Strattec Security Corporation Reports Fiscal 2018 Third Quarter Operating Results

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| Source: Strattec Security Corporation

MILWAUKEE, April 26, 2018 (GLOBE NEWSWIRE) -- 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):

  Three Months Ended
 April 1, 2018 April 2, 2017
      
Fiat Chrysler Automobiles$31,282 $27,962
General Motors Company 22,417  21,883
Ford Motor Company 18,062  16,788
Tier 1 Customers 19,027  19,618
Commercial and Other OEM Customers 21,714  15,237
Hyundai / Kia 4,321  8,218
TOTAL$116,823 $109,706

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):

  April 1, April 2,
  2018 2017
         
Equity Earnings of VAST LLC Joint Venture $703  $451 
Equity Loss of STRATTEC Advanced Logic LLC Joint Venture  (84)  (614)
Net Foreign Currency Realized and Unrealized Transaction Gain  122   1,296 
Other  36   (104)
  $777  $1,029 

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)
  
 Third Quarter Ended
  Nine Months Ended
                
  April 1, 2018   April 2, 2017   April 1, 2018    April 2, 2017    
Net Sales$116,823  $109,706  322,465  $308,895 
                
Cost of Goods Sold 101,626   92,105   281,159   262,797 
                
Gross Profit 15,197   17,601   41,306   46,098 
                
Engineering, Selling &  Administrative Expenses 10,839   11,782   31,033   34,308 
                
Income from Operations 4,358   5,819   10,273   11,790 
                
Interest Income 1   52   8   132 
                
Interest Expense (305)  (100)  (761)  (276)
                
Other Income, Net 777   1,029   3,472   1,504 
                
Income before Provision for Income Taxes and Non-Controlling Interest 4,831   6,800   12,992   13,150 
                
Provision for Income Taxes 899   1,752   1,956   4,060 
                
Net Income  3,932   5,048   11,036   9,090 
                
Net Income Attributable to Non-Controlling Interest (963)  (1,566)  (2,729)  (3,668)
                
Net Income Attributable to STRATTEC SECURITY CORPORATION$2,969  $
3,482
  8,307  $5,422 
                
Earnings Per Share:               
Basic$0.82  $0.97  $2.29  $1.51 
Diluted$0.80  $0.95  $ 2.24  $1.48 
Average Basic               
Shares Outstanding 3,634   3,592   3,625   3,586 
                
Average Diluted               
Shares Outstanding 3,708   3,671   3,702   3,666 
                
Other               
Capital Expenditures$5,033  $10,313  $19,382  $26,642 
Depreciation & Amortization$3,884  $2,807  $10,551  $8,454 
 

 

STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
       
       
 April 1, 2018   July 2, 2017   
 (Unaudited)
     
ASSETS       
Current Assets:       
Cash and cash equivalents$7,037   $  8,361 
Receivables, net   70,527     64,933 
Inventories, net   42,981     35,476 
Other current assets   27,401    20,235 
Total Current Assets   147,946     129,005 
Investment in Joint Ventures   21,367     16,840 
Other Long Term Assets 19,218     16,278 
Property, Plant and Equipment, Net 118,549     111,591 
 $307,080   $  273,714 
        
LIABILITIES AND SHAREHOLDERS’ EQUITY       
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
                
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 

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