No contributions were made to the Qualified Pension Plan during the three month periods ended September 27, 2015. Additional contributions totaling $2 million are anticipated to be made during the remainder of fiscal 2017.

Accumulated Other Comprehensive Loss

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

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

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	Three Months Ended September 27, 2015
	Foreign Currency Translation Adjustments		Retirement and Postretirement Benefit Plans			Total
Balance, June 28, 2015	$	8,221	$	18,638		$	26,859
Other comprehensive loss before reclassifications		2,867		—			2,867
Income tax		—		—			—
Net other comprehensive loss before       reclassifications		2,867		—			2,867
Reclassifications:
Prior service credits (A)		—		188			188
Unrecognized net loss (A)		—		(765	)		(765	)
Total reclassifications before tax		—		(577	)		(577	)
Income tax		—		213			213
Net reclassifications		—		(364	)		(364	)
Other comprehensive loss (income)		2,867		(364	)		2,503
Other comprehensive loss attributable to non-    controlling interest		159		—			159
Balance, September 27, 2015	$	10,929	$	18,274		$	29,203

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

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Item 2

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s accompanying Condensed Consolidated Financial Statements and Notes thereto and its 2016 Annual Report which was filed with the Securities and Exchange Commission as an exhibit to its Form 10-K on September 8, 2016. Unless otherwise indicated, all references to quarters and years refer to fiscal quarters and fiscal years.

Outlook

During fiscal year ended July 3, 2016, we experienced stronger sales demand for our components from our major North American automotive customers, Fiat Chrysler Automobiles, General Motors Company and Ford Motor Company, as it relates to light trucks and both sport and car based utility vehicles in comparison to passenger cars, which was likely influenced by lower gas prices. Since this time period, we have seen slight increases in gas prices and customer actions in temporarily closing facility production at Ford relating to the F-150 pickup trucks, Focus, Fusion and Escape models and Fiat Chrysler discontinuing production on the Dodge Dart and Chrysler 200 passenger cars. These actions will have an impact on both our second fiscal quarter and full fiscal year sales. As we look out over the next calendar year, the current projections from our third-party forecasting service indicate that North American light vehicle production will remain flat with levels experienced over the past calendar year.

Analysis of Results of Operations

Three months ended October 2, 2016 compared to the three months ended September 27, 2015

	Three Months Ended
	October 2, 2016		September 27, 2015
Net Sales (in millions)	$	100.2	$	96.5

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Fiat Chrysler Automobiles	$	23.9	$	28.5
General Motors Company		22.0		18.8
Ford Motor Company		15.0		13.6
Tier 1 Customers		17.8		17.7
Commercial and Other OEM Customers		13.6		11.0
Hyundai / Kia		7.9		6.9
	$	100.2	$	96.5

Sales to Fiat Chrysler Automobiles in the current year quarter decreased in comparison to the prior year quarter due to lower customer vehicle production volume and content on the Chrysler 200, which is to be discontinued in December 2016, and lower content on the new Chrysler Pacifica Minivan. Increased sales to General Motors Company in the current year quarter over the prior year quarter was attributed to higher customer production volumes and content on vehicles for which we supply components. Increased sales to Ford Motor Company in the current year quarter as compared to the prior year quarter were attributed to increased product content on locksets and latches, in particular for the F-150 pick-up truck. Sales to Tier 1 customers were flat in comparison to the prior year quarter. Sales to commercial and other OEM customers during the current year quarter increased in comparison to the prior year quarter due to new customer programs. These customers, along with Tier 1 customers, primarily represent purchasers of vehicle access control products, such as latches, fobs, and driver controls that have been developed in recent years to complement our historic core business of locks and keys. The increased sales to Hyundai / Kia in the current year quarter over the prior year quarter were due to higher levels of production on vehicles for which we supply components.

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	Three Months Ended
	October 2, 2016		September 27, 2015
Cost of Goods Sold (in millions)	$	85.6	$	80.0

Direct material costs are the most significant component of our cost of goods sold and comprised $56.6 million or 66.1 percent of cost of goods sold in the current year quarter compared to $53.3 million or 66.6 percent of cost of goods sold in the prior year quarter. The increase in our direct material costs between these quarters of $5.6 million or 7.0 percent was due to increased sales volumes in the current year period as compared to the prior year period.

The remaining components of cost of goods sold consist of labor and overhead costs which increased $2.3 million or 8.6 percent to $29.0 million in the current year quarter from $26.7 million in the prior year quarter. The variable portion of these costs increased due to the increased sales volumes in the current year quarter over the prior year quarter. In addition, the current year quarter as compared to the prior year quarter included higher than expected production and expediting costs to meet certain customer schedules, which costs were partially offset by a reduction of approximately $1.7 million in the U.S. dollar value of our Mexican operations due to a favorable Mexican peso to U.S. dollar exchange rate between these quarterly periods and a reduction in expense provisions for the accrual of bonuses under our incentive bonus plans. The average U.S. dollar / Mexican peso exchange rate increased to approximately 18.73 pesos to the dollar in the current year quarter from approximately 16.37 pesos to the dollar in the prior year quarter.

	Three Months Ended
	October 2, 2016			September 27, 2015
Gross Profit (in millions)	$	14.6		$	16.5
Gross Profit as a percentage of net sales		14.6	%		17.1	%

The reduction in gross profit and gross profit as a percentage of net sales in the current year quarter as compared to the prior year quarter were the result of agreed upon customer price reductions that became effective at the start of the 2016 calendar year and higher than expected production and expediting costs to meet certain customer schedules, which were partially offset by a favorable Mexican peso to U.S. dollar exchange rate affecting the cost of our Mexican operations and a reduction in expense provisions for the accrual of bonuses under our incentive bonus plans, all as discussed above.

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Expenses (in millions)	$	11.4		$	10.6
Expenses as a percentage of net sales		11.3	%		11.0	%

Engineering, selling and administrative expenses increased approximately $800,000 between periods. The increase in these costs in the current year quarter as compared to the prior year quarter was due to higher new product program development costs for which we are utilizing third party vendors for a portion of the development work, partially offset by a reduction in expense provisions for the accrual of bonuses under our incentive bonus plans.

Income from operations in the current year quarter was $3.2 million compared to $5.9 million in the prior year quarter. This reduction in income from operations was the result of a reduction in our gross profit and an increase in engineering, selling and administrative expenses in the current year quarter as compared to the prior year quarter as discussed above.  

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Vehicle Access Systems Technology LLC	$	390		$	133
STRATTEC Advanced Logic, LLC		(328	)		(426	)
	$	62		$	(293	)

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STRATTEC is not the primary beneficiary and does not control STRATTEC Advanced Logic, LLC (“SAL LLC”). Accordingly, our investment in SAL LLC is accounted for using the equity method. During all periods presented in this report, 100 percent of the funding for SAL LLC was being made through loans from STRATTEC to SAL LLC and through STRATTEC’s guarantee of the SAL Credit Facility which is discussed herein. Therefore, during all periods presented in this report, even though STRATTEC maintains a 51 percent ownership interest in SAL LLC, STRATTEC recognized 100 percent of the losses of SAL LLC up to our committed financial support.

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Foreign Currency Transaction Gain	$	689		$	957
Unrealized Loss on Peso Forward Contracts		(899	)		(896	)
Realized Loss on Peso Forward Contracts		(230	)		—
Rabbi Trust Gain (Loss)		83			(164	)
Other		400			71
	$	43		$	(32	)

Foreign currency transaction gains during the current year quarter resulted from activity associated with foreign denominated assets held by our Mexican subsidiaries. We entered into the Mexican peso currency forward contracts to minimize earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. Unrealized losses on the peso forward contracts recognized as a result of mark-to-market adjustments as of October 2, 2016 may or may not be realized in future periods, depending on the actual Mexican peso to U.S. dollar exchange rates experienced during the balance of the contract period. Our Rabbi Trust assets fund our amended and restated supplemental executive retirement plan. The investments held in the Trust are considered trading securities.  

Our effective tax rate was 27.2 percent for the current year quarter compared to 31.4 percent for the prior year quarter. Our income tax provision for the current year quarter was affected by the increased impact of the non-controlling interest in certain of our subsidiaries. The non-controlling interest impacts the effective tax rate as ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes.

Liquidity and Capital Resources

Outstanding Receivable Balances from Major Customers

Our primary source of cash flow is from our major customers, which include Fiat Chrysler Automobiles, General Motors Company and Ford Motor Company. As of the date of filing this Form 10-Q with the Securities and Exchange Commission, all of our major customers are making payments on their outstanding accounts receivable in accordance with the payment terms included on their purchase orders. A summary of our outstanding receivable balances from our major customers as of October 2, 2016 was as follows (in millions):

Fiat Chrysler Automobiles	$	16.6
General Motors Company	$	14.9
Ford Motor Company	$	9.7

Cash Balances in Mexico

We earn a portion of our operating income in Mexico, which is deemed to be permanently reinvested. As of October 2, 2016, $10.4 million of our $17.1 million cash and cash equivalents balance was deemed to be permanently reinvested in Mexico. A portion of our 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, cash flows from operations and borrowings under our credit facility 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. These alternatives could result in higher effective tax rates, increased interest expense, and dilution of our earnings.

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Cash Flow Analysis

	Three Months Ended
	October 2, 2016			September 27, 2015
Cash Flows from (in millions):
Operating Activities	$	5.0		$	4.0
Investing Activities	$	(8.2	)	$	(4.0	)
Financing Activities	$	4.7		$	(5.1	)

Net cash provided by operating activities was $5.0 million during the current year quarter compared to $4.0 million during the prior year quarter. The change in operating cash flow between quarters was impacted by a decrease in working capital requirements in the current year quarter as compared to the prior year quarter, partially offset by a reduction in our operating profit in the current year quarter as compared to the prior year quarter, as discussed above under Analysis of Results of Operations. The decrease in our working capital requirements between quarters was made up of the following working capital changes (in millions):

	Increase (Decrease) in Working Capital Requirements
	Three Months Ended
	October 2,     2016			September 27, 2015			Change
Accounts Receivable	$	4.4		$	(2.0	)	$	6.4
Inventory	$	-		$	7.2		$	(7.2	)
Other Assets	$	1.4		$	(0.6	)	$	2.0
Accounts Payable and Accrued Liabilities	$	(5.3	)	$	(1.6	)	$	(3.7	)

The quarter over quarter change in the accounts receivable balances reflected an increase in accounts receivable balances during the current year quarter compared to a reduction in accounts receivable balances during the prior year quarter. The increase in the accounts receivable balances during the current year quarter reflected higher sales levels toward the end of our current year quarter as compared to the end of our June 2016 quarter. The decrease in accounts receivable balances during the prior year quarter reflected a reduction in outstanding receivable balances related to customer tooling billings as such outstanding balances were collected during that quarter. The quarter over quarter change in inventory reflected an increase in inventory balances during the prior year quarter, which was the result of prepayments of zinc commitments and lower sales of parts we supply for certain customer vehicle programs. The quarter over quarter change in other assets reflected cash contributions of $3 million to our qualified pension plan during the current year quarter while no cash contributions were made during the prior year quarter, partially offset by a larger reduction in income tax recoverable balances in the current year quarter as compared to the prior year quarter, which was based on the required tax provision and the timing and amounts of Federal, state, and foreign tax payments. The quarter over quarter change in accounts payable and accrued liability balances reflected a reduction in cash payments under our incentive bonus plans between quarters. Such cash payments totaled $837,000 in the current year quarter compared to $5.2 million during the prior year quarter.

Net cash used by investing activities of $8.2 million during the current year quarter and $4.0 million during the prior year quarter included capital expenditures of $7.4 million and $3.9 million, respectively. Capital expenditures during each quarter were made in support of requirements for new product programs and the upgrade and replacement of existing equipment. Current year quarter capital expenditures also included $3.7 million related to the construction of a new ADAC-STRATTEC facility and the purchase of related equipment in Leon, Mexico. Refer to discussion under Future Capital Expenditures included herein. Net cash used by investing activities during the current year quarter also included $850,000 of loans to our joint venture, SAL LLC, in support of operating expenses, working capital needs, and the payment of outstanding balances due to STRATTEC for the supply of parts.

Net cash provided by financing activities during the current year quarter of $4.7 million included $8.0 million of additional borrowings under credit facilities and $2.9 million in non-controlling interest contributions to ADAC-STRATTEC LLC in accordance with the ADAC-STRATTEC debt facility provisions, partially offset by repayments of borrowings under credit facilities of $4.0 million, $503,000 of regular quarterly dividend payments to shareholders and $1.8 million of dividend payments to non-controlling interests in our subsidiaries. Net cash used in financing activities of $5.1 million during the prior year quarter included repayments of borrowings under credit facilities of $4.5 million, $466,000 of regular quarterly dividend payments to shareholders and $1.6 million of dividend payments to non-controlling interests in our subsidiaries, partially offset by $1.0 million of additional borrowings under credit facilities and $483,000 of proceeds received from stock option exercises and related excess tax benefits.

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VAST LLC Cash Requirements

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

ADAC-STRATTEC LLC Cash Requirements

As discussed under Future Capital Expenditures included herein, ADAC-STRATTEC de Mexico (ASdM), a wholly owned subsidiary of ADAC-STRATTEC LLC, which is a joint venture between STRATTEC SECURITY CORPORATION and ADAC Automotive, is in the process of constructing a new manufacturing facility in Leon, Mexico. Total capital expenditures required for the land, facility, paint system, and assembly equipment is expected to total approximately $22 million. Capital expenditures made through October 2, 2016 for the land, facility and equipment totaled $10.7 million. We anticipate financing the remaining required capital expenditures through current cash balances, bank loans, and current operating cash flow. In contemplation of this facility construction, effective April 27, 2016, the ADAC-STRATTEC Credit Facility was amended to increase the available borrowings under the credit facility from $10 million to $20 million. Under the terms of the amended credit agreement, a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC was completed during the quarter ended October 2, 2016. STRATTEC’s portion of the required capital contribution was $3.06 million.

STRATTEC Advanced Logic, LLC Cash Requirements

During all periods presented in this report, STRATTEC provided 100 percent of the financial support to fund the start-up operating losses of SAL LLC due to our partner’s inability to contribute capital to this joint venture. We anticipate STRATTEC will continue to fund 100 percent of the start-up costs through fiscal year 2017.

Future Capital Expenditures

We anticipate capital expenditures will be approximately $30 million in fiscal 2017 in support of requirements for new product programs, the upgrade and replacement of existing equipment, and the construction of a new facility in Leon, Mexico. Capital expenditures totaled $7.4 million for the three month period ended October 2, 2016. On March 17, 2016, ASdM purchased land in Leon, Mexico. ASdM is in the process of constructing a new manufacturing facility on this land. This facility is expected to be used primarily to paint and assemble door handle products and is expected to be completed and operational at the end of fiscal year 2017. Currently, the ADAC-STRATTEC LLC joint venture has net sales of approximately $60 million. With newly awarded customer business, we anticipate net sales will increase to approximately $120 million within the next two years. Total capital expenditures required for the land, facility, paint system, and assembly equipment is expected to total approximately $22 million. Capital expenditures made through October 2, 2016 for the land, facility and equipment totaled $10.7 million. We anticipate financing the required capital expenditures through a combination of current cash balances, bank loans, and current operating cash flow.

Stock Repurchase Program

Our Board of Directors has authorized a stock repurchase program to buy back outstanding shares of our common stock. Shares authorized for buy back under the program totaled 3,839,395 at October 2, 2016. A total of 3,655,322 shares have been repurchased over the life of the program through October 2, 2016, at a cost of approximately $136.4 million. No shares were repurchased during the three month periods ended October 2, 2016 or September 27, 2015. Additional repurchases may occur from time to time and are expected to continue to be funded by cash flow from operations and current cash balances. Based on the current economic environment and our preference to conserve cash for other uses, we anticipate modest or no stock repurchase activity for the remainder of fiscal year 2017.

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Credit Facilities

STRATTEC has a $30 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $20 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities both expire August 1, 2019. Borrowings under either credit facility are secured by our cash balances, accounts receivable, inventory and fixed assets located in the U.S. Interest on borrowings under both credit facilities is at varying rates based, at our option, on LIBOR plus 1.0 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. The ADAC-STRATTEC Credit Facility also required that a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC be completed by September 30, 2016. This capital contribution was completed as required. STRATTEC’s portion of this capital contribution totaled $3.06 million. Outstanding borrowings under the STRATTEC Credit Facility totaled $16.0 million at October 2, 2016 and $11.5 million at July 3, 2016. The average outstanding borrowings and weighted average interest rate on the STRATTEC Credit Facility loans were approximately $12.2 million and 1.5 percent, respectively, during the three months ended October 2, 2016. Outstanding borrowings under the ADAC-STRATTEC Credit Facility totaled $8.0 million at October 2, 2016 and $8.5 million at July 3, 2016. The average outstanding borrowings and weighted average interest rate on the ADAC-STRATTEC Credit Facility loans were approximately $8.5 million and 1.5 percent, respectively, during the three months ended October 2, 2016.

SAL LLC maintains a license agreement with Westinghouse allowing SAL LLC to do business as Westinghouse Security. STRATTEC guaranteed all payments due Westinghouse under this license agreement. As of October 2, 2016, STRATTEC has a recorded liability related to this guarantee of $250,000, which amount is equal to the amount of future payments required under the license agreement and the estimated fair value of the guarantee as of October 2, 2016. See further discussion under Equity (Loss) Earnings of Joint Ventures included in Notes to Condensed Consolidated Financial Statements herein.

Inflation and Other Changes in Prices

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

Joint Ventures and Majority Owned Subsidiaries

We participate in certain Alliance Agreements with WITTE Automotive (“WITTE”) and ADAC Automotive (“ADAC”). WITTE, of Velbert, Germany, is a privately held automotive supplier. WITTE designs, manufactures and markets automotive components, including locks and keys, hood latches, rear compartment latches, seat back latches, door handles and specialty fasteners. WITTE’s primary market for these products has been Europe. ADAC, of Grand Rapids, Michigan, is a privately held automotive supplier and manufactures engineered products, including door handles and other automotive trim parts, utilizing plastic injection molding, automated painting and various assembly processes.  

The Alliance Agreements include a set of cross-licensing agreements for the manufacture, distribution and sale of WITTE products by STRATTEC and ADAC in North America, and the manufacture, distribution and sale of STRATTEC and ADAC products by WITTE in Europe. Additionally, a joint venture company, Vehicle Access Systems Technology LLC (“VAST LLC”), in which WITTE, STRATTEC and ADAC each hold a one-third interest, exists to seek opportunities to manufacture and sell each company’s products in areas of the world outside of North America and Europe.  

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

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

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manufacturer in the Indian marketplace of security & access products, handles, automotive safety, restraint systems, driver information and telematics systems for both OEMs and the aftermarket.

The VAST LLC investments are accounted for using the equity method of accounting. The activities related to the VAST LLC joint ventures resulted in equity earnings of joint ventures to STRATTEC of $390,000 during the three months ended October 2, 2016 and $133,000 during the three months ended September 27, 2015. No capital contributions were made to VAST LLC during the three month periods ended October 2, 2016 and September 27, 2015.

ADAC-STRATTEC LLC, a Delaware limited liability company, was formed in fiscal year 2007 to support injection molding and door handle assembly operations in Mexico. ADAC-STRATTEC LLC was 51 percent owned by STRATTEC and 49 percent owned by ADAC for all periods presented in this report. An additional Mexican entity, ADAC-STRATTEC de Mexico, is wholly owned by ADAC-STRATTEC LLC. ADAC-STRATTEC LLC’s financial results are consolidated with the financial results of STRATTEC and resulted in increased net income to STRATTEC of approximately $479,000 during the three months ended October 2, 2016 and approximately $647,000 during the three months ended September 27, 2015. In accordance with the provisions of the ADAC-STRATTEC Credit Facility a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC was completed during the three month period ended October 2, 2016. STRATTEC’s portion of this capital contribution totaled $3.06 million. No capital contributions to ADAC-STRATTEC LLC were made during the three month period ended September 27, 2015.

STRATTEC POWER ACCESS LLC (“SPA”) was formed in fiscal year 2009 to supply the North American portion of the power sliding door, lift gate and deck lid system access control products which were acquired from Delphi Corporation. SPA was 80 percent owned by STRATTEC and 20 percent owned by WITTE for all periods presented in this report. The financial results of SPA are consolidated with the financial results of STRATTEC and resulted in increased net income to STRATTEC of approximately $35,000 during the three months ended October 2, 2016 and decreased net income to STRATTEC of approximately $1.1 million during the three months ended September 27, 2015.  

SAL LLC was formed in fiscal 2013 to introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner and the owner of the remaining ownership interest. SAL LLC was 51 percent owned by STRATTEC for all periods presented in this report. Our investment in SAL LLC, for which we exercise significant influence but do not control and are not the primary beneficiary, is accounted for using the equity method. The activities related to SAL LLC resulted in an equity loss of joint ventures to STRATTEC of approximately $328,000 during the three months ended October 2, 2016 and approximately $426,000 during the three months ended September 27, 2015. Effective with our fiscal 2015 fourth quarter, 100 percent of the funding for SAL LLC was being made through loans from STRATTEC to SAL LLC and through STRATTEC’s guarantee of a SAL Credit Facility. Therefore, for all periods presented in this report, even though STRATTEC maintains a 51 percent ownership interest in SAL LLC, STRATTEC began recognizing 100 percent of the losses of SAL LLC up to our committed financial support through Equity (Loss) Earnings of Joint Ventures in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income. See further discussion under Equity (Loss) Earnings of Joint Ventures included in Notes to Condense Consolidated Financial Statements herein.

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Item 3 Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rates: We are subject to interest rate fluctuations on borrowings under our revolving credit facilities. At October 2, 2016, we had $24.0 million of outstanding borrowings under our credit facilities. The interest expense related to borrowings under the credit facilities during the three months ended October 2, 2016 was $78,000. A 10% increase or decrease in the interest rate on our borrowings would not have a material effect on our financial position, results of operations or cash flows.

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

The following table quantifies the outstanding Mexican peso forward contracts as of October 2, 2016 (thousands of dollars, except average forward contract exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 14, 2016 - June 15, 2017	$	18,000		17.95	$	(1,573	)
Buy MXP/Sell USD	July 14, 2017 - June 15, 2018	$	9,000		19.93	$	(215	)

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

	October 2, 2016		July 3,   2016
Not Designated as Hedging Instruments:
Other Current Liabilities:
Mexican Peso Forward Contracts	$	1,592	$	107
Other Long-term Liabilities:
Mexican Peso Forward Contracts	$	196	$	996

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Not Designated as Hedging Instruments:
Realized Loss	$	230	$	—
Unrealized Loss	$	899	$	896

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Raw Materials Commodity Prices: Our primary raw materials are high-grade zinc, brass, nickel silver, aluminum, steel and plastic resins. These materials are generally available from a number of suppliers, but we have chosen to concentrate our sourcing with one primary vendor for each commodity or purchased component. We believe our sources of raw materials are reliable and adequate for our needs. However, the development of future sourcing issues related to using existing or alternative raw materials and the global availability of these materials as well as significant fluctuations in the market prices of these materials may have an adverse effect on our financial results if the increased raw material costs cannot be recovered from our customers. Given the significant financial impact on us relating to changes in the cost of our primary raw materials, we now attempt to quote quarterly material price adjustments for changes in our zinc costs in our negotiations with our customers. Our success in obtaining these quarterly price adjustments in our customer contracts is dependent on separate negotiations with each customer. It is not a standard practice for our customers to include such price adjustments in their contracts. We have been successful in obtaining quarterly price adjustments in some of our customer contracts. However, we have not been successful in obtaining the adjustments with all of our customers.

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Item 4 Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act are accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures were effective at reaching a level of reasonable assurance. It should be noted that in designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. We have designed our disclosure controls and procedures to reach a level of reasonable assurance of achieving the desired control objectives.

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

27

Part II

Other Information

Item 1 Legal Proceedings

In the normal course of business, we may be involved in various legal proceedings from time to time.  We do not believe we are currently involved in any claim or action the ultimate disposition of which would have a material adverse effect on our financial statements.

Item 1A—Risk Factors

There have been no material changes to the risk factors disclosed in our Form 10-K as filed with the Securities and Exchange Commission on September 8, 2016.

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

Our Board of Directors authorized a stock repurchase program on October 16, 1996, and the program was publicly announced on October 17, 1996. The Board of Directors has periodically increased the number of shares authorized for repurchase under the program, most recently in August 2008. The program currently authorizes the repurchase of up to 3,839,395 shares of our common stock from time to time, directly or through brokers or agents, and has no expiration date. Over the life of the repurchase program through October 2, 2016, a total of 3,655,322 shares have been repurchased at a cost of approximately $136.4 million. No shares were repurchased during the three month period ended October 2, 2016.

Item 3 Defaults Upon Senior Securities—None

Item 4 Mine Safety Disclosures—None

Item 5 Other Information—None

Item 6 Exhibits

(a)  Exhibits

31.1	Rule 13a-14(a) Certification for Frank J. Krejci, President and Chief Executive Officer
31.2	Rule 13a-14(a) Certification for Patrick J. Hansen, Chief Financial Officer
32 (1)	18 U.S.C. Section 1350 Certifications
101	The following materials from STRATTEC SECURITY CORPORATION's Quarterly Report on Form 10-Q for the fiscal quarter ended October 2, 2016 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) Condensed Consolidated Statements of Income and Comprehensive Income; (ii) Condensed Consolidated Balance Sheets; (iii) Condensed Consolidated Statements of Cash Flows; and (iv) Notes to Condensed Consolidated Financial Statements

⁽¹⁾ This certification is not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

28

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	STRATTEC SECURITY CORPORATION (Registrant)
Date: November 8, 2016	By:	/s/ Patrick J. Hansen
		Patrick J. Hansen
		Senior Vice President,
		Chief Financial Officer,
		Treasurer and Secretary
		(Principal Accounting and Financial Officer)

29

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 quarterly report on Form 10-Q of STRATTEC SECURITY CORPORATION;

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

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

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

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

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

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

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

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

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

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

Date:  November 8, 2016

/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 quarterly report on Form 10-Q of STRATTEC SECURITY CORPORATION;

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

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

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

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

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

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

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

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

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

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

Date:  November 8, 2016

/s/ Patrick J. Hansen

Patrick J. Hansen,

Chief Financial Officer

EX-32

Exhibit 32

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of STRATTEC SECURITY CORPORATION (the "Company") certifies that the Quarterly Report on Form 10-Q of the Company for the quarter ended October 2, 2016 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 8, 2016 /s/ Frank J. Krejci

Frank J. Krejci,

Chief Executive Officer

Dated:  November 8, 2016 /s/ Patrick J. Hansen

Patrick J. Hansen,

Chief Financial Officer

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

XML

Document and Entity Information - shares	3 Months Ended
	Oct. 02, 2016	Oct. 03, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	STRATTEC SECURITY CORP
Entity Central Index Key	0000933034
Document Type	10-Q
Document Period End Date	Oct. 02, 2016
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Trading Symbol	STRT
Current Fiscal Year End Date	--07-02
Entity Filer Category	Accelerated Filer
Entity Common Stock Shares Outstanding		3,587,921

XML

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Income Statement [Abstract]
Net sales	$ 100,244	$ 96,513
Cost of goods sold	85,639	80,014
Gross profit	14,605	16,499
Engineering, selling and administrative expenses	11,370	10,574
Income from operations	3,235	5,925
Interest income	41	7
Equity earnings (loss) of joint ventures	62	(293)
Interest expense	(78)	(21)
Other income (expense), net	43	(32)
Income before provision for income taxes and non-controlling interest	3,303	5,586
Provision for income taxes	898	1,754
Net income	2,405	3,832
Net income attributable to non-controlling interest	863	559
Net income attributable to STRATTEC SECURITY CORPORATION	1,542	3,273
Comprehensive Income:
Net income	2,405	3,832
Pension and postretirement plans, net of tax	475	364
Currency translation adjustments	(1,623)	(2,867)
Other comprehensive loss, net of tax	(1,148)	(2,503)
Comprehensive income	1,257	1,329
Comprehensive income attributable to non-controlling interest	753	400
Comprehensive income attributable to STRATTEC SECURITY CORPORATION	$ 504	$ 929
Earnings per share attributable to STRATTEC SECURITY CORPORATION:
Basic	$ 0.43	$ 0.92
Diluted	$ 0.42	$ 0.90
Average shares outstanding:
Basic	3,576	3,543
Diluted	3,661	3,617
Cash dividends declared per share	$ 0.14	$ 0.13

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 02, 2016	Jul. 03, 2016
Current Assets:
Cash and cash equivalents	$ 17,069	$ 15,477
Receivables, net	68,060	63,726
Inventories:
Finished products	10,693	10,137
Work in process	8,788	8,291
Purchased materials	22,045	23,055
Excess and obsolete reserve	(2,840)	(2,800)
Inventories, net	38,686	38,683
Other current assets	14,985	16,565
Total current assets	138,800	134,451
Investment in joint ventures	14,419	14,168
Deferred income taxes	5,018	5,387
Other long-term assets	6,395	3,021
Property, plant and equipment	220,369	216,859
Less: accumulated depreciation	(133,385)	(131,710)
Net property, plant and equipment	86,984	85,149
Total assets	251,616	242,176
Current Liabilities:
Accounts payable	37,008	32,416
Accrued Liabilities:
Payroll and benefits	11,127	11,210
Environmental	1,359	1,365
Warranty	9,186	9,228
Other	8,385	9,996
Total current liabilities	67,065	64,215
Borrowings under credit facility	24,000	20,000
Accrued pension obligations	1,491	1,466
Accrued postretirement obligations	1,191	1,262
Other long-term liabilities	925	721
Shareholders’ Equity:
Common stock, authorized 12,000,000 shares, $.01 par value, 7,209,763 issued shares at October 2, 2016 and 7,188,363 issued shares at July 3, 2016	72	72
Capital in excess of par value	92,567	92,076
Retained earnings	221,767	220,728
Accumulated other comprehensive loss	(38,711)	(37,673)
Less: treasury stock, at cost (3,621,842 shares at October 2, 2016 and 3,622,506 shares at July 3, 2016)	(135,860)	(135,871)
Total STRATTEC SECURITY CORPORATION shareholders’ equity	139,835	139,332
Non-controlling interest	17,109	15,180
Total shareholders’ equity	156,944	154,512
Total liabilities and shareholders' equity	$ 251,616	$ 242,176

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 02, 2016	Jul. 03, 2016
Statement Of Financial Position [Abstract]
Common stock, shares authorized	12,000,000	12,000,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares issued	7,209,763	7,188,363
Treasury stock, shares	3,621,842	3,622,506

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 2,405	$ 3,832
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,760	2,396
Foreign currency transaction gain	(689)	(957)
Unrealized loss on peso forward contracts	899	896
Stock based compensation expense	428	498
Equity (earnings) loss of joint ventures	(62)	293
Change in operating assets and liabilities:
Receivables	(4,433)	1,998
Inventories	(3)	(7,226)
Other assets	(1,372)	610
Accounts payable and accrued liabilities	5,268	1,636
Other, net	(172)	35
Net cash provided by operating activities	5,029	4,011
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to joint ventures	(850)	(150)
Repayment from loan to joint ventures	75
Purchase of property, plant and equipment	(7,446)	(3,865)
Net cash used in investing activities	(8,221)	(4,015)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facility	8,000	1,000
Repayments of borrowings under credit facility	(4,000)	(4,500)
Contribution from non-controlling interest of subsidiaries	2,940
Dividends paid to non-controlling interests of subsidiaries	(1,764)	(1,568)
Dividends paid	(503)	(466)
Exercise of stock options and employee stock purchases	74	483
Net cash provided by (used in) financing activities	4,747	(5,051)
Foreign currency impact on cash	37	(673)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,592	(5,728)
CASH AND CASH EQUIVALENTS
Beginning of period	15,477	25,695
End of period	17,069	19,967
Cash paid during the period for:
Income taxes	487	954
Interest	86	12
Non-cash investing activities:
Change in capital expenditures in accounts payable	$ (1,714)	(35)
Guarantee of joint venture revolving credit facility		$ 55

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Basis of Financial Statements

3 Months Ended

Oct. 02, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Financial Statements

Basis of Financial Statements

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

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

In the opinion of management, the accompanying condensed consolidated balance sheets as of October 2, 2016 and July 3, 2016, which have been derived from our audited financial statements, and the related unaudited interim condensed consolidated financial statements included herein contain all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Rule 10-01 of Regulation S-X. All significant intercompany transactions have been eliminated.

Interim financial results are not necessarily indicative of operating results for an entire year. The information included in this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the STRATTEC SECURITY CORPORATION 2016 Annual Report, which was filed with the Securities and Exchange Commission as an exhibit to our Form 10-K on September 8, 2016.

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New Accounting Standards

3 Months Ended

Oct. 02, 2016

Accounting Changes And Error Corrections [Abstract]

New Accounting Standards

New Accounting Standards

In May 2014, the FASB issued an update to the accounting guidance for the recognition of revenue arising from contracts with customers. The update supersedes most current revenue recognition guidance and outlines a single comprehensive model for revenue recognition based on the principle that an entity should recognize revenue in an amount that reflects the expected consideration to be received in the exchange of goods and services. The guidance update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The guidance update is effective for annual reporting periods beginning after December 15, 2017 and becomes effective for us at the beginning of our 2019 fiscal year. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

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

In February 2015, the FASB issued an update to the accounting guidance that amends current consolidation guidance by modifying the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, eliminating the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with variable interest entities. The update is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In April 2015 and August 2015, the FASB issued updates to the accounting guidance for debt issuance costs. The updated guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability and allows an entity to defer and present debt issuance costs associated with a line of credit arrangement as an asset, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The guidance updates are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

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

In November 2015, the FASB issued an update to an accounting standard to simplify the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current in a classified statement of financial position, which would be a change from our historical presentation whereby certain of our deferred tax assets and liabilities were classified as current and the remainder were classified as non-current. The standard update is effective for fiscal years beginning after December 15, 2016 and interim periods within those years, and early adoption is permitted. The standard is to be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. We have elected to adopt this guidance effective July 3, 2016, and have applied the guidance retrospectively.

In February 2016, the FASB issued an update to the accounting guidance for leases. The update increases the transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

In March 2016, the FASB issued an update to the accounting guidance for share-based payments. The update simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification of such items in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those years. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

In August 2016, the FASB issued an update to the accounting guidance on the classification of certain cash receipts and cash payments. The update aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. We are currently assessing the impact that this guidance will have on our consolidated financial statements.

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Derivative Instruments

3 Months Ended

Oct. 02, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

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

The following table quantifies the outstanding Mexican peso forward contracts as of October 2, 2016 (thousands of dollars, except average forward contractual exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 14, 2016 - June 15, 2017	$	18,000		17.95	$	(1,573	)
Buy MXP/Sell USD	July 14, 2017 - June 15, 2018	$	9,000		19.93	$	(215	)

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

	October 2, 2016		July 3, 2016
Not Designated as Hedging Instruments:
Other Current Liabilities:
Mexican Peso Forward Contracts	$	1,592	$	107
Other Long-term Liabilities:
Mexican Peso Forward Contracts	$	196	$	996

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Not Designated as Hedging Instruments:
Realized Loss	$	230	$	—
Unrealized Loss	$	899	$	896

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Fair Value of Financial Instruments

3 Months Ended

Oct. 02, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facility approximated book value as of October 2, 2016 and July 3, 2016. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of October 2, 2016 (in thousands):

	Fair Value Inputs
	Level 1 Assets: Quoted Prices InActive Markets		Level 2 Assets: Observable Inputs Other Than Market Prices		Level 3 Assets: Unobservable Inputs
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	376	$	—	$	—
Mid Cap		374		—		—
Large Cap		516		—		—
International		414		—		—
Fixed Income Funds		704		—		—
Cash and Cash Equivalents		—		2		—
Total Assets at Fair Value	$	2,384	$	2	$	—
Liabilities:
Mexican Peso Forward Contracts	$	—	$	1,788	$	—

The Rabbi Trust assets fund our amended and restated supplemental executive retirement plan and are included in Other Long-term Assets in the accompanying Condensed Consolidated Balance Sheets. Refer to discussion of Mexican peso forward contracts under Derivative Instruments above. The fair value of the Mexican peso forward contracts considers the remaining term, current exchange rate, and interest rate differentials between the two currencies. There were no transfers between Level 1 and Level 2 assets during the three month period ended October 2, 2016.

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Equity Earnings (Loss) Earnings of Joint Ventures

3 Months Ended

Oct. 02, 2016

Equity Method Investments And Joint Ventures [Abstract]

Equity Earnings (Loss) Earnings of Joint Ventures

Equity Earnings (Loss) Earnings of Joint Ventures

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

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Net Sales	$	25,009	$	26,348
Cost of Goods Sold		20,093		21,914
Gross Profit		4,916		4,434
Engineering, Selling and Administrative Expenses		4,015		3,625
Income From Operations		901		809
Other Income (Expense), net		441		(312	)
Income before Provision for Income Taxes		1,342		497
Provision for Income Taxes		172		94
Net Income	$	1,170	$	403
STRATTEC’s Share of VAST LLC Net Income	$	390	$	134
Intercompany Profit Elimination		—		(1	)
STRATTEC’s Equity Earnings of VAST LLC	$	390	$	133

We hold a 51% ownership interest in a joint venture company, SAL LLC, which exists to introduce a new generation of biometric security products based upon the designs of Actuator Systems LLC, our partner. SAL LLC had a $1.5 million revolving credit facility (the “SAL Credit Facility”) with BMO Harris Bank N.A., which was fully guaranteed by STRATTEC. The SAL Credit Facility had a maturity date of February 16, 2016. Outstanding borrowings under the SAL Credit Facility as of February 16, 2016 totaled $1.5 million. SAL LLC did not have cash available to pay the outstanding debt balance as of the maturity date. Therefore, STRATTEC made a payment of $1.5 million on its guarantee on February 16, 2016. SAL LLC is considered a variable interest entity based on the STRATTEC guarantee and additional loans from STRATTEC as discussed below. STRATTEC is not the primary beneficiary and does not control the entity. Accordingly, our investment in SAL LLC is accounted for using the equity method. Prior to making the guarantee payment, STRATTEC had a recorded liability related to the guarantee of $1.5 million at February 16, 2016, which amount was equal to the estimated fair value of the guarantee as of this date. STRATTEC’s proportionate share of the guarantee based on our ownership percentage in SAL LLC totaled $765,000 as of February 16, 2016, and accordingly, our investment in SAL LLC included this amount as of this date. Our joint venture partner did not guarantee their proportionate share of the SAL Credit Facility. As a result, we recorded a loss equal to our partner’s proportionate share of the fair value of the STRATTEC guarantee based upon our partner’s ownership interest in the joint venture during our fiscal years 2015 and 2016.

SAL LLC maintains a license agreement with Westinghouse allowing SAL LLC to do business as Westinghouse Security. Payments due Westinghouse under the license agreement were guaranteed by STRATTEC. As of October 2, 2016 and July 3, 2016, STRATTEC has a recorded liability equal to the estimated fair value of the future payments due under this guarantee of $250,000. The liability is included in Other Long-term Liabilities in the accompanying Condensed Consolidated Balance Sheets.

Loans were made from STRATTEC to SAL LLC in support of operating expenses and working capital needs. The outstanding loan amounts totaled $1.2 million and $325,000 as of October 2, 2016 and July 3, 2016, respectively. As of October 2, 2016, the outstanding loan amount was eliminated against STRATTEC’s Investment in SAL LLC in the preparation of the consolidated financial statements.

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

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Net Sales	$	100		$	60
Cost of Goods Sold		87			55
Gross Profit		13			5
Engineering, Selling and Administrative Expenses		337			246
Loss From Operations		(324	)		(241	)
Other Expense, net		(12	)		(8	)
Net Loss	$	(336	)	$	(249	)
STRATTEC’s Share of Equity Loss of SAL LLC	$	(328	)	$	(249	)
Loss on Loan to SAL LLC		—			(150	)
Loss on SAL LLC Credit Facility Guarantee		—			(27	)
STRATTEC’s Equity Loss of SAL LLC	$	(328	)	$	(426	)

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Sales to VAST LLC	$	50	$	138
Sales to SAL, LLC	$	75	$	17
Purchases from VAST LLC	$	31	$	25
Expenses Charged to VAST LLC	$	228	$	235
Expenses Charged from VAST LLC	$	409	$	392

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Credit Facilities and Guarantees

3 Months Ended

Oct. 02, 2016

Debt Disclosure [Abstract]

Credit Facilities and Guarantees

Credit Facilities and Guarantees

STRATTEC has a $30 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $20 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The credit facilities both expire August 1, 2019. Borrowings under either credit facility are secured by our cash balances, accounts receivable, inventory and fixed assets located in the U.S. Interest on borrowings under both credit facilities is at varying rates based, at our option, on the London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. The ADAC-STRATTEC Credit Facility also required that a capital contribution to ADAC-STRATTEC LLC of $6 million collectively from STRATTEC and ADAC be completed by September 30, 2016. This capital contribution was completed as required. STRATTEC’s portion of the capital contribution totaled $3.06 million. As of October 2, 2016, we were in compliance with all financial covenants required by these credit facilities.

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

	October 2, 2016		July 3, 2016
STRATTEC Credit Facility	$	16,000	$	11,500
ADAC-STRATTEC Credit Facility	$	8,000	$	8,500

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

	Three Months Ended
	AverageOutstanding Borrowings				Weighted Average Interest Rate
	October 2, 2016		September 27, 2015		October 2, 2016			September 27, 2015
STRATTEC Credit Facility	$	12,159	$	3,747		1.5	%		1.2	%
ADAC-STRATTEC Credit Facility	$	8,473	$	3,137		1.5	%		1.2	%

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Commitments and Contingencies

3 Months Ended

Oct. 02, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

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

ADAC STRATTEC de Mexico (ASdM), a wholly owned subsidiary of ADAC-STRATTEC LLC, which is a joint venture between STRATTEC SECURITY CORPORATION and ADAC Automotive, is in the process of constructing a new manufacturing facility in Leon, Mexico. Total capital expenditures required for the land, facility, paint system, and assembly equipment is expected to total approximately $22 million. Capital expenditures made through October 2, 2016 for the land, facility and equipment totaled $10.7 million. We anticipate financing the required capital expenditures through a combination of current cash balances, bank loans, and current operating cash flow.

In 1995, we recorded a provision of $3 million for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The facility was contaminated by a solvent spill, which occurred in 1985, from a former above ground solvent storage tank located on the east side of the facility. The reserve was originally established based on third party estimates to adequately cover the cost for active remediation of the contamination. Due to changing technology and related costs associated with active remediation of the contamination, in fiscal 2010, the reserve was adjusted based on updated third party estimates to adequately cover the cost for active remediation of the contamination. Additionally, in fiscal 2016, we obtained updated third party estimates for adequately covering the cost for active remediation of this contamination. Based upon the updated estimates, no further adjustment to the reserve was required. From 1995 through October 2, 2016, costs of approximately $515,000 have been incurred related to the installation of monitoring wells on the property and ongoing monitoring costs. We monitor and evaluate the site with the use of these groundwater monitoring wells. An environmental consultant samples these wells one or two times a year to determine the status of the contamination and the potential for remediation of the contamination by natural attenuation, the dissipation of the contamination over time to concentrations below applicable standards. If such sampling evidences a sufficient degree of and trend toward natural attenuation of the contamination at the site, we may be able to obtain a closure letter from the regulatory authorities resolving the issue without the need for active remediation. If a sufficient degree and trend toward natural attenuation is not evidenced by sampling, a more active form of remediation beyond natural attenuation may be required. The sampling has not yet satisfied all of the requirements for closure by natural attenuation. As a result, sampling continues and the reserve remains at an amount to reflect the estimated cost of active remediation. The reserve is not measured on a discounted basis. We believe, based on findings-to-date and known environmental regulations, that the remaining environmental reserve of $1.4 million at October 2, 2016 is adequate.

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Shareholders' Equity

3 Months Ended

Oct. 02, 2016

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

A summary of activity impacting shareholders’ equity for the three month period ended October 2, 2016 was as follows (in thousands):

	Total Shareholders’ Equity			Equity Attributable to STRATTEC			Equity Attributable toNon- Controlling Interest
Balance, July 3, 2016	$	154,512		$	139,332		$	15,180
Net Income		2,405			1,542			863
Dividend Declared		(503	)		(503	)		—
Dividend Declared – Non-controlling Interests of    Subsidiaries		(1,764	)		—			(1,764	)
Contributions from Non-controlling Interests of    Subsidiaries		2,940			—			2,940
Translation adjustments		(1,623	)		(1,513	)		(110	)
Stock Based Compensation		428			428			—
Pension and Postretirement Adjustment, Net of    tax		475			475			—
Employee Stock Purchases and Stock Option    Exercises		74			74			—
Balance, October 2, 2016	$	156,944		$	139,835		$	17,109

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Other Income (Expense), Net

3 Months Ended

Oct. 02, 2016

Other Income And Expenses [Abstract]

Other Income (Expense), Net

Other Income (Expense), net

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

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Foreign Currency Transaction Gain	$	689		$	957
Unrealized Loss on Peso Forward Contracts		(899	)		(896	)
Realized Loss on Peso Forward Contracts		(230	)		—
Rabbi Trust Gain (Loss)		83			(164	)
Other		400			71
	$	43		$	(32	)

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Income Taxes

3 Months Ended

Oct. 02, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax provisions for the three months periods ended October 2, 2016 and September 27, 2015 were affected by the non-controlling interest portion of our pre-tax income. The reduction in our effective tax rate in the current year quarter as compared to the prior year quarter was due to the increased impact of the non-controlling interest in certain of our subsidiaries. The non-controlling interest impacts the effective tax rate as ADAC-STRATTEC LLC and STRATTEC POWER ACCESS LLC entities are taxed as partnerships for U.S. tax purposes.

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Earnings Per Share (''EPS'')

3 Months Ended

Oct. 02, 2016

Earnings Per Share [Abstract]

Earnings Per Share (''EPS'')

Earnings Per Share (EPS)

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the potential dilutive common shares outstanding during the applicable period using the treasury stock method. Potential dilutive common shares include outstanding stock options and unvested restricted stock awards.

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Net Income Attributable to STRATTEC SECURITY    CORPORATION	$	1,542	$	3,273
Less: Income Attributable to Participating Securities		1		21
Net Income Attributable to Common Shareholders	$	1,541	$	3,252
Basic Weighted Average Shares of Common Stock    Outstanding		3,576		3,543
Incremental Shares – Stock based Compensation		85		74
Diluted Weighted Average Shares of Common Stock    Outstanding		3,661		3,617
Basic Earnings Per Share	$	0.43	$	0.92
Diluted Earnings Per Share	$	0.42	$	0.90

We consider unvested restricted stock that provides the holder with a non-forfeitable right to receive dividends to be a participating security.

The calculation of earnings per share excluded 14,010 and 10,000 share-based payment awards for the three month periods ended October 2, 2016 and September 27, 2015, respectively, because their inclusion would have been anti-dilutive.

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Stock-Based Compensation

3 Months Ended

Oct. 02, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

Stock-based Compensation

We maintain an omnibus stock incentive plan. This plan provides for the granting of stock options, shares of restricted stock and stock appreciation rights. As of October 2, 2016, the Board of Directors had designated 1,850,000 shares of common stock available for the grant of awards under the plan. Remaining shares available to be granted under the plan as of October 2, 2016 were 204,939. Awards that expire or are canceled without delivery of shares become available for re-issuance under the plan. We issue new shares of common stock to satisfy stock option exercises.

Nonqualified and incentive stock options and shares of restricted stock have been granted to our officers, outside directors and specified associates under our stock incentive plan. Stock options granted under the plan may not be issued with an exercise price less than the fair market value of the common stock on the date the option is granted. Stock options become exercisable as determined at the date of grant by the Compensation Committee of the Board of Directors. The options expire 10 years after the grant date unless an earlier expiration date is set at the time of grant. The options vest 1 to 4 years after the date of grant. Shares of restricted stock granted under the plan are subject to vesting criteria determined by the Compensation Committee of the Board of Directors at the time the shares are granted and have a minimum vesting period of three years from the date of grant. Restricted shares granted prior to August 2014 have voting and dividend rights, regardless of whether the shares are vested or unvested. Restricted shares granted during August 2014 and thereafter have voting rights, regardless of whether the shares are vested or unvested, but only have the right to receive cash dividends after such shares become vested. Prior to August 2015, the restricted stock grants issued vest 3 years after the date of grant. As of August 2015, restricted stock grants issued vest 3 to 5 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 fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant. The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight line basis over the vesting period for the entire award.

A summary of stock option activity under our stock incentive plan for the three months ended October 2, 2016 was as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding, July 3, 2016		144,998		$	28.86
Exercised		(2,200	)	$	10.92
Outstanding, October 2, 2016		142,798		$	29.13		5.2	$	1,391
Exercisable, October 2, 2016		133,788		$	25.73		5.0	$	1,391

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Intrinsic Value of Options Exercised	$	71	$	414
Fair Value of Stock Options Vesting	$	596	$	331

No options were granted during the three month period ended October 2, 2016 or September 27, 2015.  

A summary of restricted stock activity under our omnibus stock incentive plan for the three months ended October 2, 2016 was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Balance, July 3, 2016		71,750		$	60.05
Granted		27,150		$	43.87
Vested		(19,200	)	$	35.89
Forfeited		(1,800	)	$	58.24
Nonvested Balance, October 2, 2016		77,900		$	60.40

As of October 2, 2016, there was $92,375 of total unrecognized compensation cost related to outstanding stock options granted under our omnibus stock incentive plan. This cost is expected to be recognized over a remaining weighted average period of 0.5 years. As of October 2, 2016, there was approximately $2.5 million of total unrecognized compensation cost related to unvested restricted stock grants outstanding under the plan. This cost is expected to be recognized over a remaining weighted average period of 1.2 years. Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures of awards granted under our omnibus stock incentive plan.

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Pension and Postretirement Benefits

3 Months Ended

Oct. 02, 2016

Compensation And Retirement Disclosure [Abstract]

Pension and Postretirement Benefits

Pension and Postretirement Benefits

We have a qualified, noncontributory defined benefit pension plan (“Qualified Pension Plan”) covering substantially all U.S. associates. Benefits under the Qualified Pension Plan are based on years of service and final average compensation. Our policy is to fund the Qualified Pension Plan with at least the minimum actuarially computed annual contribution required under the Employee Retirement Income Security Act of 1974 (ERISA). Plan assets consist primarily of listed equity and fixed income securities. Effective December 31, 2009, an amendment to the Qualified Pension Plan discontinued the benefit accruals for salary increases and credited service rendered after that date.  On April 2, 2014, our Board of Directors approved a resolution to terminate the Qualified Pension Plan.  The termination of the Qualified Pension Plan is subject to the Internal Revenue Service’s (“IRS”) determination that the Qualified Pension Plan is qualified on termination.  We believe it will take 18 to 24 months to finalize the complete termination of the Qualified Pension Plan after obtaining IRS approval.  We have not yet received IRS approval that the Qualified Pension Plan is qualified on termination. Additionally, we have amended the Qualified Pension Plan to provide that participants are 100 percent vested in their accrued benefits as of the effective date of the plan termination, to adopt a new standard for disability benefits that will apply when the plan’s assets are distributed due to the termination, to add a lump sum distribution for employees and terminated vested participants who are not in payment status when Qualified Pension Plan assets are distributed due to the termination and to make certain other conforming amendments to the Qualified Pension Plan to comply with applicable laws that may be required by the IRS or may be deemed necessary or advisable to improve the administration of the Qualified Pension Plan or facilitate its termination and liquidation.  We also intend to make contributions to the Trust Fund for the Qualified Pension Plan to ensure that there are sufficient assets to provide all Qualified Pension Plan benefits as of the anticipated distribution date.  The financial impact of the plan termination will be recognized as a settlement of the Qualified Pension Plan liabilities.  The settlement date and related financial impact have not yet been determined.

We have historically had in place a noncontributory supplemental executive retirement plan (“SERP”), which prior to January 1, 2014 was a nonqualified defined benefit plan that essentially mirrored the Qualified Pension Plan, but provided benefits in excess of certain limits placed on our Qualified Pension Plan by the Internal Revenue Code.  As noted above, we froze our Qualified Pension Plan effective as of December 31, 2009 and the SERP provided benefits to participants as if the Qualified Pension Plan had not been frozen.  Because the Qualified Pension Plan was frozen and because new employees were not eligible to participate in the Qualified Pension Plan, our Board of Directors adopted amendments to the SERP on October 8, 2013 that were effective as of December 31, 2013 to simplify the SERP calculation.  The SERP is funded through a Rabbi Trust with BMO Harris Bank N.A.  Under the amended SERP, participants received an accrued lump-sum benefit as of December 31, 2013 which was credited to each participant’s account.  Subsequent to December 31, 2013, each eligible participant receives a supplemental retirement benefit equal to the foregoing lump sum benefit, plus an annual benefit accrual equal to 8 percent of the participant’s base salary and cash bonus, plus annual credited interest on the participant’s account balance.  All then current participants as of December 31, 2013 are fully vested in their account balances with any new individuals participating in the SERP effective on or after January 1, 2014 being subject to a five year vesting period.  The SERP, which is considered a defined benefit plan under applicable rules and regulations of the Internal Revenue Code, will continue to be funded through use of a Rabbi Trust to hold investment assets to be used in part to fund any future required lump sum benefit payments to participants.  The Rabbi Trust assets had a value of $2.4 million at October 2, 2016 and $2.3 million at July 3, 2016, respectively, and are included in Other Long-Term Assets in the accompanying Condensed Consolidated Balance Sheets.

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

Net periodic benefit costs under these plans are allocated between Cost of Goods Sold and Engineering, Selling and Administrative Expenses in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.

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

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Service cost	$	14		$	12		$	3		$	3
Interest cost		981			1,076		14				21
Expected return on plan assets		(1,464	)		(1,351	)		—			—
Amortization of prior service cost (credit)	3				3			(191	)		(187	)
Amortization of unrecognized net loss	807				599		135				151
Net periodic benefit cost (credit)	$	341		$	339		$	(39	)	$	(12	)

Voluntary contributions of $3 million were made to the Qualified Pension Plan during the three month period ended October 2, 2016. No contributions were made to the Qualified Pension Plan during the three month periods ended September 27, 2015. Additional contributions totaling $2 million are anticipated to be made during the remainder of fiscal 2017.

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Accumulated Other Comprehensive Loss

3 Months Ended

Oct. 02, 2016

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

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

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

	Three Months Ended September 27, 2015
	Foreign Currency Translation Adjustments		Retirement and Postretirement Benefit Plans			Total
Balance, June 28, 2015	$	8,221	$	18,638		$	26,859
Other comprehensive loss before reclassifications		2,867		—			2,867
Income tax		—		—			—
Net other comprehensive loss before       reclassifications		2,867		—			2,867
Reclassifications:
Prior service credits (A)		—		188			188
Unrecognized net loss (A)		—		(765	)		(765	)
Total reclassifications before tax		—		(577	)		(577	)
Income tax		—		213			213
Net reclassifications		—		(364	)		(364	)
Other comprehensive loss (income)		2,867		(364	)		2,503
Other comprehensive loss attributable to non-    controlling interest		159		—			159
Balance, September 27, 2015	$	10,929	$	18,274		$	29,203

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

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Derivative Instruments (Tables)

3 Months Ended

Oct. 02, 2016

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Quantification of Outstanding Mexican Peso Forward Contracts

The following table quantifies the outstanding Mexican peso forward contracts as of October 2, 2016 (thousands of dollars, except average forward contractual exchange rates):

	Effective Dates	Notional Amount		Average Forward Contractual Exchange Rate		Fair Value
Buy MXP/Sell USD	October 14, 2016 - June 15, 2017	$	18,000		17.95	$	(1,573	)
Buy MXP/Sell USD	July 14, 2017 - June 15, 2018	$	9,000		19.93	$	(215	)

Fair Market Value of All Outstanding Peso Forward Contracts

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

	October 2, 2016		July 3, 2016
Not Designated as Hedging Instruments:
Other Current Liabilities:
Mexican Peso Forward Contracts	$	1,592	$	107
Other Long-term Liabilities:
Mexican Peso Forward Contracts	$	196	$	996

Pre-Tax Effects of the Peso Forward Contracts

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Not Designated as Hedging Instruments:
Realized Loss	$	230	$	—
Unrealized Loss	$	899	$	896

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Oct. 02, 2016

Fair Value Disclosures [Abstract]

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

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of October 2, 2016 (in thousands):

	Fair Value Inputs
	Level 1 Assets: Quoted Prices InActive Markets		Level 2 Assets: Observable Inputs Other Than Market Prices		Level 3 Assets: Unobservable Inputs
Assets:
Rabbi Trust Assets:
Stock Index Funds:
Small Cap	$	376	$	—	$	—
Mid Cap		374		—		—
Large Cap		516		—		—
International		414		—		—
Fixed Income Funds		704		—		—
Cash and Cash Equivalents		—		2		—
Total Assets at Fair Value	$	2,384	$	2	$	—
Liabilities:
Mexican Peso Forward Contracts	$	—	$	1,788	$	—

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Equity Earnings (Loss) Earnings of Joint Ventures (Tables)

3 Months Ended

Oct. 02, 2016

VAST LLC

Summarized Statements of Operations

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Net Sales	$	25,009	$	26,348
Cost of Goods Sold		20,093		21,914
Gross Profit		4,916		4,434
Engineering, Selling and Administrative Expenses		4,015		3,625
Income From Operations		901		809
Other Income (Expense), net		441		(312	)
Income before Provision for Income Taxes		1,342		497
Provision for Income Taxes		172		94
Net Income	$	1,170	$	403
STRATTEC’s Share of VAST LLC Net Income	$	390	$	134
Intercompany Profit Elimination		—		(1	)
STRATTEC’s Equity Earnings of VAST LLC	$	390	$	133

SAL, LLC

Summarized Statements of Operations

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Net Sales	$	100		$	60
Cost of Goods Sold		87			55
Gross Profit		13			5
Engineering, Selling and Administrative Expenses		337			246
Loss From Operations		(324	)		(241	)
Other Expense, net		(12	)		(8	)
Net Loss	$	(336	)	$	(249	)
STRATTEC’s Share of Equity Loss of SAL LLC	$	(328	)	$	(249	)
Loss on Loan to SAL LLC		—			(150	)
Loss on SAL LLC Credit Facility Guarantee		—			(27	)
STRATTEC’s Equity Loss of SAL LLC	$	(328	)	$	(426	)

VAST LLC and SAL LLC

Summarize of Related Party Transaction

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Sales to VAST LLC	$	50	$	138
Sales to SAL, LLC	$	75	$	17
Purchases from VAST LLC	$	31	$	25
Expenses Charged to VAST LLC	$	228	$	235
Expenses Charged from VAST LLC	$	409	$	392

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Credit Facilities and Guarantees (Tables)

3 Months Ended

Oct. 02, 2016

Debt Disclosure [Abstract]

Schedule of Outstanding Borrowings Under the Credit Facilities

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

	October 2, 2016		July 3, 2016
STRATTEC Credit Facility	$	16,000	$	11,500
ADAC-STRATTEC Credit Facility	$	8,000	$	8,500

Schedule of Average Outstanding Borrowings and the Weighted Average Interest Rate

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

	Three Months Ended
	AverageOutstanding Borrowings				Weighted Average Interest Rate
	October 2, 2016		September 27, 2015		October 2, 2016			September 27, 2015
STRATTEC Credit Facility	$	12,159	$	3,747		1.5	%		1.2	%
ADAC-STRATTEC Credit Facility	$	8,473	$	3,137		1.5	%		1.2	%

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Shareholders' Equity (Tables)

3 Months Ended

Oct. 02, 2016

Equity [Abstract]

Summary of Activity Impacting Shareholders' Equity

A summary of activity impacting shareholders’ equity for the three month period ended October 2, 2016 was as follows (in thousands):

	Total Shareholders’ Equity			Equity Attributable to STRATTEC			Equity Attributable toNon- Controlling Interest
Balance, July 3, 2016	$	154,512		$	139,332		$	15,180
Net Income		2,405			1,542			863
Dividend Declared		(503	)		(503	)		—
Dividend Declared – Non-controlling Interests of    Subsidiaries		(1,764	)		—			(1,764	)
Contributions from Non-controlling Interests of    Subsidiaries		2,940			—			2,940
Translation adjustments		(1,623	)		(1,513	)		(110	)
Stock Based Compensation		428			428			—
Pension and Postretirement Adjustment, Net of    tax		475			475			—
Employee Stock Purchases and Stock Option    Exercises		74			74			—
Balance, October 2, 2016	$	156,944		$	139,835		$	17,109

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Other Income (Expense), Net (Tables)

3 Months Ended

Oct. 02, 2016

Other Income And Expenses [Abstract]

Summary of Other Income (Expense), Net

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

	Three Months Ended
	October 2, 2016			September 27, 2015
Foreign Currency Transaction Gain	$	689		$	957
Unrealized Loss on Peso Forward Contracts		(899	)		(896	)
Realized Loss on Peso Forward Contracts		(230	)		—
Rabbi Trust Gain (Loss)		83			(164	)
Other		400			71
	$	43		$	(32	)

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

3 Months Ended

Oct. 02, 2016

Earnings Per Share [Abstract]

Reconciliation of the Components of Basic and Diluted Per Share

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Net Income Attributable to STRATTEC SECURITY    CORPORATION	$	1,542	$	3,273
Less: Income Attributable to Participating Securities		1		21
Net Income Attributable to Common Shareholders	$	1,541	$	3,252
Basic Weighted Average Shares of Common Stock    Outstanding		3,576		3,543
Incremental Shares – Stock based Compensation		85		74
Diluted Weighted Average Shares of Common Stock    Outstanding		3,661		3,617
Basic Earnings Per Share	$	0.43	$	0.92
Diluted Earnings Per Share	$	0.42	$	0.90

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Stock-Based Compensation (Tables)

3 Months Ended

Oct. 02, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Option Activity Under Our Stock Incentive Plan

A summary of stock option activity under our stock incentive plan for the three months ended October 2, 2016 was as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Outstanding, July 3, 2016		144,998		$	28.86
Exercised		(2,200	)	$	10.92
Outstanding, October 2, 2016		142,798		$	29.13		5.2	$	1,391
Exercisable, October 2, 2016		133,788		$	25.73		5.0	$	1,391

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

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

	Three Months Ended
	October 2, 2016		September 27, 2015
Intrinsic Value of Options Exercised	$	71	$	414
Fair Value of Stock Options Vesting	$	596	$	331

Summary of Restricted Stock Activity Under Our Stock Incentive Plan

A summary of restricted stock activity under our omnibus stock incentive plan for the three months ended October 2, 2016 was as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested Balance, July 3, 2016		71,750		$	60.05
Granted		27,150		$	43.87
Vested		(19,200	)	$	35.89
Forfeited		(1,800	)	$	58.24
Nonvested Balance, October 2, 2016		77,900		$	60.40

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Pension and Postretirement Benefits (Tables)

3 Months Ended

Oct. 02, 2016

Compensation And Retirement Disclosure [Abstract]

Summary of Net Periodic Benefit Cost Recognized

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

	Pension Benefits						Postretirement Benefits
	Three Months Ended						Three Months Ended
	October 2, 2016			September 27, 2015			October 2, 2016			September 27, 2015
Service cost	$	14		$	12		$	3		$	3
Interest cost		981			1,076		14				21
Expected return on plan assets		(1,464	)		(1,351	)		—			—
Amortization of prior service cost (credit)	3				3			(191	)		(187	)
Amortization of unrecognized net loss	807				599		135				151
Net periodic benefit cost (credit)	$	341		$	339		$	(39	)	$	(12	)

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Oct. 02, 2016

Accumulated Other Comprehensive Income Loss Net Of Tax [Abstract]

Summary of Changes in Accumulated Other Comprehensive Loss

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

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

	Three Months Ended September 27, 2015
	Foreign Currency Translation Adjustments		Retirement and Postretirement Benefit Plans			Total
Balance, June 28, 2015	$	8,221	$	18,638		$	26,859
Other comprehensive loss before reclassifications		2,867		—			2,867
Income tax		—		—			—
Net other comprehensive loss before       reclassifications		2,867		—			2,867
Reclassifications:
Prior service credits (A)		—		188			188
Unrecognized net loss (A)		—		(765	)		(765	)
Total reclassifications before tax		—		(577	)		(577	)
Income tax		—		213			213
Net reclassifications		—		(364	)		(364	)
Other comprehensive loss (income)		2,867		(364	)		2,503
Other comprehensive loss attributable to non-    controlling interest		159		—			159
Balance, September 27, 2015	$	10,929	$	18,274		$	29,203

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

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Basis of Financial Statements (Details Textual)	3 Months Ended
	Oct. 02, 2016 Subsidiary Joint_Venture Segment	Jun. 28, 2015
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of reporting segments related to STRATTEC Security Corporation | Segment	1
SAL, LLC
Organization Consolidation And Presentation Of Financial Statements [Line Items]
STRATTEC's percentage ownership in joint venture	51.00%	51.00%
VAST LLC
Organization Consolidation And Presentation Of Financial Statements [Line Items]
STRATTEC's percentage ownership in joint venture	33.33%
VAST LLC | CHINA
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of wholly owned subsidiaries	3
VAST LLC | BRAZIL
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of wholly owned subsidiaries	1
VAST LLC | INDIA
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of joint venture entities | Joint_Venture	1

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Derivative Instruments - (Details Textual)	3 Months Ended
	Oct. 02, 2016
Derivative [Line Items]
Mexican peso contract: contract end date	Jun. 15, 2018
Mexican Peso Forward Contracts
Derivative [Line Items]
Forward contract settlement dates, beginning	Oct. 16, 2015
Forward contract settlement dates, ending	Jun. 15, 2018

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Derivative Instruments - Schedule of Quantification of Outstanding Mexican Peso Forward Contracts (Details)	3 Months Ended
	Oct. 02, 2016 USD ($) $ / MXN
Currency buy sell under contract one
Derivative [Line Items]
Effective Dates, Beginning	Oct. 14, 2016
Effective Dates, Ending	Jun. 15, 2017
Notional Amount	$ 18,000,000
Average Forward Contractual Exchange Rate | $ / MXN	17.95
Fair Value	$ (1,573,000)
Currency buy sell under contract two
Derivative [Line Items]
Effective Dates, Beginning	Jul. 14, 2017
Effective Dates, Ending	Jun. 15, 2018
Notional Amount	$ 9,000,000
Average Forward Contractual Exchange Rate | $ / MXN	19.93
Fair Value	$ (215,000)

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Derivative Instruments - Fair Market Value of All Outstanding Peso Forward Contracts (Details) - Mexican Peso Forward Contracts - USD ($) $ in Thousands	Oct. 02, 2016	Jul. 03, 2016
Other Current Liabilities
Not Designated as Hedging Instruments:
Fair market value of derivative instruments	$ 1,592	$ 107
Other Long-term Liabilities
Not Designated as Hedging Instruments:
Fair market value of derivative instruments	$ 196	$ 996

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Derivative Instruments - Pre-Tax Effects of the Peso Forward Contracts (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Pre-tax effects of the Mexican peso forward contracts
Realized Loss	$ 230
Unrealized Loss	899	$ 896
Not Designated as Hedging Instrument | Other Income (Expense), Net
Pre-tax effects of the Mexican peso forward contracts
Realized Loss	230
Unrealized Loss	$ 899	$ 896

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Fair Value of Financial Instruments (Details) $ in Thousands	Oct. 02, 2016 USD ($)
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	$ 2,384
Level 1 | Fixed Income Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	704
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	2
Stock Index Funds | Level 1 | Small Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	376
Stock Index Funds | Level 1 | Mid Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	374
Stock Index Funds | Level 1 | Large Cap
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	516
Stock Index Funds | Level 1 | International
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	414
Cash and Cash Equivalents | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Assets at Fair Value	2
Mexican Peso Forward Contracts | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total Liabilities at Fair Value	$ 1,788

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Fair Value of Financial Instruments (Details Textual)	Oct. 02, 2016 USD ($)
Fair Value Disclosures [Abstract]
Fair value, assets, level 1 to level 2 transfers, amount	$ 0

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Equity Earnings (Loss) Earnings of Joint Ventures (Details Textual) - USD ($)		3 Months Ended
	Feb. 16, 2016	Oct. 02, 2016	Sep. 27, 2015	Jun. 28, 2015	Jul. 03, 2016
Schedule Of Equity Method Investments [Line Items]
Repayments of borrowings under credit facility		$ 4,000,000	$ 4,500,000
VAST LLC
Schedule Of Equity Method Investments [Line Items]
STRATTEC's percentage ownership in joint venture		33.33%
SAL LLC
Schedule Of Equity Method Investments [Line Items]
STRATTEC's percentage ownership in joint venture		51.00%		51.00%
Outstanding balance on loan from STRATTEC to equity method investment		$ 1,200,000			$ 325,000
Percentage of funding in joint venture through loans		100.00%		100.00%
Percentage of losses of joint venture recognized by STRATTEC		100.00%		100.00%
SAL LLC | Westinghouse Agreement
Schedule Of Equity Method Investments [Line Items]
Guarantee liability		$ 250,000			$ 250,000
SAL LLC | STRATTEC Advanced Logic Credit Facility
Schedule Of Equity Method Investments [Line Items]
Secured revolving credit facility	$ 1,500,000
Credit facility maturity date		Feb. 16, 2016
Outstanding borrowings under the credit facility	1,500,000
SAL LLC | STRATTEC Advanced Logic Credit Facility | Registrant's Guarantee of STRATTEC Advanced Logic Credit Facility
Schedule Of Equity Method Investments [Line Items]
Repayments of borrowings under credit facility	1,500,000
Guarantee liability	1,500,000
STRATTEC's proportionate share of guarantor obligations	$ 765,000

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Equity Earnings (Loss) Earnings of Joint Ventures (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Summarized statements of operations
Equity Earnings (Loss) of Joint Ventures	$ 62	$ (293)
VAST LLC
Summarized statements of operations
Net Sales	25,009	26,348
Cost of Goods Sold	20,093	21,914
Gross Profit	4,916	4,434
Engineering, Selling and Administrative Expenses	4,015	3,625
Income (Loss) From Operations	901	809
Other Income (Expense), net	441	(312)
Income before Provision for Income Taxes	1,342	497
Provision for Income Taxes	172	94
Net Income	1,170	403
STRATTEC’s Share of VAST LLC Net Income	390	134
Intercompany Profit Elimination		(1)
Equity Earnings (Loss) of Joint Ventures	390	133
SAL LLC
Summarized statements of operations
Net Sales	100	60
Cost of Goods Sold	87	55
Gross Profit	13	5
Engineering, Selling and Administrative Expenses	337	246
Income (Loss) From Operations	(324)	(241)
Other Income (Expense), net	(12)	(8)
Net Income	(336)	(249)
STRATTEC’s Share of Equity Loss of SAL LLC	(328)	(249)
Loss on Loan to SAL LLC		(150)
Loss on SAL LLC Credit Facility Guarantee		(27)
Equity Earnings (Loss) of Joint Ventures	$ (328)	$ (426)

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Equity Earnings (Loss) Earnings of Joint Ventures (Details 1) - Equity Method Investee - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
VAST LLC
Schedule Of Equity Method Investments [Line Items]
Sales to Joint Venture	$ 50	$ 138
Purchases from VAST LLC	31	25
Expenses Charged to VAST LLC	228	235
Expenses Charged from VAST LLC	409	392
SAL LLC
Schedule Of Equity Method Investments [Line Items]
Sales to Joint Venture	$ 75	$ 17

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Credit Facilities and Guarantees (Details Textual)	3 Months Ended
	Oct. 02, 2016 USD ($)
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Secured revolving credit facility	$ 30,000,000
Credit facility maturity date	Aug. 01, 2019
Interest rate on borrowings under the credit facility	The London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate
Interest rate - percentage points added to LIBOR - on borrowings under credit facility	1.00%
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Secured revolving credit facility	$ 20,000,000
Credit facility maturity date	Aug. 01, 2019
Interest rate on borrowings under the credit facility	The London Interbank Offering Rate (“LIBOR”) plus 1.0 percent or the bank’s prime rate
Interest rate - percentage points added to LIBOR - on borrowings under credit facility	1.00%
Capital contribution from partners during the period as required under the credit agreement	$ 6,000,000
ADAC-STRATTEC Credit Facility | STRATTEC
Line Of Credit Facility [Line Items]
Capital contribution from registrant during the period as required under the credit agreement	$ 3,060,000

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Credit Facilities and Guarantees (Details) - USD ($) $ in Thousands	Oct. 02, 2016	Jul. 03, 2016
Line Of Credit Facility [Line Items]
Outstanding Borrowing	$ 24,000	$ 20,000
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Outstanding Borrowing	16,000	11,500
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Outstanding Borrowing	$ 8,000	$ 8,500

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Credit Facilities and Guarantees (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Average Outstanding Borrowings	$ 12,159	$ 3,747
Weighted Average Interest Rate	1.50%	1.20%
ADAC-STRATTEC Credit Facility
Line Of Credit Facility [Line Items]
Average Outstanding Borrowings	$ 8,473	$ 3,137
Weighted Average Interest Rate	1.50%	1.20%

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Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended
	Oct. 02, 2016	Jul. 03, 2016
Other Commitments [Line Items]
Environmental reserve originally established in 1995	$ 3,000,000
Environmental	1,359,000	$ 1,365,000
Cost incurred inception to date on installation and on-going monitoring of wells	515,000
ADAC-STRATTEC LLC | New Mid-Mexico Manufacturing Facility.
Other Commitments [Line Items]
Total anticipated capital expenditures	22,000,000
Capital expenditures made as of the balance sheet date for land, facilities and equipment	$ 10,700,000

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Shareholders' Equity (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Summary of activity impacting shareholders' equity
Beginning Balance	$ 154,512
Net income	2,405	$ 3,832
Dividend Declared	(503)
Dividend Declared – Non-controlling Interests of Subsidiaries	(1,764)
Contributions from Non-controlling Interests of Subsidiaries	2,940
Translation adjustments	(1,623)	(2,867)
Stock Based Compensation	428
Pension and postretirement plans, net of tax	475	$ 364
Employee Stock Purchases and Stock Option Exercises	74
Ending Balance	156,944
Equity Attributable to STRATTEC
Summary of activity impacting shareholders' equity
Beginning Balance	139,332
Net income	1,542
Dividend Declared	(503)
Translation adjustments	(1,513)
Stock Based Compensation	428
Pension and postretirement plans, net of tax	475
Employee Stock Purchases and Stock Option Exercises	74
Ending Balance	139,835
Equity Attributable to Non-Controlling Interest
Summary of activity impacting shareholders' equity
Beginning Balance	15,180
Net income	863
Dividend Declared – Non-controlling Interests of Subsidiaries	(1,764)
Contributions from Non-controlling Interests of Subsidiaries	2,940
Translation adjustments	(110)
Ending Balance	$ 17,109

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Other Income (Expense), Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Other Income And Expenses [Abstract]
Foreign Currency Transaction Gain	$ 689	$ 957
Unrealized Loss on Peso Forward Contracts	(899)	(896)
Realized Loss on Peso Forward Contracts	(230)
Rabbi Trust Gain (Loss)	83	(164)
Other	400	71
Other income (expense), net	$ 43	$ (32)

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Earnings Per Share (''EPS'') (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Reconciliation of the components of the basic and diluted per share
Net Income Attributable to STRATTEC SECURITY CORPORATION	$ 1,542	$ 3,273
Less: Income Attributable to Participating Securities	1	21
Net Income Attributable to Common Shareholders	$ 1,541	$ 3,252
Basic Weighted Average Shares of Common Stock Outstanding	3,576	3,543
Incremental Shares – Stock based Compensation	85	74
Diluted Weighted Average Shares of Common Stock Outstanding	3,661	3,617
Basic Earnings Per Share	$ 0.43	$ 0.92
Diluted Earnings Per Share	$ 0.42	$ 0.90

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Earnings Per Share (''EPS'') (Details 1) - shares	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from earnings per share computation	14,010	10,000

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Stock-Based Compensation (Details Textual) - USD ($)	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options, granted	0	0
Employee Stock Option
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options expires after date of grant	10 years
Unrecognized compensation cost related to stock options	$ 92,375
Weighted average period over which unrecognized compensation is expected to be recognized	6 months
Employee Stock Option | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	1 year
Employee Stock Option | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	4 years
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average period over which unrecognized compensation is expected to be recognized	1 year 2 months 12 days
Unrecognized compensation cost related to unvested restricted stock grants	$ 2,500,000
Restricted Stock | Prior to August 2015
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	3 years
Restricted Stock | Minimum | August 2015 and Thereafter
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	3 years
Restricted Stock | Maximum | August 2015 and Thereafter
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period after the date of grant	5 years
Omnibus Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation arrangement by share based payment award number of shares authorized	1,850,000
Shares of common stock available for grant	204,939

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Stock-Based Compensation (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Oct. 02, 2016 USD ($) $ / shares shares
Summary of stock option activity under our stock incentive plan
Shares, Beginning Balance | shares	144,998
Shares, Exercised | shares	(2,200)
Shares, Ending Balance | shares	142,798
Shares, Exercisable | shares	133,788
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 28.86
Weighted Average Exercise Price, Exercised | $ / shares	10.92
Weighted Average Exercise Price, Ending Balance | $ / shares	29.13
Weighted Average Exercise Price, Exercisable | $ / shares	$ 25.73
Weighted Average Remaining Contractual Term, Outstanding	5 years 2 months 12 days
Weighted Average Remaining Contractual Term, Exercisable, Outstanding	5 years
Aggregate Intrinsic Value, Outstanding | $	$ 1,391
Aggregate Intrinsic Value, Outstanding | $	$ 1,391

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Stock-Based Compensation (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Intrinsic value of stock options exercised and the fair value of stock options vested
Intrinsic Value of Options Exercised	$ 71	$ 414
Fair Value of Stock Options Vesting	$ 596	$ 331

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Stock-Based Compensation (Details 2) - Restricted Stock	3 Months Ended
	Oct. 02, 2016 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Nonvested, Shares Beginning Balance | shares	71,750
Granted, Shares | shares	27,150
Vested, Shares | shares	(19,200)
Forfeited, Shares | shares	(1,800)
Nonvested, Shares Ending Balance | shares	77,900
Nonvested, Weighted Average Grant Date Fair Value Beginning Balance | $ / shares	$ 60.05
Granted, Weighted Average Grant Date Fair Value | $ / shares	43.87
Vested, Weighted Average Grant Date Fair Value | $ / shares	35.89
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	58.24
Nonvested, Weighted Average Grant Date Fair Value Ending Balance | $ / shares	$ 60.40

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Pension and Postretirement Benefits (Details Textual) - USD ($)	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015	Jul. 03, 2016
Defined Benefit Plan Disclosure [Line Items]
Date the Board of Directors approved a resolution to terminate the qualified retirement plan	Apr. 02, 2014
Qualified Retirement Plan participants' vesting percentage as of the final termination date of the plan	100.00%
Termination of Qualified Pension Plan, description	On April 2, 2014, our Board of Directors approved a resolution to terminate the Qualified Pension Plan. The termination of the Qualified Pension Plan is subject to the Internal Revenue Service’s (“IRS”) determination that the Qualified Pension Plan is qualified on termination. We believe it will take 18 to 24 months to finalize the complete termination of the Qualified Pension Plan after obtaining IRS approval. We have not yet received IRS approval that the Qualified Pension Plan is qualified on termination. Additionally, we have amended the Qualified Pension Plan to provide that participants are 100 percent vested in their accrued benefits as of the effective date of the plan termination, to adopt a new standard for disability benefits that will apply when the plan’s assets are distributed due to the termination, to add a lump sum distribution for employees and terminated vested participants who are not in payment status when Qualified Pension Plan assets are distributed due to the termination and to make certain other conforming amendments to the Qualified Pension Plan to comply with applicable laws that may be required by the IRS or may be deemed necessary or advisable to improve the administration of the Qualified Pension Plan or facilitate its termination and liquidation.
Rabbi Trust Assets - SERP	$ 2,400,000		$ 2,300,000
Postretirement plan annual benefit limit for future eligible retirees	$ 4,000
Other postretirement benefits maximum benefit period	5 years
Contributions to the qualified pension plan	$ 3,000,000	$ 0
Expected additional employer contributions during remainder of fiscal 2017	$ 2,000,000
Supplemental Employee Retirement Plan, Defined Benefit
Defined Benefit Plan Disclosure [Line Items]
Percentage of participant's base salary received as Supplemental Retirement Benefits	8.00%

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Pension and Postretirement Benefits (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Pension Benefits
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	$ 14	$ 12
Interest cost	981	1,076
Expected return on plan assets	(1,464)	(1,351)
Amortization of prior service cost (credit)	3	3
Amortization of unrecognized net loss	807	599
Net periodic benefit cost (credit)	341	339
Postretirement Benefits
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost	3	3
Interest cost	14	21
Amortization of prior service cost (credit)	(191)	(187)
Amortization of unrecognized net loss	135	151
Net periodic benefit cost (credit)	$ (39)	$ (12)

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 02, 2016	Sep. 27, 2015
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	$ 37,673	$ 26,859
Other comprehensive loss before reclassifications	1,623	2,867
Other comprehensive loss before reclassifications, income tax	0
Net other comprehensive loss before reclassifications	1,623	2,867
Reclassifications:
Prior service credits	188	188
Unrecognized net loss	(941)	(765)
Total reclassifications before tax	(753)	(577)
Reclassifications, income tax	278	213
Net reclassifications	(475)	(364)
Other comprehensive loss (income)	1,148	2,503
Other comprehensive loss attributable to non- controlling interest	110	159
Ending balance	38,711	29,203
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	13,155	8,221
Other comprehensive loss before reclassifications	1,623	2,867
Other comprehensive loss before reclassifications, income tax	0
Net other comprehensive loss before reclassifications	1,623	2,867
Reclassifications:
Other comprehensive loss (income)	1,623	2,867
Other comprehensive loss attributable to non- controlling interest	110	159
Ending balance	14,668	10,929
Retirement and Postretirement Benefit Plans
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning balance	24,518	18,638
Other comprehensive loss before reclassifications, income tax	0
Reclassifications:
Prior service credits	188	188
Unrecognized net loss	(941)	(765)
Total reclassifications before tax	(753)	(577)
Reclassifications, income tax	278	213
Net reclassifications	(475)	(364)
Other comprehensive loss (income)	(475)	(364)
Ending balance	$ 24,043	$ 18,274