STRATTEC SECURITY CORPORATION Reports Fiscal 2017 Third Quarter Operating Results

MILWAUKEE, April 27, 2017 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal third quarter ended April 2, 2017.

Net sales for the Company’s third quarter ended April 2, 2017 were $109.7 million, compared to net sales of $94.0 million for the third quarter ended March 27, 2016. Net income for the current year quarterly period was $3.5 million, compared to net income of $1.9 million in the prior year quarter. Diluted earnings per share for the current year quarterly period were $.95 compared to diluted earnings per share of $.52 in the prior year quarter.

For the nine months ended April 2, 2017, the Company’s net sales were $308.9 million compared to net sales of $293.1 million in the prior year nine month period. Net income during the current year nine month period was $5.4 million compared to net income of $8.6 million in the prior year nine month period. Diluted earnings per share were $1.48 for the nine month period ended April 2, 2017 compared to diluted earnings per share of $2.35 during the 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
April 2, 2017 March 27, 2016
Fiat Chrysler Automobiles $27,962 $27,188
General Motors Company 21,883 18,670
Ford Motor Company 16,788 13,860
Tier 1 Customers 19,618 14,198
Commercial and Other OEM Customers 15,237 12,415
Hyundai / Kia 8,218 7,717
TOTAL $109,706 $94,048

Sales to Fiat Chrysler Automobiles in the current year quarter increased slightly over the same period in the prior year. Increased sales to both General Motors Company and Ford Motor Company in the current year quarter related primarily to higher content sales on models for which we supply components, in particular latches and locksets. Sales to Tier 1 Customers increased in the current quarter due to higher production volume on vehicles for which we supply driver control, door handle components and switches. Sales to 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 15.9 percent in the current year quarter compared to 15.4 percent in the prior year quarter. The increase in gross profit margin was attributed to a favorable Mexican Peso to US dollar exchange rate affecting our Mexican operations offset by a less favorable product sales mix and startup costs associated with our new Leon, Mexico facility with production to start in September 2017.

Engineering, Selling and Administrative expenses as a percent of net sales in the current year quarter were 10.8 percent compared to 11.4 percent in the prior year quarter. Overall operating expenses were higher in the current year quarter primarily due to higher new product development costs associated with utilizing third party vendors for a portion of our 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):

April 2, March 27,
2017 2016
Equity Earnings of VAST LLC Joint Venture $451 $211
Equity Loss of STRATTEC Advanced Logic LLC Joint Venture (614) (382)
Net Foreign Currency Realized and Unrealized Transaction Gain 1,296 215
Other 181 29
$1,314 $73

Frank Krejci, President & CEO commented: “After last quarter, where earnings were significantly impacted by a combination of lower sales, manufacturing initiatives, higher engineering expenses to execute new business won, we have seen improvements in all three of those areas. In our current quarter, while continuing to add new capital equipment, incurring start-up expenses related to our new facility in Leon, Mexico and investing in our manufacturing processes, I am pleased that we generated improved operating performance.”

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 Ended Nine Months Ended
April 2, 2017 March 27, 2016 April 2, 2017 March 27, 2016
Net Sales 109,706 $94,048 $308,895 $293,072
Cost of Goods Sold 92,303 79,527 263,392 243,442
Gross Profit 17,403 14,521 45,503 49,630
Engineering, Selling &
Administrative Expenses 11,869 10,680 34,568 32,450
Income from Operations 5,534 3,841 10,935 17,180
Interest Income 52 4 132 19
Interest Expense (100) (51) (276) (95)
Other Income, Net 1,314 73 2,359 76
Income before Provision for Income
Taxes and Non-Controlling Interest 6,800 3,867 13,150 17,180
Provision for Income Taxes 1,752 589 4,060 4,857
Net Income 5,048 3,278 9,090 12,323
Net Income Attributable
to Non-Controlling Interest (1,566) (1,389) (3,668) (3,758)
Net Income Attributable to
CORPORATION 3,482 1,889 5,422 8,565
Earnings Per Share:
Basic $0.97 $0.53 $1.51 $2.39
Diluted $0.95 $0.52 $1.48 $2.35
Average Basic
Shares Outstanding 3,592 3,565 3,586 3,557
Average Diluted
Shares Outstanding 3,671 3,619 3,666 3,620
Capital Expenditures $10,313 $6,244 $26,642 $14,339
Depreciation & Amortization $2,807 $2,528 $8,454 $7,603

Condensed Balance Sheet Data
(In Thousands)
April 2, 2017 July 3, 2016
Current Assets:
Cash and cash equivalents $4,991 $15,477
Receivables, net 70,711 63,726
Inventories, net 38,210 38,683
Other current assets 16,603 16,565
Total Current Assets 130,515 134,451
Investment in Joint Ventures 15,423 14,168
Other Long Term Assets 14,863 8,408
Property, Plant and Equipment, Net 102,677 85,149
$263,478 $242,176
Current Liabilities:
Accounts Payable $40,438 $32,416
Other 29,345 31,799
Total Current Liabilities 69,783 64,215
Accrued Pension and Post Retirement Obligations 2,592 2,728
Borrowings Under Credit Facility 26,000 20,000
Other Long-term Liabilities 743 721
Shareholders’ Equity 318,094 312,876
Accumulated Other Comprehensive Loss (37,992) (37,673)
Less: Treasury Stock (135,835) (135,871)
CORPORATION Shareholders’ Equity 144,267 139,332
Non-Controlling Interest 20,093 15,180
Total Shareholders’ Equity 164,360 154,512
$263,478 $242,176

Condensed Cash Flow Statement Data
(In Thousands)
Third Quarter Ended Nine Months Ended
April 2, 2017 March 27, 2016 April 2, 2017 March 27, 2016
Cash Flows from Operating Activities: $5,048 $3,278 $9,090 $12,323
Net Income
Adjustment to Reconcile Net Income to
Cash Provided by Operating Activities:
Equity Loss (Earnings) in Joint Ventures 163 171 (128) 486
Depreciation and Amortization 2,807 2,528 8,454 7,603
Foreign Currency Transaction Loss (Gain) 722 (474) (1,775) (1,795)
Unrealized (Gain) Loss on Peso
Forward Contracts (2,710) (267) (1,147) 600
Stock Based Compensation Expense 362 377 1,154 1,247
Change in Operating Assets/Liabilities (4,241) (371) (3,348) (12,002)
Other, net 5 (44) (143) (44)
Net Cash Provided by Operating Activities 2,156 5,198 12,157 8,418
Cash Flows from Investing Activities:
Investment in Joint Ventures (150) (1,500) (250) (1,720)
Loan to Joint Venture (525) - (1,925) (150)
Repayment of Loan to Joint Venture - - 75 -
Additions to Property, Plant and Equipment (10,313) (6,244) (26,642) (14,339)
Proceeds from Sale of Property, Plant
and Equipment - 76 - 76
Net Cash Used in Investing Activities (10,988) (7,668) (28,742) (16,133)
Cash Flows from Financing Activities:
Borrowings Under Credit Facility 9,000 15,000 30,000 20,500
Repayment of Borrowings Under Credit Facility (3,000) (7,000) (24,000) (12,500)
Dividends Paid to Non-Controlling
Interests of Subsidiaries - - (1,764) (1,568)
Dividends Paid (503) (465) (1,509) (1,397)
Contributions from Non-Controlling
Interest of Subsidiaries - - 2,940 -
Exercise of Stock Options and
Employee Stock Purchases 27 25 187 609
Net Cash Provided by Financing Activities 5,523 7,560 5,853 5,644
Effect of Foreign Currency Fluctuations on Cash 109 145 245 (466)
Net (Decrease) Increase in Cash & Cash Equivalents (3,199) 5,235 (10,486) (2,537)
Cash and Cash Equivalents:
Beginning of Period 8,190 17,923 15,477 25,695
End of Period $4,991 $23,158 $4,991 $23,158

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