STRATTEC SECURITY CORPORATION Reports Fiscal 2016 Third Quarter Operating Results

MILWAUKEE, April 21, 2016 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal third quarter ended March 27, 2016.

Net sales for the Company’s third quarter ended March 27, 2016 were $94.0 million, compared to net sales of $88.8 million for the third quarter ended March 29, 2015. Net income for the current year quarterly period was $1.9 million, compared to net income of $4.4 million in the prior year quarter. Diluted earnings per share for the current year quarterly period were $.52 compared to diluted earnings per share of $1.20 in the prior year quarter.

For the nine months ended March 27, 2016, the Company’s net sales were $293.1 million compared to net sales of $313.0 million in the prior year nine month period. Net income during the current year nine month period was $8.6 million compared to net income of $19.5 million in the prior year nine month period. Diluted earnings per share were $2.35 for the nine month period ended March 27, 2016 compared to diluted earnings per share of $5.33 during the nine month period ended March 29, 2015. The lower net sales and net income for the year to date period was anticipated and was primarily attributed to a $34 million decrease in incremental service parts sales to General Motors to support a recall campaign for service parts that were shipped during the prior year period. Those incremental sales did not continue during the current year nine month period ended March 27, 2016.

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
March 27, 2016March 29, 2015
Fiat Chrysler Automobiles$ 27,188 $ 26,151
General Motors Company 18,670 17,015
Ford Motor Company 13,860 10,951
Tier 1 Customers 14,198 18,637
Commercial and Other OEM Customers 12,415 10,380
Hyundai / Kia 7,717 5,683
TOTAL$ 94,048 $ 88,817

Sales to Fiat Chrysler Automobiles in the current year quarter increased slightly. During the current year quarter, Fiat Chrysler Automobiles temporarily shutdown production at its Sterling Heights, Michigan and Toluca, Mexico assembly plants which are primarily responsible for production of the Chrysler 200 and Dodge Journey. This shutdown reduced our sales by $4.5 million during the current year quarter. During the prior year quarter, Fiat Chrysler implemented a temporary shutdown of its Windsor, Canada assembly plant to re-tool for production of the new Chrysler Pacifica minivan. The negative effect of that shutdown last year was partially offset by increased service sales during the prior year quarter in comparison to the current year quarter. These two items reflected a reduction in sales to Fiat Chrysler Automobiles between the current year quarter and the prior year quarter of $6.5 million. Increased sales to General Motors Company in the current year quarter related primarily to a sales concession recorded during the prior year quarter. Increased sales to Ford Motor Company in the current year quarter were attributed primarily to higher vehicle production volumes and content on models for which we supply components, in particular for components we supply for F-150 pick-up trucks. Sales to Tier 1 Customers decreased in the current quarter due to lower production volume on passenger cars for which we supply driver control and door handle components. Commercial and Other OEM Customers during the current year quarter increased in comparison to the prior year quarter. These customers primarily represent purchasers of vehicle access control products, such as latches and fobs, that have been developed in recent years to complement our historic core business of locks and keys. The increased sales to Hyundai / Kia in the current year quarter were principally due to higher vehicle production volumes on the Kia Sedona minivan for which we supply components.

Gross profit margins were 15.4 percent in the current year quarter compared to 17.7 percent in the prior year quarter. The decrease in gross profit margin was attributed to a combination of product sales mix, higher costs associated with diversifying our product portfolio and agreed upon customer price reductions that became effective at the start of the new calendar year. These negative items were offset by a favorable Mexican Peso to US dollar exchange rate affecting our Mexican operations.

Engineering, Selling and Administrative expenses as a percent of net sales in the current year quarter were 11.4% compared to 11.1% in the prior year quarter. Overall operating expenses were higher in the current year quarter primarily due to new product development costs associated with utilizing third party vendors for a portion of the development work.

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

March 27,March 29,
2016 2015
Equity Earnings of VAST LLC Joint Venture$ 211 $ 301
Equity Loss of STRATTEC Advanced Logic (382) (508)
Net Foreign Currency Realized and Unrealized Transaction Gain 215 583
Other 29 115
$ 73 $ 491

During the current year quarter STRATTEC contributed $3.0 million to its Defined Benefit Pension Trust to improve the overall funded status of the Plan.

Frank Krejci, President & CEO commented: “While overall sales levels remained strong, profits were impacted by product mix and following our strategy for long term growth. We are spending money now on design expenses for programs which we are excited to have recently been awarded. This current activity will be very positive for earnings and strategic growth in the future. Attractive returns are also expected from recent investments to improve our efficiency and the quality processes within our operations. Lastly, our efforts to diversify continue to progress, but they are not yet contributing to the bottom line.”

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 each company’s 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 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,” “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 fluctuations in our costs of operation (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)
Third Quarter EndedNine Months Ended
March 27, 2016March 29, 2015March 27, 2016March 29, 2015
Net Sales$ 94,048 $ 88,817 $ 293,072 $ 313,049
Cost of Goods Sold 79,527 73,066 243,442 250,789
Gross Profit 14,521 15,751 49,630 62,260
Engineering, Selling & Administrative Expenses 10,680 9,847 32,450 33,524
Income from Operations 3,841 5,904 17,180 28,736
Interest Income 4 61 19 126
Interest Expense (51) (17) (95) (39)
Other Income, Net 73 491 76 3,171
Income before Provision for Income Taxes and Non-Controlling Interest 3,867 6,439 17,180 31,994
Provision for Income Taxes 589 1,064 4,857 9,378
Net Income 3,278 5,375 12,323 22,616
Net Income Attributable to Non-Controlling Interest (1,389) (999) (3,758) (3,162)
Net Income Attributable to STRATTEC SECURITY CORPORATION$ 1,889 $ 4,376 $ 8,565 $ 19,454
Earnings Per Share:
Basic$ 0.53 $ 1.23 $ 2.39 $ 5.47
Diluted$ 0.52 $ 1.20 $ 2.35 $ 5.33
Average Basic Shares Outstanding 3,565 3,520 3,557 3,511
Average Diluted Shares Outstanding 3,619 3,603 3,620 3,603
Capital Expenditures$ 6,244 $ 4,696 $ 14,339 $ 21,651
Depreciation & Amortization$ 2,528 $ 2,206 $ 7,603 $ 6,467

Condensed Balance Sheet Data
(In Thousands)
March 27, 2016June 28, 2015
Current Assets:
Cash and cash equivalents$ 23,158 $ 25,695
Receivables, net 55,606 58,807
Inventories, net 41,713 34,786
Other current assets 19,908 18,873
Total Current Assets 140,385 138,161
Investment in Joint Ventures 15,365 15,326
Other Long Term Assets 14,527 10,816
Property, Plant and Equipment, Net 77,009 71,126
$ 247,286 $ 235,429
Current Liabilities:
Accounts Payable$ 29,400 $ 27,838
Other 30,707 36,897
Total Current Liabilities 60,107 64,735
Accrued Pension and Post Retirement Obligations 2,803 2,988
Borrowings Under Credit Facility 18,000 10,000
Deferred Income Taxes 5,077 4,595
Other Long-term Liabilities 731 710
Shareholders’ Equity 312,080 303,073
Accumulated Other Comprehensive Loss (29,686) (26,859)
Less: Treasury Stock (135,883) (135,902)
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity 146,511 140,312
Non-Controlling Interest 14,057 12,089
Total Shareholders’ Equity 160,568 152,401
$ 247,286 $ 235,429

Condensed Cash Flow Statement Data
(In Thousands)
Third Quarter EndedNine Months Ended
March 27, 2016March 29, 2015March 27, 2016March 29, 2015
Cash Flows from Operating Activities:
Net Income$ 3,278 $ 5,375 $ 12,323 $ 22,616
Adjustment to Reconcile Net Income to Cash Provided by Operating Activities:
Equity Loss in Joint Ventures 171 207 486 138
Depreciation and Amortization 2,528 2,206 7,603 6,467
Foreign Currency Transaction Gain (474) (583) (1,795) (3,004)
Unrealized (Gain) Loss on Peso Forward Contractors (267) - 600 -
Stock Based Compensation Expense 377 313 1,247 1,013
Change in Operating Assets/Liabilities (371) (1,622) (12,002) (3,807)
Other, net (44) 15 (44) 172
Net Cash Provided by Operating Activities 5,198 5,911 8,418 23,595
Cash Flows from Investing Activities:
Investment in Joint Ventures (1,500) - (1,720) (384)
Additions to Property, Plant and Equipment (6,244) (4,696) (14,339) (21,651)
Proceeds from Sale of Property, Plant and Equipment 76 - 76 -
Other - - (150) (215)
Net Cash Used in Investing Activities (7,668) (4,696) (16,133) (22,250)
Cash Flows from Financing Activities:
Borrowings Under Credit Facility 15,000 7,500 20,500 9,000
Repayment of Borrowings Under Credit Facility (7,000) - (12,500) (500)
Dividends Paid to Non-Controlling Interests of Subsidiaries - - (1,568) (882)
Dividends Paid (465) (428) (1,397) (1,282)
Exercise of Stock Options and Employee Stock Purchases 25 20 609 734
Net Cash Provided by Financing Activities 7,560 7,092 5,644 7,070
Effect of Foreign Currency Fluctuations on Cash 145 (115) (466) (136)
Net Increase in Cash & Cash Equivalents 5,235 8,192 (2,537) 8,279
Cash and Cash Equivalents:
Beginning of Period 17,923 19,843 25,695 19,756
End of Period$ 23,158 $ 28,035 $ 23,158 $ 28,035

Contact: Pat Hansen Senior Vice President and Chief Financial Officer 414-247-3435