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

Source:STRATTEC SECURITY CORPORATION