MILWAUKEE, Oct. 22, 2015 (GLOBE NEWSWIRE) — STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended September 27, 2015.
Net sales for the Company’s first quarter ended September 27, 2015 were $96.5 million, compared to net sales of $122.2 million for the prior year quarter ended September 28, 2014. Net income for the current year quarter was $3.3 million, compared to net income of $9.3 million in the prior year quarter. Diluted earnings per share for the current year quarter were $0.90 compared to diluted earnings per share of $2.55 in the prior year quarter. The lower net sales and net income for the current year quarter was anticipated and primarily attributed to a $28 million decrease in incremental service sales to General Motors for parts used to support a recall campaign that were shipped during the prior year quarter.
Net sales to each of our customers or customer groups in the current year quarter and prior year quarter were as follows (in thousands):
| Three Months Ended | ||||||
| September 27, 2015 | September 28, 2014 | |||||
| Fiat Chrysler Automobiles | $ | 28,528 | $ | 31,996 | ||
| General Motors Company | 18,789 | 44,949 | ||||
| Ford Motor Company | 13,616 | 11,808 | ||||
| Tier 1 Customers | 17,682 | 16,974 | ||||
| Commercial and Other OEM Customers | 10,987 | 9,072 | ||||
| Hyundai / Kia | 6,911 | 7,443 | ||||
| TOTAL | $ | 96,513 | $ | 122,242 | ||
The decreased sales to Fiat Chrysler Automobiles in the current year quarter were primarily due to lower customer vehicle production volume on the Dodge and Chrysler Minivans. As previously mentioned, the decrease in sales to General Motors Company in the current year quarter was primarily attributed to incremental service parts sales of $28 million shipped in the prior year quarter. Increased sales to Ford Motor Company in the current year quarter were attributed to increased product content on locksets and latches, in particular for the new F-150 pick-up truck. Sales to Tier 1 Customers during the current year quarter increased slightly in comparison to the prior year quarter. These customers primarily represent purchasers of vehicle access control products, such as latches, fobs, and driver controls, that we have developed in recent years to complement our historic core business of locks and keys. The decrease in sales to Hyundai / Kia in the current year quarter was principally due to higher levels of sales in the prior year quarter resulting from a significant ramp-up in production of parts for a new model introduction for which we supply components.
The gross profit margin was 17.1 percent in the current year quarter compared to 23.0 percent in the prior year quarter. The decrease in gross profit margin in the current year quarter compared to the prior year quarter was attributed to lower sales and a less favorable product mix, offset by lower costs associated with new product launches and lower bonus expense provisions in the current year quarter.
Engineering, Selling and Administrative expenses as a percentage of net sales increased to 11.0 percent in the current year quarter from 10.8 percent in the prior year quarter. However, overall expenses were lower due to lower bonus provisions recorded during the current year quarter compared to the prior year quarter.
Included in “Other (Expense) Income, Net” in the current year quarter compared to the prior year quarter were the following items (in thousands of dollars):
| September 27, | September 28, | |||||
| 2015 | 2014 | |||||
| Equity Earnings of VAST LLC Joint Venture | $ | 133 | $ | 376 | ||
| Equity Loss of STRATTEC Advanced Logic LLC Joint Venture | (426 | ) | (186 | ) | ||
| Foreign Currency Transaction Gain | 957 | 786 | ||||
| Unrealized Loss on Peso Forward Contracts | (896 | ) | – | |||
| Other | (93 | ) | 2 | |||
| $ | (325 | ) | $ | 978 | ||
Frank Krejci, President and CEO commented: “As expected, this quarter compared unfavorably to a very unusual and strong first quarter in fiscal 2015. During this period last year, our associates worked long hours to deliver a large volume of service parts in a short amount of time to support a recall effort by one of our customers. For STRATTEC, it resulted in a spike in sales, asset utilization, overhead absorption and profits.
Comparing to years prior to fiscal 2015 gives a more normalized view of our progress. We have benefitted from product line expansion, winning new business and the strength of the automotive business, particularly in light truck and sport utility vehicles. While sales have increased, profits have increased, but not at the same rate. We are working on programs to further increase the efficiency of our operations. Earnings also continue to be impacted by our diversification efforts both in STRATTEC Component Solutions and STRATTEC Advanced Logic, which should benefit us in the long run, but are costing us in the short term.
Last quarter through our VAST partnership, we made an investment in Minda-VAST Access Systems. We are excited to have a quality partner like the Spark Minda Group as we begin our journey of collaboration with this investment in India. These efforts will be an important strategic initiative for our future. Not only do we expect to participate in the projected growth within India, but an even greater benefit will be winning additional global programs that are probable with an India presence.
Lastly, we are pleased and proud to have recently received the Supplier of the Year award from Ford Rotunda. It demonstrates the consistency of our efforts in supporting Ford’s service business, since this is the second year in a row that we have won this honor.”
STRATTEC designs, develops, manufactures and markets automotive Access Control Products, including mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings, latches, power sliding side door systems, power lift gate systems, power deck lid systems, door handles and related products. These products are provided to customers in North America, and on a global basis through a unique strategic relationship with WITTE Automotive of Velbert, Germany and ADAC Automotive of Grand Rapids, Michigan. Under this relationship, STRATTEC, WITTE and ADAC market our companies’ products to global customers under the “VAST” brand name. STRATTEC’s history in the automotive business spans over 105 years.
Certain statements contained in this release are “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,” “could,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” and “would.” Such forward-looking statements in this release are inherently subject to many uncertainties in the Company’s operations and business environment. These uncertainties include general economic conditions, in particular, relating to the automotive industry, consumer demand for the Company’s and its customers’ products, competitive and technological developments, customer purchasing actions, changes in warranty provisions and customer product recall policies, foreign currency fluctuations, and costs of operations (including fluctuations in the cost of raw materials). 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 press release 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 release. In addition, such uncertainties and other operational matters are discussed further in the Company’s quarterly and annual filings with the Securities and Exchange Commission.
| STRATTEC SECURITY CORPORATION | ||||||
| Results of Operations | ||||||
| (In Thousands except per share amounts) | ||||||
| (Unaudited) | ||||||
| First Quarter Ended | ||||||
| September 27, 2015 | September 28, 2014 | |||||
| Net Sales | $ | 96,513 | $ | 122,242 | ||
| Cost of Goods Sold | 80,014 | 94,185 | ||||
| Gross Profit | 16,499 | 28,057 | ||||
| Engineering, Selling & | ||||||
| Administrative Expenses | 10,574 | 13,187 | ||||
| Income from Operations | 5,925 | 14,870 | ||||
| Interest Income | 7 | 22 | ||||
| Interest Expense | (21 | ) | (11 | ) | ||
| Other (Expense) Income, Net | (325 | ) | 978 | |||
| Income before Provision for Income | ||||||
| Taxes and Non-Controlling Interest | 5,586 | 15,859 | ||||
| Provision for Income Taxes | 1,754 | 5,519 | ||||
| Net Income | 3,832 | 10,340 | ||||
| Net Income Attributable | ||||||
| to Non-Controlling Interest | (559 | ) | (1,040 | ) | ||
| Net Income Attributable | ||||||
| to STRATTEC SECURITY CORP. | $ | 3,273 | $ | 9,300 | ||
| Earnings Per Share: | ||||||
| Basic | $ | 0.92 | $ | 2.63 | ||
| Diluted | $ | 0.90 | $ | 2.55 | ||
| Average Basic | ||||||
| Shares Outstanding | 3,543 | 3,497 | ||||
| Average Diluted | ||||||
| Shares Outstanding | 3,617 | 3,593 | ||||
| Other | ||||||
| Capital Expenditures | $ | 3,865 | $ | 6,963 | ||
| Depreciation & Amortization | $ | 2,396 | $ | 2,112 | ||
| STRATTEC SECURITY CORPORATION | ||||||
| Condensed Balance Sheet Data | ||||||
| (In Thousands) | ||||||
| September 27, 2015 | June 28, 2015 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 19,967 | $ | 25,695 | ||
| Receivables, net | 56,701 | 58,807 | ||||
| Inventories, net | 42,012 | 34,786 | ||||
| Other current assets | 18,468 | 18,873 | ||||
| Total Current Assets | 137,148 | 138,161 | ||||
| Investment in Joint Ventures | 14,936 | 15,326 | ||||
| Other Long Term Assets | 10,930 | 10,816 | ||||
| Property, Plant and Equipment, Net | 71,614 | 71,126 | ||||
| $ | 234,628 | $ | 235,429 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current Liabilities: | ||||||
| Accounts Payable | $ | 34,050 | $ | 27,838 | ||
| Other | 33,137 | 36,897 | ||||
| Total Current Liabilities | 67,187 | 64,735 | ||||
| Accrued Pension and Post Retirement Obligations | 2,932 | 2,988 | ||||
| Borrowings Under Credit Facility | 6,500 | 10,000 | ||||
| Deferred Income Taxes | 4,574 | 4,595 | ||||
| Other Long-term Liabilities | 757 | 710 | ||||
| Shareholders’ Equity | 306,857 | 303,073 | ||||
| Accumulated Other Comprehensive Loss | (29,203 | ) | (26,859 | ) | ||
| Less: Treasury Stock | (135,897 | ) | (135,902 | ) | ||
| Total STRATTEC SECURITY | ||||||
| CORPORATION Shareholders’ Equity | 141,757 | 140,312 | ||||
| Non-Controlling Interest | 10,921 | 12,089 | ||||
| Total Shareholders’ Equity | 152,678 | 152,401 | ||||
| $ | 234,628 | $ | 235,429 | |||
| STRATTEC SECURITY CORPORATION | ||||||
| Condensed Cash Flow Statement Data | ||||||
| (In Thousands) | ||||||
| (Unaudited) | ||||||
| First Quarter Ended | ||||||
| September 27, 2015 | September 28, 2014 | |||||
| Cash Flows from Operating Activities: | ||||||
| Net Income | $ | 3,832 | $ | 10,340 | ||
| Adjustment to Reconcile Net Income to Net | ||||||
| Cash Provided by Operating Activities: | ||||||
| Depreciation and Amortization | 2,396 | 2,112 | ||||
| Equity Loss (Earnings) in Joint Ventures | 293 | (190 | ) | |||
| Foreign Currency Transaction Gain | (957 | ) | (786 | ) | ||
| Unrealized Loss Peso Forward Contracts | 896 | – | ||||
| Stock Based Compensation Expense | 498 | 389 | ||||
| Change in Operating Assets/Liabilities | (2,982 | ) | (2,755 | ) | ||
| Other, net | 35 | 125 | ||||
| Net Cash Provided by Operating Activities | 4,011 | 9,235 | ||||
| Cash Flows from Investing Activities: | ||||||
| Loan to Joint Ventures | (150 | ) | (215 | ) | ||
| Additions to Property, Plant and Equipment | (3,865 | ) | (6,963 | ) | ||
| Net Cash Used in Investing Activities | (4,015 | ) | (7,178 | ) | ||
| Cash Flow from Financing Activities: | ||||||
| Borrowings on Credit Facility | 1,000 | 1,500 | ||||
| Repayment of Borrowings Under Credit Facility | (4,500 | ) | – | |||
| Dividends Paid to Non-Controlling Interest of Subsidiaries | (1,568 | ) | (882 | ) | ||
| Dividends Paid | (466 | ) | (427 | ) | ||
| Exercise of Stock Options and Employee | ||||||
| Stock Purchases | 483 | 440 | ||||
| Net Cash (Used in) Provided by Financing Activities | (5,051 | ) | 631 | |||
| Foreign Currency Impact on Cash | (673 | ) | 101 | |||
| Net (Decrease) Increase in Cash & Cash Equivalents | (5,728 | ) | 2,789 | |||
| Cash and Cash Equivalents: | ||||||
| Beginning of Period | 25,695 | 19,756 | ||||
| End of Period | $ | 19,967 | $ | 22,545 | ||
CONTACT: Contact: Pat Hansen Senior Vice President and Chief Financial Officer 414-247-3435 www.strattec.com