<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
STRATTEC SECURITY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
STRATTEC LOGO
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of STRATTEC SECURITY CORPORATION, a
Wisconsin corporation (the "Corporation"), will be held at the Manchester East
Hotel, 7065 North Port Washington Road, Milwaukee, Wisconsin 53217, on Tuesday,
October 26, 1999, at 2 p.m. local time, for the following purposes:
1. To elect two Directors, each to serve for a three-year term.
2. To take action with respect to any other matters that may be properly
brought before the meeting and that might be considered by the shareholders of a
Wisconsin corporation at their annual meeting.
By order of the Board of Directors
Milwaukee, Wisconsin
September 21, 1999
PATRICK J. HANSEN,
Secretary
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON SEPTEMBER 9, 1999 ARE
ENTITLED TO VOTE AT THE MEETING. YOUR VOTE IS IMPORTANT TO ENSURE THAT A
MAJORITY OF THE STOCK IS REPRESENTED. PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. IF YOU LATER FIND THAT YOU MAY BE PRESENT AT THE
MEETING OR FOR ANY OTHER REASON DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT
ANY TIME BEFORE IT IS VOTED.
<PAGE> 3
STRATTEC LOGO
STRATTEC SECURITY CORPORATION
3333 WEST GOOD HOPE ROAD
MILWAUKEE, WISCONSIN 53209
PROXY STATEMENT FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 26, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of STRATTEC SECURITY CORPORATION of proxies, in the
accompanying form, to be used at the Annual Meeting of Shareholders of the
Corporation to be held on October 26, 1999 and any adjournments thereof. Only
shareholders of record at the close of business on September 9, 1999 will be
entitled to notice of and to vote at the meeting. The shares represented by each
valid proxy received in time will be voted at the meeting and, if a choice is
specified on the proxy, it will be voted in accordance with that specification.
If no instructions are specified in a signed proxy returned to the Corporation,
the shares represented thereby will be voted in FAVOR of the election of the
Directors listed in the enclosed proxy. Shareholders may revoke proxies at any
time to the extent they have not been exercised. The cost of solicitation of
proxies will be borne by the Corporation. Solicitation will be made primarily by
use of the mails; however, some solicitation may be made by employees of the
Corporation, without additional compensation therefor, by telephone, by
facsimile, or in person. On the record date, the Corporation had outstanding
5,456,057 shares of $.01 par value common stock ("Common Stock") entitled to one
vote per share.
A majority of the votes entitled to be cast with respect to each matter
submitted to the shareholders, represented either in person or by proxy, shall
constitute a quorum with respect to such matter. The election of directors
requires the affirmative vote of a plurality of the shares represented at the
meeting. Abstentions and broker non-votes (i.e., shares held by brokers in
street name, voting on certain matters due to discretionary authority or
instructions from the beneficial owners but not voting on other matters due to
lack of authority to vote on such matters without instructions from the
beneficial owner) will count toward the quorum requirement and will not count
toward the determination of whether such directors are elected. The Inspector of
Election appointed by the Board of Directors will count the votes and ballots.
The Corporation's principal executive offices are located at 3333 West Good
Hope Road, Milwaukee, Wisconsin 53209. It is expected that this Proxy Statement
and the form of Proxy will be mailed to shareholders on or about September 21,
1999.
<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided into three classes,
with the term of office of each class ending in successive years. Two directors
are to be elected at the Annual Meeting, each to serve for a term of three years
expiring in 2002, and three directors will continue to serve for the terms
designated in the following schedule. As indicated below, the individuals
nominated by the Board of Directors are both incumbent directors. The
Corporation anticipates that both nominees listed in this Proxy Statement will
be candidates when the election is held. However, if for any reason either
nominee is not a candidate at that time, proxies will be voted for a substitute
nominee designated by the Corporation (except where a proxy withholds authority
with respect to the election of directors).
<TABLE>
<CAPTION>
DIRECTOR
NAME, PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND DIRECTORSHIPS AGE SINCE
- ---------------------------------------------------------------- --- --------
<S> <C> <C>
NOMINEES FOR ELECTION AT THE ANNUAL MEETING (CLASS OF 2002):
MICHAEL J. KOSS............................................... 45 1995
President and Chief Executive Officer of Koss Corporation
(manufacturer and marketer of high fidelity stereophones for the
international consumer electronics market) since 1989. Director
of Koss Corporation.
JOHN G. CAHILL................................................ 42 1995
President and Chief Operating Officer of the Corporation since
February 1999. Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the Corporation from 1994 to
February 1999. Vice President, Chief Financial Officer,
Secretary and Treasurer, Johnson Worldwide Associates, Inc.
(manufacturer and marketer of recreational and marking systems
products) from 1992 to 1994.
INCUMBENT DIRECTORS (CLASS OF 2000):
HAROLD M. STRATTON II......................................... 51 1994
Chairman of the Board and Chief Executive Officer of the
Corporation since February 1999. President and Chief Executive
Officer of the Corporation from 1994 to February 1999. Vice
President of Briggs & Stratton Corporation and General Manager
of the Technologies Division of Briggs & Stratton Corporation
from 1989 to February 1995. Director of Smith Investment
Company.
ROBERT FEITLER................................................ 68 1995
Chairman of the Executive Committee of the Board of Directors of
Weyco Group, Inc. (manufacturer, purchaser and distributor of
men's footwear) since April 1996. President and Chief Operating
Officer of Weyco Group, Inc. from June 1968 to April 1996.
Director of Weyco Group, Inc. and Trustee of ABN AMRO Funds.
INCUMBENT DIRECTOR (CLASS OF 2001):
FRANK J. KREJCI............................................... 49 1995
President of Wisconsin Furniture LLC (a manufacturer of custom
furniture) since June 1996. Vice President of WITECH Corp.
(venture capital subsidiary of Wisconsin Energy Corp., a public
utility) from May 1988 to June 1996.
</TABLE>
The Board of Directors has an Audit Committee and a Compensation Committee.
The Board's Audit Committee is comprised of Messrs. Krejci, Koss and Feitler
(Chairman). The Audit Committee makes
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<PAGE> 5
recommendations to the Board of Directors regarding the engagement of
independent public accountants to audit the books and accounts of the
Corporation and reviews with such accountants the audited financial statements
and their reports thereon. The Audit Committee also consults with the
independent public accountants with respect to the annual audit scope and plan
of audit and with respect to the adequacy of the Corporation's internal controls
and accounting procedures. The Audit Committee met two times during fiscal 1999.
The Board's Compensation Committee is comprised of Messrs. Krejci
(Chairman), Koss and Feitler. The Compensation Committee, in addition to such
other duties as may be specified by the Board of Directors, reviews the
compensation and benefits of senior managers and makes appropriate
recommendations to the Board of Directors, administers the Corporation's
Economic Value Added Plan for Executive Officers and Senior Managers,
administers the STRATTEC SECURITY CORPORATION Stock Incentive Plan and prepares
on an annual basis a report on executive compensation. The Compensation
Committee met three times during fiscal 1999.
The Board of Directors held five meetings in fiscal 1999, and all of the
directors attended at least 75% of the total meetings of the Board of Directors
and the committees thereof on which they served.
COMPENSATION OF DIRECTORS
Each nonemployee director of the Corporation receives an annual retainer
fee of $8,000, a fee of $750 for each Board meeting attended and a fee of $500
for each committee meeting attended. Effective June 30, 1997, the Corporation
implemented an Economic Value Added Plan for Non-Employee Members of the Board
of Directors (the "Director EVA* Plan"). The purpose of the Director EVA Plan is
to maximize long-term shareholder value by providing incentive compensation to
nonemployee directors in a form which relates the financial reward to an
increase in the value of the Corporation to its shareholders and to enhance the
Corporation's ability to attract and retain outstanding individuals to serve as
nonemployee directors of the Corporation. The Director EVA Plan provides for the
payment of an annual cash bonus to each nonemployee director equal to the
product of (a) 40% of the director's retainer and meeting fees for the fiscal
year, multiplied by (b) a Company Performance Factor. In general, the Company
Performance Factor is determined by reference to the financial performance of
the Corporation relative to a targeted cash-based return on capital, which is
intended to approximate the Corporation's weighted cost of capital (which was
12% for fiscal 1999). For fiscal 1999, Messrs. Krejci, Koss and Feitler received
cash bonuses of $13,452, $13,452 and $12,272, respectively, pursuant to the
Director EVA Plan.
- ---------------
*EVA is a registered trademark of Stern, Stewart & Co.
3
<PAGE> 6
SECURITY OWNERSHIP
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock as of August 27, 1999 by (i) each director
and named executive officer (as defined below), (ii) all directors and executive
officers as a group, and (iii) each person or other entity known by the
Corporation to beneficially own more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
NATURE OF BENEFICIAL
OWNERSHIP
------------------------
TOTAL NUMBER SOLE VOTING SOLE SOLE
OF SHARES AND VOTING OR VOTING
BENEFICIALLY PERCENT INVESTMENT INVESTMENT POWER
NAME OF BENEFICIAL OWNER OWNED(1) OF CLASS POWER POWER ONLY(2)
------------------------ ------------ -------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
The State of Wisconsin Investment Board(3).... 440,600 8.0 440,600 -- --
First Union Corporation(4).................... 340,222 6.2 322,000 -- --
Heartland Advisors, Inc.(5)................... 636,500 11.6 -- 636,500 --
FMR Corp.(6).................................. 442,600 8.1 -- 442,600 --
The Prudential Insurance Company of
America(7).................................. 500,000 9.1 136,600 -- --
Investment Counselors of Maryland, Inc.(8).... 295,000 5.4 295,000 -- --
PRIMECAP Management Company(9)................ 348,600 6.4 188,600 -- --
John G. Cahill................................ 101,786 1.8 5,475 -- 11
Robert Feitler................................ 15,000 * 15,000 -- --
Michael J. Koss............................... 1,000 * 1,000 -- --
Frank Krejci.................................. 40 * 40 -- --
Harold M. Stratton II......................... 188,240 3.3 31,183 11,169(10) 22
Michael R. Elliott............................ 60,026 1.1 -- -- 30
Patrick J. Hansen............................. -- -- -- -- --
Gerald L. Peebles............................. 39,360 * -- -- 193
All directors and executive officers as a
group (9 persons)........................... 405,452 7.0 52,698 11,169 256
</TABLE>
- -------------------------
* Less than 1%.
(1) Includes the rights of the following persons to acquire shares pursuant to
the exercise of currently vested stock options: Mr. Stratton -- 145,866
shares; Mr. Cahill -- 96,300 shares; Mr. Peebles -- 39,167 shares; Mr.
Elliott -- 59,996 shares; and all directors and executive officers as a
group -- 341,329 shares.
(2) All shares are held in the Employee Savings and Investment Plan Trust.
(3) The State of Wisconsin Investment Board, P.O. Box 7842, 121 East Wilson
Street, Madison, Wisconsin 53707, filed a Schedule 13G dated February 6,
1996, as amended by a Schedule 13G/A dated January 21, 1997, a Schedule
13G/A dated January 20, 1998 and a Schedule 13G/A dated February 2, 1999,
reporting that as of February 2, 1999 it was the beneficial owner of
440,600 shares of Common Stock, with sole voting and investment power as to
all of such shares.
(4) First Union Corporation, One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288-0137, filed a Schedule 13G dated February
3, 1997, as amended by a Schedule 13G/A dated
4
<PAGE> 7
February 11, 1998 and a Schedule 13G/A dated February 11, 1999, reporting
that as of February 11, 1999 it was the beneficial owner of 340,222 shares
of Common Stock. The shares of Common Stock beneficially owned by First
Union Corporation include 323,022 shares as to which First Union
Corporation has sole voting power, 17,200 shares as to which First Union
Corporation has shared voting power, 322,000 shares as to which First Union
Corporation has sole investment power and 18,222 shares as to which First
Union Corporation has shared investment power.
(5) Heartland Advisors, Inc. ("Heartland"), 790 North Milwaukee Street,
Milwaukee Wisconsin 53202, filed a Schedule 13G dated February 12, 1997, as
amended by a Schedule 13G/A dated February 2, 1998 and a Schedule 13G/A
dated February 9, 1999, reporting that as of February 9, 1999 it was the
beneficial owner of 636,500 shares of Common Stock. The shares of Common
Stock beneficially owned by Heartland include 132,700 shares as to which
Heartland has sole voting power and 636,500 shares as to which Heartland
has sole investment power.
(6) FMR Corp., 82 Devonshire Street, Boston, Massachusetts 02109, filed a
Schedule 13G dated February 12, 1999, reporting that as of February 12,
1999 it was the beneficial owner of 442,600 shares of Common Stock, with
sole investment power as to all of such shares.
(7) The Prudential Insurance Company of America ("Prudential"), 751 Broad
Street, Newark, New Jersey 07102-3777, filed a Schedule 13G dated February
6, 1997, as amended by a Schedule 13G/A dated February 9, 1998 and a
Schedule 13G/A dated January 27, 1999, reporting that as of January 27,
1999 it was the beneficial owner of 500,000 shares of Common Stock. The
shares of Common Stock beneficially owned by Prudential include 136,600
shares as to which Prudential has sole voting and investment power and
363,400 shares as to which Prudential has shared voting and investment
power.
(8) Investment Counselors of Maryland, Inc., 803 Cathedral Street, Baltimore,
Maryland 21201, filed a Schedule 13G dated March 2, 1999, reporting that as
of March 2, 1999 it was the beneficial owner of 295,000 shares of Common
Stock, with sole voting and investment power as to all of such shares.
(9) PRIMECAP Management Company ("PRIMECAP"), 225 South Lake Avenue, Suite 400,
Pasadena, California 91101-3005, filed a Schedule 13G dated June 17, 1999,
reporting that as of June 17, 1999 it was the beneficial owner of 348,600
shares of Common Stock. The shares of Common Stock beneficially owned by
PRIMECAP include 188,600 shares as to which PRIMECAP has sole voting and
investment power, and 160,000 shares as to which PRIMECAP has shared
investment power.
(10) Includes 10,100 shares held in trust as to which Mr. Stratton is co-trustee
and beneficiary, 169 shares owned by Mr. Stratton's spouse and 900 shares
as to which Mr. Stratton is custodian on behalf of his children.
The above beneficial ownership information is based on information
furnished by the specified persons and is determined in accordance with Rule
13d-3, as required for purposes of this Proxy Statement. It is not necessarily
to be construed as an admission of beneficial ownership for other purposes.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers,
and persons who own more than 10% of a registered class of the Corporation's
equity securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of beneficial ownership and reports of changes in
beneficial ownership of the Corporation's equity securities. The rules
promulgated by the Commission under section 16(a) of the Exchange Act require
those persons to furnish the Corporation with copies of all reports filed with
the Commission pursuant to
5
<PAGE> 8
section 16(a). Based solely upon a review of such forms actually furnished to
the Corporation, and written representations of certain of the Corporation's
directors and executive officers that no forms were required to be filed, all
directors, executive officers and 10% shareholders have filed with the
Commission on a timely basis all reports required to be filed under section
16(a) of the Exchange Act, except that Mr. Harrod filed reports in September
1999 to report his appointment as an officer of the Corporation in November 1998
and an option grant during fiscal 1999.
PERFORMANCE GRAPH
The chart below shows a comparison of the cumulative return since February
27, 1995 had $100 been invested at the close of business on February 27, 1995 in
each of the Common Stock, the Nasdaq Composite Index (all issuers), and the Dow
Jones Auto Parts and Equipment Index.
CUMULATIVE TOTAL RETURN COMPARISON*
THE CORPORATION VERSUS PUBLISHED INDICES
(NASDAQ COMPOSITE INDEX AND THE DOW JONES AUTO PARTS AND EQUIPMENT INDEX)
<TABLE>
<CAPTION>
DOW JONES AUTO PARTS AND
THE CORPORATION** NASDAQ COMPOSITE INDEX EQUIPMENT INDEX
----------------- ---------------------- ------------------------
<S> <C> <C> <C>
2/27/95 100.00 100.00 100.00
6/30/95 94.00 119.00 110.00
6/28/96 137.00 152.00 127.00
6/27/97 160.00 185.00 157.00
6/26/98 235.00 241.00 180.00
6/25/99 277.00 325.00 168.00
</TABLE>
* Total return assumes reinvestment of dividends.
** The closing price of the Common Stock on February 27, 1995 was $13.00, the
closing price on June 30, 1995 was $12.25, the closing price on June 28, 1996
was $17.75, the closing price on June 27, 1997 was $20.75, the closing price
on June 26, 1998 was $30.47 and the closing price on June 25, 1999 was
$36.00.
6
<PAGE> 9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's Compensation Committee (the "Committee"), which is
comprised of three outside directors of the Corporation, is responsible for
considering and approving compensation arrangements for senior management of the
Corporation, including the Corporation's executive officers and the chief
executive officer. The objectives of the Committee in establishing compensation
arrangements for senior management are to: (i) attract and retain key executives
who are important to the continued success of the Corporation; and (ii) provide
strong financial incentives, at reasonable cost to the shareholders, for senior
management to enhance the value of the shareholders' investment.
The primary components of the Corporation's executive compensation program
are (i) base salary, (ii) incentive compensation bonuses and (iii) stock
options.
The Committee believes that:
- The Corporation's incentive plans provide strong incentives for
management to increase shareholder value;
- The Corporation's pay levels are appropriately targeted to attract and
retain key executives; and
- The Corporation's total compensation program is a cost-effective strategy
to increase shareholder value.
BASE SALARIES
Executive officers' base salaries are reviewed annually by the Committee,
based on level of responsibility and individual performance. It is the
Corporation's objective that base salary levels, in the aggregate, be at
competitive salary levels. In fixing competitive base salary levels, the
Committee used a survey of a broad group of domestic industrial organizations
from all segments of industry. From this survey, the Committee determined a
competitive salary level for fiscal 1999 for each executive officer position
near the average derived from the survey for positions with similar
responsibilities at companies with a similar level of sales, also taking into
account additional factors such as the executive officer's performance. Because
the survey was based on industry-wide studies, the companies in the survey do
not correspond to the companies that make up the Dow Jones Auto Parts and
Equipment Index, which is used by the Corporation as the published industry
index for comparison in the Performance Graph on page 6.
INCENTIVE BONUSES
The Corporation maintains an Economic Value Added ("EVA") Plan for
Executive Officers and Senior Managers (the "EVA Plan"), the purpose of which is
to provide incentive compensation to certain key employees, including all
executive officers, in a form which relates the financial reward to an increase
in the value of the Corporation to its shareholders. In general, EVA is the net
operating profit after taxes, less a capital charge. The capital charge is
intended to represent the return expected by the providers of the Corporation's
capital. The Corporation believes that EVA improvement is the financial
performance measure most closely correlated with increases in shareholder value.
7
<PAGE> 10
For fiscal 1999, the amount of bonus which a participant was entitled to
earn was derived from a Company Performance Factor and from an Individual
Performance Factor. The Company Performance Factor was determined by reference
to the financial performance of the Corporation relative to a targeted
cash-based return on capital established by the Committee, which is intended to
approximate the Corporation's weighted cost of capital. The Individual
Performance Factor was determined by reference to the level of attainment of
certain quantifiable and non-quantifiable company or individual goals which
contribute to increasing the value of the Corporation to its shareholders.
Individual Target Incentive Awards under the EVA Plan range from 75% of base
compensation for the Chairman of the Board and Chief Executive Officer to 35% of
base compensation for other officers for fiscal 1999. Mr. Stratton's fiscal 1999
bonus equals 162% of his Target Incentive Award.
The EVA Plan provides the powerful incentive of an uncapped bonus
opportunity, but also uses a "Bonus Bank" to ensure that significant EVA
improvements are sustained before significant bonus awards are paid out. The
Bonus Bank feature applies to those participants determined by the Committee to
be "Executive Officers" under the EVA Plan. All of the named executive officers
have been designated Executive Officers for fiscal 1999. Each year, any accrued
bonus in excess of 125% of the target bonus award is added to the outstanding
Bonus Bank balance. The bonus paid is equal to the accrued bonus for the year,
up to a maximum of 125% of the target bonus, plus 33% of the Bonus Bank balance
at the end of the year. Thus, significant EVA improvements must be sustained for
several years to ensure full payout of the accrued bonus. A Bonus Bank account
is considered "at risk" in the sense that in any year the accrued bonus is
negative, the negative bonus amount is subtracted from the outstanding Bonus
Bank balance. In the event the outstanding Bonus Bank balance at the beginning
of the year is negative, the bonus paid is limited to the accrued bonus up to a
maximum of 75% of the target bonus. The executive is not expected to repay
negative balances. On termination of employment due to death, disability or
retirement or by the Corporation without cause, the available balance in the
Bonus Bank will be paid to the terminating executive or his designated
beneficiary or estate. Executive officers who voluntarily leave to accept
employment elsewhere or who are terminated for cause will forfeit any positive
available balance.
STOCK INCENTIVE PLAN
In 1994, the Corporation established the STRATTEC SECURITY CORPORATION
Stock Incentive Plan ("Incentive Plan"). The Incentive Plan authorizes the
Committee to grant to officers and other key employees stock incentive awards in
the form of one or any combination of the following: stock options, stock
appreciation rights, deferred stock, restricted stock and stock purchase rights.
During fiscal 1999, the Committee granted options to purchase Common Stock to
the executives as shown in the Summary Compensation Table.
On August 24, 1999, after publication of financial results for fiscal 1999,
the Committee granted leveraged stock options (LSOs) to 15 key employees,
including options to purchase 25,550 shares to Mr. Stratton, options to purchase
17,613 shares to Mr. Cahill, options to purchase 6,504 shares to Mr. Elliott,
options to purchase 6,364 shares to Mr. Peebles and options to purchase 4,068
shares to Mr. Hansen, based on the amount of incentive bonus under the EVA Plan
earned for fiscal 1999. The method of calculating the number of options granted
to each executive, and the method of determining their exercise price, is set
forth in the EVA Plan and Incentive Plan. These leveraged stock options have an
exercise price of $45.79 per share and provide a form of option grant that
simulates a stock purchase with 10:1 leverage. The number of leveraged options
granted to Mr. Stratton for fiscal 1999 was determined in the manner described
and was based on his incentive bonus for fiscal 1999.
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<PAGE> 11
The maximum aggregate number of LSOs to be granted each year is 80,000. If
the Total Bonus Payout under EVA produces more than 80,000 LSOs in any year,
LSOs granted for that year will be reduced pro-rata based on proportionate Total
Bonus Payouts under the EVA Plan. The amount of any such reduction shall be
carried forward to subsequent years and invested in LSOs to the extent the
annual limitation is not exceeded in such years.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation awarded to Mr. Stratton reflects the basic philosophy
generally discussed above that compensation be based on Corporation and
individual performance.
The Committee determined Mr. Stratton's base salary for fiscal 1999 based
on the compensation survey and annual review described above. With respect to
the EVA Plan and the Stock Incentive Plan, Mr. Stratton's awards for fiscal 1999
were determined in the same manner as for all other participants in these plans.
COMPENSATION COMMITTEE:
Frank J. Krejci
Michael J. Koss
Robert Feitler
9
<PAGE> 12
EXECUTIVE COMPENSATION
CASH COMPENSATION
The table which follows sets forth certain information for the years
indicated below concerning the compensation paid by the Corporation to the
Corporation's Chief Executive Officer and the four other most highly compensated
executive officers in fiscal 1999 (collectively, the "named executive
officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION ---------------------
FISCAL ---------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS/SARS (#)(1) COMPENSATION ($)
--------------------------- ------ ---------- --------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Harold M. Stratton II,............ 1999 240,000 269,071 25,550 6,127(2)
Chairman of the Board and Chief 1998 220,648 242,920 26,805 4,995(2)
Executive Officer 1997 205,000 174,558 26,549 4,172(2)
John G. Cahill,................... 1999 202,500 185,839 17,613 6,273(3)
President and Chief Operating 1998 178,811 157,667 17,399 5,469(3)
Officer 1997 166,400 108,493 16,501 5,098(3)
Gerald L. Peebles,................ 1999 120,958 67,360 6,364 4,876(4)
Vice President-General Manager 1998 113,488 64,080 7,071 4,722(4)
Strattec de Mexico 1997 112,000 43,198 6,570 4,464(4)
Michael R. Elliott,............... 1999 126,500 69,416 6,504 3,972(5)
Vice President-Global Market 1998 117,048 65,311 7,207 2,918(5)
Development 1997 111,200 47,288 7,192 3,209(5)
Patrick J. Hansen,................ 1999 109,458 42,105 4,068 4,517(7)
Vice President, Chief Financial
Officer, Secretary and
Treasurer(6)
</TABLE>
- -------------------------
(1) For fiscal 1997, all amounts are leveraged stock options granted on August
20, 1997 based on executive performance for fiscal 1997. For fiscal 1998,
all amounts are leveraged stock options granted on August 25, 1998 based on
executive performance for fiscal 1998. For fiscal 1999, all amounts are
leveraged stock options granted on August 24, 1999 based on executive
performance for fiscal 1999.
(2) For fiscal 1997, includes $3,650 in matching contributions to the
Corporation's Savings and Investment Plan (the "Plan") for the executive
officer and includes $522 of taxable employer paid group term life
insurance. For fiscal 1998, includes $3,435 in matching contributions to the
Plan for the executive officer and includes $1,560 of taxable employer paid
group term life insurance. For fiscal 1999, includes $3,667 in matching
contributions to the Plan for the executive officer and includes $2,460 of
taxable employer paid group term life insurance.
(3) For fiscal 1997, includes $4,846 in matching contributions to the Plan, and
includes $252 of taxable employer paid group term life insurance. For fiscal
1998, includes $4,918 in matching contributions to the Plan for the
executive officer and includes $551 of taxable employer paid group term life
insurance. For fiscal 1999, includes $5,561 in matching contributions to the
Plan for the executive officer and includes $712 of taxable employer paid
group term life insurance.
10
<PAGE> 13
(4) For fiscal 1997, includes $3,357 in matching contributions to the Plan, and
includes $1,107 of taxable employer paid group term life insurance. For
fiscal 1998, includes $3,274 in matching contributions to the Plan for the
executive officer and includes $1,448 of taxable employer paid group term
life insurance. For fiscal 1999, includes $3,158 in matching contributions
to the Plan for the executive officer and includes $1,718 of taxable
employer paid group term life insurance.
(5) For fiscal 1997, includes $2,903 in matching contributions to the Plan, and
includes $306 of taxable employer paid group term life insurance. For fiscal
1998, includes $2,576 in matching contributions to the Plan for the
executive officer and includes $342 of taxable employer paid group term life
insurance. For fiscal 1999, includes $3,568 in matching contributions to the
Plan for the executive officer and includes $404 of taxable employer paid
group term life insurance.
(6) Mr. Hansen was appointed as Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company in February 1999.
(7) For fiscal 1999, includes $4,243 in matching contributions to the Plan for
the executive officer and includes $274 of taxable employer paid group term
life insurance.
STOCK OPTIONS
The Incentive Plan approved by shareholders provides for the granting of
stock options with respect to Common Stock.
The following tables set forth further information relating to stock
options.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS/SARS OPTION
UNDERLYING GRANTED TO TERM ($)(2)
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------
NAME GRANTED (#)(1) FISCAL YEAR ($ / SH) DATE 5% 10%
---- -------------- ------------ -------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Harold M. Stratton II.... 26,805 31.5 37.88 August 25, 2003 -- 225,698
John G. Cahill........... 17,399 20.5 37.88 August 25, 2003 -- 146,500
Gerald L. Peebles........ 7,071 8.3 37.88 August 25, 2003 -- 59,538
Michael R. Elliott....... 7,207 8.5 37.88 August 25, 2003 -- 60,683
Patrick J. Hansen........ 3,565 4.2 37.88 August 25, 2003 -- 30,017
</TABLE>
- -------------------------
(1) The foregoing options are exercisable beginning on the third anniversary of
the date of grant and terminate on the fifth anniversary of the date of
grant.
(2) The dollar amounts under these columns are the result of theoretical
calculations at 5% and 10% rates set by the Commission, and therefore are
not intended to forecast possible future appreciation, if any, in the Common
Stock.
11
<PAGE> 14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES*
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES ACQUIRED VALUE AT FISCAL YEAR END(#) AT FISCAL YEAR END($)
NAME ON EXERCISE(#) REALIZED($) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- --------------- ----------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Harold M. Stratton
II.................. -- -- 145,866/53,354 3,143,347/106,727
John G. Cahill........ -- -- 103,300/33,900 2,246,900/66,334
Gerald L. Peebles..... 10,000 212,500 39,467/13,641 845,938/26,411
Michael R. Elliott.... 1,000 18,250 59,996/14,399 1,331,289/28,912
Patrick J. Hansen..... 1,899 22,256 3,490/7,086 56,957/14,154
</TABLE>
- -------------------------
* No SARs are outstanding. Options at fiscal year end exclude leveraged stock
options granted on August 24, 1999, based on executive performance for fiscal
1999.
RETIREMENT PLAN AND SUPPLEMENTAL PENSION PLAN
The Corporation maintains a defined benefit retirement plan (the
"Retirement Plan") covering all executive officers and substantially all other
employees in the United States. Under the Retirement Plan, nonbargaining unit
employees receive an annual pension payable on a monthly basis at retirement
equal to 1.6% of the employee's average of the highest 5 years of compensation
during the last 10 calendar years of service prior to retirement multiplied by
the number of years of credited service, with an offset of 50% of Social
Security (prorated if years of credited service are less than 30). Compensation
under the Retirement Plan includes the compensation as shown in the Summary
Compensation Table under the heading "Salary and Bonus," subject to a maximum
compensation amount set by law ($160,000 in 1999).
Executive officers participate in a program which supplements benefits
under the Retirement Plan. Under the Supplemental Executive Retirement Plan (the
"Supplemental Pension Plan"), executive officers are provided with additional
increments of (a) 0.50% of compensation (as limited under the Retirement Plan)
per year of credited service over the benefits payable under the Retirement Plan
to nonbargaining unit employees and (b) 2.1% of the compensation exceeding the
Retirement Plan dollar compensation limit per year of credited service.
A Rabbi trust has been created for deposit of the aggregate present value
of the benefits described above for executive officers.
12
<PAGE> 15
The following table shows total estimated annual benefits payable from the
Retirement Plan and the unfunded Supplemental Pension Plan to executive officers
upon normal retirement at age 65 at specified compensation and years of service
classifications calculated on a single life basis and adjusted for the projected
Social Security offset:
<TABLE>
<CAPTION>
ANNUAL PENSION PAYABLE FOR LIFE
AVERAGE ANNUAL COMPENSATION AFTER SPECIFIED YEARS OF CREDITED SERVICE
IN HIGHEST 5 OF LAST 10 -----------------------------------------------------------
CALENDAR YEARS OF SERVICE 10 YEARS 20 YEARS 30 YEARS 40 YEARS
- --------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000................................ $ 18,300 $ 36,700 $ 55,000 $ 70,000*
150,000................................ 28,800 57,700 86,500 105,000*
200,000................................ 39,300 78,700 118,000 140,000*
250,000................................ 49,800 99,700 149,500 175,000*
300,000................................ 60,300 120,700 181,000 210,000*
350,000................................ 70,800 141,700 212,500 245,000*
400,000................................ 81,300 162,700 244,000 280,000*
450,000................................ 91,800 183,700 275,500 315,000*
500,000................................ 102,300 204,700 307,000 350,000*
</TABLE>
- -------------------------
* Figures reduced to reflect the maximum limitation under the plans of 70% of
compensation.
The above table does not reflect limitations imposed by the Internal
Revenue Code of 1986, as amended, on pensions paid under federal income tax
qualified plans. However, an executive officer covered by the Corporation's
unfunded program will receive the full pension to which he would be entitled in
the absence of such limitations.
EMPLOYMENT AGREEMENTS
Each executive officer of the Corporation has signed an employment
agreement which extended through June 30, 1999, with a one-year automatic
extension upon each anniversary date, unless either party gives 30 days' notice
that the agreement will not be further extended. Under the agreement, the
officer agrees to perform the duties currently being performed in addition to
other duties that may be assigned from time to time. The Corporation agrees to
pay the officer a salary of not less than that of the previous year and to
provide fringe benefits that are provided to all other salaried employees of the
Corporation in comparable positions.
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
Each executive officer of the Corporation has signed a change in control
employment agreement which guarantees the employee continued employment
following a "change in control" on a basis equivalent to the employee's
employment immediately prior to such change in terms of position, duties,
compensation and benefits, as well as specified payments upon termination
following a change in control. The Corporation currently has such agreements
with the five named executive officers. Such agreements become effective only
upon a defined change in control of the Corporation, or if the employee's
employment is terminated upon, or in anticipation of such a change in control,
and automatically supersede any existing employment agreement. Under the
agreements, if during the employment term (three years from the change in
control) the employee is terminated other than for "cause" or if the employee
voluntarily terminates his employment for good reason or during a 30-day window
period one year after a change in control, the employee is entitled to specified
severance benefits, including a lump sum payment of three times the sum of the
employee's annual salary and
13
<PAGE> 16
bonus and a "gross-up" payment which will, in general, effectively reimburse the
employee for any amounts paid under federal excise taxes.
AUDITORS
Arthur Andersen LLP served as independent auditors for the purpose of
auditing the financial statements of the Corporation for fiscal 1999. A
representative of Arthur Andersen LLP will be present at the Annual Meeting and
will have the opportunity to make a statement if he desires to do so and will be
available to respond to appropriate questions. The Audit Committee will not
choose independent auditors for fiscal 2000 until after the Annual Meeting.
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K
The Corporation is required to file an annual report, called a Form 10-K,
with the Commission. A copy of Form 10-K for the fiscal year ended June 27, 1999
will be made available, without charge, to any person entitled to vote at the
Annual Meeting. Written request should be directed to Patrick J. Hansen, Office
of the Corporate Secretary, STRATTEC SECURITY CORPORATION, 3333 West Good Hope
Road, Milwaukee, Wisconsin 53209.
SHAREHOLDER PROPOSALS
Proposals which shareholders intend to present at the 2000 Annual Meeting
of Shareholders pursuant to Rule 14a-8 under the Exchange Act must be received
at the Corporation's principal offices in Milwaukee, Wisconsin no later than May
24, 2000 for inclusion in the proxy material for that meeting. Proposals
submitted other than pursuant to Rule 14a-8 will be considered untimely if
received after July 28, 2000 and the Corporation will not be required to present
any such proposal at the 2000 Annual Meeting of Shareholders. If the Board of
Directors decides to present a proposal despite its untimeliness, the people
named in the proxies solicited by the Board of Directors for the 2000 Annual
Meeting of Shareholders will have the right to exercise discretionary voting
power with respect to such proposal.
OTHER MATTERS
The Directors of the Corporation know of no other matters to be brought
before the meeting. If any other matters properly come before the meeting,
including any adjournment or adjournments thereof, it is intended that proxies
received in response to this solicitation will be voted on such matters in the
discretion of the person or persons named in the accompanying proxy form.
BY ORDER OF THE BOARD OF DIRECTORS
STRATTEC SECURITY CORPORATION
Patrick J. Hansen, Secretary
Milwaukee, Wisconsin
September 21, 1999
14
<PAGE> 17
PROXY
STRATTEC SECURITY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Harold M. Stratton II and John G. Cahill,
or either one of them, with full power of substitution and resubstitution, as
proxy or proxies of the undersigned to attend the Annual Meeting of Shareholders
of STRATTEC SECURITY CORPORATION to be held on October 26, 1999 at 2:00 p.m.,
local time, at the Manchester East Hotel, 7065 North Port Washington Road,
Milwaukee, Wisconsin 53217, and at any adjournment thereof, there to vote all
shares of Common Stock which the undersigned would be entitled to vote if
personally present as specified upon the following matters and in their
discretion upon such other matters as may properly come before the meeting.
1. ELECTION OF DIRECTORS (terms expiring at the 2002 Annual Meeting)
[ ] FOR all nominees listed below [ ] WITHHOLD UTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
MICHAEL J. KOSS AND JOHN G. CAHILL
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- ----------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
(continued on reverse side)
<PAGE> 18
PROXY NO. NO. OF SHARES
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and accompanying Proxy Statement, ratifies all that said proxies
or their substitutes may lawfully do by virtue hereof, and revokes all former
proxies.
Please sign exactly as your name appears hereon, date and return this Proxy.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO GRANT AUTHORITY TO ELECT
THE NOMINATED DIRECTORS. IF OTHER MATTERS COME BEFORE THE MEETING, THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES APPOINTED.
DATED: , 1999
-------------------
------------------------------------
(SIGNATURE OF SHAREHOLDER)
------------------------------------
(SIGNATURE IF JOINTLY HELD)
If signing as attorney, executor,
administrator, trustee or guardian, please
add you full title as such. If shares are
held by two or more persons, all holders must
sign the Proxy.
2
