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STRATTEC SECURITY CORPORATION Reports Fiscal 2018 Fourth Quarter and Full Year Operating Results

MILWAUKEE, Wis., Aug. 09, 2018 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal fourth quarter and year ended July 1, 2018.

/EIN News/ -- Fourth Quarter
Net 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 Year
For 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 CORPORATION
Condensed 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 CORPORATION
Condensed 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 CORPORATION
Condensed 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 Hansen
Senior Vice President and
Chief Financial Officer
414-247-3435
www.strattec.com

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