STRATTEC SECURITY CORPORATION Reports Fiscal 2018 Fourth Quarter and Full Year Operating Results
August 09 2018 - 4:00PM
STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”)
(NASDAQ:STRT) today reported operating results for the fiscal
fourth quarter and year ended July 1, 2018.
Fourth QuarterNet sales for the fourth quarter
ended July 1, 2018 were $116.7 million, compared to net sales of
$108.4 million for the fourth quarter ended July 2, 2017. Net
income was $4.0 million in the current year quarter compared to
$1.8 million in the prior year quarter. Diluted earnings per
share for the 2018 fourth quarter were $1.07 compared to $0.48 in
the prior year quarter.
Net sales to each of our customers in the
current year quarter and prior year quarter were as follows (in
thousands):
|
Three Months Ended |
|
July 1, 2018 |
|
July 2, 2017 |
|
|
|
|
Fiat Chrysler
Automobiles |
$ |
33,263 |
|
$ |
25,984 |
General Motors
Company |
21,675 |
|
22,518 |
Ford Motor Company |
14,933 |
|
16,250 |
Tier 1 Customers |
19,232 |
|
17,678 |
Commercial and Other
OEM Customers |
22,609 |
|
17,818 |
Hyundai / Kia |
5,018 |
|
8,182 |
TOTAL |
$ |
116,730 |
|
$ |
108,430 |
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
decrease in sales to General Motors Company in the current year
quarter compared to the prior year quarter related primarily to
lower production volumes and content on products we supplied to
Opel Automotive GmbH as part of our General Motors business.
We now supply these products directly to Opel Automotive whose
sales are now included under “Commercial and Other OEM Customers”
above. Sales to Ford Motor Company decreased in the current
year quarter due to lower production volumes on components we
supply compared to the prior year quarter. Sales to Tier 1
Customers increased in the current year quarter due to higher
production volumes on products we supply. 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 11.3 percent in the
current year quarter compared to 13.7 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
the 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.
Engineering, Selling and Administrative expenses
as a percent of net sales in the current year quarter were 8.7
percent compared to 10.9 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. During the prior year quarter, we utilized
third party vendors for a portion of our development work, which
resulted in higher operating expenses during the prior year quarter
as compared to the current year quarter.
Also included in cost of goods sold and
engineering, selling and administrative costs in the current year
quarter were discretionary bonuses approved by the STRATTEC Board
of Directors Compensation Committee of $1.0 million relating to the
benefit of tax reform that reduced diluted earnings per share by
$0.18 in comparison to the prior year quarter.
Included in Other Income (Expense), Net in the
current year quarter compared to the prior year quarter were the
following items (in thousands of dollars):
|
July 1, 2018 |
|
July 2, 2017 |
|
|
|
|
|
Equity Earnings of VAST
LLC Joint Venture |
$ |
1,299 |
|
$ |
1,110 |
|
Equity Earnings (Loss)
of STRATTEC Advanced Logic, LLC |
115 |
|
(572 |
) |
Net Foreign Currency
Transaction Gain |
408 |
|
64 |
|
Other |
258 |
|
(273 |
) |
|
$ |
2,080 |
|
$ |
329 |
|
The improvement in equity earnings (loss) of
STRATTEC Advanced Logic LLC in the current quarter relates to
winding down this business to only selling commercial biometric
locks in comparison to the prior year quarter.
The lower tax provision in the current year
quarter was attributed to the impact of the new Federal tax law
change generally referred to as the “Tax Cuts and Jobs Act of
2017,” which reduced the income tax provision by $2.1 million and
increased diluted earnings per share by $0.57 in comparison to the
prior year quarter end.
Full YearFor the fiscal year
ended July 1, 2018, STRATTEC net sales were $439.2 million compared
to net sales of $417.3 million during fiscal 2017. Net income
for fiscal 2018 was $12.3 million compared to net income of $7.2
million in the prior year. Diluted earnings per share for the
current year were $3.32 compared to diluted earnings per share of
$1.96 in the prior year. The impact of the new Federal tax law in
the current year reduced the income tax provision by $3.0 million
and increased diluted earnings per share by $0.81 in comparison to
the prior year.
Frank Krejci, President and CEO commented:
“Thumbs up and thanks to our team for the progress we made in new
product innovation, launching business which was awarded a couple
of years ago, opening a new plant and another good year of winning
new programs. That lays the groundwork for continued growth in
sales and significant opportunities to erase inefficiencies related
to simultaneous product launches and expansion
initiatives”.
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 customers’ product recall policies, foreign
currency fluctuations, uncertainties stemming from U.S. trade
policies, tariffs and reaction to same from foreign countries and
costs of operations (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
CORPORATIONCondensed Results of
Operations(In Thousands, except per share
amounts)
|
Fourth Quarter Ended |
|
Years Ended |
|
July 1, 2018 |
|
July 2, 2017 |
|
July 1, 2018 |
|
July 2, 2017 |
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Net Sales |
$ |
116,730 |
|
$ |
108,430 |
|
$ |
439,195 |
|
$ |
417,325 |
Cost of Goods Sold |
103,593 |
|
93,573 |
|
384,752 |
|
356,370 |
Gross Profit |
13,137 |
|
14,857 |
|
54,443 |
|
60,955 |
|
|
|
|
|
|
|
|
Engineering, Selling
& Administrative Expenses |
10,135 |
|
11,805 |
|
41,168 |
|
46,113 |
Income from
Operations |
3,002 |
|
3,052 |
|
13,275 |
|
14,842 |
|
|
|
|
|
|
|
|
Interest Income |
- |
|
4 |
|
8 |
|
136 |
Interest Expense |
(376) |
|
(141) |
|
(1,137) |
|
(417) |
Other Income (Expense),
Net |
2,080 |
|
329 |
|
5,552 |
|
1,833 |
Income before Provision
for Income Taxes and Non-Controlling Interest |
4,706 |
|
3,244 |
|
17,698 |
|
16,394 |
|
|
|
|
|
|
|
|
Provision for
Income |
|
|
|
|
|
|
|
Taxes |
114 |
|
224 |
|
2,070 |
|
4,284 |
|
|
|
|
|
|
|
|
Net Income |
$ |
4,592 |
|
$ |
3,020 |
|
$ |
15,628 |
|
$ |
12,110 |
|
|
|
|
|
|
|
|
Net Income Attributable
to Non-Controlling Interest |
616 |
|
1,245 |
|
3,345 |
|
4,913 |
|
|
|
|
|
|
|
|
Net Income Attributable
to STRATTEC SECURITY CORPORATION |
$ |
3,976 |
|
$ |
1,775 |
|
$ |
12,283 |
|
$ |
7,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per
Share: |
|
|
|
|
|
|
|
Basic |
$ |
1.09 |
|
$ |
0.49 |
|
$ |
3.39 |
|
$ |
2.01 |
Diluted |
$ |
1.07 |
|
$ |
0.48 |
|
$ |
3.32 |
|
$ |
1.96 |
Average Basic Shares
Outstanding |
3,635 |
|
3,595 |
|
3,628 |
|
3,588 |
|
|
|
|
|
|
|
|
Average Diluted Shares
Outstanding |
3,705 |
|
3,680 |
|
3,703 |
|
3,670 |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Capital
Expenditures |
$ |
4,752 |
|
$ |
10,368 |
|
$ |
24,134 |
|
$ |
37,010 |
Depreciation
& Amortization |
$ |
4,034 |
|
$ |
2,964 |
|
$ |
14,585 |
|
$ |
11,418 |
STRATTEC SECURITY
CORPORATIONCondensed Balance Sheet
Data(In Thousands)
|
July 1, 2018 |
|
|
July 2, 2017 |
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
8,090 |
|
|
$ |
8,361 |
|
Receivables, net |
73,832 |
|
|
64,933 |
|
Inventories, net |
46,654 |
|
|
35,476 |
|
Other
current assets |
22,527 |
|
|
20,235 |
|
Total
Current Assets |
151,103 |
|
|
129,005 |
|
Investment in Joint Ventures |
22,192 |
|
|
16,840 |
|
Other
Long Term Assets |
17,338 |
|
|
16,278 |
|
Property,
Plant and Equipment, Net |
116,542 |
|
|
111,591 |
|
|
$ |
307,175 |
|
|
$ |
273,714 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
Accounts
Payable |
$ |
38,439 |
|
|
$ |
39,679 |
|
Other |
30,354 |
|
|
28,216 |
|
Total
Current Liabilities |
68,793 |
|
|
67,895 |
|
Accrued
Pension and Post Retirement Obligations |
2,379 |
|
|
2,495 |
|
Borrowings Under Credit Facility |
51,000 |
|
|
30,000 |
|
Other
Long-term Liabilities |
1,757 |
|
|
610 |
|
Shareholders’ Equity |
331,375 |
|
|
319,798 |
|
Accumulated Other Comprehensive Loss |
(33,439 |
) |
|
(32,888 |
) |
Less:
Treasury Stock |
(135,778 |
) |
|
(135,822 |
) |
Total
STRATTEC SECURITY CORPORATION Shareholders’ Equity |
162,158 |
|
|
151,008 |
|
Non-Controlling Interest |
21,088 |
|
|
21,626 |
|
Total
Shareholders’ Equity |
183,246 |
|
|
172,714 |
|
|
$ |
307,175 |
|
|
$ |
273,714 |
|
STRATTEC SECURITY
CORPORATIONCondensed Cash Flow Statement
Data(In Thousands)
|
Fourth Quarter Ended |
|
|
Years Ended |
|
|
July 1, 2018 |
|
|
July 2, 2017 |
|
|
July 1, 2018 |
|
|
July 2, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
Net Income |
$ |
4,592 |
|
|
$ |
3,020 |
|
|
$ |
15,628 |
|
|
$ |
12,110 |
|
Adjustment to Reconcile
Net Income to Cash Provided by Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
Equity
Gain in Joint Ventures |
(1,414 |
) |
|
(538 |
) |
|
(4,532 |
) |
|
(666 |
) |
Depreciation and Amortization |
4,034 |
|
|
2,964 |
|
|
14,585 |
|
|
11,418 |
|
Foreign
Currency Transaction (Gain) Loss |
(722 |
) |
|
647 |
|
|
(549 |
) |
|
(1,128 |
) |
Unrealized Loss (Gain) on Peso Contracts |
473 |
|
|
(863 |
) |
|
1,160 |
|
|
(2,010 |
) |
Deferred
Income Taxes |
2,739 |
|
|
1,851 |
|
|
1,029 |
|
|
1,851 |
|
Stock
Based Compensation Expense |
259 |
|
|
354 |
|
|
1,130 |
|
|
1,508 |
|
Change in
Operating Assets/Liabilities |
(6,713 |
) |
|
3,517 |
|
|
(21,457 |
) |
|
169 |
|
Other,
net |
(10 |
) |
|
33 |
|
|
(54 |
) |
|
(110 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by
Operating Activities |
3,238 |
|
|
10,985 |
|
|
6,940 |
|
|
23,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
Investment in Joint Ventures |
- |
|
|
(150 |
) |
|
(125 |
) |
|
(400 |
) |
Additions
to Property, Plant and Equipment |
(4,752 |
) |
|
(10,368 |
) |
|
(24,134 |
) |
|
(37,010 |
) |
Other |
29 |
|
|
(278 |
) |
|
341 |
|
|
(2,128 |
) |
Net Cash Used in
Investing Activities |
(4,723 |
) |
|
(10,796 |
) |
|
(23,918 |
) |
|
(39,538 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
Borrowings Under Credit Facility |
3,000 |
|
|
6,000 |
|
|
24,000 |
|
|
36,000 |
|
Repayments Under Credit Facility |
- |
|
|
(2,000 |
) |
|
(3,000 |
) |
|
(26,000 |
) |
Dividends
Paid |
(509 |
) |
|
(503 |
) |
|
(2,034 |
) |
|
(2,012 |
) |
Dividends
Paid to Non-Controlling Interest Of Subsidiaries |
(600 |
) |
|
(200 |
) |
|
(2,817 |
) |
|
(1,964 |
) |
Contribution from Non-Controlling Interest Of Subsidiaries |
- |
|
|
- |
|
|
- |
|
|
2,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of Stock Options and Employee Stock Purchases, Including Excess Tax
Benefits From Stock Based Compensation |
25 |
|
|
75 |
|
|
242 |
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by
Financing Activities |
1,916 |
|
|
3,372 |
|
|
16,391 |
|
|
9,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Impact
on Cash |
622 |
|
|
(191 |
) |
|
316 |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease)
in Cash & Cash Equivalents |
1,053 |
|
|
3,370 |
|
|
(271 |
) |
|
(7,116 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
Beginning
of Period |
7,037 |
|
|
4,991 |
|
|
8,361 |
|
|
15,477 |
|
End of
Period |
$ |
8,090 |
|
|
$ |
8,361 |
|
|
$ |
8,090 |
|
|
$ |
8,361 |
|
Contact:
Pat HansenSenior Vice President andChief Financial
Officer414-247-3435www.strattec.com
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