STRATTEC SECURITY CORPORATION Reports Fiscal Second Quarter Results
Net sales for the Company's second quarter ended December 27, 2009 were $52.5 million, compared to net sales of $33.8 million for the second quarter ended December 28, 2008. Net income for the period was $844,000, compared to a net loss of $1.2 million in the prior year quarter. Diluted earnings per share for the period were $.26 compared to diluted loss per share of $.37 in the prior year quarter. The higher sales for the quarter can be attributed to increased customer production volumes and the power access business STRATTEC acquired November 30, 2008. That business, now called STRATTEC POWER ACCESS, generated $15.5 million of sales in the current quarter compared to $1.3 million in the prior year quarter.
For the six months ended December 27, 2009, net sales were $93.7 million compared to net sales of $68.5 million in the prior year period. Net income was $1.8 million compared to net a loss of $1.2 million in the prior year period and diluted earnings per share were $.55 compared to diluted loss per share of $.36.
Sales to STRATTEC's largest customers overall increased in the current quarter compared to the prior year quarter levels. Sales to Chrysler Group LLC were $16.5 million in the current quarter compared to $7.7 million in the prior year quarter. Included in the current quarter were sales generated by STRATTEC POWER ACCESS, offset by a combination of lower vehicle production volume and reduced component content in the other security products we supply. Sales to General Motors Company were $12.3 million compared to $11.6 million. Sales to Ford Motor Company were $5.2 million compared to $3.0 million due to higher Ford vehicle production volumes. In the current quarter, sales to Hyundai/Kia were $4.3 million generated by the STRATTEC POWER ACCESS business.
Gross profit margins were 14.6 percent in the current quarter compared to 8.6 percent in the prior year quarter. The higher gross profit margin in the current year quarter was primarily the result of favorable customer vehicle production volumes compared to the prior year quarter, offset by premium freight costs and overtime incurred during the months of October and November to meet significantly increased production requirements from the Company's largest customers as they continued to rebuild retail inventories following the U.S. Government's "Cash for Clunkers" program that ended in August 2009. These negative factors reduced the current quarter gross profit margin by approximately 3.0 percentage points.
Operating expenses were $7.5 million in the current quarter, compared to $6.7 million in the prior year quarter. The current quarter includes three months of expenses for STRATTEC POWER ACCESS engineering and administrative personnel compared to one month in the prior year quarter, due to the timing of the acquisition of this business.
Included in the current quarter results are the following non-recurring items:
-- A $505,000 curtailment loss to immediately recognize the prior service
cost associated with freezing STRATTEC's defined benefit retirement plan
effective December 31, 2009;
-- A $223,000 impairment charge to write off the goodwill recorded as part
of the acquisition of STRATTEC POWER ACCESS in November 2008;
-- A $1,125,000 favorable adjustment to an environmental reserve resulting
from a re-evaluation of the potential remaining cost to satisfy an
environmental remediation issue at the Milwaukee production facility
dating back to 1985; and
-- A $201,000 recovery of the allowance for doubtful accounts recorded in
the third quarter of fiscal 2009, relating to the Chrysler LLC
bankruptcy filing. During the current quarter, Chrysler paid a
significant portion of the outstanding accounts receivable STRATTEC held
at the time of Chrysler's bankruptcy filing.
On November 20, 2009, Vehicle Access Systems Technology LLC (VAST LLC) a joint venture between STRATTEC, WITTE Automotive of Velbert, Germany, and ADAC Automotive of Grand Rapids, Michigan, completed its acquisition of the remaining non-controlling interest in VAST LLC's two Chinese joint ventures, VAST Great Shanghai CO., LTD. and VAST Fuzhou CO., LTD., collectively known as VAST China.
During the current quarter the Company contributed $1.0 million to its Defined Benefit Pension Trust.
At the end of fiscal year 2009, we changed our method of accounting for inventories from last-in, first-out (LIFO) to first-in, first-out (FIFO). The prior year reported information has been retrospectively adjusted on a FIFO basis.
STRATTEC designs, develops, manufactures and markets automotive Security Products, including mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings; and Access Control Products including 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 the VAST Alliance in which STRATTEC participates with WITTE Automotive of Velbert, Germany and ADAC Automotive of Grand Rapids, Michigan. STRATTEC's history in the automotive business spans over 100 years.
The STRATTEC SECURITY CORPORATION logo is available athttp://www.globenewswire.com/newsroom/prs/?pkgid=4700
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, foreign currency fluctuations, and costs of operations. 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)
Second Quarter
Ended Six Months Ended
December December December December
27, 2009 28, 2008 27, 2009 28, 2008
-------- -------- -------- --------
(Note A) (Note A)
Net Sales $52,540 $33,799 93,721 $68,530
Cost of Goods Sold 44,887 30,888 79,270 60,195
-------- -------- -------- --------
Gross Profit 7,653 2,911 14,451 8,335
Engineering, Selling &
Administrative Expenses 7,455 6,669 13,654 12,621
Impairment Charge 223 -- 223 --
Environmental (1,125) -- (1,125) --
Recovery of Bad Debts (201) -- 421 --
-------- -------- -------- --------
Income (Loss) from
Operations 1,301 (3,758) 2,120 (4,286)
Interest Income 19 284 42 602
Interest Expense -- -- -- --
Other Income, Net 247 557 675 780
-------- -------- -------- --------
1,567 (2,917) 2,837 (2,904)
Provision (Benefit) for
Income Taxes 721 (1,428) 1,062 (1621)
-------- -------- -------- --------
Net Income (Loss) 846 (1,489) 1,775 (1283)
Net Income (Loss)
Attributable
to Non-Controlling
Interest (2) 287 12 101
-------- -------- -------- --------
Net Income Attributable
to
STRATTEC SECURITY
CORPORATION $844 ($1,202) $1,787 ($1,182)
======== ======== ======== ========
Earnings (Loss) Per
Share:
Basic $0.26 ($0.37) $0.55 ($0.36)
======== ======== ======== ========
Diluted $0.26 ($0.37) $0.55 ($0.36)
======== ======== ======== ========
Average Basic
Shares Outstanding 3,272 3,264 3,269 3,298
Average Diluted
Shares Outstanding 3,272 3,267 3,271 3,303
Other
Capital Expenditures $1,342 $3,195 $3,104 $8,511
Depreciation &
Amortization $1,827 $1,475 $3,578 $2,855
NOTE A:Prior year balances have been restated to reflect the
change from LIFO to FIFO accounting for inventories.
STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
December June 28,
27, 2009 2009
----------- ---------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $22,016 $22,764
Receivables, net 26,450 17,235
Restricted Cash (A) 2,100 --
Inventories 16,435 16,589
Other current assets 15,989 15,970
----------- ---------
Total Current Assets 82,990 72,558
Deferred Income Taxes 10,121 13,143
Investment in Joint Venture 4,652 4,483
Other Long Term Assets 2,290 1,069
Property, Plant and
Equipment, Net 36,672 36,936
----------- ---------
$136,725 $128,189
=========== =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Accounts Payable 18,727 11,369
Other 19,762 19,479
----------- ---------
Total Current Liabilities 38,489 30,848
Borrowings Under Line of
Credit Facility -- --
Accrued Pension and Post
Retirement Obligations 23,485 24,784
Shareholders' Equity 240,180 238,601
Accumulated Other
Comprehensive Loss (30,494) (31,094)
Less:Treasury Stock (136,064) (136,089)
----------- ---------
Total STRATTEC SECURITY
CORPORATION Shareholders'
Equity 73,622 71,418
Non-Controlling Interest 1,129 1,139
----------- ---------
Total Shareholders' Equity 74,751 72,557
----------- ---------
$136,725 $128,189
=========== =========
NOTE A: Represents a commercial guarantee by STRATTEC
SECURITY CORPORATION relating to a promissory note
issued by Vehicle Access System Technology, LLC
(VAST, LLC).
STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)
Second Quarter
Ended Six Months Ended
December December December December
27, 2009 28, 2008 27, 2009 28, 2008
-------- -------- -------- --------
(Note A) (Note A)
Cash Flows from Operating
Activities:
Net (Loss) Income $844 ($1,202) $1,787 ($1,182)
Adjustment to Reconcile Net Income
(Loss) to
Cash Provided by Operating
Activities:
Non-Controlling Interest 2 (287) (12) (101)
Depreciation and Amortization 1,827 1,475 3,578 2,855
Stock Based Compensation Expense 98 89 204 217
Recovery of Doubtful Accounts (201) -- (421) --
Deferred Tax Provision 3,258 -- 3,258 --
Curtailment Loss 505 -- 505 --
Impairment Charge 223 -- 223 --
Environmental (1,125) -- (1,125) --
Change in Operating
Assets/Liabilities (289) (2,198) (1,540) (2,951)
Other, net (171) (992) (300) (1,270)
-------- -------- -------- --------
Net Cash Provided by (Used in)
Operating Activities 4,971 (3,115) 6,157 (2,432)
Cash Flows from Investing
Activities:
Investment in Joint Ventures (100) (263) (100) (388)
Loan to Joint Venture (1,500) -- (1,500) --
Restricted Cash (2,100) -- (2,100) --
Purchase of Delphi Power Products -- (3,813) -- (3,813)
Additions to Property, Plant and
Equipment (1,342) (3,195) (3,104) (8,511)
Proceeds from Sale of Property,
Plant
and Equipment 10 -- 10 --
-------- -------- -------- --------
Net Cash Used in Investing
Activities (5,032) (7,271) (6,794) (12,712)
Cash Flow from Financing
Activities:
Purchase of Common Stock -- (500) -- (6,214)
Dividends Paid -- (502) -- (1,023)
Contribution from Non-Controlling
Interest -- 762 -- 762
Loan from Non-Controlling
Interest -- 800 -- 1,175
Exercise of Stock Options and
Employee Stock Purchases 12 10 23 20
-------- -------- -------- --------
Net Cash Provided by (Used in)
Financing Activities 12 570 23 (5,280)
Effect of Foreign Currency
Fluctuations on Cash (165) 636 (134) 801
-------- -------- -------- --------
Net Decrease in Cash & Cash
Equivalents (214) (9,180) (748) (19,623)
Cash and Cash Equivalents:
Beginning of Period 22,230 41,058 22,764 51,501
-------- -------- -------- --------
End of Period $22,016 $31,878 $22,016 $31,878
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SOURCE: STRATTEC SECURITY CORPORATION
CONTACT: STRATTEC SECURITY CORPORATION Pat Hansen, Senior Vice President and Chief Financial Officer 414-247-3435 www.strattec.com