UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 26, 2018
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STRATTEC SECURITY CORPORATION
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(Exact name of registrant as specified in charter)
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Wisconsin
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(State or other jurisdiction of incorporation)
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0-25150
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39-1804239
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(Commission File Number)
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(I.R.S. Employer I.D. Number)
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3333 West Good Hope Road
Milwaukee, WI
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53209
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(Address of Principal Executive Offices)
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(Zip Code)
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(414) 247-3333
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(Registrant's telephone number; including area code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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| ☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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| ☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition.
On April 26, 2018, STRATTEC SECURITY CORPORATION issued a press release (the "Press Release") announcing results for the fiscal third quarter ended April 1, 2018. A copy of the Press Release is attached as Exhibit 99.1 to this report. The attached Exhibit 99.1 is furnished pursuant to Item 2.02 of Form 8-K.
The information in this Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.
Section 9 - Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 ‑‑ Press Release of STRATTEC SECURITY CORPORATION, issued April 26, 2018.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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STRATTEC SECURITY CORPORATION
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Date: April 26, 2018
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By:
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/s/ Patrick J. Hansen
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Patrick J. Hansen, Senior Vice President and
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Chief Financial Officer
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Exhibit 99.1
FOR RELEASE AT 3:00 PM CST
Contact: Pat Hansen
Senior Vice President and
Chief Financial Officer
414-247-3435
www.strattec.com
STRATTEC SECURITY CORPORATION
REPORTS FISCAL 2018 THIRD QUARTER OPERATING RESULTS
Milwaukee, Wisconsin – April 26, 2018 -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal third quarter ended April 1, 2018.
Net sales for the Company’s third quarter ended April 1, 2018 were $116.8 million, compared to net sales of $109.7 million for the third quarter ended April 2, 2017. Net income for the current year quarterly period was $3.0 million, compared to net income of $3.5 million in the prior year quarter. Diluted earnings per share for the current year quarterly period were $.80 compared to diluted earnings per share of $.95 in the prior year quarter.
For the nine months ended April 1, 2018, the Company’s net sales were $322.5 million compared to net sales of $308.9 million in the prior year nine month period. Net income during the current year nine month period was $8.3 million compared to net income of $5.4 million in the prior year nine month period. Diluted earnings per share were $2.24 for the nine month period ended April 1, 2018 compared to diluted earnings per share of $1.48 during the nine month period ended April 2, 2017.
Net sales to each of our customers or customer groups in the current year quarter and prior year quarter were as follows (in thousands):
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Three Months Ended
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||||||||
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April 1, 2018
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April 2, 2017
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|||||||
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Fiat Chrysler Automobiles
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$
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31,282 | $ |
27,962
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||||
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General Motors Company
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22,417
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21,883
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||||||
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Ford Motor Company
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18,062
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16,788
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||||||
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Tier 1 Customers
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19,027
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19,618
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Commercial and Other OEM Customers
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21,714
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15,237
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||||||
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Hyundai / Kia
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4,321
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8,218
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||||||
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TOTAL
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$
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116,823
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$
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109,706
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||||
Sales to Fiat Chrysler Automobiles in the current year quarter increased over the same period in the prior year quarter due to a combination of higher vehicle production volumes and product content on the components we supply. The increase in sales to General Motors Company in the current year quarter compared to the prior year quarter related primarily to higher content sales on models for which we supply components, in particular latches. In the prior year quarter we supplied Opel Automotive GmbH as part of our General Motors business. We now supply these products directly to Opel Automotive which sales are now included under “Commercial and Other OEM Customers” above. Sales to Ford Motor Company increased in the current year quarter due to a combination of higher production volumes and content on components we supply compared to the prior year quarter. Sales to Tier 1 Customers decreased in the current year quarter due to lower sales on our driver control 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. and Volkswagen. 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 that we have developed in recent years to complement our historic core business of locks and keys. The decreased sales to Hyundai / Kia in the current year quarter were principally due to lower levels of production on vehicles for which we supply components.
Gross profit margins were 13.0 percent in the current year quarter compared to 16.0 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 a continuation from our previous quarters of higher production and expediting costs associated with new product launches occurring in fiscal year 2018, in particular in connection with the start-up of our new door handle paint facility in Leon, Mexico. Also, negatively impacting gross margins in the current quarter were an unfavorable Mexican Peso to US dollar exchange rate affecting our operations in Mexico.
Engineering, Selling and Administrative expenses as a percent of net sales in the current year quarter were 9.3 percent compared to 10.7 percent in the prior year quarter. The reduction in overall operating expenses in the current year quarter was primarily due to lower outside expenditures on 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):
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April 1,
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April 2,
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|||||||
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2018
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2017
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|||||||
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Equity Earnings of VAST LLC Joint Venture
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$
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703
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$
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451
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||||
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Equity Loss of STRATTEC Advanced Logic LLC Joint Venture
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(84
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)
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(614
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)
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||||
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Net Foreign Currency Realized and Unrealized Transaction Gain
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122
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1,296
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||||||
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Other
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36
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(104
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)
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|||||
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$
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777
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$
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1,029
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|||||
The decrease in Other Income, Net in the current year quarter was primarily related to lower net foreign currency gains, which was partially offset by lower losses from our STRATTEC Advanced Logic LLC joint venture incurred in the current year quarter as we continue to wind down the operation of this joint venture.
Frank Krejci, President & CEO commented: “Due to the added costs of launching significant amounts of new business and the production start-up expenses related to our new Leon, Mexico facility for painting and assembling door handles we continue to feel the negative impacts on our profitability. We believe these impacts will continue over the next two quarters before these efforts will positively contribute to our results.
STRATTEC was recently spotlighted in the automotive industry when we won the very prestigious Automotive News PACE Award for innovation. More can be seen at www.autonews.com/pace. Since we were competing with many much larger companies, we are extremely proud of our team for designing a unique power door lifting system, offering many advantages over competitors’ products. This product is currently featured on the new Honda Odyssey”.
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 Automotive Group” brand name. STRATTEC’s history in the automotive business spans over 110 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
Condensed Results of Operations
(In Thousands except per share amounts)
(Unaudited)
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Third Quarter Ended
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Nine Months Ended
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|||||||||||||||
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April 1, 2018
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April 2, 2017
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April 1, 2018
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April 2, 2017
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Net Sales
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$
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116,823
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$
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109,706
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$
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322,465
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$
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308,895
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||||||||
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Cost of Goods Sold
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101,626
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92,105
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281,159
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262,797
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||||||||||||
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Gross Profit
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15,197
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17,601
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41,306
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46,098
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||||||||||||
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Engineering, Selling & Administrative Expenses
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10,839
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11,782
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31,033
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34,308
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||||||||||||
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Income from Operations
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4,358
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5,819
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10,273
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11,790
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||||||||||||
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Interest Income
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1
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52
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8
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132
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||||||||||||
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Interest Expense
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(305
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)
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(100
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)
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(761
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)
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(276
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)
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||||||||
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Other Income, Net
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777
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1,029
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3,472
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1,504
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||||||||||||
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Income before Provision for Income Taxes and Non-Controlling Interest
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4,831
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6,800
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12,992
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13,150
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||||||||||||
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Provision for Income Taxes
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899
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1,752
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1,956
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4,060
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||||||||||||
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Net Income
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3,932
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5,048
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11,036
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9,090
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||||||||||||
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Net Income Attributable to Non-Controlling Interest
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(963
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)
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(1,566
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)
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(2,729
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)
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(3,668
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)
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||||||||
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Net Income Attributable to STRATTEC SECURITY CORPORATION
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$
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2,969
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$
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3,482
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$
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8,307
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$
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5,422
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||||||||
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Earnings Per Share:
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||||||||||||||||
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Basic
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$
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0.82
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$
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0.97
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$
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2.29
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$
|
1.51
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||||||||
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Diluted
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$
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0.80
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$
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0.95
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$
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2.24
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$
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1.48
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||||||||
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Average Basic Shares Outstanding
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3,634
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3,592
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3,625
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3,586
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||||||||||||
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Average Diluted Shares Outstanding
|
3,708
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3,671
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3,702
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3,666
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||||||||||||
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Other
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||||||||||||||||
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Capital Expenditures
|
$
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5,033
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$
|
10,313
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$
|
19,382
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$
|
26,642
|
||||||||
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Depreciation & Amortization
|
$
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3,884
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$
|
2,807
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$
|
10,551
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$
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8,454
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||||||||
STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
|
April 1, 2018
|
July 2, 2017
|
|||||||
|
(Unaudited)
|
||||||||
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ASSETS
|
||||||||
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Current Assets:
|
||||||||
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Cash and cash equivalents
|
$
|
7,037
|
$
|
8,361
|
||||
|
Receivables, net
|
70,527
|
64,933
|
||||||
|
Inventories, net
|
42,981
|
35,476
|
||||||
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Other current assets
|
27,401
|
20,235
|
||||||
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Total Current Assets
|
147,946
|
129,005
|
||||||
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Investment in Joint Ventures
|
21,367
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16,840
|
||||||
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Other Long Term Assets
|
19,218
|
16,278
|
||||||
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Property, Plant and Equipment, Net
|
118,549
|
111,591
|
||||||
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$
|
307,080
|
$
|
273,714
|
|||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
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Current Liabilities:
|
||||||||
|
Accounts Payable
|
$
|
44,268
|
$
|
39,679
|
||||
|
Other
|
27,461
|
28,216
|
||||||
|
Total Current Liabilities
|
71,729
|
67,895
|
||||||
|
Accrued Pension and Post Retirement Obligations
|
2,382
|
2,495
|
||||||
|
Borrowings Under Credit Facility
|
48,000
|
30,000
|
||||||
|
Other Long-term Liabilities
|
1,787
|
610
|
||||||
|
Shareholders’ Equity
|
327,636
|
319,798
|
||||||
|
Accumulated Other Comprehensive Loss
|
(30,782
|
)
|
(32,888
|
)
|
||||
|
Less: Treasury Stock
|
(135,790
|
)
|
(135,822
|
)
|
||||
|
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity
|
161,064
|
151,008
|
||||||
|
Non-Controlling Interest
|
22,118
|
21,626
|
||||||
|
Total Shareholders’ Equity
|
183,182
|
172,714
|
||||||
|
$
|
307,080
|
$
|
273,714
|
|||||
STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)
|
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
|
April 1, 2018
|
April 2, 2017
|
April 1, 2018
|
April 2, 2017
|
|||||||||||||
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Cash Flows from Operating Activities:
|
||||||||||||||||
|
Net Income
|
$
|
3,932
|
$
|
5,048
|
$
|
11,036
|
$
|
9,090
|
||||||||
|
Adjustment to Reconcile Net Income to Cash Provided by Operating Activities:
|
||||||||||||||||
|
Equity (Earnings) Loss in Joint Ventures
|
(619
|
)
|
163
|
(3,118
|
)
|
(128
|
)
|
|||||||||
|
Depreciation and Amortization
|
3,884
|
2,807
|
10,551
|
8,454 | ||||||||||||
|
Foreign Currency Transaction Loss (Gain)
|
592
|
722
|
173
|
(1,775
|
)
|
|||||||||||
|
Unrealized (Gain) Loss on Peso
|
||||||||||||||||
|
Forward Contracts
|
(392
|
)
|
(2,710
|
)
|
687
|
(1,147
|
)
|
|||||||||
|
Stock Based Compensation Expense
|
250
|
362
|
871
|
1,154
|
||||||||||||
|
Deferred Income taxes
|
-
|
-
|
(1,710
|
)
|
-
|
|||||||||||
|
Change in Operating Assets/Liabilities
|
(4,972
|
)
|
(4,241
|
)
|
(14,744
|
)
|
(3,348
|
)
|
||||||||
|
Other, net
|
(11
|
)
|
5
|
(44
|
)
|
(143
|
)
|
|||||||||
|
Net Cash Provided by Operating Activities
|
2,664
|
2,156
|
3,702
|
12,157
|
||||||||||||
|
Cash Flows from Investing Activities:
|
||||||||||||||||
|
Investment in Joint Ventures
|
(125
|
)
|
(150
|
)
|
(125
|
)
|
(250
|
)
|
||||||||
|
Loan to Joint Venture
|
-
|
(525
|
)
|
-
|
(1,925
|
)
|
||||||||||
|
Repayment of Loan to Joint Venture
|
150
|
-
|
300
|
75
|
||||||||||||
|
Additions to Property, Plant and Equipment
|
(5,033
|
)
|
(10,313
|
)
|
(19,382
|
)
|
(26,642
|
)
|
||||||||
|
Proceeds from Sale of Property, Plant and Equipment
|
10
|
-
|
12
|
-
|
||||||||||||
|
Net Cash Used in Investing Activities
|
(4,998
|
)
|
(10,988
|
)
|
(19,195
|
)
|
(28,742
|
)
|
||||||||
|
Cash Flows from Financing Activities:
|
||||||||||||||||
|
Borrowings Under Credit Facility
|
3,000
|
9,000
|
21,000
|
30,000
|
||||||||||||
|
Repayment of Borrowings Under Credit Facility
|
(1,000
|
)
|
(3,000
|
)
|
(3,000
|
)
|
(24,000
|
)
|
||||||||
|
Dividends Paid to Non-Controlling Interests of Subsidiaries
|
(200
|
)
|
-
|
(2,217
|
)
|
(1,764
|
)
|
|||||||||
|
Dividends Paid
|
(508
|
)
|
(503
|
)
|
(1,525
|
)
|
(1,509
|
)
|
||||||||
|
Contributions from Non-Controlling Interest of Subsidiaries
|
-
|
-
|
-
|
2,940
|
||||||||||||
|
Exercise of Stock Options and Employee Stock Purchases
|
27
|
27
|
217
|
187
|
||||||||||||
|
Net Cash Provided by Financing Activities
|
1,319
|
5,524
|
14,475
|
5,854
|
||||||||||||
|
Effect of Foreign Currency Fluctuations on Cash
|
(333
|
)
|
109
|
(306
|
)
|
245
|
||||||||||
|
Net Decrease in Cash & Cash Equivalents
|
(1,348
|
)
|
(3,199
|
)
|
(1,324
|
)
|
(10,486
|
)
|
||||||||
|
Cash and Cash Equivalents:
|
||||||||||||||||
|
Beginning of Period
|
8,385
|
8,190
|
8,361
|
15,477
|
||||||||||||
|
End of Period
|
$
|
7,037
|
$
|
4,991
|
$
|
7,037
|
$
|
4,991
|
||||||||