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.

 
STRATTEC SECURITY CORPORATION
Results of Operations
(In Thousands except per share amounts)
(Unaudited)
 
 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        
STRATTEC SECURITY        
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 
     
Other  
Capital Expenditures $10,313  $6,244  $26,642  $14,339 
Depreciation & Amortization $2,807  $2,528  $8,454  $7,603 
                 


STRATTEC SECURITY CORPORATION
 
Condensed Balance Sheet Data
(In Thousands)
 
 April 2, 2017 July 3, 2016
  (Unaudited) 
 
ASSETS 
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 
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
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)
Total STRATTEC SECURITY    
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 
        


STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)
 
 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 
                 



            

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