UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
 
[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

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     X        NO ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):
 
Large Accelerated filer  ___          Accelerated filer     X          Non-accelerated filer  ___
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES ___    NO    X      
 
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: 3,519,293 shares outstanding as of September 30, 2007.

STRATTEC SECURITY CORPORATION
FORM 10-Q
September 30, 2007

INDEX

 	Page	
Part I - FINANCIAL INFORMATION
Item 1	Financial Statements	 	
 	Condensed Consolidated Statements of Income	3	
 	Condensed Consolidated Balance Sheets	4	
 	Condensed Consolidated Statements of Cash Flows	5	
 	Notes to Condensed Consolidated Financial Statements	6-9	
Item 2	Management’s Discussion and Analysis of Financial Conditionand Results of Operations	 
10-15	
Item 3	Quantitative and Qualitative Disclosures About Market Risk	16	
Item 4	Controls and Procedures	16	

Part II - OTHER INFORMATION
Item 1	Legal Proceedings	17	
Item 1A	Risk Factors	17	
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	17	
Item 3	Defaults Upon Senior Securities	17	
Item 4	Submission of Matters to a Vote of Security Holders	17	
Item 5	Other Information	17	
Item 6	Exhibits	17	

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.”  These statements include expected future financial results, product offerings, global expansion, liquidity needs, financing ability, planned capital expenditures, management's or the Company's expectations and beliefs, and similar matters discussed 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, customer demand for the Company’s and its customers’ products, competitive and technological developments, customer purchasing actions, foreign currency fluctuations, costs of operations and other matters described under the caption “Risk Factors” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-Q and in the section titled “Risk Factors” in the Company’s Form 10-K report filed with the Securities and Exchange Commission for the year ended July 1, 2007.

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.

2

Item 1   Financial Statements

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)

 	Three Months Ended	 	 	
 	September 30,
2007	 	 	 October 1,
  2006	 	
 	 	 	
Net sales	 	$	42,739	 	 	$	38,050 	 	 	 	 	
 	 	 	
Cost of goods sold	 	 	34,345	 	 	 	32,768 	 	 	 	 	
 	 	
Gross profit	 	 	8,394	 	 	 	5,282 	 	 	 	 	
 	 	
Engineering, selling and administrative	 	 	 	 	 	 	 	 	 	
expenses	 	 	5,793	 	 	 	5,056 	 	 	 	 	
 	 	
Income from operations	 	 	2,601	 	 	 	226 	 	 	 	 	
 	 	
Interest income	 	 	913	 	 	 	922 	 	 	 	 	
Other income, net	 	 	308	 	 	 	28 	 	 	 	 	
Minority Interest	 	 	49	 	 	 	-- 	 	 	 	 	
 	 	
Income before provision for income taxes	 	 	3,871	 	 	 	1,176 	 	 	 	 	
 	 	
Provision for income taxes	 	 	1,452	 	 	 	435 	 	 	 	 	
 	 	
Net income	 	$	2,419	 	 	$	741 	 	 	 	 	
 	 	
Earnings per share:	 	
Basic	 	$	0.69	 	 	$	0.21 	 	 	 	 	
Diluted	 	$	0.69	 	 	$	0.21 	 	 	 	 	
 	 	
Average shares outstanding:	 	
Basic	 	 	3,519	 	 	 	3,598 	 	 	 	 	
Diluted	 	 	3,525	 	 	 	3,600 	 	 	 	 	
 	 	
Cash dividends per share	 	$	1.15	 	 	 	-- 	 	 	 	 	
 	 	
 The accompanying notes are an integral part of these condensed consolidated statements of income.

3

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 (In Thousands, Except Share Amounts)

 	 	September 30,
2007	 	 	July 1,
2007	 	 	
ASSETS	 	(Unaudited)	 	 	 	 	 	
Current Assets:	 	 	
Cash and cash equivalents	 	$	60,823	 	 	$	65,491	 	 	
Receivables, net	 	 	25,641	 	 	 	26,890	 	 	
Inventories-	 	 	
Finished products	 	 	3,675	 	 	 	2,660	 	 	
Work in process	 	 	5,129	 	 	 	4,522	 	 	
Purchased Materials	 	 	5,128	 	 	 	4,813	 	 	
LIFO adjustment	 	 	(4,400	)	 	 	(4,829	)	 	
Total inventories	 	 	9,532	 	 	 	7,166	 	 	
Other current assets	 	 	13,788	 	 	 	13,017	 	 	
Total current assets	 	 	109,784	 	 	 	112,564	 	 	
Deferred income taxes	 	 	2,420	 	 	 	2,117	 	 	
Investment in joint ventures	 	 	2,988	 	 	 	2,813	 	 	
Prepaid pension obligations	 	 	5,666	 	 	 	4,385	 	 	
Other long-term assets	 	 	38	 	 	 	41	 	 	
 	 	 	
Property, plant and equipment	 	 	113,956	 	 	 	112,920	 	 	
Less: accumulated depreciation	 	 	(87,453	)	 	 	(86,394	)	 	
  Net property, plant and equipment	 	 	26,503	 	 	 	26,526	 	 	
 	 	$	147,399	 	 	$	148,446	 	 	
 	 	 	
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:	 	 	 	 	
  Accounts payable	 	$	14,380	 	 	$	16,575	 	 	 	 	
    Accrued Liabilities:	 	 	 	 	
     Payroll and benefits	 	 	6,660	 	 	 	6,280	 	 	 	 	
     Environmental reserve	 	 	2,653	 	 	 	2,655	 	 	 	 	
     Other	 	 	7,708	 	 	 	5,971	 	 	 	 	
   Total current liabilities	 	 	31,401	 	 	 	31,481	 	 	 	 	
Accrued pension obligations	 	 	2,936	 	 	 	2,855	 	 	 	 	
Accrued postretirement obligations	 	 	10,667	 	 	 	10,576	 	 	 	 	
 	 	 	 	 	
Minority interest	 	 	862	 	 	 	574	 	 	 	 	
 	 	 	 	 	
Shareholders' Equity:	 	 	 	 	
Common stock, authorized 12,000,000 shares, $.01 par value,	 	 	 	 	
issued 6,887,757 shares at September 30, 2007 and July 1, 2007	 	 	69	 	 69	 	 	 	 	
  Capital in excess of par value	 	 	78,436	 	 	 	78,122	 	 	 	 	
  Retained earnings	 	 	164,259	 	 	 	165,928	 	 	 	 	
  Accumulated other comprehensive loss	 	 	(14,416	)	 	 	(14,341	)	 	 	 	
 Less: treasury stock, at cost (3,368,464 shares at September 30,	 	
2007 and 3,368,619 shares at July 1, 2007)	 	 	(126,815	)	 	 	(126,818	)	 	 	 	
Total shareholders' equity	 	 	101,533	 	 	 	102,960	 	 	 	 	
 	 	$	147,399	 	 	$	148,446	 	 	 	 	
 
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	 	
 	 	 September 30,	 	 	 October 1,	 	
 	 	2007	 	 	2006	 	
CASH FLOWS FROM OPERATING ACTIVITIES:	 	
Net income	 	$	2,419	 	 	$	741	 	
Adjustments to reconcile net income to net cash provided by
operating activities:	
Minority interest	 	 	(61	)	 	 	-	 	
Depreciation	 	 	1,738	 	 	 	1,749	 	
Stock-based compensation expense	 	 	313	 	 	 	193	 	
Change in operating assets and liabilities:	 	
Receivables	 	 	1,234	 	 	 	5,254	 	
Inventories	 	 	(2,366	)	 	 	1,028	 	
Other assets	 	 	(2,381	)	 	 	(1,336	)	
Accounts payable and accrued liabilities	 	 	94	 	 	 	(4,812	)	
Other, net	 	 	(218	)	 	 	99	 	
Net cash provided by operating activities	 	 	772	 	 	 	2,916	 	
 	 	
CASH FLOWS FROM INVESTING ACTIVITIES:	 	
Purchase of property, plant and equipment	 	 	(1,746	)	 	 	(915	)	
Proceeds received on sale of property, plant and equipment	 	 	--	 	 	 	21	 	
Net cash used in investing activities	 	 	(1,746	)	 	 	(894	)	
 	 	
CASH FLOWS FROM FINANCING ACTIVITIES:	 	
Purchase of treasury stock	 	 	-	 	 	 	(3,326	)	
Dividends paid	 	 	(4,050	)	 	 	-	 	
Exercise of stock options and employee stock purchases	 	 	7	 	 	 	9	 	
Contribution from minority interest	 	 	349	 	 	 	--	 	
Net cash used in financing activities	 	 	(3,694	)	 	 	(3,317	)	
 	 	
NET DECREASE IN CASH AND CASH EQUIVALENTS	 	 	(4,668	)	 	 	(1,295	)	
 	 	
CASH AND CASH EQUIVALENTS	 	
Beginning of period	 	 	65,491	 	 	 	65,712	 	
End of period	 	$	60,823	 	 	$	64,417	 	
 	 	
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:	 	
Income taxes paid	 	$	188	 	 	$	891	 	
Interest paid	 	 	--	 	 	 	--	 	
 	 	
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 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 Plastics, Inc. of Grand Rapids, Michigan.  STRATTEC’s history in the automotive business spans nearly 100 years.  The accompanying financial statements reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiaries, STRATTEC de Mexico and STRATTEC Componentes Automotrices, and its majority owned subsidiary, ADAC-STRATTEC de Mexico, LLC.  STRATTEC SECURITY CORPORATION is located in Milwaukee, Wisconsin.  STRATTEC de Mexico and STRATTEC Componentes Automotrices are located in Juarez, Mexico.  ADAC-STRATTEC de MEXICO, LLC has operations in El Paso, Texas and Juarez, Mexico.  Equity investments for which we exercise significant influence but do not control and are not the primary beneficiary are accounted for using the equity method.

In the opinion of management, the accompanying condensed consolidated balance sheet as of July 1, 2007, which has been derived from our audited financial statements, and the related unaudited interim condensed consolidated financial statements 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”).  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 Management’s Discussion and Analysis and the financial statements and notes thereto included in the STRATTEC SECURITY CORPORATION 2007 Annual Report, which was filed with the Securities and Exchange Commission as an exhibit to our Form 10-K on August 30, 2007.

Certain reclassifications have been made to the 2007 interim financial statements to conform to the 2008 presentation.

Income Taxes

We or one of our subsidiaries files income tax returns in the United States (Federal), Wisconsin (state), Michigan (state) and various other state and foreign jurisdictions.  We are not currently subject to income tax examinations in any of our significant tax jurisdictions.  Tax years open to examination by tax authorities under the statute of limitations include fiscal 2004 through 2007 for Federal, fiscal 2003 through 2007 for most states and calendar 2002 through 2006 for foreign jurisdictions.

We adopted the provisions for FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, on July 2, 2007.  As a result of the implementation of FIN 48, we did not recognize a significant change in the liability for unrecognized tax benefits.  The total liability for unrecognized tax benefits was $1.1 million as of July 2, 2007.  This liability includes approximately $87,000 of accrued interest.  The liability does not include an amount for accrued penalties.  The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $760,000.  We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.  We do not expect a significant increase or decrease to the total amounts of unrecognized tax benefits within the next 12 months.  There was no material change in the amount of unrecognized tax benefits during the first three months ended September 30, 2007.

6

Earnings Per Share (EPS)

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the dilutive potential common shares outstanding during the period using the treasury stock method.  Dilutive potential common shares include outstanding stock options and restricted stock awards.  A reconciliation of the components of the basic and diluted per-share computations follows (in thousands, except per share amounts):

 	 	Three Months Ended	 	
 	 	September 30, 2007	 	 	October 1, 2006	 	
 	 	Net Income	 	 	Weighted
Average
Shares	 	 	Per-Share
Amount	 	 	Net
Income	 	 	Weighted
Average
Shares	 	 	Per-Share
Amount	 	
Basic Earnings Per Share	 	$	2,419	 	 	 	3,519	 	 	$	0.69	 	 	$	741	 	 	 	3,598	 	 	$	0.21	 	
Stock-Based Compensation	 	 	 	 	 	 	6	 	 	 	 	 	 	 	 	 	 	 	2	 	 	 	 	 	
Diluted Earnings Per Share	 	$	2,419	 	 	 	3,525	 	 	$	0.69	 	 	$	741	 	 	 	3,600	 	 	$	0.21	 	

As of September 30, 2007, options to purchase 182,680 shares of common stock at a weighted-average exercise price of $59.29 were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.  As of October 1, 2006, options to purchase 245,820 shares of common stock at a weighted-average exercise price of $58.92 were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Comprehensive Income

Comprehensive income is presented in the following table (in thousands):

 	 	Three Months Ended	 	
 	 	September 30,
2007	 	 	October 1,
2006	 	
Net Income	 	$	2,419	 	 	$	741	 	
Change in Cumulative Translation
Adjustments, net	 	 	(75	)	 	 	201	 	
Total Comprehensive Income	 	$	2,344	 	 	$	942	 	

Stock-based Compensation

We maintain an omnibus stock incentive plan.  This plan provides for the granting of stock options, shares of restricted stock and stock appreciation rights.  The Board of Directors has designated 1,700,000 shares of common stock available for the grant of awards under the plan.  Remaining shares available to be granted under the plan as of September 30, 2007 were 390,463.  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 and specified employees 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 5 to 10 years after the grant date unless an earlier expiration date is set at the time of grant.  The options vest 1 to 3 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.  Restricted shares granted have voting and dividend rights.  The restricted stock granted vests 3 years after the date of grant.

7

We account for stock options and restricted stock issued under our stock incentive plan in accordance with Statement of Financial Accounting Standards (‘SFAS’) No. 123(R), “Share-based Payments”.   The fair value of each stock option grant was estimated as of the date of grant using the Black-Scholes pricing model.  The resulting compensation cost for fixed awards with graded vesting schedules is amortized on a straight line basis over the vesting period for the entire award.  The fair value of each restricted stock grant was based on the market price of the underlying common stock as of the date of grant.  The resulting compensation cost is amortized on a straight line basis over the vesting period.

A summary of stock option activity under the plan for the three months ended September 30, 2007 is as follows:

 	 	Shares	 	 	Weighted
Average
Exercise Price	 	 	Weighted
Average
Remaining
Contractual
Term (years)	 	 	Aggregate
Intrinsic
Value
(in thousands)	 	
Outstanding, July 1, 2007	 	 	235,420	 	 	$	58.71	 	 	 	 	 	 	 	
Granted	 	 	--	 	 	 	--	 	 	 	 	 	 	 	
Exercised	 	 	--	 	 	 	--	 	 	 	 	 	 	 	
Expired	 	 	(47,640	)	 	$	58.59	 	 	 	 	 	 	 	
Forfeited	 	 	--	 	 	 	--	 	 	 	 	 	 	 	
Outstanding, September 30, 2007	 	 	187,780	 	 	$	58.74	 	 	 	4.1	 	 	$	39	 	
Exercisable, September 30, 2007	 	 	143,440	 	 	$	58.16	 	 	 	4.3	 	 	$	39	 	

The intrinsic value of stock options exercised and the fair value of stock options vesting during the three month periods presented is as follows (in thousands):

 	 	Three Months Ended	 	
 	 	September 30,
2007	 	 	October 1,
2006	 	
Intrinsic Value of Options Exercised	 	$	--	 	 	$	--	 	
Fair Value of Stock Options Vesting	 	$	197	 	 	$	658	 	

A summary of restricted stock activity under the plan for the three months ended September 30, 2007 is as follows:

 	 	Shares	 	 	Weighted Average
Grant Date
Fair Value	 	
Nonvested Balance, July 1, 2007	 	 	19,400	 	 	$	45.56	 	
Granted	 	 	10,000	 	 	$	47.78	 	
Vested	 	 	--	 	 	 	--	 	
Forfeited	 	 	--	 	 	 	--	 	
Nonvested Balance, September 30, 2007	 	 	29,400	 	 	$	46.32	 	

As of September 30, 2007, there was $82,000 of total unrecognized compensation cost related to stock options granted under the plan.  This cost is expected to be recognized over a weighted average period of .4 years.  As of September 30, 2007, there was $730,000 of total unrecognized compensation cost related to restricted stock grants under the plan.  This cost is expected to be recognized over a weighted average period of 1.2 years.  Total unrecognized compensation cost will be adjusted for any future changes in estimated and actual forfeitures.

8

Pension and Other Postretirement Benefits

We have a noncontributory defined benefit pension plan covering substantially all U.S. associates.  Benefits are based on years of service and final average compensation. Our policy is to fund at least the minimum actuarially computed annual contribution required under the Employee Retirement Income Security Act of 1974 (ERISA). Plan assets consist primarily of listed equity and fixed income securities.   We have a noncontributory supplemental executive retirement plan (SERP), which is a nonqualified defined benefit plan.  The SERP will pay supplemental pension benefits to certain key employees upon retirement based upon the employees’ years of service and compensation.  The SERP is being funded through a rabbi trust with M&I Trust Company.  We also sponsor a postretirement health care plan for all of our U.S. associates hired prior to June 2, 2001.  The expected cost of retiree health care benefits is recognized during the years that the associates who are covered under the plan render service. The postretirement health care plan is unfunded.

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

 	 	Pension Benefits	 	 	Postretirement Benefits	 	
 	 	Three Months Ended	 	 	Three Months Ended	 	
 	 	September 30,
2007	 	 	October 1,
2006	 	 	September 30,
2007	 	 	October 1,
2006	 	
Service cost	 	$	505	 	 	$	494	 	 	$	55	 	 	$	55	 	
Interest cost	 	 	1,170	 	 	 	1,087	 	 	 	179	 	 	 	172	 	
Expected return on plan assets	 	 	(1,553	)	 	 	(1,337	)	 	 	-	 	 	 	-	 	
Amortization of prior service cost	 	 	16	 	 	 	16	 	 	 	(94	)	 	 	(94	)	
Amortization of unrecognized net loss	 	 	161	 	 	 	118	 	 	 	176	 	 	 	160	 	
Net periodic benefit cost	 	$	299	 	 	$	378	 	 	$	316	 	 	$	293	 	

          Voluntary contributions made to the qualified pension plan totaled $1.5 million during the three months ended September 30, 2007 and during the three months ended October 1, 2006.  Additional contributions of $1.5 million were made subsequent to September 30, 2007.  No additional contributions are anticipated to be made during the remainder of fiscal 2008.
 
9

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 2007 Annual Report.  Unless otherwise indicated, all references to years refer to fiscal years.

Analysis of Results of Operations

Three months ended September 30, 2007 compared to the three months ended October 1, 2006

Net sales for the three months ended September 30, 2007 were $42.7 million compared to net sales of $38.1 million for the three months ended October 1, 2006.  Sales to our largest customers overall increased in the current quarter compared to the prior year quarter.  Sales to General Motors Corporation were $12.5 million in the current quarter compared to $7.9 million in the prior year quarter.  The increase is due to higher product content on certain General Motors’ vehicles, the takeover of certain passenger car lockset production from another supplier and price adjustments received to partially recover raw material cost increases.  Sales to Ford Motor Company increased to $5.5 million in the current quarter from $4.6 million in the prior year quarter due to higher product content and higher production on the vehicles we supply.  Sales to Chrysler LLC decreased during the current quarter to $10.6 million from $12.5 million in the prior year quarter due to reduced component content.  Sales to Delphi Corporation were $4.0 million in the current quarter compared to $4.5 million in the prior year quarter.  This decrease is primarily due to reduced component content, which was partially offset by price adjustments received to partially recover raw material cost increases.  Sales during the month of September were weaker than anticipated for the above four customers.  Subsequent to the end of the quarter, these customers announced production cuts that will affect our second fiscal quarter ending December 30, 2007.  Sales to our industrial products and aftermarket customers increased during the current quarter.  The sales increase to these customers was primarily due to increased volumes and price adjustments received from some of these customers to partially recover raw material cost increases.

Gross profit as a percentage of net sales was 19.6 percent in the current quarter compared to 13.9 percent in the prior year quarter.  The increase in gross profit margin was primarily attributed to raw material price adjustments received from some of our customers as discussed above in connection with our net sales, a more favorable sales content mix, higher levels of production as a result of increased orders from some of our customers and cost reduction activities.  The primary raw materials used in our business are zinc and brass.  Although the prices paid per pound for zinc and brass were relatively consistent between the current quarter and the prior year quarter, we have been experiencing higher costs for these raw materials over the past 24 months.  We were able to receive price adjustments from some of our customers to partially recover these higher costs.  The cost reduction activities include the move of our service products assembly operation from our Milwaukee, Wisconsin facility to our Juarez, Mexico facilities, which occurred in January 2007.

Engineering, selling and administrative expenses were $5.8 million in the current quarter compared to $5.1 million in the prior year quarter.  This increased expense is primarily attributed to an increase in spending for new product development, an increase in salaries, benefits and related recruiting costs to support awarded customer programs, and higher stock-based compensation costs.

10

 
          Income from operations increased to $2.6 million in the current quarter from $226,000 in the prior year quarter.  This increase is primarily the result of an increase in sales and an increase in the gross profit margin as discussed above.

The effective income tax rate for the current quarter was 37.5 percent compared to 37.0 percent in the prior year quarter.  The overall effective tax rate differs from the Federal statutory tax rate primarily due to the effects of state income taxes.

Liquidity and Capital Resources

Cash flow generated from operating activities was $772,000 during the three months ended September 30, 2007 compared to $2.9 million during the three months ended October 1, 2006.  Operating cash flow results were impacted by increases in LIFO inventory balances in the current quarter as compared to a reduction in the prior year quarter and improved profitability in the current year period.  LIFO inventory balances increased $2.4 million in the current quarter and decreased $1.0 million during the prior year quarter.  The prior year quarter reduction was primarily due to reduced production resulting from reduced sales, while the current quarter increase is consistent with increased production associated with the increased sales. Contributions to the qualified pension fund totaled $1.5 million in both the current and the prior year period.

Accounts receivable balances decreased $1.2 million from the July 1, 2007 balance.  This decrease is primarily the result of decreased sales during the current quarter as compared to the quarter ended July 1, 2007.  We typically experience decreased sales during the first fiscal quarter due to scheduled customer plant shut-downs and new model changeovers.  There was also a reduction in accounts payable balances of $2.2 million and an increase in other current liabilities of $1.7 million from the July 1, 2007 balance.  The change in the accounts payable balances is based on the timing of payments to our suppliers in accordance with our normal payment terms.  The change in other current liabilities is due to the amount and timing of income tax payments.  

Capital expenditures during the three months ended September 30, 2007, were $1.7 million compared to expenditures of $915,000 during the three months ended October 1, 2006.  We anticipate that capital expenditures will be approximately $7 million to $8 million in fiscal 2008, primarily relating to expenditures in support of requirements for new product programs and the upgrade and replacement of existing equipment.

Our Board of Directors has authorized a stock repurchase program to buy back outstanding shares of our common stock.  Shares authorized for buy back under the program totaled 3,639,395 at September 30, 2007.  A total of 3,384,700 shares have been repurchased as of September 30, 2007, at a cost of approximately $127.1 million.  During the three months ended September 30, 2007, no shares were repurchased.  Funding for the repurchases was provided by cash flow from operations.  Additional repurchases may occur from time to time and are expected to continue to be funded by cash flow from operations.

On August 21, 2007, our Board of Directors declared a quarterly cash dividend of $0.15 per common share and a special one-time cash dividend of $1.00 per common share, both payable on October 1, 2007 to shareholders of record as of September 14, 2007.  The dividend totaled approximately $4.1 million.  The dividend was funded on September 28, 2007 from current cash balances.

We have a $50.0 million unsecured line of credit (the “Line of Credit”), which expires October 31, 2008.  There were no outstanding borrowings under the Line of Credit at September 30, 2007 or October 1, 2006.  Interest on borrowings under the Line of Credit are at varying rates based on the London Interbank Offering Rate or the bank’s prime rate.  We believe that the Line of Credit is adequate, along with cash flow from operations, to meet our anticipated capital expenditure, working capital and operating expenditure requirements.
 
Up until the past 21 months, we have not been significantly impacted by general inflationary pressures over the last several years.  However, in addition to rising health care costs, which have increased our cost of employee medical coverage, we have been impacted by increases in the market price of zinc, brass and magnesium over the past 21 months and inflation in Mexico, which impacts the U.S. dollar costs of our Mexican operations.  We do not hedge against our Mexican peso exposure.

11

Joint Ventures
 
          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 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 provides a set of cross-licensing agreements for the manufacture, distribution and sale of WITTE products by STRATTEC and ADAC in North America, and the manufacture, distribution and sale of STRATTEC and ADAC products by WITTE in Europe.  Additionally, a joint venture company, Vehicle Access Systems Technology LLC (“VAST LLC”), in which WITTE, STRATTEC and ADAC each hold a one-third interest, exists to seek opportunities to manufacture and sell the companies’ products in areas of the world outside of North America and Europe.
 
          VAST LLC participates in joint ventures in Brazil and China.  VAST do Brasil, a joint venture between VAST LLC and Ifer do Brasil Ltda., was formed to service customers in South America.  VAST Fuzhou and VAST Great Shanghai, joint ventures between VAST LLC, Fortitude Corporation and a unit of Elitech Technology Co. Ltd. of Taiwan, are the base of operations to service our automotive customers in the Asian market.
 
          The VAST investments are accounted for using the equity method of accounting.  The activities related to the joint ventures resulted in a gain to STRATTEC of approximately $146,000 during the three months ended September 30, 2007 and a gain of approximately $74,000 during the three months ended October 1, 2006.
 
          In 2007, we entered into a joint venture with ADAC, in which STRATTEC holds a 50.1 percent interest and ADAC holds a 49.9 percent interest.  The joint venture was created to establish injection molding and door handle assembly operations in Mexico.  ADAC-STRATTEC de MEXICO, LLC (“ASdM”), a Delaware limited liability company, was formed on October 27, 2006.  An additional Mexican entity, which is wholly owned by ASdM, was formed on February 21, 2007.  ASdM production activities began in July 2007.  ASdM’s financial results are consolidated with the financial results of STRATTEC and resulted in a net loss to STRATTEC of $61,000 during the three months ended September 30, 2007.

Critical Accounting Policies

The Company believes the following represents its critical accounting policies:

Pension and Postretirement Health Benefits– Pension and postretirement health obligations and costs are developed from actuarial valuations.  The determination of the obligation and expense for pension and postretirement health benefits is dependent on the selection of certain assumptions used by actuaries in calculating such amounts.  Those assumptions are described in the Notes to Financial Statements in our 2007 Annual Report and include, among others, the discount rate, expected long-term rate of return on plan assets, retirement age and rates of increase in compensation and health care costs.  Actual results that differ from these assumptions are deferred and, under certain circumstances, amortized over future periods.  While we believe that the assumptions used are appropriate, significant differences in the actual experience or significant changes in the assumptions may materially affect our pension and postretirement health obligations and future expense.

Other Reserves– We have reserves such as an environmental reserve, an incurred but not reported claim reserve for self-insured health plans, a workers’ compensation reserve, an allowance for doubtful accounts related to trade accounts receivable and a repair and maintenance supply parts reserve.  These reserves require the use of estimates and judgment with regard to risk exposure, ultimate liability and net realizable value.  We believe such reserves are estimated using consistent and appropriate methods.  However, changes to the assumptions could materially affect the recorded reserves.

12

Stock-Based Compensation– We account for stock-based compensation in accordance with SFAS No. 123(R), “Share-based Payments.”  Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period.  Determining the fair value of share-based awards at the grant date requires judgment, including estimating future volatility of our stock, the amount of share-based awards that are expected to be forfeited and the expected term of awards granted.  We estimate the fair value of stock options granted using the Black-Scholes option valuation model.  We amortize the fair value of all awards on a straight-line basis over the vesting periods.  The expected term of awards granted represents the period of time they are expected to be outstanding.  We determine the expected term based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules.  We estimate the expected volatility of our common stock at the date of grant based on the historical volatility of our common stock.  The volatility factor used in the Black-Scholes option valuation model is based on our historical stock prices over the most recent period commensurate with the estimated expected term of the award.  We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. We use historical data to estimate pre-vesting option forfeitures.  We record stock-based compensation only for those awards that are expected to vest.  If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

Risk Factors

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

Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share – Sales to General Motors Corporation, Ford Motor Company, Chrysler LLC and Delphi Corporation represent approximately 80 percent of our annual sales.  The contracts with these customers provide for supplying the customer’s requirements for a particular model.  The contracts do not specify a specific quantity of parts.  The contracts typically cover the life of a model, which averages approximately four to five years.  Components for certain customer models may also be "market tested" annually.  Therefore, the loss of any one of these customers, the loss of a contract for a specific vehicle model, reduction in vehicle content, early cancellation of a specific vehicle model, technological changes or a significant reduction in demand for certain key models could have a material adverse effect on our existing and future revenues and net income.

Our major customers also have significant underfunded legacy liabilities related to pension and postretirement health care obligations.  The future impact of these items along with a continuing loss in their North American automotive market share to the “New Domestic” automotive manufacturers (primarily the Japanese automotive manufacturers) may have a significant impact on our future sales and collectibility risks.  For example, on October 8, 2005, Delphi Corporation filed for Chapter 11 bankruptcy protection.  As a result, we wrote-off $1.6 million of uncollectible pre-petition Chapter 11 accounts receivable due from Delphi Corporation.  This directly reduced our pre-tax net income during fiscal 2006.

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

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

13

Foreign Operations – As discussed under Joint Ventures, we have joint venture investments in Mexico, Brazil and China.  These operations are currently not material.  However, as these operations expand, their success will depend, in part, on our and our partners’ ability to anticipate and effectively manage certain risks inherent in international operations including: enforcing agreements and collecting receivables through certain foreign legal systems, payment cycles of foreign customers, compliance with foreign tax laws, general economic and political conditions in these countries and compliance with foreign laws and regulations.

     Currency Exchange Rate Fluctuations – We incur a portion of our expenses in Mexican pesos.  Exchange rate fluctuations between the U.S. dollar and the Mexican peso could have an adverse effect on our financial results.

     Sources of and Fluctuations in Market Prices of Raw Materials – Our primary raw materials are high-grade zinc, brass, magnesium, 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 alternative raw materials and to the availability of these materials as well as significant fluctuations in the market prices of these materials may have an adverse affect on our financial results if the increased raw material costs cannot be recovered from our customers.

Disruptions Due to Work Stoppages and Other Labor Matters – Our major customers and many of their suppliers have unionized work forces.  Work stoppages or slow-downs experienced by our customers or their suppliers could result in slow-downs or closures of assembly plants where our products are included in assembled vehicles.  For example, strikes by the United Auto Workers led to a shut-down of most of General Motors Corporation’s North American assembly plants in June and July of 1998.  A material work stoppage experienced by one or more of our customers could have an adverse effect on our business and our financial results. In addition, all production associates at our Milwaukee facility are unionized.  A sixteen-day strike by these associates in June 2001 resulted in increased costs as all salaried associates worked with additional outside resources to produce the components necessary to meet customer requirements.  The current contract with the unionized associates is effective through June 29, 2008.  We may encounter further labor disruption after the expiration date of this contract and may also encounter unionization efforts in our other plants or other types of labor conflicts, any of which could have an adverse effect on our business and our financial results.

   Environmental and Safety Regulations – We are subject to federal, state, local and foreign laws and other legal requirements related to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations.  These laws include the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended).  We have an environmental management system that is ISO-14001 certified.  We believe that our existing environmental management system is adequate for current and anticipated operations and we have no current plans for substantial capital expenditures in the environmental area.  An environmental reserve was established in 1995 for estimated costs to remediate a site at our Milwaukee facility.  The site was contaminated by a former above-ground solvent storage tank, located on the east side of the facility.  The contamination occurred in 1985.  This is being monitored in accordance with federal, state and local requirements.  We do not currently anticipate any material adverse impact on our results of operations, financial condition or competitive position as a result of compliance with federal, state, local and foreign environmental laws or other legal requirements.  However, risk of environmental liability and changes associated with maintaining compliance with environmental laws is inherent in the nature of our business and there is no assurance that material liabilities or changes could not arise.

14

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

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

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

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

15

Item 3  Quantitative and Qualitative Disclosures About Market Risk

 Our exposure to market risk is limited to foreign currency exchange rate risk associated with STRATTEC’s foreign operations.  We do not utilize financial instruments for trading purposes and hold no derivative financial instruments which would expose us to significant market risk.  We have not had outstanding borrowings since December 1997.  To the extent that we incur future borrowings under our line of credit, we would be subject to interest rate risk related to such borrowings.  There is therefore no significant exposure to market risk for changes in interest rates.  However, we are subject to foreign currency exchange rate exposure related to the U.S. dollar costs of our Mexican operations.  A material increase in the value of the Mexican peso relative to the U.S. dollar would increase our expenses and therefore, could adversely affect our profitability.

Item 4  Controls and Procedures

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 the Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended).  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 in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in reports that we file with or submit to the Securities and Exchange Commission.  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 and, based on the evaluation described above, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at reaching that level of reasonable assurance.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

16

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 in our risk factors from those disclosed in Part I, Item 1A “Risk Factors,” of our 2007 Annual Report on Form 10-K.  Please refer to that section for disclosures regarding the risks and uncertainties relating to our business.

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

Issuer Purchases of Equity Securities

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 under the program.  The program currently authorizes the repurchase of up to 3,639,395 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 September 30, 2007, a total of 3,384,700 shares have been repurchased at a cost of approximately $127.1 million.

No repurchases were made under the program during the quarter ended September 30, 2007.

Item 3 Defaults Upon Senior Securities - None

Item 4 Submission of Matters to a Vote of Security Holders – None

Item 5 Other Information - None

Item 6 Exhibits

 	(a)	Exhibits	

 	4.4 	 	Promissory Note dated as of November 1, 2007 by and between the Company and M&I Bank
 	
 	10.5 (1)	 	Amended STRATTEC SECURITY CORPORATION Economic Value Added Plan for Executive Officers and Senior Managers
 	
 	10.6 (1)	 	Amended STRATTEC SECURITY CORPORATION Economic Value Added Plan for Non-employee Members of the Board of Directors
 	
 	31.1	 	Rule 13a-14(a) Certification for Harold M. Stratton II, Chairman and Chief Executive Officer
 	
 	31.2	 	Rule 13a-14(a) Certification for Patrick J. Hansen, Chief Financial Officer
 	
 	32 (2)	 	18 U.S.C. Section 1350 Certifications	
____________________
(1)     Incorporated by reference from the July 1, 2007 Form 10-K filed on August 30, 2007.
(2)	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.	
 
17

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 6, 2007
By  /s/ Patrick J. Hansen                                  
Patrick J. Hansen
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
(Principal Accounting and Financial Officer)

 
18

Exhibit 4.4
 
PROMISSORY NOTE
 
Principal	Loan Date	Maturity	Loan No.	Call/Coli	Account	Officer	Initials	
$50,000,000.00	11-01-2007	10-31-2008	1440055-10001	M1OO/A4	00000992919	6137	 	

References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item
 
Any item above containing "•••" has been omitted due to text length limitations.
 
Borrower:	STRATTEC SECURITY CORPORATION
3333 W Good Hope Rd
Milwaukee, WI 63209-2043	Lender:	M&I Marshall & Ilsley Bank
SE Wisconsin Region Commercial lending
770 North Water Street
Milwaukee, WI 53202	

Principal Amount:  $50,000,000.00                                                                                                                                      Date of Note:  November 1, 2007
 
PROMISE TO PAY.  STRATTEC SECURITY CORPORATION ("Borrower") promises to pay to M&I Marshall & Ilsley Bank ("Lender"), or order, in lawful money of the United States of America, the principal amount of Fifty Million &  00/100  Dollars ($50,000,000.00) or so much as may be outstanding, together with Interest on the unpaid outstanding principal balance of each advance.  Interest shall be calculated from the date of each advance until repayment of each advance.
 
PAYMENT.  Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid Interest on October 31, 2008.  In addition, Borrower will pay regular monthly payments of all accrued unpaid Interest due as of each payment date, beginning November 30, 2007, with all subsequent Interest payments to be due on the last day of each month after that unless otherwise agreed or required by applicable law, payments will be applied to accrued Interest, credit life premiums, principal, late charges, and escrow.  The annual Interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual Interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.  Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing.
 
VARIABLE INTEREST RATE.  The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the British Bankers Association (BBA) L1BOR and reported by a major news service selected by Lender (such as Reuters, Bloomberg or Moneyline TeJerate).  If BBA LIBOR for the one month period is not provided or reported on the first day of a month because, for example, it is a weekend or holiday or for another reason, the One Month L1BOR Rate shall be established as of the preceding day on which a BBA L1BOR rate is provided for the one month period and reported by the selected news service (the "Index").  The Index is not necessarily the lowest rate charged by Lender on its loans.  If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to Borrower.  Lender will tell Borrower the current Index rate upon Borrower's request.  The interest rate change will not occur more often than each first day of each calendar month.  Borrower understands that Lender may make loans based on other rates as well.  The interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 0.750 percentage points over the Index.  NOTICE:  Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.
 
PREPAYMENT.  Borrower may pay without penalty all or a portion of the amount owed earlier than it is due.  Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest.  Rather, early payments will reduce the principal balance due.  Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language.  If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender.  All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to:  M&I Marshall & Ilsley Bank, P.O. 3114 Milwaukee, WI 53201-3114.
 
INTEREST AFTER DEFAULT.  Upon default, including failure to pay upon final maturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Note to 2.00 percentage points over the Index.  The interest rate will not exceed the maximum rate permitted by applicable law.
 
DEFAULT.  Each of the following shall constitute an event of default ("Event of Default") under this Note:
 
Payment Default Borrower fails to make any payment when due under this Note.
 
Other Defaults.  Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
 
Default In Favor of Third Parties.  Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents.
 
False Statements.  Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
 
Insolvency.  The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
 
Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan.  This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender.  However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor.  Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.  In the event of a death, Lender, at its option, may, but shall not be required to, permit the guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default.
 
Change In Ownership.  Any change in ownership of fifty-one percent (51%) or more of the common stock of Borrower.
 
Adverse Change.  A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.
 
LENDER'S RIGHTS.  Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
 
ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help collect this Note if Borrower does not pay.  Borrower will pay Lender that amount.  This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.  If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.
 
JURY WAIVER.  Lender and Borrower hereby waive the right to any Jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
 
GOVERNING LAW.  This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Wisconsin without regard to its conflicts of law provisions.  This Note has been accepted by Lender in the State of Wisconsin.
 
CHOICE OF VENUE.  If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Milwaukee County, State of Wisconsin.
 
RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account).  This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.  However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law.  Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the debt against any and all such accounts.
 
LINE OF CREDIT.  This Note evidences a revolving line of credit.  Advances under this Note, as well as directions for payment from Borrower's accounts, may be requested orally or in writing by Borrower or by an authorized person.  Lender may, but need not, require that all oral requests be confirmed in writing.  Borrower agrees to be liable for all sums either:  (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender.  The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs.  Lender will have no obligation to advance funds under this Note if:  (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender.
 
INTEREST RATE.  LIBOR plus .75% for initial $20,000,000.00 increasing to LIBOR plus 1.25% for remaining $30,000,000.00.
 
SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon Borrower, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
 
GENERAL PROVISIONS.  This Note benefits Lender and its successors and assigns, and binds Borrower, successors and assigns.  Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them.  Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor.  Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability.  All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone.  All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made.
 
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER AGREES TO THE TERMS OF THE NOTE.
 
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
 
BORROWER:

STRATTEC SECURITY CORPORATION
 
By: /s/ Patrick J. Hansen                                              	 
 
By: /s/ Harold M. Stratton II                                       	
 	 	
Patrick J. Hansen, Senior Vice President of
STRATTEC SECURITY CORPORATION	Harold M. Stratton II, Chairman & CEO of
STRATTEC SECURITY CORPORATION	

 
2

Exhibit 31.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Harold M. Stratton II, 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 6, 2007
 
/s/ Harold M. Stratton II                                 
Harold M. Stratton II,
Chief Executive Officer

 

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 6, 2007

/s/ Patrick J. Hansen                               
Patrick J. Hansen,
Chief Financial Officer

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 September 30, 2007 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 6, 2007                                                                           
/s/ Harold M. Stratton II                                 
Harold M. Stratton II,
Chief Executive Officer

Dated:  November 6, 2007                                                                           
/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.