STRATTEC SECURITY CORPORATION Reports Fiscal 2019 First Quarter Operating Results
October 25 2018 - 4:00PM
STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”)
(NASDAQ:STRT) today reported operating results for the fiscal first
quarter ended September 30, 2018.
Net sales for the Company’s fiscal 2019 first
quarter ended September 30, 2018 were $117.2 million, compared to
net sales of $102.5 million for the prior year quarter ended
October 1, 2017. Net income for the current year quarter was
$3.5 million, compared to net income of $2.5 million in the prior
year quarter. Diluted earnings per share for the current year
quarter were $0.93 compared to diluted earnings per share of $0.67
in the prior year quarter.
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 |
|
|
September 30, 2018 |
|
October 1, 2017 |
|
|
|
|
|
Fiat Chrysler
Automobiles |
|
$
30,297 |
|
$
24,102 |
General Motors
Company |
|
25,287 |
|
20,338 |
Ford Motor Company |
|
15,523 |
|
15,373 |
Tier 1 Customers |
|
17,816 |
|
15,743 |
Commercial and Other
OEM Customers |
|
20,928 |
|
17,867 |
Hyundai / Kia |
|
7,308 |
|
9,037 |
TOTAL |
|
$
117,159 |
|
$
102,460 |
Sales to Fiat Chrysler Automobiles in the
current year quarter increased over the same period in the prior
year quarter due to higher product content on the components we
supply. The increase in sales to General Motors Company in the
current year quarter was primarily attributed to higher production
volumes and content on products we supplied to General Motors
during the current year quarter in comparison to the prior year
quarter. Sales to Ford Motor Company in the current year quarter
were essentially flat in comparison to the prior year quarter.
Sales to Tier 1 Customers increased during 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 control steering column
locks and door handles and related components, that we have
developed in recent years to complement our historic core business
of locks and keys. The decrease in sales to Hyundai / Kia in
the current year quarter was principally due to lower levels of
production on vehicles for which we supply components.
The gross profit margins were 13.0 percent in
the current year quarter compared to 13.1 percent in the prior year
quarter. The slight decrease in gross profit margin in the
current year quarter compared to the prior year quarter was
attributed to higher than expected production and expediting costs
with new product launches during the 2019 fiscal first quarter, in
particular in connection with our custom door handle paint and
assembly facility in Leon, Mexico, to meet certain customer
schedules which was also partially offset by a favorable Mexican
Peso to US Dollar exchange rate affecting our operations in Mexico
during the 2019 fiscal first quarter.
Engineering, Selling and Administrative expenses
as a percentage of net sales decreased to 9.4 percent in the
current year quarter from 9.8 percent in 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):
|
|
|
September 30, 2018 |
|
October 1, 2017 |
|
|
|
|
|
|
Equity Earnings of VAST
LLC Joint Venture |
|
|
$
915 |
|
$
1,035 |
Equity Loss of STRATTEC
Advanced Logic LLC |
|
|
(6) |
|
(9) |
Net Foreign Currency
Transaction Gain (Loss) |
|
|
(31) |
|
63 |
Other |
|
|
(214) |
|
24 |
|
|
|
$ 664 |
|
$ 1,113 |
The lower income tax provision in the current
year quarter was attributed to a favorable tax adjustment due 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 $372,000 and increased diluted earnings per share
by $0.10 in the current year quarter in comparison to the prior
year quarter.
Frank Krejci, President and CEO commented: “This
quarter, we saw a positive impact to our revenues as we are
launching business that was won two years ago. Our team is
focused on eliminating inefficiencies related to bringing new
product to market under tight timelines. While there are some
concerns of possible headwinds for the industry, we are focused on
meeting those challenges.
Last year, we were honored to win a 2018 PACE
Award for innovation in the automotive industry. We have now
been named as a 2019 PACE Award Finalist, with winners to be
announced in April 2019. We are very proud of our team’s
accomplishment of winning back to back honors. This year’s
product gaining recognition is the Chevrolet Silverado pick-up
truck tailgate which features power open and power close with the
touch of a button or a manual nudge”.
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 our companies' 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 are
“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,
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
CORPORATION |
|
Results of Operations |
(In Thousands except per share
amounts) |
(Unaudited) |
|
|
|
|
|
|
|
First Quarter Ended |
|
|
|
|
|
|
|
September 30, 2018 |
|
October 1, 2017 |
|
|
|
|
|
Net Sales |
|
$117,159 |
|
$102,460 |
Cost of Goods Sold |
|
101,976 |
|
88,997 |
Gross Profit |
|
15,183 |
|
13,463 |
|
|
|
|
|
Engineering, Selling
& Administrative Expenses |
|
11,031 |
|
10,042 |
Income from
Operations |
|
4,152 |
|
3,421 |
|
|
|
|
|
Interest Income |
|
- |
|
4 |
Interest Expense |
|
(407) |
|
(203) |
Other Income, Net |
|
664 |
|
1,113 |
Income before (Benefit)
Provision for Income Taxes and Non-Controlling Interest |
|
4,409 |
|
4,335 |
|
|
|
|
|
(Benefit) Provision for
Income Taxes |
|
(20) |
|
1,066 |
|
|
|
|
|
Net Income |
|
4,429 |
|
3,269 |
Net
Income Attributable to Non-Controlling Interest |
|
(962) |
|
(813) |
|
|
|
|
|
Net Income
Attributable to STRATTEC SECURITY CORP. |
|
$ 3,467 |
|
$ 2,456 |
|
|
|
|
|
Earnings Per
Share: |
|
|
|
|
Basic |
|
$ 0.95 |
|
$ 0.68 |
Diluted |
|
$ 0.93 |
|
$ 0.67 |
Average
Basic Shares Outstanding |
|
3,652 |
|
3,611 |
|
|
|
|
|
Average
Diluted Shares Outstanding |
|
3,711 |
|
3,681 |
|
|
|
|
|
Other |
|
|
|
|
Capital
Expenditures |
|
$3,969 |
|
$7,571 |
Depreciation & Amortization |
|
$4,047 |
|
$3,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STRATTEC SECURITY CORPORATION |
|
|
|
|
|
Condensed Balance Sheet Data |
(In Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
July 1, 2018 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Current
Assets: |
|
|
|
|
Cash and
cash equivalents |
|
$
10,345 |
|
$
8,090 |
Receivables, net |
|
78,525 |
|
73,832 |
Inventories, net |
|
46,279 |
|
46,654 |
Other
current assets |
|
20,469 |
|
22,527 |
Total
Current Assets |
|
155,618 |
|
151,103 |
Investment in Joint
Ventures |
|
21,787 |
|
22,192 |
Other Long Term
Assets |
|
17,542 |
|
17,338 |
Property, Plant and
Equipment, Net |
|
118,001 |
|
116,542 |
|
|
$312,948 |
|
$307,175 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current
Liabilities: |
|
|
|
|
Accounts
Payable |
|
$
39,010 |
|
$
38,439 |
Borrowings Under Credit Facility |
|
2,000 |
|
- |
Other |
|
31,459 |
|
30,354 |
Total
Current Liabilities |
|
72,469 |
|
68,793 |
Accrued
Pension and Post Retirement Obligations |
|
2,368 |
|
2,379 |
Borrowings Under Credit Facility |
|
49,000 |
|
51,000 |
Other
Long-term Liabilities |
|
1,179 |
|
1,757 |
Shareholders’ Equity |
|
334,725 |
|
331,375 |
Accumulated Other Comprehensive Loss |
|
(32,946) |
|
(33,439) |
Less: Treasury Stock |
|
(135,767) |
|
(135,778) |
Total
STRATTEC SECURITY CORPORATION Shareholders’ Equity |
|
166,012 |
|
162,158 |
Non-Controlling Interest |
|
21,920 |
|
21,088 |
Total
Shareholders’ Equity |
|
187,932 |
|
183,246 |
|
|
$312,948 |
|
$307,175 |
|
|
|
|
|
STRATTEC SECURITY CORPORATION |
|
|
|
|
|
Condensed Cash Flow Statement
Data |
(In Thousands) |
(Unaudited) |
|
|
|
|
|
|
|
First Quarter Ended |
|
|
|
|
|
|
|
September 30, 2018 |
|
October 1, 2017 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities: |
|
|
|
|
Net Income |
|
$4,429 |
|
$3,269 |
Adjustment to Reconcile
Net Income to Net |
|
|
|
|
Cash Provided by
Operating Activities: |
|
|
|
|
Depreciation and Amortization |
|
4,047 |
|
3,095 |
Equity
Earnings in Joint Ventures |
|
(909) |
|
(1,026) |
Foreign
Currency Transaction Loss |
|
428 |
|
137 |
Unrealized (Gain) Loss on Peso Forward Contracts |
|
(225) |
|
258 |
Stock
Based Compensation Expense |
|
385 |
|
371 |
Deferred
Income Taxes |
|
(372) |
|
- |
Change in
Operating Assets/Liabilities |
|
14 |
|
(5,745) |
Other,
net |
|
- |
|
(5) |
|
|
|
|
|
Net Cash Provided by
Operating Activities |
|
7,797 |
|
354 |
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
Additions to Property,
Plant and Equipment |
|
(3,969) |
|
(7,571) |
Net Cash Used in
Investing Activities |
|
(3,969) |
|
(7,571) |
|
|
|
|
|
Cash Flow from
Financing Activities: |
|
|
|
|
Borrowings on Credit
Facility |
|
2,000 |
|
12,000 |
Repayment of Borrowings
under Credit Facility |
|
(2,000) |
|
(2,000) |
Dividends Paid to
Non-Controlling Interest of Subsidiaries |
|
(784) |
|
(2,017) |
Dividends Paid
|
|
(514) |
|
(508) |
Exercise of Stock
Options and Employee Stock Purchases |
|
23 |
|
25 |
|
|
|
|
|
Net Cash (Used In)
Provided by Financing Activities |
|
(1,275) |
|
7,500 |
|
|
|
|
|
Foreign Currency Impact
on Cash |
|
(298) |
|
(146) |
|
|
|
|
|
Net Increase in Cash
& Cash Equivalents |
|
2,255 |
|
137 |
|
|
|
|
|
Cash and Cash
Equivalents: |
|
|
|
|
Beginning of
Period |
|
8,090 |
|
8,361 |
End of Period |
|
$10,345 |
|
$8,498 |
Contact: Pat HansenSenior Vice President
andChief Financial Officer414-247-3435www.strattec.com
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