STRATTEC SECURITY CORPORATION Reports Fiscal 2017 Second Quarter Operating Results

STRATTEC SECURITY CORPORATION Reports Fiscal 2017 Second Quarter Operating Results

MILWAUKEE, Jan. 26, 2017 (GLOBE NEWSWIRE) — STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal second quarter ended January 1, 2017.

Net sales for the Company’s fiscal second quarter ended January 1, 2017 were $98.9 million, compared to net sales of $102.5 million for the prior year quarter ended December 27, 2015.  Net income for the current year quarter was $398,000, compared to net income of $3.4 million in the prior year quarter.  Diluted earnings per share for the current year quarter were $0.11 compared to diluted earnings per share of $0.93 in the prior year quarter. 

For the six months ended January 1, 2017, net sales were $199.2 million compared to net sales of $199.0 million during the prior year six month period. Net income during the current year six month period was $1.9 million compared to net income of $6.7 million during the prior year six month period. Diluted earnings per share were $0.53 for the current year six month period ended January 1, 2017 compared to diluted earnings per share of $1.83 for the prior year six month period ended December 27, 2015.

Net sales to each of our customers or customer groups in the current year quarter and prior year quarter were as follows (in millions):
                            

  Three Months Ended
    January 1, 2017     December 27, 2015
           
Fiat Chrysler Automobiles $ 22.8   $ 31.8
General Motors Company   22.2     20.7
Ford Motor Company   14.3     14.1
Tier 1 Customers   17.3     15.7
Commercial and Other OEM Customers   13.6     11.5
Hyundai / Kia   8.7     8.7
TOTAL $ 98.9   $ 102.5

The sales to Fiat Chrysler Automobiles in the current year quarter decreased due to lower customer vehicle production volume and content on components we supply, in particular on the Chrysler 200 which was discontinued during December 2016 and lower volume on the new Pacifica minivan.

The increase in sales to General Motors Company in the current year quarter was primarily attributed to higher customer vehicle production volume. Sales to Ford Motor Company and Hyundai/Kia in the current year quarter were flat compared to the prior year quarter.  Sales to Tier 1 Customers and Commercial and Other OEM Customers during the current year quarter each increased 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 gross profit margin was 13.6 percent in the current year quarter compared to 18.2 percent in the prior year quarter.  The decrease gross profit margin in the current year quarter compared to the prior year quarter was attributed to agreed upon customer price reductions that became effective at the start of the 2016 calendar year, a less favorable product sales mix, additional costs incurred to improve quality of our production processes and start up of our new Leon, Mexico facility. The above items were partially offset by a more favorable Mexican Peso to U.S. Dollar exchange rate affecting our operations in Mexico.

Engineering, Selling and Administrative expenses as a percentage of net sales increased to 11.4 percent in the current year quarter from 10.9 percent in the prior year quarter. Overall, expenses were relatively flat in the current year quarter compared to the prior year quarter.

Included in “Other Income, Net” in the current year quarter compared to the prior year quarter were the following items (in thousands of dollars):  

  January 1,   December 27,
   2017     2015 
       
Equity Earnings of VAST LLC Joint Venture $ 642     $ 345  
Equity Loss of STRATTEC Advanced Logic LLC Joint Venture   (413 )     (367 )
Net Foreign Currency Transaction Gain   568       215  
Other   143       135  
  $ 940     $ 328  

The higher income tax provision in the current year quarter compared to the prior year quarter  related to a dividend paid from our Mexican subsidiaries to our U.S. parent company that increased our income tax expense by $424,000 in the current year quarter and reduced diluted earnings per share by $0.12.

During the current year quarter, STRATTEC contributed $2.0 million to its Defined Benefit Pension Trust to improve the funded status of the Plan.

Frank Krejci, President and CEO commented:  “After winning record amounts of new business last fiscal year, we are faced with additional costs in executing new programs which have a negative impact now, but should create positive results when those programs go into production. We are also actively adding new capital equipment, building a new facility in Leon, Mexico, plus investing in people and manufacturing processes to improve quality which will benefit us in the future. Earnings are currently being impacted for these reasons.”

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)
 
    Second Quarter Ended Six Months Ended
    January 1, 2017   December 27, 2015   January 1, 2017   December 27, 2015
                 
Net Sales   $ 98,945     $ 102,511     $ 199,189     $ 199,024  
                 
Cost of Goods Sold     85,450       83,901       171,089       163,915  
                 
Gross Profit     13,495       18,610       28,100       35,109  
                 
Engineering, Selling & Administrative Expenses     11,329       11,196       22,699       21,770  
                 
Income from Operations     2,166       7,414       5,401       13,339  
                 
Interest Income     39       8       80       15  
                 
Interest Expense     (98 )     (23 )     (176 )     (44 )
                 
Other Income, Net     940       328       1,045       3  
                 
Income Before Provision for Income Taxes and Non-Controlling Interest     3,047       7,727       6,350       13,313  
                 
Provision for Income Taxes     1,410       2,514       2,308       4,268  
                 
Net Income     1,637       5,213       4,042       9,045  
                 
Net Income Attributable to Non-Controlling Interest    (1,239 )    (1,810 )   (2,102 )    (2,369 )
                 
Net Income Attributable to STRATTEC SECURITYCORPORATION   $ 398     $ 3,403     $ 1,940     $ 6,676  
                 
Earnings Per Share:                
Basic   $ 0.11     $ 0.95     $ 0.54     $ 1.87  
Diluted   $ 0.11     $ 0.93     $ 0.53     $ 1.83  
                 
Average Basic                
Shares Outstanding     3,589       3,563       3,583       3,553  
                 
Average Diluted                
Shares Outstanding     3,667       3,624       3,664       3,621  
                 
Other                
Capital Expenditures   $ 8,883     $ 4,230     $ 16,329     $ 8,095  
Depreciation & Amortization   $ 2,887     $ 2,679     $ 5,647     $ 5,075  

 

STRATTEC SECURITY CORPORATION
 
Condensed Balance Sheet Data
(In Thousands)
         
    January 1, 2017   July 3, 2016
    (Unaudited)    
ASSETS        
Current Assets:        
Cash and cash equivalents   $ 8,190     $ 15,477  
Receivables, net     59,393       63,726  
Inventories, net     39,086       38,683  
Other current assets     14,966       16,565  
Total Current Assets     121,635       134,451  
Investment in Joint Ventures     14,713       14,168  
Other Long Term Assets     13,113       8,408  
Property, Plant and Equipment, Net     91,141       85,149  
    $ 240,602     $ 242,176  
                 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current Liabilities:        
Accounts Payable   $ 32,294     $ 32,416  
Other     28,857       31,799  
Total Current Liabilities     61,151       64,215  
Accrued Pension and Post Retirement Obligations     2,661       2,728  
Borrowings Under Credit Facility     20,000       20,000  
Other Long-term Liabilities     1,195       721  
Shareholders’ Equity     314,742       312,876  
Accumulated Other Comprehensive Loss     (40,752 )     (37,673 )
Less: Treasury Stock     (135,850 )     (135,871 )
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity     138,140       139,332  
Non-Controlling Interest     17,455       15,180  
Total Shareholders’ Equity     155,595       154,512  
    $ 240,602     $ 242,176  

 

STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)
         
  Second Quarter Ended Six Months Ended
  January 1, 2017   December 27, 2015   January 1, 2017   December 27, 2015
                     
Cash Flows from Operating Activities:                    
Net Income $ 1,637     $ 5,213     $ 4,042     $ 9,045  
Adjustments to Reconcile Net Income to        
Cash Provided by (Used In) Operating Activities:        
Equity (Earnings) Loss in Joint Ventures   (229 )     22       (291 )     315  
Depreciation and Amortization   2,887       2,679       5,647       5,075  
Foreign Currency Transaction Gain   (1,808 )     (364 )     (2,497 )     (1,321 )
Unrealized Loss (Gain) on Peso Forward Contracts   664       (29 )     1,563       867  
Stock Based Compensation Expense   364       372       792       870  
Change in Operating Assets/Liabilities   1,433       (8,649 )     893       (11,631 )
Other, net   24       (35 )     (148 )      
                       
Net Cash Provided by (Used In) Operating Activities   4,972       (791 )     10,001       3,220  
         
Cash Flows from Investing Activities:        
Investment in Joint Ventures   (100 )     (220 )     (100 )     (220 )
Loan to Joint Venture   (550 )           (1,400 )     (150 )
Repayment of Loan to Joint Venture               75        
Additions to Property, Plant and Equipment   (8,883 )     (4,230 )     (16,329 )     (8,095 )
Net Cash Used in Investing Activities   (9,533 )     (4,450 )     (17,754 )     (8,465 )
         
Cash Flow from Financing Activities:        
Borrowings on Line of Credit Facility   13,000       4,500       21,000       5,500  
Payments on Line of Credit Facility   (17,000 )     (1,000 )     (21,000 )     (5,500 )
Dividends Paid to Non-Controlling Interest of Subsidiary               (1,764 )     (1,568 )
Contribution from Non-Controlling Interest               2,940        
Dividends Paid   (503 )     (466 )     (1,006 )     (932 )
Exercise of Stock Options and Employee Stock Purchases   86       101       160       584  
                       
Net Cash (Used in) Provided by Financing   (4,417 )     3,135       330       (1,916 )
         
Effect of Foreign Currency Fluctuations on Cash   99       62       136       (611 )
                       
Net Decrease in Cash & Cash Equivalents   (8,879 )     (2,044 )     (7,287 )     (7,772 )
         
Cash and Cash Equivalents:        
Beginning of Period   17,069       19,967       15,477       25,695  
End of Period $ 8,190     $ 17,923     $ 8,190     $ 17,923  

 

CONTACT: Contact:  Pat Hansen
Senior Vice President and
Chief Financial Officer
414-247-3435
www.strattec.com