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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  
                                 


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

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STRATTEC SECURITY CORPORATION