STRATTEC Security Corporation Reports Fiscal 2016 First Quarter Operating Results

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.

Results of Operations
(In Thousands except per share amounts)
    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  
Capital Expenditures 3,865   $ 6,963  
Depreciation & Amortization 2,396    $ 2,112  


Condensed Balance Sheet Data  
(In Thousands)  
  September 27, 2015   June 28, 2015
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  
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
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  


Condensed Cash Flow Statement Data
(In Thousands)
  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