STRATTEC SECURITY CORPORATION Reports Fiscal 2017 First Quarter Operating Results

MILWAUKEE, Oct. 27, 2016 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended October 2, 2016.

Net sales for the Company’s fiscal 2017 first quarter ended October 2, 2016 were $100.2 million, compared to net sales of $96.5 million for the prior year quarter ended September 27, 2015. Net income for the current year quarter was $1.5 million, compared to net income of $3.3 million in the prior year quarter. Diluted earnings per share for the current year quarter were $0.42 compared to diluted earnings per share of $0.90 in 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
October 2, 2016 September 27, 2015
Fiat Chrysler Automobiles$23,872 $28,528
General Motors Company 21,983 18,789
Ford Motor Company 14,953 13,616
Tier 1 Customers 17,838 17,682
Commercial and Other OEM Customers 13,612 10,987
Hyundai / Kia 7,986 6,911
TOTAL $100,244 $96,513

The decreased sales to Fiat Chrysler Automobiles in the current year quarter were primarily due to lower customer vehicle production volume and content in particular on the Chrysler 200 which is to be discontinued in December 2016 and content on the new Chrysler Pacifica Minivan. The increase in sales to General Motors Company in the current year quarter was primarily attributed to higher production volumes and content on products we supply. 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 were flat in comparison to the prior year quarter. Sales to Commercial and Other OEM Customers during the current year quarter increased in comparison to the prior year quarter primarily due to new customer programs. These customers, along with the Tier 1 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 increase in sales to Hyundai / Kia in the current year quarter was principally due to higher levels of production on vehicles for which we supply components.

The gross profit margin was 14.6 percent in the current year quarter compared to 17.1 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 agreed upon customer price reductions that became effective at the start of the 2016 calendar year, higher than expected production and expediting costs to meet certain customer schedules which were offset partially by a favorable Mexican Peso to US Dollar exchange rate affecting our operations in Mexico.

Engineering, Selling and Administrative expenses as a percentage of net sales increased to 11.3 percent in the current year quarter from 11.0 percent 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 offset by lower bonus provisions recorded during the current year quarter compared to the prior year quarter for bonuses accrued under our incentive bonus plans.

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

October 2, September 27,
2016 2015
Equity Earnings of VAST LLC Joint Venture$390 $133
Equity Loss of STRATTEC Advanced Logic LLC (328) (426)
Net Foreign Currency Transaction (Loss) Gain (440) 61
Other 483 (93)
$105 $(325)

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

Frank Krejci, President and CEO commented: “The results of this last quarter have been impacted by both a combination of business challenges and investments in the future. We are focused on finding ways to reduce costs, improve quality of our products and capture efficiencies to offset price reductions to customers. In addition, we are investing in the future through product development costs necessary to support a record amount of new business won last year, construction of our new plant in Leon, Mexico driven by incremental business awards and adding people to implement process improvements.”

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 100 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
October 2, 2016 September 27, 2015
Net Sales$100,244 $96,513
Cost of Goods Sold 85,639 80,014
Gross Profit 14,605 16,499
Engineering, Selling &
Administrative Expenses 11,370 10,574
Income from Operations 3,235 5,925
Interest Income 41 7
Interest Expense (78) (21)
Other Income (Expense), Net 105 (325)
Income before Provision for Income
Taxes and Non-Controlling Interest 3,303 5,586
Provision for Income Taxes 898 1,754
Net Income 2,405 3,832
Net Income Attributable
to Non-Controlling Interest (863) (559)
Net Income Attributable
Earnings Per Share:
Basic$0.43 $0.92
Diluted$0.42 $0.90
Average Basic
Shares Outstanding 3,576 3,543
Average Diluted
Shares Outstanding 3,661 3,617
Capital Expenditures$7,446 $3,865
Depreciation & Amortization$2,760 $2,396

Condensed Balance Sheet Data
(In Thousands)
October 2, 2016 July 3, 2016
Current Assets:
Cash and cash equivalents$17,069 $15,477
Receivables, net 68,060 63,726
Inventories, net 38,686 38,683
Other current assets 14,985 16,565
Total Current Assets 138,800 134,451
Investment in Joint Ventures 14,419 14,168
Other Long Term Assets 11,413 8,408
Property, Plant and Equipment, Net 86,984 85,149
$251,616 $242,176
Current Liabilities:
Accounts Payable$37,008 $32,416
Other 30,057 31,799
Total Current Liabilities 67,065 64,215
Accrued Pension and Post Retirement Obligations 2,682 2,728
Borrowings Under Credit Facility 24,000 20,000
Other Long-term Liabilities 925 721
Shareholders’ Equity 314,406 312,876
Accumulated Other Comprehensive Loss (38,711) (37,673)
Less: Treasury Stock (135,860) (135,871)
CORPORATION Shareholders’ Equity 139,835 139,332
Non-Controlling Interest 17,109 15,180
Total Shareholders’ Equity 156,944 154,512
$251,616 $242,176

Condensed Cash Flow Statement Data
(In Thousands)
First Quarter Ended
October 2, 2016 September 27, 2015
Cash Flows from Operating Activities:
Net Income$2,405 $3,832
Adjustment to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 2,760 2,396
Equity Loss (Earnings) in Joint Ventures (62) 293
Foreign Currency Transaction Gain (689) (957)
Unrealized Loss Peso Forward Contracts 899 896
Stock Based Compensation Expense 428 498
Change in Operating Assets/Liabilities (540) (2,982)
Other, net (172) 35
Net Cash Provided by Operating Activities 5,029 4,011
Cash Flows from Investing Activities:
Loan to Joint Ventures (850) (150)
Repayments from Loan to Joint Ventures 75 -
Additions to Property, Plant and Equipment (7,446) (3,865)
Net Cash Used in Investing Activities (8,221) (4,015)
Cash Flow from Financing Activities:
Borrowings on Credit Facility 8,000 1,000
Repayment of Borrowings under Credit Facility (4,000) (4,500)
Contribution from Non-controlling Interest 2,940 -
Dividends Paid to Non-Controlling Interest of Subsidiaries (1,764) (1,568)
Dividends Paid (503) (466)
Exercise of Stock Options and Employee
Stock Purchases 74 483
Net Cash Provided by (Used in) Financing Activities 4,747 (5,051)
Foreign Currency Impact on Cash 37 (673)
Net Increase (Decrease) in Cash & Cash Equivalents 1,592 (5,728)
Cash and Cash Equivalents:
Beginning of Period 15,477 25,695
End of Period$17,069 $19,967

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