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Opening New Doors
 2008 ANNUAL REPORT




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Opening New Doors
 A new era has begun for STRATTEC and our worldwide partners. Furthering our efforts to succeed
in todays challenging global marketplace, we are pleased to announce an acquisition that will add
power access devices to open and close sliding doors, liftgates and trunk lids to our core product
lineup. This represents a meaningful expansion of our product line, customer base and
electromechanical engineering capability. Literally and figuratively, we are opening new doors to
expanded opportunities and crossing the threshold into a new era.




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##### 



2008 ANNUAL REPORT
 
  CONTENTS
 LETTER TO THE SHAREHOLDERS
    
    
    2FINANCIAL HIGHLIGHTS
    
    
    4COMPANY DESCRIPTION
    
    
    5STRATTEC EQUIPPED VEHICLE LIST
    
    
    10MANAGEMENTS DISCUSSION AND ANALYSIS
    
    
    11FINANCIAL STATEMENTS
    
    
    19REPORT OF MANAGEMENT
    
    
    36REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    37FINANCIAL SUMMARY
    
    
    39PERFORMANCE GRAPH
    
    
    40DIRECTORS / OFFICERS / SHAREHOLDERS INFORMATION
    
    
    41
 PROSPECTIVE INFORMATION




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LETTER TO THE SHAREHOLDERS
 
 AUGUST, 2008




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LETTER TO THE SHAREHOLDERS




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##### Table of Contents



FINANCIAL HIGHLIGHTS
 (IN MILLIONS)
 
 2008
    
    2007
    
    2006Net Sales
    
    $
    159.6
    
    
    $
    167.7
    
    
    $
    181.2Gross Profit
    
    
    25.6
    
    
    
    26.5
    
    
    
    37.0Income from Operations
    
    
    1.6
    
    
    
    6.3
    
    
    
    13.4Net Income
    
    
    3.3
    
    
    
    8.2
    
    
    
    12.5Total Assets
    
    
    141.7
    
    
    
    148.4
    
    
    
    154.3Total Debt
    
    
    
    
    
    
    
    
    
    
    Shareholders Equity
    
    
    95.4
    
    
    
    103.0
    
    
    
    110.3
 ECONOMIC VALUE ADDED (EVA
®)
 ® ® ®
 Net Operating Profit After Cash-Basis Taxes
    
    
    
    
    
    $
    4.1Average Net Capital Employed
    
    $
    104.1Capital Cost
    
    
    10%10.4Economic Value Added
    
    
    
    
    
    $
    (6.3
    )
 ® ® ® ®
 Net Operating Profit After Cash-Basis Taxes:
 2008 Net Income as Reported
    
    $
    3.3Deferred Tax Provision
    
    
    .9Other
    
    
    (.1
    )Net Operating Profit After 
Cash-Basis Taxes
    
    $
    4.1
 Average Monthly Net Capital Employed:
 Total Shareholders Equity as Reported at June 29, 2008
    
    $
    95.4Long-Term Liabilities
    
    
    12.4Prepaid Pension Obligations
    
    
    (.7
    )Long-Term Deferred Tax Asset
    
    
    (6.9
    )Other
    
    
    (.3
    )Net Capital Employed at June 29, 2008
    
    $
    99.9Impact of 12 Month Average
    
    
    4.2Average Monthly Net Capital Employed
    
    $
    104.1
 EVA®is a registered trademark of Stern, Stewart & Co.




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(IMAGE)
    
    COMPANY DESCRIPTION




BASIC BUSINESS


STRATTEC SECURITY CORPORATION designs, develops, manufactures and markets mechanical
locks and keys, electronically enhanced locks and keys, steering column and instrument
panel ignition lock housings, latches, door handles and related access control products
for North American automotive customers, and for global automotive manufacturers through
the VAST Alliance in which we participate with WITTE Automotive of Velbert, Germany and
ADAC Automotive of Grand Rapids, Michigan. Our products are shipped to customer locations
in the United States, Canada, Mexico, Europe, South America and China, and we provide
full service and aftermarket support.

(IMAGE)


HISTORY


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

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

(IMAGE)




Our traditional products are locks and keys for cars and light trucks. A typical new car uses
a set of two to three locks. A typical 3-way lockset contains a steering column/ignition lock, a
drivers door lock and a rear compartment (trunk, hatch or liftgate) lock. Pickup trucks also use
two to three locks, while sport utility vehicles and vans use three to five locks. Some vehicles
have additional locks for consoles, storage compartments or folding rear seats. Pickup truck
tailgate locks and spare tire locks are offered as options. Usually, two keys are provided with
each vehicle lockset. Most of the vehicles we currently supply are using keys with sophisticated radio
frequency identification technology for theft prevention. However, keys with remote entry devices
integrated into a single unit have been added to our product line.

(IMAGE)


A relatively new and growing product line for us is ignition lock housings. These housings are
the mating part for our ignition locks and typically are part of the steering column structure,
although there are instrument panel-mounted versions for certain vehicle applications. These
housings are typically zinc or magnesium die castings and can include electronic components for
theft deterrent systems.


We are also developing business for additional access control products, including trunk latches,
liftgate latches, tailgate latches, hood latches, side door latches and related hardware for this
product category. With a planned acquisition in 2009, we will be supplying power access devices for
sliding side doors, liftgates and trunk lids. Through a joint venture formed with ADAC Automotive
during fiscal 2007, we are also pursuing door handles and related vehicle access hardware.

(IMAGE)

MARKETS


We are a direct supplier to OEM auto and light truck manufacturers as well as other
transportation-related manufacturers. For the 2008 model year, our lock and key products
enjoyed a 43% market share in the North American automotive industry, supplying over 75%
of General Motors production, 50% of Fords production and 100% of Chryslers
production. Our growing ignition lock housing business captured an estimated 22% share




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(IMAGE)
    
    COMPANY DESCRIPTION



in 2008. Our housings and OEM components are also sold to other Tier 1 automotive
suppliers and industrial manufacturers.


Direct sales to various OEMs represented approximately 71% of our total sales for
fiscal 2008. The remainder of our revenue is received primarily through sales to the OEM
service channels, the aftermarket and Tier 1 customers.

(IMAGE)


Sales to our major automotive customers, both OEM and Tier 1, are coordinated through direct
sales personnel located in our Detroit-area office. Sales are also facilitated through daily
interaction between our customer Program Managers and Application Engineers located in Detroit and
product engineering departments. Sales to other OEM customers are accomplished through a
combination of our own sales personnel located in Detroit and personnel in our Milwaukee
headquarters office. STRATTECs products are supported by an extensive staff of experienced lock,
housing and latch engineers. This staff, which includes product design, quality and manufacturing
engineers, is capable of providing complete design, development and testing services of new
products for our customers. This staff also is available for customer problem solving, warranty
analysis, and other activities that arise during a products life cycle. Our customers receive
after-sales support in the form of special field service kits, service manuals, and specific
in-plant production repair programs.

(IMAGE)


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

OEM service and replacement parts are sold to the OEMs own service operations. In
addition, we distribute our components and security products to the automotive aftermarket
through approximately 50 authorized wholesale distributors, as well as other marketers and
users of component parts, including export customers. Increasingly, our products find
their way into the retail channel, specifically the hardware store channel. Our ability to
provide a full line of keys to that channel has been accomplished through the introduction
of the STRATTEC XL key line. This extension to our line includes keys that we currently
do not supply on an OE basis, including keys for Toyota, Honda and other popular domestic
and import vehicles. This extended line of keys enable automotive repair specialists to
satisfy consumer needs for repair or replacement parts. Our aftermarket activities are
serviced through a warehousing operation integral to our Milwaukee headquarters and
manufacturing facility.

CUSTOMER FOCUS


To bring the proper focus to the relationships with our major customers, we have
seven customer-focused teams, each with a Director of Sales, a Product Business Manager,
one or two Engineering Program Managers and Customer Application Engineers. In addition to
customer teams for General Motors, Ford and Chrysler, we currently have teams for New
Domestic Vehicle Manufacturers, Driver Control/Ignition Lock Housing customers, Tiered
Products, and for Service and Aftermarket customers. In 2009, we will add a team for Power
Access Products.

Each Sales Director is responsible for the overall relationship between STRATTEC
and a specific customer group. Engineering Program Managers report to their respective
teams and are responsible for coordinating engineering resources and managing new
product programs for their customers.

To serve our customers product needs, STRATTECs engineering resources are organized




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(IMAGE)
    
    COMPANY DESCRIPTION




(IMAGE)

by product type. We currently have four product groups: Locks and Keys, Latches, Driver
Control/Ignition Lock Housings and Electrical. Assuming completion of the Delphi Power Products
acquisition described in this Annual Report, in 2009 we will be adding Power Access Devices,
including electronic control module capability. Each group has an Engineering Manager and a
complement of skilled engineers who design and develop products for specific applications. In doing
this, each engineering group works closely with the Product Business Managers, team Engineering
Program Managers, sales personnel and application engineers.


(IMAGE)


Underlying this organization is a formalized product development process to identify and meet
customer needs in the shortest possible time. By following this streamlined development system, we
shorten product lead times, tighten our response to market changes and provide our customers with
the optimum value solution to their security/access control requirements. STRATTEC is also ISO/TS
16949 and ISO 14001 certified. This means we embrace the philosophy that quality should exist not
only in the finished product, but in every step of our processes as well.

(IMAGE)


OPERATIONS


A significant number of the components that go into our products are manufactured at our main
facility and headquarters in Milwaukee, Wisconsin. This facility produces zinc die cast components,
stampings and key blanks. Key finishing takes place at STRATTEC Componentes Automotrices in Juarez,
Mexico along with assembly activities for ADAC-STRATTEC de Mexico. The majority of our assembly
operations take place at STRATTEC de Mexico, also located in Juarez. Warehousing and distribution
of aftermarket product is accomplished at the Milwaukee facility.

ADVANCED DEVELOPMENT


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

(IMAGE)


(IMAGE)




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COMPANY DESCRIPTION
 
 VAST ALLIANCE
    
 ADAC-STRATTEC de MEXICO




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COMPANY DESCRIPTION
 
  SEASONAL NATURE OF THE BUSINESS
  GLOBAL PRESENCE
 
 1. STRATTEC  Milwaukee, Wisconsin 1
 2. STRATTEC de Mexico  Juarez, Mexico 1
 3. STRATTEC Componentes Automotrices  Juarez, Mexico 1
 4. ADAC-STRATTEC de Mexico  Juarez, Mexico
 5. ADAC Automotive  Grand Rapids and Muskegan, Michigan 1
 6. WITTE Automotive  Velbert, Germany 1
 7. WITTE Automotive  Nejdek, Czech Republic 1
 8.
VAST do Brasil  Sao Paulo, Brazil 2
 9.
VAST Fuzhou  Fuzhou, China 2
 10.
VAST Great Shanghai Co.  Shanghai, China 2
 11.
VAST Japan  Tokyo, Japan (Branch Office) 2
 12.
VAST Korea  Anyang, Korea (Branch Office) 2
 1
Members of the VAST Alliance. 2Units of VAST LLC joint venture. ECONOMIC VALUE COMMITMENT
 ® ® ®




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VEHICLE LIST
2009 VEHICLES
We are proud to be associated with many of the quality vehicles produced in North America and
elsewhere. The following model year 2009 cars and light trucks are equipped with STRATTEC products.
CARS AND CARBASED UTILITY VEHICLES
Buick AllureChrysler PT CruiserJeep Compass
(Canada only) Chrysler SebringJeep Patriot
Buick EnclaveDodge AvengerLincoln MKS
Buick LaCrosseDodge CaliberLincoln Town Car
Buick LucerneDodge ChallengerMercury Grand Marquis
Cadillac XLRDodge ChargerMercury Sable
Cadillac CTSDodge JourneyOpel GT (Europe only)
Cadillac DTSDodge ViperPontiac G5
Cadillac SRXFord Crown VictoriaPontiac G6
Chevrolet CobaltFord MustangPontiac G8
Chevrolet EquinoxFord TaurusPontiac Solstice
Chevrolet CorvetteFord Taurus XPontiac Torrent
Chevrolet HHRGMC AcadiaSaturn Aura
Chevrolet ImpalaHolden CommodoreSaturn Outlook
Chevrolet Malibu (Australia only) Saturn Sky
Chevrolet TraverseHonda CivicSuzuki XL7
Chrysler 300/300CHyundai Veracruz
LIGHT TRUCKS, VANSAND SPORT UTILITYVEHICLES
Cadillac EscaladeDodge Ram PickupHyundai Entourage
Cadillac Escalade ESVFord ExpeditionJeep Commander
Cadillac Escalade EXTFord Expedition ELJeep Grand Cherokee
Chevrolet AvalancheFord ExplorerJeep Liberty
Chevrolet Express VanFord Explorer Sport TracJeep Wrangler/Wrangler
Chevrolet Silverado PickupFord F-Series PickupUnlimited
Chevrolet SuburbanFord F-Series SupercrewKia Sedona
Chevrolet TahoeFord F-Series Super DutyLincoln Navigator
Chevrolet TrailblazerFord Ranger PickupLincoln Navigator L
Chrysler AspenGMC EnvoyMazda B-Series Pickup
Chrysler Town & CountryGMC SavanaMercury Mountaineer
Dodge Grand CaravanGMC Sierra PickupNissan Titan
Dodge Dakota PickupGMC YukonSaab 9-7X
Dodge DurangoGMC Yukon XLVolkswagen Routan
Dodge NitroHummer H2
2008 STRATTEC Annual Report




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MANAGEMENTS DISCUSSION AND ANALYSIS
 
  RESULTS OF OPERATIONS  2008 Compared to 2007




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MANAGEMENTS DISCUSSION AND ANALYSIS
 
 
 RESULTS OF OPERATIONS  2007 Compared to 2006




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MANAGEMENTS DISCUSSION AND ANALYSIS
 
  
 LIQUIDITY AND CAPITAL RESOURCES




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MANAGEMENTS DISCUSSION AND ANALYSIS
 
   CONTRACTUAL OBLIGATIONS
  Payments Due By PeriodLess Than
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligation
    
    Total
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsOperating Leases
    
    
    $  1,621
    
    
    
    $    478
    
    
    
    $   554
    
    
    
    $383
    
    
    
    $206Capital Purchase Obligations
    
    
    5,422
    
    
    
    5,422
    
    
    
    
    
    
    
    
    
    
    
    Other Purchase Obligations
    
    
    11,900
    
    
    
    10,090
    
    
    
    1,810
    
    
    
    
    
    
    
    Pension and Postretirement
Obligations (a)
    
    
    4,182
    
    
    
    4,182
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    $23,125
    
    
    
    $20,172
    
    
    
    $2,364
    
    
    
    $383
    
    
    
    $206
 (a)
  JOINT VENTURES




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MANAGEMENTS DISCUSSION AND ANALYSIS
 
    RECENTLY ISSUED ACCOUNTING STANDARDS
   CRITICAL ACCOUNTING POLICIES
  Pension
and Postretirement Health Benefits 




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MANAGEMENTS DISCUSSION AND ANALYSIS
 
         Other
Reserves 
 Stock-Based
Compensation 




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MANAGEMENTS DISCUSSION AND ANALYSIS
 
  RISK FACTORS
  Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share 
  Cost Reduction 
 Cyclicality and Seasonality in the Automotive Market 
 Foreign Operations 
 Currency Exchange Rate Fluctuations 
 Sources of and Fluctuations in Market Prices of Raw Materials 






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MANAGEMENTS DISCUSSION AND ANALYSIS
 
  Disruptions Due to Work Stoppages and Other Labor Matters 
 Environmental and Safety Regulations 
 Highly Competitive Automotive Supply Industry 
  Program Volume and Pricing Fluctuations 
 Investments in Customer Program Specific Assets 




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CONSOLIDATED STATEMENTS OF INCOME  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
 Years EndedJune 29, 2008
    
    
    July 1, 2007
    
    
    July 2, 2006NET SALES
    
    
    $ 159,642
    
    
    
    $ 167,707
    
    
    
    $ 181,197Cost of goods sold
    
    
    134,091
    
    
    
    141,213
    
    
    
    144,151GROSS PROFIT
    
    
    25,551
    
    
    
    26,494
    
    
    
    37,046Engineering, selling, and administrative expenses
    
    
    23,962
    
    
    
    20,189
    
    
    
    22,067Provision for doubtful accounts, net
    
    
    
    
    
    
    
    
    
    
    1,622INCOME FROM OPERATIONS
    
    
    1,589
    
    
    
    6,305
    
    
    
    13,357Interest income
    
    
    2,749
    
    
    
    3,611
    
    
    
    2,563Interest expense
    
    
    
    
    
    
    
    
    
    
    Other income, net
    
    
    230
    
    
    
    715
    
    
    
    960Minority interest
    
    
    (76
    )
    
    
    75
    
    
    
    INCOME BEFORE PROVISION FOR
INCOME TAXES
    
    
    4,492
    
    
    
    10,706
    
    
    
    16,880Provision for income taxes
    
    
    1,225
    
    
    
    2,523
    
    
    
    4,403NET INCOME
    
    
    $     3,267
    
    
    
    $     8,183
    
    
    
    $    12,477EARNINGS PER SHARE:BASIC
    
    
    $        0.94
    
    
    
    $        2.30
    
    
    
    $         3.36DILUTED
    
    
    $        0.94
    
    
    
    $        2.30
    
    
    
    $         3.35AVERAGE SHARES OUTSTANDING:BASIC
    
    
    3,487
    
    
    
    3,552
    
    
    
    3,716DILUTED
    
    
    3,494
    
    
    
    3,555
    
    
    
    3,720




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CONSOLIDATED BALANCE SHEETS  (IN THOUSANDS, EXCEPT SHARE AMOUNTS AND PER SHARE AMOUNTS)
 
 June 29, 2008
    
    
    July 1, 2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    
    $  51,501
    
    
    
    $  65,491Receivables, less allowance for doubtful accounts
of $250 at June 29, 2008 and July 1, 2007
    
    
    23,518
    
    
    
    26,890Inventories
    
    
    10,269
    
    
    
    7,166Customer tooling in progress
    
    
    3,914
    
    
    
    1,824Deferred income taxes
    
    
    3,252
    
    
    
    2,729Income taxes recoverable
    
    
    1,815
    
    
    
    Other current assets
    
    
    8,997
    
    
    
    8,464Total current assets
    
    
    103,266
    
    
    
    112,564DEFERRED INCOME TAXES
    
    
    3,684
    
    
    
    2,117INVESTMENT IN JOINT VENTURES
    
    
    3,642
    
    
    
    2,813PREPAID PENSION OBLIGATIONS
    
    
    758
    
    
    
    4,385OTHER LONG-TERM ASSETS
    
    
    27
    
    
    
    41PROPERTY, PLANT AND EQUIPMENT, NET
    
    
    30,336
    
    
    
    26,526$141,713
    
    
    
    $148,446LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    
    $  15,974
    
    
    
    $  16,575Accrued liabilities:Payroll and benefits
    
    
    7,319
    
    
    
    6,280Environmental
    
    
    2,648
    
    
    
    2,655Income taxes
    
    
    
    
    
    
    664Other
    
    
    6,998
    
    
    
    5,307Total current liabilities
    
    
    32,939
    
    
    
    31,481COMMITMENTS AND CONTINGENCIES see note on page 28BORROWINGS UNDER LINE OF CREDIT
    
    
    
    
    
    
    ACCRUED PENSION OBLIGATIONS
    
    
    2,606
    
    
    
    2,855ACCRUED POSTRETIREMENT OBLIGATIONS
    
    
    9,783
    
    
    
    10,576MINORITY INTEREST
    
    
    953
    
    
    
    574SHAREHOLDERS EQUITY:Common stock, authorized 12,000,000 shares, $.01 par value,
issued 6,887,757 shares at June 29, 2008 and at July 1, 2007
    
    
    69
    
    
    
    69Capital in excess of par value
    
    
    78,885
    
    
    
    78,122Retained earnings
    
    
    163,889
    
    
    
    165,928Accumulated other comprehensive loss
    
    
    (17,495
    )
    
    
    (14,341
    )Less: Treasury stock at cost (3,444,548 shares at
June 29, 2008 and 3,368,619 shares at July 1, 2007)
    
    
    (129,916
    )
    
    
    (126,818
    )Total shareholders equity
    
    
    95,432
    
    
    
    102,960$141,713
    
    
    
    $148,446




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CONSOLIDATED STATEMENTS OFSHAREHOLDERS EQUITY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
 AccumulatedCapital in
    
    
    
    
    
    OtherCommon
    
    Excess of
    
    Retained
    
    Comprehensive
    
    Treasury
    
    ComprehensiveStock
    
    Par Value
    
    Earnings
    
    Loss
    
    Stock
    
    IncomeBALANCE JULY 3, 2005
    
    
    $69
    
    
    
    $74,924
    
    
    
    $145,268
    
    
    
    $(12,047
    )
    
    
    $(116,463
    )Net Income
    
    
    
    
    
    
    
    
    
    
    12,477
    
    
    
    
    
    
    
    
    
    
    
    $12,477Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (317
    )
    
    
    
    
    
    
    (317
    )Minimum pension liability,
net of tax of $5,765
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,406
    
    
    
    
    
    
    
    9,406Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $21,566Purchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,306
    )Stock-Based Compensation
    
    
    
    
    
    
    1,118
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
and employee stock
purchases, including
tax benefit of $62
    
    
    
    
    
    
    1,133
    
    
    
    
    
    
    
    
    
    
    
    13BALANCE JULY 2, 2006
    
    
    $69
    
    
    
    $77,175
    
    
    
    $157,745
    
    
    
    $  (2,958
    )
    
    
    $(121,756
    )Net Income
    
    
    
    
    
    
    
    
    
    
    8,183
    
    
    
    
    
    
    
    
    
    
    
    8,183Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    449
    
    
    
    
    
    
    
    449Minimum pension liability,
net of tax of $14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $  8,656Purchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,075
    )Stock-Based Compensation
    
    
    
    
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
and employee stock
purchases, including tax
benefit of $69
    
    
    
    
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    13Adjustments to initially adopt
SFAS No. 158:Prior service costs, net of tax
of $1,363
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,224
    
    
    
    Net losses, net of tax of $8,629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,080
    )
    
    
    BALANCE JULY 1, 2007
    
    
    $69
    
    
    
    $78,122
    
    
    
    $165,928
    
    
    
    $(14,341
    )
    
    
    $(126,818
    )Net Income
    
    
    
    
    
    
    
    
    
    
    3,267
    
    
    
    
    
    
    
    
    
    
    
    $  3,267Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    714
    
    
    
    
    
    
    
    714Pension and postretirement
funded status adjustment,
net of tax of $2,371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,868
    )
    
    
    
    
    
    
    (3,868
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $     113Purchase of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,109
    )Cash dividends declared
($1.60 per share)
    
    
    
    
    
    
    
    
    
    
    (5,652
    )
    
    
    
    
    
    
    Stock-Based
Compensation, including
tax benefit on restricted stock
dividends of $13
    
    
    
    
    
    
    745
    
    
    
    
    
    
    
    
    
    
    
    Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    346
    
    
    
    
    
    
    
    Employee stock purchases
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    11BALANCE JUNE 29, 2008
    
    
    $69
    
    
    
    $78,885
    
    
    
    $163,889
    
    
    
    $(17,495
    )
    
    
    $(129,916
    )




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 (IN THOUSANDS)
 
 Years EndedJune 29, 2008
    
    
    July 1, 2007
    
    
    July 2, 2006CASH FLOWS FROM OPERATING ACTIVITIESNet Income
    
    
    $  3,267
    
    
    
    $  8,183
    
    
    
    $12,477Adjustments to reconcile net income to
net cash provided by operating activities:Minority Interest
    
    
    26
    
    
    
    (75
    )
    
    
    Depreciation
    
    
    6,830
    
    
    
    6,988
    
    
    
    7,155Loss on disposition of property,
plant and equipment
    
    
    434
    
    
    
    58
    
    
    
    320Deferred income taxes
    
    
    920
    
    
    
    (359
    )
    
    
    350Tax benefit from options exercised
    
    
    
    
    
    
    23
    
    
    
    61Stock-based compensation expense
    
    
    741
    
    
    
    738
    
    
    
    1,118Provision for doubtful accounts
    
    
    
    
    
    
    
    
    
    
    1,622Change in operating assets and liabilities:Receivables
    
    
    3,465
    
    
    
    1,434
    
    
    
    (3,870
    )Inventories
    
    
    (3,103
    )
    
    
    2,171
    
    
    
    2,317Other assets
    
    
    (8,413
    )
    
    
    (7,277
    )
    
    
    (3,953
    )Accounts payable and accrued liabilities
    
    
    163
    
    
    
    (1,937
    )
    
    
    2,184Other, net
    
    
    (576
    )
    
    
    (153
    )
    
    
    (485
    )Net cash provided by operating activities
    
    
    3,754
    
    
    
    9,794
    
    
    
    19,296CASH FLOWS FROM INVESTING ACTIVITIESInvestment in joint ventures
    
    
    
    
    
    
    (100
    )
    
    
    (569
    )Additions to property, plant and equipment
    
    
    (10,930
    )
    
    
    (5,748
    )
    
    
    (5,766
    )Proceeds received on sale of property,
plant and equipment
    
    
    
    
    
    
    21
    
    
    
    22Net cash used in investing activities
    
    
    (10,930
    )
    
    
    (5,827
    )
    
    
    (6,313
    )CASH FLOWS FROM FINANCING ACTIVITIESPurchase of common stock
    
    
    (3,109
    )
    
    
    (5,075
    )
    
    
    (5,306
    )Exercise of stock options and employee stock purchases
    
    
    29
    
    
    
    238
    
    
    
    1,085Dividends paid
    
    
    (5,133
    )
    
    
    
    
    
    
    Loan from minority interest
    
    
    1,050
    
    
    
    
    
    
    
    Contribution from minority interest
    
    
    349
    
    
    
    649
    
    
    
    Net cash used in financing activities
    
    
    (6,814
    )
    
    
    (4,188
    )
    
    
    (4,221
    )NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS
    
    
    (13,990
    )
    
    
    (221
    )
    
    
    8,762CASH AND CASH EQUIVALENTSBeginning of year
    
    
    65,491
    
    
    
    65,712
    
    
    
    56,950End of year
    
    
    $51,501
    
    
    
    $65,491
    
    
    
    $65,712SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATIONIncome taxes paid
    
    
    $  3,238
    
    
    
    $  3,231
    
    
    
    $  3,120Interest paid
    
    
    
    
    
    
    
    
    
    
    




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    Principles of Consolidation and Presentation:
 Reclassifications:
 Fiscal Year:
 Use of Estimates:
 Cash and Cash Equivalents:
 Fair Value of Financial Instruments:
 Receivables:
 Balance,
    
    Provision
    
    
    
    
    
    Balance,Beginning
    
    Charged to
    
    Balances
    
    End ofof Year
    
    Expense
    
    Written Off
    
    YearYear ended June 29, 2008
    
    $
    250
    
    
    $
    
    
    
    $
    
    
    
    $
    250Year ended July 1, 2007
    
    $
    250
    
    
    $
    
    
    
    $
    
    
    
    $
    250Year ended July 2, 2006
    
    $
    250
    
    
    $
    1,622
    
    
    $
    1,622
    
    
    $
    250
 Inventories:
 June 29, 2008
    
    July 1, 2007Finished products
    
    
    $  2,521
    
    
    
    $ 2,660Work in process
    
    
    4,379
    
    
    
    4,522Purchased materials
    
    
    7,414
    
    
    
    4,813LIFO reserve
    
    
    (4,045
    )
    
    
    (4,829
    )$10,269
    
    
    
    $ 7,166




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
 Customer Tooling in Progress:
 Repair and Maintenance Supply Parts:
 Balance,
    
    Provision
    
    
    
    
    
    Balance,Beginning
    
    Charged to
    
    Amounts
    
    End ofof Year
    
    Expense
    
    Written Off
    
    YearYear ended June 29, 2008
    
    $
    640
    
    
    $
    145
    
    
    $
    135
    
    
    $
    650Year ended July 1, 2007
    
    $
    650
    
    
    $
    32
    
    
    $
    42
    
    
    $
    640Year ended July 2, 2006
    
    $
    650
    
    
    $
    49
    
    
    $
    49
    
    
    $
    650
 Property, Plant and Equipment:
 Classification
    
    Expected Useful LivesLand improvements
    
    20 yearsBuildings and improvements
    
    
    20 to 35 yearsMachinery and equipment
    
    
    3 to 10 years
  June 29, 2008
    
    July 1, 2007Land and improvements
    
    
    $   3,349
    
    
    
    $   1,405Buildings and improvements
    
    
    12,913
    
    
    
    12,712Machinery and equipment
    
    
    103,183
    
    
    
    98,803119,445
    
    
    
    112,920Less: accumulated depreciation
    
    
    (89,109
    )
    
    
    (86,394
    )$ 30,336
    
    
    
    $ 26,526
   Supplier Concentrations:




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
 Labor Concentrations:
 Revenue Recognition:
 Research and Development Costs:
 Self Insurance and Loss Sensitive Plans:
    Balance,
    
    Provision
    
    
    
    
    
    Balance,Beginning
    
    Charged to
    
    
    
    
    
    End ofof Year
    
    Expense
    
    Payments
    
    YearYear ended June 29, 2008Incurred but not reported claims
reserve for self-insured plans
    
    
    $300
    
    
    $
    2,408
    
    
    $
    2,408
    
    
    
    $300Workers Compensation
    
    
    (251
    )
    
    
    254
    
    
    
    143
    
    
    
    (140
    )Year ended July 1, 2007Incurred but not reported claims
reserve for self-insured plans
    
    
    $400
    
    
    $
    2,250
    
    
    $
    2,350
    
    
    
    $300Workers Compensation
    
    
    (185
    )
    
    
    331
    
    
    
    397
    
    
    
    (251
    )Year ended July 2, 2006Incurred but not reported claims
reserve for self-insured plans
    
    
    $500
    
    
    $
    2,733
    
    
    $
    2,833
    
    
    
    $400Workers Compensation
    
    
    (202
    )
    
    
    314
    
    
    
    297
    
    
    
    (185
    )
 Product Warranty:




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
 Foreign Currency Translation:
 Accumulated Other Comprehensive Loss:
 June 29, 2008
    
    July 1, 2007
    
    July 2, 2006Minimum pension liability, net of tax
    
    
    $         
    
    
    
    $         
    
    
    
    $      62Unrecognized pension and postretirement
benefit liabilities, net of tax
    
    
    15,762
    
    
    
    11,894
    
    
    
    Foreign currency translation
    
    
    1,733
    
    
    
    2,447
    
    
    
    2,896$17,495
    
    
    
    $14,341
    
    
    
    $ 2,958
  Accounting For Stock-Based Compensation:
      Years EndedJune 29, 2008
    
    July 1, 2007
    
    July 2, 2006Intrinsic value of options exercised
    
    
    $       0
    
    
    $
    186
    
    
    $
    188Fair value of stock options vesting
    
    
    $   273
    
    
    $
    762
    
    
    $
    1,480




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
  Options Granted During
    
    
    2006Weighted average grant date fair value:Options issued at grant date market value
    
    
    n/aOptions issued above grant date market value
    
    
    $11.92Assumptions:Risk free interest rates
    
    
    4.08%Expected volitilty
    
    
    31.77%Expected term (in years)
    
    
    4.00
   Weighted Average RemainingNumber of Options
    
    Weighted Average Exercise
    
    Contractual Life OutstandingOutstanding/Exercisable
    
    Price Outstanding/Exercisable
    
    (In Years)$31.95-$44.93
    
    5,100/5,100
    
    $39.25/$39.25
    
    
    3.7$53.07-$56.08
    
    56,500/56,500
    
    $53.87/$56.87
    
    
    5.4Over $61.21
    
    126,180/86,840
    
    $61.72/$61.94
    
    
    2.4$58.74/$58.09
 Recent Accounting Pronouncements:




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
 INVESTMENT IN JOINT VENTURES
        LINE OF CREDIT
  COMMITMENTS AND CONTINGENCIES




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
   INCOME TAXES
  2008
    
    
    2007
    
    
    2006Currently payable:Federal
    
    
    $      62
    
    
    
    $2,624
    
    
    
    $5,089State
    
    
    226
    
    
    
    485
    
    
    
    738State refund claim recovery
    
    
    
    
    
    
    (506
    )
    
    
    (1,814
    )Foreign
    
    
    17
    
    
    
    279
    
    
    
    40305
    
    
    
    2,882
    
    
    
    4,053Deferred tax (benefit) provision
    
    
    920
    
    
    
    (359
    )
    
    
    350$1,225
    
    
    
    $2,523
    
    
    
    $4,403The items accounting for the difference between income taxes computed at the
Federal statutory tax rate and the provision for income taxes are as follows:2008
    
    2007
    
    2006U.S. statutory rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.4
    %State taxes, net of Federal tax benefit
    
    
    4.6
    
    
    
    2.6
    
    
    
    3.1State refund claim recovery
    
    
    
    
    
    
    (3.1
    )
    
    
    (7.1
    )Foreign sales benefit
    
    
    
    
    
    
    (4.2
    )
    
    
    Foreign Subsidiaries
    
    
    (8.1
    )
    
    
    (4.9
    )
    
    
    (3.9
    )Other
    
    
    (3.2
    )
    
    
    (.8
    )
    
    
    (.4
    )27.3
    %
    
    
    23.6
    %
    
    
    26.1
    %




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
  June 29, 2008
    
    July 1, 2007Deferred income taxescurrent:Repair and maintenance supply parts reserve
    
    
    $      247
    
    
    
    $      243Payroll-related accruals
    
    
    850
    
    
    
    475Environmental reserve
    
    
    1,006
    
    
    
    1,009Accrued customer pricing
    
    
    1,245
    
    
    
    1,245Other
    
    
    (96
    )
    
    
    (243
    )$  3,252
    
    
    
    $  2,729Deferred income taxesnoncurrent:Accrued pension obligations
    
    
    $(6,513
    )
    
    
    $(4,588
    )Unrecognized pension and postretirement
benefit plan liabilities
    
    
    9,661
    
    
    
    7,290Accumulated depreciation
    
    
    (2,319
    )
    
    
    (2,863
    )Stock-based compensation
    
    
    806
    
    
    
    564Postretirement obligations
    
    
    1,721
    
    
    
    1,714Other
    
    
    328
    
    
    
    $  3,684
    
    
    
    $  2,117
     Unrecognized tax benefits July 2, 2007
    
    $
    1,063Gross increases  tax positions in prior years
    
    
    131Gross decreases  tax positions in prior years
    
    
    Gross increases  current period tax positions
    
    
    251Lapse of statute of limitations
    
    
    (267
    )Unrecognized tax benefits June 30, 2008
    
    $
    1,178




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
  RETIREMENT PLANS AND POSTRETIREMENT COSTS
 
 Pension and SERP Benefits
    
    Postretirement BenefitsPrior service cost (credit)
    
    
    $      450
    
    
    
    $(2,457
    )Net actuarial loss
    
    
    11,381
    
    
    
    6,388$11,831
    
    
    
    $ 3,931




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
  Pension and SERP Benefits
    
    
    Postretirement Benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006COMPONENTS OF NET PERIODIC
BENEFIT COST:Service cost
    
    $
    2,018
    
    
    $
    1,974
    
    
    $
    2,540
    
    
    $
    221
    
    
    $
    219
    
    
    $
    232Interest cost
    
    
    4,680
    
    
    
    4,348
    
    
    
    3,924
    
    
    
    718
    
    
    
    688
    
    
    
    491Expected return on plan assets
    
    
    (6,210
    )
    
    
    (5,348
    )
    
    
    (4,989
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    64
    
    
    
    64
    
    
    
    20
    
    
    
    (378
    )
    
    
    (378
    )
    
    
    (378
    )Amortization of unrecognized net loss
    
    
    643
    
    
    
    473
    
    
    
    1,275
    
    
    
    702
    
    
    
    641
    
    
    
    528Net periodic benefit cost
    
    $
    1,195
    
    
    $
    1,511
    
    
    $
    2,770
    
    
    $
    1,263
    
    
    $
    1,170
    
    
    $
    873Pension and SERP Benefits
    
    
    Postretirement BenefitsJune 29,
    
    
    
    
    
    July 1,
    
    June 29,
    
    
    
    
    
    July 1,2008
    
    
    
    
    
    
    2007
    
    
    2008
    
    
    
    
    
    
    2007WEIGHTED-AVERAGE ASSUMPTIONSBenefit Obligations:Discount rate
    
    
    7.13%
    
    
    
    
    
    
    
    6.41%
    
    
    
    7.13%
    
    
    
    
    
    
    
    6.41%Expected return on plan assets
    
    
    8.25%
    
    
    
    
    
    
    
    8.5%
    
    
    
    n/a
    
    
    
    
    
    
    
    n/aRate of compensation increases
    
    
    3.5%
    
    
    
    
    
    
    
    3.5%
    
    
    
    n/a
    
    
    
    
    
    
    
    n/aNet Periodic Benefit Cost:Discount rate
    
    
    6.41%
    
    
    
    
    
    
    
    6.62%
    
    
    
    6.41%
    
    
    
    
    
    
    
    6.62%Expected return on plan assets
    
    
    8.5%
    
    
    
    
    
    
    
    8.5%
    
    
    
    n/a
    
    
    
    
    
    
    
    n/aRate of compensation increases
    
    
    3.5%
    
    
    
    
    
    
    
    3.5%
    
    
    
    n/a
    
    
    
    
    
    
    
    n/a2008
    
    
    
    
    
    
    2007
    
    
    2008
    
    
    
    
    
    
    2007CHANGE IN PROJECTED
BENEFIT OBLIGATION:Benefit obligation at beginning of year
    
    $
    74,494
    
    
    
    
    
    
    $
    66,953
    
    
    $
    11,748
    
    
    
    
    
    
    $
    10,851Service cost
    
    
    2,018
    
    
    
    
    
    
    
    1,974
    
    
    
    221
    
    
    
    
    
    
    
    219Interest cost
    
    
    4,680
    
    
    
    
    
    
    
    4,348
    
    
    
    718
    
    
    
    
    
    
    
    688Plan amendments
    
    
    167
    
    
    
    
    
    
    
    32
    
    
    
    (131
    )
    
    
    
    
    
    
    Actuarial (gain) loss
    
    
    (5,399
    )
    
    
    
    
    
    
    3,773
    
    
    
    (441
    )
    
    
    
    
    
    
    1,221Benefits paid
    
    
    (3,021
    )
    
    
    
    
    
    
    (2,586
    )
    
    
    (1,244
    )
    
    
    
    
    
    
    (1,231
    )Benefit obligation at end of year
    
    $
    72,939
    
    
    
    
    
    
    $
    74,494
    
    
    $
    10,871
    
    
    
    
    
    
    $
    11,748CHANGE IN PLAN ASSETS:Fair value of plan assets at beginning of year
    
    $
    75,881
    
    
    
    
    
    
    $
    61,989
    
    
    $
    
    
    
    
    
    
    
    $
    Actual return on plan assets
    
    
    (6,864
    )
    
    
    
    
    
    
    9,478
    
    
    
    
    
    
    
    
    
    
    
    Employer contribution
    
    
    5,000
    
    
    
    
    
    
    
    7,000
    
    
    
    1,244
    
    
    
    
    
    
    
    1,231Benefits paid
    
    
    (3,021
    )
    
    
    
    
    
    
    (2,586
    )
    
    
    (1,244
    )
    
    
    
    
    
    
    (1,231
    )Fair value of plan assets at end of year
    
    
    70,996
    
    
    
    
    
    
    
    75,881
    
    
    
    
    
    
    
    
    
    
    
    Funded status  prepaid (accrued) benefit
obligations
    
    $
    (1,943
    )
    
    
    
    
    
    $
    1,387
    
    
    $
    (10,871
    )
    
    
    
    
    
    $
    (11,748
    )AMOUNTS RECOGNIZED IN
CONSOLIDATED BALANCE SHEETS:Accrued payroll and benefits (current
liabilities)
    
    $
    (95
    )
    
    
    
    
    
    $
    (143
    )
    
    $
    (1,088
    )
    
    
    
    
    
    $
    (1,172
    )Accrued benefit obligations (long-term
liabilities)
    
    
    (2,606
    )
    
    
    
    
    
    
    (2,855
    )
    
    
    (9,783
    )
    
    
    
    
    
    
    (10,576
    )Prepaid pension obligations (long-term
assets)
    
    
    758
    
    
    
    
    
    
    
    4,385
    
    
    
    
    
    
    
    
    
    
    
    Net amount recognized
    
    $
    (1,943
    )
    
    
    
    
    
    $
    1,387
    
    
    $
    (10,871
    )
    
    
    
    
    
    $
    (11,748
    )




---



##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
 Pension and SERP Benefits
    
    Postretirement BenefitsJune 29,
    
    
    
    June 29,2008
    
    
    
    2008CHANGES IN PLAN ASSETS
AND BENEFIT OBLIGATIONS
RECOGNIZED IN OTHER
COMPREHENSIVE INCOME:Net periodic benefit cost
    
    
    $1,195
    
    
    
    
    
    
    
    $1,263Net actuarial (gain) loss
    
    
    7,675
    
    
    
    
    
    
    
    (441
    )Prior service cost
    
    
    167
    
    
    
    
    
    
    
    (131
    )Amortization of prior service (cost) credits
    
    
    (64
    )
    
    
    
    
    
    
    378Amortization of unrecognized net loss
    
    
    (643
    )
    
    
    
    
    
    
    (702
    )Total recognized in other comprehensive income,
before tax
    
    
    7,135
    
    
    
    
    
    
    
    (896
    )Total recognized in net periodic benefit cost and
other comprehensive income
    
    
    $8,330
    
    
    
    
    
    
    
    $    367
  Pension
    

SERPJune 29, 2008
    
    July 1, 2007
    
    June 29, 2008
    
    July 1, 2007Accumulated benefit obligation
    
    $
    65,626
    
    
    $
    65,385
    
    
    $
    2,434
    
    
    $
    2,998Projected benefit obligation
    
    $
    70,238
    
    
    $
    71,496
    
    
    $
    2,701
    
    
    $
    2,998
 
 1% Increase
    
    1% DecreaseEffect on total of service and interest cost components in fiscal 2008
    
    $
    80
    
    
    $
    (71
    )Effect on postretirement benefit obligation as of June 29, 2008
    
    $
    716
    
    
    $
    (643
    )
  Target Allocation
    
    June 29, 2008
    
    July 1, 2007Equity investments
    
    
    65%
    
    
    
    59%
    
    
    
    64%Fixed-income investments
    
    
    35%
    
    
    
    41%
    
    
    
    36%Total
    
    
    100%
    
    
    
    100%
    
    
    
    100%
 
 Pension and SERP Benefits
    

Postretirement Benefits2009
    
    $
    3,346
    
    
    $
    1,0872010
    
    
    3,695
    
    
    
    1,2062011
    
    
    6,304
    
    
    
    1,3802012
    
    
    4,316
    
    
    
    1,4342013
    
    
    4,649
    
    
    
    1,4782014-2018
    
    
    27,317
    
    
    
    4,913




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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
  SHAREHOLDERS EQUITY
   EARNINGS PER SHARE (EPS)
  2008
    
    2007
    
    2006Net
    
    
    
    
    
    Per Share
    
    Net
    
    
    
    
    
    Per Share
    
    Net
    
    
    
    
    
    Per ShareIncome
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    AmountBasic EPS
    
    
    $3,267
    
    
    
    3,487
    
    
    
    $0.94
    
    
    
    $8,183
    
    
    
    3,552
    
    
    
    $2.30
    
    
    
    $12,477
    
    
    
    3,716
    
    
    
    $3.36Stock-based
compensation
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    4Diluted EPS
    
    
    $3,267
    
    
    
    3,494
    
    
    
    $0.94
    
    
    
    $8,183
    
    
    
    3,555
    
    
    
    $2.30
    
    
    
    $12,477
    
    
    
    3,720
    
    
    
    $3.35
  STOCK OPTION AND PURCHASE PLANS
  Weighted
    
    Weighted Average
    
    AggregateAverage
    
    Remaining
    
    Intrinsic ValueShares
    
    Exercise Price
    
    Contractual Term (in years)
    
    (in thousands)Balance at July 3, 2005
    
    
    281,860
    
    
    $
    54.80Granted
    
    
    40,000
    
    
    $
    61.22Exercised
    
    
    (24,220
    )
    
    $
    43.30Expired
    
    
    (5,000
    )
    
    $
    54.99Terminated
    
    
    (9,110
    )
    
    $
    59.59Balance at July 2, 2006
    
    
    283,530
    
    
    $
    56.53Granted
    
    
    
    
    
    $
    Exercised
    
    
    (7,300
    )
    
    $
    21.74Expired
    
    
    (35,810
    )
    
    $
    49.24Terminated
    
    
    (5,000
    )
    
    $
    56.72Balance at July 1, 2007
    
    
    235,420
    
    
    $
    58.71Granted
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    Expired
    
    
    (47,640
    )
    
    $
    58.59Terminated
    
    
    
    
    
    $
    Balance at June 29, 2008
    
    
    187,780
    
    
    $
    58.74
    
    
    
    3.3
    
    
    $
    3Exercisable as of:June 29, 2008
    
    
    148,440
    
    
    $
    58.09
    
    
    
    3.6
    
    
    $
    3July 1, 2007
    
    
    181,080
    
    
    $
    58.05
    
    
    
    3.2
    
    
    $
    39July 2, 2006
    
    
    157,350
    
    
    $
    52.78
    
    
    
    4.0
    
    
    $
    361Available for grant as of June 29, 2008
    
    
    380,463




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##### Table of Contents



NOTES TO FINANCIAL STATEMENTS
 
  Weighted AverageGrant DateShares
    
    Fair ValueNonvested Balance at July 3, 2005
    
    
    
    
    
    $
    Granted
    
    
    9,900
    
    
    $
    51.24Vested
    
    
    
    
    
    $
    Forfeited
    
    
    (300
    )
    
    $
    51.24Nonvested Balance at July 2, 2006
    
    
    9,600
    
    
    $
    51.24Granted
    
    
    10,000
    
    
    $
    40.00Vested
    
    
    
    
    
    $
    Forfeited
    
    
    (200
    )
    
    $
    40.00Nonvested Balance at July 1, 2007
    
    
    19,400
    
    
    $
    45.56Granted
    
    
    10,000
    
    
    $
    47.78Vested
    
    
    
    
    
    $
    Forfeited
    
    
    
    
    
    $
    Nonvested Balance at June 29, 2008
    
    
    29,400
    
    
    $
    46.32
   EXPORT SALES
  2008
    
    2007
    
    2006Export Sales
    
    $
    25,714
    
    
    $
    30,643
    
    
    $
    34,244Percent of Net Sales
    
    
    16%
    
    
    
    18%
    
    
    
    19%
  SALES AND RECEIVABLE CONCENTRATION
  2008
    
    2007
    
    2006Sales
    
    
    %
    
    Sales
    
    
    %
    
    Sales
    
    
    %General Motors Corporation
    
    $
    45,039
    
    
    
    28
    %
    
    $
    35,687
    
    
    
    21
    %
    
    $
    32,887
    
    
    
    18
    %Ford Motor Company
    
    
    19,419
    
    
    
    12
    %
    
    
    21,013
    
    
    
    13
    %
    
    
    27,295
    
    
    
    15
    %Chrysler LLC
    
    
    40,209
    
    
    
    25
    %
    
    
    58,099
    
    
    
    35
    %
    
    
    58,603
    
    
    
    32
    %Delphi Corporation
    
    
    14,872
    
    
    
    9
    %
    
    
    18,398
    
    
    
    11
    %
    
    
    26,721
    
    
    
    15
    %$
    119,539
    
    
    
    75
    %
    
    $
    133,197
    
    
    
    80
    %
    
    $
    145,506
    
    
    
    80
    %
  June 29, 2008
    

July 1, 2007Receivables
    
    
    %
    
    Receivables
    
    
    %General Motors Corporation
    
    
    $  8,367
    
    
    
    35
    %
    
    
    $  8,174
    
    
    
    30
    %Ford Motor Company
    
    
    2,030
    
    
    
    9
    %
    
    
    3,022
    
    
    
    11
    %Chrysler LLC
    
    
    6,582
    
    
    
    28
    %
    
    
    9,965
    
    
    
    37
    %Delphi Corporation
    
    
    830
    
    
    
    3
    %
    
    
    1,116
    
    
    
    4
    %$17,809
    
    
    
    75
    %
    
    
    $22,277
    
    
    
    82
    %




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##### Table of Contents



REPORTS
 
 
 REPORT ON MANAGEMENTS ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING
     -s- Harold M. Stratton II
    
    -s- Patrick J. HansenHarold M. Stratton II
    
    Patrick J. HansenChairman, President and
    
    Senior Vice President andChief Executive Officer
    
    Chief Financial Officer




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##### Table of Contents



REPORTS
 
 
 REPORT OF INDEPENDENT REGISTERED 
PUBLIC ACCOUNTING FIRM




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##### Table of Contents



REPORTS
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




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##### Table of Contents



FINANCIAL SUMMARY
 
 FIVE-YEAR FINANCIAL SUMMARY
  Fiscal Years2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004INCOME STATEMENT DATANet sales
    
    $
    159,642
    
    
    $
    167,707
    
    
    $
    181,197
    
    
    $
    190,314
    
    
    $
    195,646Gross profit
    
    
    25,551
    
    
    
    26,494
    
    
    
    37,046
    
    
    
    42,776
    
    
    
    47,513Engineering, selling, and
administrative expenses
    
    
    23,962
    
    
    
    20,189
    
    
    
    22,067
    
    
    
    20,688
    
    
    
    20,624Provision for doubtful
accounts, net
    
    
    
    
    
    
    
    
    
    
    1,622
    
    
    
    80
    
    
    
    26Income from operations
    
    
    1,589
    
    
    
    6,305
    
    
    
    13,357
    
    
    
    22,008
    
    
    
    26,863Interest income
    
    
    2,749
    
    
    
    3,611
    
    
    
    2,563
    
    
    
    1,169
    
    
    
    426Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income, net
    
    
    230
    
    
    
    715
    
    
    
    960
    
    
    
    320
    
    
    
    362Minority interest
    
    
    (76
    )
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    Income before taxes
    
    
    4,492
    
    
    
    10,706
    
    
    
    16,880
    
    
    
    23,497
    
    
    
    27,651Provision for income taxes
    
    
    1,225
    
    
    
    2,523
    
    
    
    4,403
    
    
    
    8,459
    
    
    
    10,369Net income
    
    $
    3,267
    
    
    $
    8,183
    
    
    $
    12,477
    
    
    $
    15,038
    
    
    $
    17,282Earnings per share:Basic
    
    $
    0.94
    
    
    $
    2.30
    
    
    $
    3.36
    
    
    $
    3.97
    
    
    $
    4.56Diluted
    
    
    0.94
    
    
    
    2.30
    
    
    
    3.35
    
    
    
    3.94
    
    
    
    4.49Cash dividends delcared
per share:
    
    $
    1.60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BALANCE SHEET DATANet working capital
    
    $
    70,327
    
    
    
    $81,083
    
    
    $
    80,264
    
    
    $
    74,619
    
    
    $
    68,682Total assets
    
    
    141,713
    
    
    
    148,446
    
    
    
    154,292
    
    
    
    138,090
    
    
    
    137,190Long-term liabilities
    
    
    12,389
    
    
    
    13,431
    
    
    
    10,510
    
    
    
    16,271
    
    
    
    12,054Shareholders Equity
    
    
    95,432
    
    
    
    102,960
    
    
    
    110,275
    
    
    
    91,751
    
    
    
    89,852
 QUARTERLY FINANCIAL DATA (UNAUDITED)
  CashEarnings Per Share
    
    Dividends
    Market Price Per ShareNet Income
    
    
    
    
    
    
    
    
    DeclaredQuarter
    
    Net Sales
    
    Gross Profit
    (Loss)
    Basic
    
    Diluted
    
    Per Share
    
    High
    
    Low2008
    
    First
    
    
    $ 42,739
    
    
    
    $  8,394
    
    
    
    $ 2,419
    
    
    
    $ 0.69
    
    
    
    $ 0.69
    
    
    
    $ 1.15
    
    
    
    $51.04
    
    
    
    $45.03Second
    
    
    39,908
    
    
    
    6,906
    
    
    
    1,323
    
    
    
    0.38
    
    
    
    0.38
    
    
    
    0.15
    
    
    
    49.18
    
    
    
    42.00Third
    
    
    38,428
    
    
    
    6,267
    
    
    
    446
    
    
    
    0.13
    
    
    
    0.13
    
    
    
    0.15
    
    
    
    44.87
    
    
    
    35.06Fourth
    
    
    38,567
    
    
    
    3,984
    
    
    
    (921
    )
    
    
    (0.27
    )
    
    
    (0.27
    )
    
    
    0.15
    
    
    
    43.95
    
    
    
    34.57TOTAL
    
    
    $159,642
    
    
    
    $ 25,551
    
    
    
    $ 3,267
    
    
    
    $ 0.94
    
    
    
    $ 0.94
    
    
    
    $ 1.602007
    
    First
    
    
    $38,050
    
    
    
    $   5,282
    
    
    
    $    741
    
    
    
    $ 0.21
    
    
    
    $ 0.21
    
    
    
    $     
    
    
    
    $48.51
    
    
    
    $37.50Second
    
    
    37,913
    
    
    
    5,040
    
    
    
    1,094
    
    
    
    0.31
    
    
    
    0.31
    
    
    
    
    
    
    
    47.11
    
    
    
    33.85Third
    
    
    45,647
    
    
    
    8,354
    
    
    
    2,914
    
    
    
    0.82
    
    
    
    0.82
    
    
    
    
    
    
    
    51.40
    
    
    
    41.31Fourth
    
    
    46,097
    
    
    
    7,818
    
    
    
    3,434
    
    
    
    0.97
    
    
    
    0.97
    
    
    
    
    
    
    
    49.89
    
    
    
    40.49TOTAL
    
    
    $167,707
    
    
    
    $ 26,494
    
    
    
    $ 8,183
    
    
    
    $ 2.30
    
    
    
    $ 2.30
    
    
    
    $      




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##### Table of Contents



PERFORMANCE GRAPH
 
  
 6/27/03
    
    6/25/04
    
    7/1/05
    
    6/30/06
    
    6/29/07
    
    6/27/08STRATTEC**
    
    
    100
    
    
    
    128
    
    
    
    102
    
    
    
    94
    
    
    
    89
    
    
    
    69NASDAQ Composite Index
    
    
    100
    
    
    
    129
    
    
    
    128
    
    
    
    136
    
    
    
    164
    
    
    
    143Dow Jones U.S. Auto Parts Index
    
    
    100
    
    
    
    131
    
    
    
    115
    
    
    
    115
    
    
    
    157
    
    
    
    117
 
 * 
$100 invested on June 27, 2003 in stock or index-including reinvestment of dividends. Indexes
calculated on a month-end basis.** The fiscal year end closing price of STRATTEC Common Stock on June 27, 2003 was $52.87,
the closing price on June 25, 2004 was $67.57, the closing price on July 1, 2005 was
$53.82, the closing price on June 30, 2006, was $49.81, the closing price on June 29,
2007 was $46.97, and the closing price on June 27, 2008 was $34.99.




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##### Table of Contents



DIRECTORS/OFFICERS/SHAREHOLDERS INFORMATION
STRATTEC Board of Directors:





(Left to Right) Frank J. Krejci, Michael J. Koss,





Robert Feitler, Harold M. Stratton II, David R. Zimmer





BOARD OF DIRECTORS





Harold M. Stratton II, 60
Chairman, President and Chief Executive Officer





Robert Feitler, 77
Former President and Chief Operating Officer
of Weyco Group, Inc.
Chairman of the Executive Committee and
Director of Weyco Group, Inc.





Michael J. Koss, 54
President and Chief Executive Officer
of Koss Corporation Director of Koss
Corporation





Frank J. Krejci, 58
President and Chief Executive Officer
of Wisconsin Furniture, LLC





David R. Zimmer, 62
Managing Partner of
Stonebridge Business Partners





CORPORATE OFFICERS





Harold M. Stratton II,
60 Patrick J. Hansen, 49
Senior Vice President-Chief
Financial Officer, Treasurer and
Secretary





Donald J. Harrod, 64
Vice President-Engineering
and Product





Dennis A. Kazmierski, 56
Vice President-Marketing and Sales





Kathryn E. Scherbarth, 52
Vice President-Milwaukee Operations





Rolando J. Guillot, 40
Vice President-Mexican Operations





Milan R. Bundalo, 57
Vice President-Materials





Brian J. Reetz, 50
Vice President-Security Products





SHAREHOLDERS
INFORMATION
Annual Meeting





The Annual Meeting of Shareholders
will convene at 8:00 a.m. (CST) on
October 7, 2008, at the Radisson
Hotel, 7065 North Port Washington
Road, Milwaukee, WI 53217
Common Stock
STRATTEC SECURITY CORPORATION common
stock is traded on the NASDAQ Global
Market under the symbol: STRT.
Form 10-K
You may receive a copy of the
STRATTEC SECURITY CORPORATION Form
10-K, filed with the Securities and
Exchange Commission, by writing to
the Secretary at STRATTEC SECURITY
CORPORATION, 3333 W. Good Hope Road,
Milwaukee, WI 53209.
Corporate Governance
To review the Companys corporate
governance, board committee charters
and code of business ethics, please
visit the Corporate Governance
section of our Web site at
www.strattec.com.
Shareholder Inquiries
Communications concerning the
transfer of shares, lost
certificates or changes of address
should be directed to the Transfer
Agent.
Transfer Agent and Registrar
Wells Fargo Bank, N.A.
Shareholder Services
P.O. Box 64854 St.
Paul, MN 55164-0854
1.800.468.9716




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##### Table of Contents



The Trusted Leader in Automotive
Access Control Products
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WI53209
PHONE 414.247.3333 FAX 414.247.3329
www.strattec.com