Equity 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
	September 30, 2018		October 1, 2017
Net Sales	$	40,056	$	38,510
Cost of Goods Sold		31,102		29,013
Gross Profit		8,954		9,497
Engineering, Selling and Administrative Expenses		6,150		6,021
Income From Operations		2,804		3,476
Other Income, net		397		150
Income before Provision for Income Taxes		3,201		3,626
Provision for Income Taxes		467		522
Net Income	$	2,734	$	3,104
STRATTEC’s Share of VAST LLC Net Income	$	911	$	1,035
Intercompany Profit Elimination		4		—
STRATTEC’s Equity Earnings of VAST LLC	$	915	$	1,035

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

Loans were made from STRATTEC to SAL LLC in support of operating expenses and working capital needs. The outstanding loan amounts totaled $2.6 million as of September 30, 2018 and July 1, 2018. As of each balance sheet date, the outstanding loan amount was eliminated against STRATTEC’s Investment in SAL LLC in the preparation of the consolidated financial statements.

Even though we maintain a 51 percent ownership interest in SAL LLC, effective with our fiscal 2015 fourth quarter, 100 percent of the funding for SAL LLC was being made by loans from STRATTEC to SAL LLC. Therefore, STRATTEC recognized 100 percent of the losses of SAL LLC up to our committed financial support through Equity 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
	September 30, 2018			October 1, 2017
Net Sales	$	6		$	108
Cost of Goods Sold		(3	)		152
Gross Margin (Loss)		9			(44	)
Engineering, Selling and Administrative Expenses		15			(10	)
Loss From Operations		(6	)		(34	)
Other Expense, net		—			(65	)
Net Loss	$	(6	)	$	(99	)
STRATTEC’s Equity Loss of SAL LLC	$	(6	)	$	(9	)

The business of SAL LLC has been wound down to sell only commercial biometric locks.

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
	September 30, 2018		October 1, 2017
Sales to VAST LLC	$	498	$	596
Sales to SAL LLC	$	—	$	35
Purchases from VAST LLC	$	42	$	45
Expenses Charged to VAST LLC	$	345	$	212
Expenses Charged from VAST LLC	$	207	$	218