STRATTEC Security Corporation Reports Fiscal 2018 First Quarter Operating Results

MILWAUKEE, Oct. 26, 2017 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended October 1, 2017.

Net sales for the Company’s fiscal 2018 first quarter ended October 1, 2017 were $102.5 million, compared to net sales of $100.2 million for the prior year quarter ended October 2, 2016. Net income for the current year quarter was $2.5 million, compared to net income of $1.5 million in the prior year quarter. Diluted earnings per share for the current year quarter were $0.67 compared to diluted earnings per share of $0.42 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 1, 2017 October 2, 2016
Fiat Chrysler Automobiles $ 24,102 $ 23,872
General Motors Company 20,338 21,983
Ford Motor Company 15,373 14,953
Tier 1 Customers 15,743 17,838
Commercial and Other OEM Customers 17,867 13,612
Hyundai / Kia 9,037 7,986
TOTAL $ 102,460 $ 100,244

Sales to Fiat Chrysler Automobiles and Ford Motor Company in the current year quarter were essentially flat in comparison to the prior year quarter. The decrease in sales to General Motors Company in the current year quarter was primarily attributed to lower production volumes and content on products we supplied to Opel Automotive GmbH as part of our General Motors business in the prior year quarter. We now supply these products directly to Opel Automotive. Sales to Tier 1 Customers decreased during the current year quarter due to lower sales on our driver controls products. Sales to Commercial and Other OEM Customers during the current year quarter increased in comparison to the prior year quarter mainly due to new customer programs at Honda of America Manufacturing, Inc. These customers, along with the Tier 1 Customers, primarily represent purchasers of vehicle access control products, such as latches, fobs, driver controls and door handles and related components, 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 margins were 13.1 percent in the current year quarter compared to 14.8 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 higher than expected production and expediting costs with new product launches occurring during the 2018 fiscal first quarter, in particular in connection with the opening of our new paint facility in Leon, Mexico, to meet certain customer schedules and due to an unfavorable Mexican Peso to US Dollar exchange rate affecting our operations in Mexico.

Engineering, Selling and Administrative expenses as a percentage of net sales decreased to 9.8 percent in the current year quarter from 11.3 percent in the prior year quarter. Overall, operating expenses were lower in the current year quarter primarily due to utilizing fewer third party vendors for a portion of our new product development work as compared to the prior year quarter.

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 1, October 2,
2017 2016
Equity Earnings of VAST LLC Joint Venture$1,035 $390
Equity Loss of STRATTEC Advanced Logic LLC (9) (328)
Net Foreign Currency Transaction Gain (Loss) 63 (440)
Other 24 198
$1,113 ($180)

Frank Krejci, President and CEO commented:

“We are going through a very busy and exciting time as we launch an unusually large amount of new business over the next year. At the same time, our new plant in Leon, Mexico is just beginning a ramp-up phase. While both efforts put pressure on our earnings now, they are expected to have a positive impact in the years ahead. Throughout this fiscal year our focus will continue to be on improving operating efficiency, reducing costs and discontinuing small customer programs which are not meeting our expectations.
I am very proud of our STRATTEC Power Access Group for recently being highlighted in Automotive News as a finalist for the Pace Award (Premier Automotive Suppliers’ Contribution to Excellence Award). Pace highlights and honors innovative new products for the automotive industry. We received recognition for our overhead lift gate system which we developed for the all-new 2018 Honda Odyssey minivan. It has the advantage of a cleaner look and improved clearance for loading vehicles.”

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 1, 2017 October 2, 2016
Net Sales$102,460 $100,244
Cost of Goods Sold88,997 85,441
Gross Profit13,463 14,803
Engineering, Selling &
Administrative Expenses10,042 11,283
Income from Operations3,421 3,520
Interest Income4 41
Interest Expense(203) (78)
Other Income (Expense), Net 1,113 (180)
Income before Provision for Income
Taxes and Non-Controlling Interest4,335 3,303
Provision for Income Taxes1,066 898
Net Income3,269 2,405
Net Income Attributable
to Non-Controlling Interest(813) (863)
Net Income Attributable
to STRATTEC SECURITY CORP.$ 2,456 $ 1,542
Earnings Per Share:
Basic$0.68 $ 0.43
Diluted$ 0.67 $ 0.42
Average Basic
Shares Outstanding3,611 3,576
Average Diluted
Shares Outstanding3,681 3,661
Capital Expenditures$7,571 $7,446
Depreciation & Amortization$3,095 $2,760

Condensed Balance Sheet Data
(In Thousands)
October 1, 2017 July 2, 2017
Current Assets:
Cash and cash equivalents$8,498 $8,361
Receivables, net 64,016 64,933
Inventories, net 39,395 35,476
Other current assets 21,959 20,235
Total Current Assets 133,868 129,005
Investment in Joint Ventures 18,416 16,840
Other Long Term Assets 16,906 16,278
Property, Plant and Equipment, Net 114,506 111,591
$283,696 $273,714
Current Liabilities:
Accounts Payable$39,908 $39,679
Other 26,286 28,216
Total Current Liabilities 66,194 67,895
Accrued Pension and Post Retirement Obligations 2,455 2,495
Borrowings Under Credit Facility 40,000 30,000
Other Long-term Liabilities 618 610
Shareholders’ Equity 322,131 319,798
Accumulated Other Comprehensive Loss (32,235) (32,888)
Less: Treasury Stock (135,811) (135,822)
154,085 151,008
Non-Controlling Interest 20,344 21,626
Total Shareholders’ Equity 174,429 172,714
$283,696 $273,714

Condensed Cash Flow Statement Data
(In Thousands)
First Quarter Ended
October 1, 2017 October 2, 2016
Cash Flows from Operating Activities:
Net Income $ 3,269 $ 2,405
Adjustment to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization3,095 2,760
Equity Earnings in Joint Ventures (1,026) (62)
Foreign Currency Transaction Gain (Loss)137 (689)
Unrealized Loss Peso Forward Contracts258 899
Stock Based Compensation Expense371 428
Change in Operating Assets/Liabilities (5,745) (540)
Other, net (5) (172)
Net Cash Provided by Operating Activities354 5,029
Cash Flows from Investing Activities:
Loan to Joint Ventures- (850)
Repayments from Loan to Joint Ventures- 75
Additions to Property, Plant and Equipment (7,571) (7,446)
Net Cash Used in Investing Activities(7,571) (8,221)
Cash Flow from Financing Activities:
Borrowings on Credit Facility12,000 8,000
Repayment of Borrowings under Credit Facility(2,000) (4,000)
Contribution from Non-controlling Interest- 2,940
Dividends Paid to Non-Controlling Interest of Subsidiaries(2,017) (1,764)
Dividends Paid(508) (503)
Exercise of Stock Options and Employee
Stock Purchases25 74
Net Cash Provided by Financing Activities7,500 4,747
Foreign Currency Impact on Cash(146) 37
Net Increase in Cash & Cash Equivalents137 1,592
Cash and Cash Equivalents:
Beginning of Period8,361 15,477
End of Period$8,498 $17,069

Contact: Pat Hansen
Senior Vice President and
Chief Financial Officer

Source:Strattec Security Corporation