STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported
operating results for the fiscal third quarter ended March 31,
2019.
Net sales for the Company’s third quarter ended
March 31, 2019 were $128.2 million, compared to net sales of $116.8
million for the third quarter ended April 1, 2018. Net income for
the current year quarterly period was $1.7 million, compared to net
income of $3.0 million in the prior year quarter. Diluted earnings
per share for the current year quarterly period were $0.46 compared
to diluted earnings per share of $0.80 in the prior year
quarter.
For the nine months ended March 31, 2019, the
Company’s net sales were $358.3 million compared to net sales of
$322.5 million in the prior year nine month period. Net loss during
the current year nine month period was $17.0 million compared to
net income of $8.3 million in the prior year nine month period.
Diluted loss per share was $4.62 for the nine month period ended
March 31, 2019 compared to diluted earnings per share of $2.24
during the nine month period ended April 1, 2018.
During the second quarter ended December 30,
2018, the Company completed a substantial portion of terminating
the STRATTEC Pension Plan that was previously frozen on December
31, 2009. A non-cash pre-tax pension settlement charge of $32.4
million was recorded during our second quarter ended December 30,
2018 that reduced diluted earnings per share by $6.73, or $24.8
million, on an after tax basis. Without the pension settlement
charge adjusted diluted earnings per share for the nine months
ended March 31, 2019 would have been $2.11. See the following table
for further explanation.
STRATTEC SECURITY
CORPORATIONRECONCILIATION OF NON-GAAP PERFORMANCE MEASURES
TO GAAP PERFORMANCE MEASURES(in thousands, except share and
earnings per share data)
|
Nine Months Ended |
|
March 31,
2019 |
|
|
|
April 1, 2018 |
|
Unaudited |
|
|
|
Unaudited |
|
|
|
|
|
|
Net (loss) income (GAAP measure) |
$ |
(16,967 |
) |
|
$ |
8,307 |
Pension termination settlement charge, net of
tax |
24,812 |
|
|
|
- |
Adjusted net income |
$ |
7,845 |
|
|
$ |
8,307 |
|
|
|
|
Diluted (loss) earnings per share (GAAP
measure) |
$ |
(4.62 |
) |
|
$ |
2.24 |
Pension termination settlement charge, net of
tax |
|
6.73 |
|
|
|
- |
Adjusted diluted earnings per share |
$ |
2.11 |
|
|
$ |
2.24 |
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 |
|
March 31,
2019 |
|
|
April 1, 2018 |
|
|
|
|
|
Fiat Chrysler Automobiles |
$ |
29,917 |
|
$ |
31,282 |
General Motors Company |
30,969 |
|
|
22,417 |
Ford Motor Company |
15,942) |
|
|
18,062 |
Tier 1 Customers |
20,078 |
|
|
19,027 |
Commercial and Other OEM Customers |
22,794 |
|
|
21,714 |
Hyundai / Kia |
8,530 |
|
|
4,321 |
TOTAL |
$ |
128,230 |
|
$ |
116,823 |
Sales to Fiat Chrysler Automobiles in the
current year quarter decreased in comparison to the prior year
quarter due to lower vehicle production volumes 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 sales content on models for which we supply
components, in particular power access products and latches. Sales
to Ford Motor Company decreased in the current year quarter due to
a combination of discontinued models and lower production volumes
on the vehicles for which we supply components compared to the
prior year quarter. Sales to Tier 1 Customers increased in the
current year quarter due to higher sales of our door handle and
component products. Sales to Commercial and Other OEM Customers
during the current year quarter increased in comparison to the
prior year quarter mainly due to increases in sales related to
painted door handle programs for Volkswagen. These Commercial and
Other OEM 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 increased sales to Hyundai / Kia in the
current year quarter were principally due to higher levels of
production of the Kia Sedona minivan for which we supply primarily
power sliding door components.
Gross profit margins were 12.2 percent in the
current year quarter compared to 13.0 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 an
increase in the Mexican minimum wage for our Mexican workforce
effective January 1, 2019 and higher than expected production costs
at our door handle paint and assembly facility in Leon, Mexico.
Also, positively impacting gross margins in the current year
quarter was a favorable product sales mix in comparison to the
prior year quarter.
Engineering, Selling and Administrative expenses
overall were higher in the current year quarter, however as a
percent of net sales were 9.1 percent compared to 9.3 percent in
the prior year quarter. The increase in overall operating expenses
in the current year quarter was primarily due to higher 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):
|
March 31, 2019 |
|
April 1, 2018 |
|
|
|
|
|
|
Equity Earnings of VAST LLC Joint Venture |
$ |
25 |
|
|
$ |
703 |
|
Equity Earnings (Loss) of STRATTEC Advanced |
|
|
|
|
|
Logic LLC Joint Venture |
41 |
|
|
(84 |
) |
Net Foreign Currency Realized and Unrealized
Transaction Gain (Loss) |
(47 |
) |
|
122 |
|
Other |
256 |
|
|
36 |
|
|
$ |
275 |
|
|
$ |
777 |
|
The decrease in Other Income, Net in the current
year quarter from the prior year quarter was primarily related to
lower profitability at our VAST LLC China operation. We continue to
invest in the growing China market with higher development costs
for new programs and breaking ground for our new plant. It is in
Jingzhou, China, which will give us added capacity, efficiencies
and the advantage of a broader geographic footprint. Earnings were
also impacted by a drop in sales which we believe was due to
customers rebalancing inventories around the Chinese New Year
holiday.
Frank Krejci, President & CEO commented: “I
am disappointed to report lower earnings on higher sales this
quarter compared to last year. Two reasons for the drop in
profitability stand out. The Mexican government mandated doubling
the minimum wage that was expected to be partially offset by tax
benefits which did not happen. The other reason was lower sales in
China, impacting our VAST LLC joint venture profitability.”
“While not reflected in earnings, after recent
investments in supporting new business, operating cash flow
improved significantly. As a result, our overall debt borrowings
were reduced by $7 million over the last nine months to $44
million.”
“Shortly after the close of the quarter, our
team at STRATTEC was honored as a winner of a PACE Award for
innovation in the automotive industry. This is the second year in a
row that we won, a remarkable feat given the number of companies
eligible and the significant resources of some of the competition.
The product which won this year’s PACE Award is a powered opening
and closing tailgate which we successfully introduced for the
Chevrolet Silverado pick-up. General Motors is now featuring it in
commercials, hopefully growing demand within this important market
segment.”
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.
Non-GAAP Financial Measures
This press release contains financial measures
not prepared in accordance with generally accepted accounting
principles (referred to as Non-GAAP), specifically “adjusted net
income” and “adjusted diluted earnings per share.” “Adjusted net
income” is defined as net (loss) income attributable to STRATTEC
SECURITY CORPORATION shareholders excluding the pension termination
settlement charge, net of tax. “Adjusted diluted earnings per
share” is defined as “Adjusted net income” divided by average
diluted shares of common stock outstanding. The Company believes
that these Non-GAAP measures, when presented in conjunction with
comparable GAAP measures, provide additional information for
evaluating STRATTEC’s performance and are important measures by
which STRATTEC’s management is able to assess the profitability and
liquidity of STRATTEC’s business. These Non-GAAP measures should be
considered in addition to, not as a substitute for or superior to,
net income (loss) as a measure of operating performance. These
Non-GAAP measures may be different than Non-GAAP financial measures
used by other companies.
STRATTEC SECURITY
CORPORATIONCondensed Results of
Operations(In Thousands except per share
amounts)(Unaudited)
|
Third Quarter
Ended |
Nine Months
Ended |
|
March 31, 2019 |
|
April 1, 2018 |
|
March 31, 2019 |
|
April 1, 2018 |
Net Sales |
$ |
128,230 |
|
$ |
116,823 |
|
$ |
358,302 |
|
$ |
322,465 |
|
|
|
|
|
|
|
|
Cost of Goods Sold |
112,548 |
|
101,626 |
|
314,701 |
|
281,159 |
|
|
|
|
|
|
|
|
Gross Profit |
15,682 |
|
15,197 |
|
43,601 |
|
41,306 |
|
|
|
|
|
|
|
|
Engineering, Selling & Administrative
Expenses |
11,721 |
|
10,839 |
|
33,222 |
|
31,033 |
|
|
|
|
|
|
|
|
Income from Operations |
3,961 |
|
4,358 |
|
10,379 |
|
10,273 |
|
|
|
|
|
|
|
|
Interest Income |
- |
|
1 |
|
- |
|
8 |
|
|
|
|
|
|
|
|
Interest Expense |
(413) |
|
(305) |
|
(1,224) |
|
(761) |
|
|
|
|
|
|
|
|
Pension Termination Settlement Charge |
- |
|
- |
|
(32,434) |
|
- |
|
|
|
|
|
|
|
|
Other Income, Net |
275 |
|
777 |
|
2,153 |
|
3,472 |
|
|
|
|
|
|
|
|
Income (Loss) before Provision (Benefit) for
Income Taxes and Non-Controlling Interest |
3,823 |
|
4,831 |
|
(21,126) |
|
12,992 |
|
|
|
|
|
|
|
|
Provision (Benefit) for Income Taxes |
786 |
|
899 |
|
(6,994) |
|
1,956 |
|
|
|
|
|
|
|
|
Net Income (Loss) |
3,037 |
|
3,932 |
|
(14,132) |
|
11,036 |
|
|
|
|
|
|
|
|
Net Income Attributable to Non-Controlling
Interest |
(1,307) |
|
(963) |
|
(2,835) |
|
(2,729) |
|
|
|
|
|
|
|
|
Net Income (Loss) Attributable to STRATTEC
SECURITY CORPORATION |
$ |
1,730 |
|
$ |
2,969 |
|
$ |
(16,967) |
|
$ |
8,307 |
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share: |
|
|
|
|
|
|
|
Basic |
$ |
0.47 |
|
$ |
0.82 |
|
$ |
(4.62) |
|
$ |
2.29 |
Diluted |
$ |
0.46 |
|
$ |
0.80 |
|
$ |
(4.62) |
|
$ |
2.24 |
Average Basic |
|
|
|
|
|
|
|
Shares Outstanding |
3,684 |
|
3,634 |
|
3,670 |
|
3,625 |
|
|
|
|
|
|
|
|
Average Diluted |
|
|
|
|
|
|
|
Shares Outstanding |
3,728 |
|
3,708 |
|
3,670 |
|
3,702 |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Capital Expenditures |
$ |
4,148 |
|
$ |
5,033 |
|
$ |
13,550 |
|
$ |
19,382 |
Depreciation &
Amortization |
$ |
4,420 |
|
$ |
3,884 |
|
$ |
12,543 |
|
$ |
10,551 |
STRATTEC SECURITY
CORPORATION
Condensed Balance Sheet
Data(In Thousands)
|
March 31, 2019 |
|
July 1, 2018 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current
Assets: |
|
|
|
Cash and cash
equivalents |
$ |
9,202 |
|
$ |
8,090 |
Receivables, net |
87,847 |
|
73,832 |
Inventories, net |
46,822 |
|
46,654 |
Other
current assets |
15,609 |
|
22,527 |
Total
Current Assets |
159,480 |
|
151,103 |
Investment in Joint Ventures |
23,876 |
|
22,192 |
Other
Long Term Assets |
12,087 |
|
17,338 |
Property,
Plant and Equipment, Net |
117,841 |
|
116,542 |
|
$ |
313,284 |
|
$ |
307,175 |
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current
Liabilities: |
|
|
|
Accounts
Payable |
$ |
46,207 |
|
$ |
38,439 |
Other |
32,598 |
|
30,354 |
Total
Current Liabilities |
78,805 |
|
68,793 |
Accrued
Pension and Post Retirement Obligations |
2,322 |
|
2,379 |
Borrowings Under Credit Facility |
44,000 |
|
51,000 |
Other
Long-term Liabilities |
831 |
|
1,757 |
Shareholders’ Equity |
317,984 |
|
331,375 |
Accumulated Other Comprehensive Loss |
(17,737) |
|
(33,439) |
Less: Treasury Stock |
(135,742) |
|
(135,778) |
Total
STRATTEC SECURITY CORPORATION Shareholders’ Equity |
164,505 |
|
162,158 |
Non-Controlling Interest |
22,821 |
|
21,088 |
Total Shareholders’
Equity |
187,326 |
|
183,246 |
|
$ |
313,284 |
|
$ |
307,175 |
STRATTEC SECURITY
CORPORATIONCondensed Cash Flow Statement
Data(In Thousands)(Unaudited)
|
Third Quarter
Ended |
Nine Months
Ended |
|
March 31, 2019 |
|
April 1, 2018 |
|
March 31, 2019 |
|
April 1, 2018 |
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
Net Income (Loss) |
$ |
3,037 |
|
$ |
3,932 |
|
$ |
(14,132) |
|
$ |
11,036 |
Adjustment to Reconcile Net Income (Loss) to Cash
Provided by Operating Activities: |
|
|
|
|
|
|
|
Equity Earnings in Joint
Ventures |
(66) |
|
(619) |
|
(2,451) |
|
(3,118) |
Depreciation and Amortization |
4,420 |
|
3,884 |
|
12,543 |
|
10,551 |
Foreign Currency Transaction
Loss |
192 |
|
592 |
|
261 |
|
173 |
Unrealized (Gain) Loss on Peso
Forward Contracts |
(23) |
|
(392) |
|
(116) |
|
687 |
Stock Based Compensation
Expense |
241 |
|
250 |
|
867 |
|
871 |
Pension Settlement Charge |
- |
|
- |
|
32,434 |
|
- |
Deferred Income taxes |
- |
|
- |
|
(8,131) |
|
(1,710) |
Change in Operating
Assets/Liabilities |
(2,805) |
|
(4,972) |
|
3,727 |
|
(14,744) |
Other, net |
3 |
|
(11) |
|
(281) |
|
(44) |
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities |
4,999 |
|
2,664 |
|
24,721 |
|
3,702 |
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
Investment in Joint Ventures |
(200) |
|
(125) |
|
(200) |
|
(125) |
Repayment of Loan to Joint
Venture |
- |
|
150 |
|
- |
|
300 |
Additions to Property, Plant and
Equipment |
(4,148) |
|
(5,033) |
|
(13,550) |
|
(19,382) |
Proceeds from Sale of Property,
Plant and Equipment |
- |
|
10 |
|
12 |
|
12 |
Net Cash Used in Investing Activities |
(4,348) |
|
(4,998) |
|
(13,738) |
|
(19,195) |
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
Borrowings Under Credit
Facility |
- |
|
3,000 |
|
2,000 |
|
21,000 |
Repayment of Borrowings Under
Credit Facility |
(2,000) |
|
(1,000) |
|
(9,000) |
|
(3,000) |
Dividends Paid to Non-Controlling
Interests of Subsidiaries |
(400) |
|
(200) |
|
(1,384) |
|
(2,217) |
Dividends Paid |
(517) |
|
(508) |
|
(1,546) |
|
(1,525) |
Exercise of Stock Options and
Employee Stock Purchases |
172 |
|
27 |
|
244 |
|
217 |
|
|
|
|
|
|
|
|
Net Cash (Used In) Provided by Financing
Activities |
(2,745) |
|
1,319 |
|
(9,686) |
|
14,475 |
|
|
|
|
|
|
|
|
Effect of Foreign Currency Fluctuations on
Cash |
(77) |
|
(333) |
|
(185) |
|
(306) |
|
|
|
|
|
|
|
|
Net (Decrease) Increase in Cash & Cash
Equivalents |
(2,171) |
|
(1,348) |
|
1,112 |
|
(1,324) |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents: |
|
|
|
|
|
|
|
Beginning of Period |
11,373 |
|
8,385 |
|
8,090 |
|
8,361 |
End of Period |
$ |
9,202 |
|
$ |
7,037 |
|
$ |
9,202 |
|
$ |
7,037 |
Contact: Pat HansenSenior Vice President andChief
Financial Officer414-247-3435www.strattec.com
Strattec Security (NASDAQ:STRT)
Historical Stock Chart
From Aug 2024 to Sep 2024
Strattec Security (NASDAQ:STRT)
Historical Stock Chart
From Sep 2023 to Sep 2024