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STRATTEC SECURITY CORPORATION Reports Fiscal 2017 Fourth Quarter and Full Year Operating Results

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MILWAUKEE, Aug. 10, 2017 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION ("STRATTEC" or the "Company") (NASDAQ:STRT) today reported operating results for the fiscal fourth quarter and year ended July 2, 2017.

Fourth Quarter

Net sales for the fourth quarter ended July 2, 2017 were $108.4 million, compared to net sales of $108.3 million for the fourth quarter ended July 3, 2016. The 2016 fiscal fourth quarter was a 14 week period while fiscal 2017's fourth quarter was the typical 13 week period. The impact of the additional week of customer shipments during the prior year quarter increased sales during that quarter by approximately $7.5 million. Net income was $1.8 million in the current year quarter compared to $584,000 in the prior year quarter. Diluted earnings per share for the 2017 fourth quarter were $0.48 compared to $0.16 in the prior year quarter. The lower net income for the prior year quarter was primarily attributed to STRATTEC's one third share ($2 million pre-tax or $1.26 million after tax) of a $6 million non-cash impairment charge related to Vehicle Access Systems Technology LLC's ("VAST LLC") investment in Minda VAST Access Systems joint venture in India. STRATTEC owns a one third interest in VAST LLC.  STRATTEC's one third share of the impairment charge reduced its earnings per share in the prior year quarter by $0.35.

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 2, 2017   July 3, 2016
             
  Fiat Chrysler Automobiles   $ 25,984   $ 28,331
  General Motors Company     22,518     21,765
  Ford Motor Company     16,250     15,745
  Tier 1 Customers     17,678     19,711
  Commercial and Other OEM Customers      17,818     14,426
  Hyundai / Kia     8,182     8,369
  TOTAL   $ 108,430   $ 108,347
               

Sales to Fiat Chrysler Automobiles in the current year quarter decreased primarily due to discontinuing production on the Chrysler 200 and Dodge Dart effective December 2016, both vehicles for which we supplied components. Sales to General Motors Company and Ford Motor Company in the current year quarter were up slightly in comparison to the prior year quarter, which had one additional shipping week during that period. 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. These customers primarily represent purchasers of vehicle access control products, such as latches and fobs, which have been 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 one less shipping week on the Kia Sedona minivan for which we supply components in comparison to the prior year quarter.

Gross profit margins were 13.5 percent in the current year quarter compared to 14.0 percent in the prior year quarter.  The slight decrease in gross profit margin in the current year quarter was primarily attributed to asset impairment write-downs related to STRATTEC Advanced Logic, LLC, our biometric joint venture, and startup costs associated with our new Leon, Mexico facility. These items were offset by the reversal of warranty expense provisions and recoveries along with a favorable Mexican Peso to U.S. Dollar exchange rate affecting our operations in Mexico.

Operating expenses were $11.9 million in the current year quarter and $11.5 million in the prior year quarter.  As a percent of net sales in the current year quarter operating expenses were 10.8% compared to 10.6% 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):

           
      July 2,   July 3,
      2017   2016
                   
  Equity Earnings (Loss) of VAST LLC Joint Venture   $ 1,110     $ (1,328 )
  Equity Loss of STRATTEC Advanced Logic, LLC     (572 )     (421 )
  Net Foreign Currency Transaction Gain (Loss)     64       (18 )
  Other     12       124  
      $ 614     $ (1,643 )
                   

The prior year quarter equity loss in VAST LLC joint venture relates to STRATTEC's share of the Minda VAST Access Systems impairment charge of $2 million previously discussed.

The lower tax provision in the current year quarter was attributed to a higher tax credit for research and development costs on new products in comparison to the prior year quarter end.

Full Year

For the fiscal year ended July 2, 2017, STRATTEC net sales were $417.3 million compared to net sales of $401.4 million during fiscal 2016. Net income for fiscal 2017 was $7.2 million compared to net income of $9.1 million in the prior year.  Diluted earnings per share for the current year were $1.96 compared to diluted earnings per share of $2.51 in the prior year.

Frank Krejci, President and CEO, commented: "As a Company, we are not satisfied with this year's profitability. We have made progress in positioning ourselves to deliver new business during the upcoming year.  Costs are being reduced where opportunities have not materialized as planned.  Our new manufacturing plant in Leon, Mexico, will begin production on a new product line within the next month.  STRATTEC Advanced Logic, our biometric technology joint venture, has proved to be much more costly than planned.  As a result, we have taken steps to drastically reduce our exposure to that business.

"For the upcoming year, we are focused on new product introduction, fine tuning processes and making capital investments to insure quality and improve efficiency as the automotive market has shown some recent signs of weakening."     

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" brand name.  STRATTEC's history in the automotive business spans over 100 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, 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 2, 2017   July 3, 2016       July 2, 2017       July 3, 2016  
      (Unaudited)        (Unaudited)          
Net Sales   $ 108,430     $ 108,347     $ 417,325     $ 401,419  
Cost of Goods Sold     93,771       93,152       357,163       336,594  
Gross Profit     14,659       15,195       60,162       64,825  
                                 
Engineering, Selling &                                
Administrative Expenses     11,892       11,467       46,460       43,917  
Income from Operations     2,767       3,728       13,702       20,908  
                                 
Interest Income     4       6       136       25  
Interest Expense     (141 )     (81 )     (417 )     (176 )
Other Income (Expense), Net     614       (1,643 )     2,973       (1,567 )
Income before Provision for                                
Income Taxes and                                
Non-Controlling Interest     3,244       2,010       16,394       19,190  
                                 
Provision for Income                                
Taxes     224       211       4,284       5,068  
                                 
Net Income   $ 3,020     $ 1,799     $ 12,110     $ 14,122  
                                 
Net Income Attributable                                
to Non-Controlling Interest     1,245       1,215       4,913       4,973  
                                 
Net Income Attributable                                
to STRATTEC SECURITY                                
CORPORATION   $ 1,775     $ 584     $ 7,197     $ 9,149  
                                 
                                 
Earnings Per Share:                                
Basic   $ 0.49     $ 0.16     $ 2.01     $ 2.55  
Diluted   $ 0.48     $ 0.16     $ 1.96     $ 2.51  
Average Basic                                
Shares Outstanding     3,595       3,565       3,588       3,559  
                                 
Average Diluted                                
Shares Outstanding     3,680       3,622       3,670       3,621  
                                 
Other                                
Capital Expenditures   $ 10,368     $ 9,157     $ 37,010     $ 23,496  
Depreciation & Amortization   $ 2,964     $ 2,518     $ 11,418     $ 10,121  
                                 
                                 


STRATTEC SECURITY CORPORATION
 
Condensed Balance Sheet Data 
(In Thousands) 
 
      July 2, 2017
   July 3, 2016
      (Unaudited)        
ASSETS                
Current Assets:                
Cash and cash equivalents   $   8,361     $   15,477  
Receivables, net     64,933       63,726  
Inventories, net     35,476       38,683  
Other current assets     20,235       16,565  
Total Current Assets     129,005       134,451  
Investment in Joint Ventures     16,840       14,168  
Other Long Term Assets     16,278       8,408  
Property, Plant and Equipment, Net     111,591       85,149  
    $   273,714     $   242,176  
LIABILITIES AND SHAREHOLDERS' EQUITY                
Current Liabilities:                
Accounts Payable   $ 39,679     $ 32,416  
Other     28,216       31,799  
Total Current Liabilities     67,895       64,215  
Accrued Pension and Post Retirement Obligations     2,495       2,728  
Borrowings Under Credit Facility     30,000       20,000  
Other Long-term Liabilities
    610       721  
Shareholders' Equity     319,798       312,876  
Accumulated Other Comprehensive Loss     (32,888 )     (37,673 )
Less:  Treasury Stock     (135,822 )     (135,871 )
Total STRATTEC SECURITY                
CORPORATION Shareholders' Equity     151,008       139,332  
Non-Controlling Interest     21,626       15,180  
Total Shareholders' Equity     172,714       154,512  
  $   273,714     $   242,176  
               
               

 

STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
 
    Fourth Quarter Ended 
      Years Ended
    July 2, 2017   July 3, 2016       July 2, 2017       July 3, 2016  
       (Unaudited)
      (Unaudited)          
                                 
Cash Flows from Operating Activities:                                
Net Income   $ 3,020     $ 1,799     $ 12,110     $ 14,122  
Adjustment to Reconcile Net Income to                                
Cash Provided by (Used in) Operating Activities:                                
Equity (Gain) Loss in Joint Ventures     (538 )     1,749       (666 )     2,235  
Depreciation and Amortization     2,964       2,518       11,418       10,121  
Foreign Currency Transaction Loss (Gain)     647       (764 )     (1,128 )     (2,559 )
Unrealized (Gain) Loss on Peso Contracts     (863 )     289       (2,010 )     889  
Deferred Income Taxes     1,851       3,027       1,851       3,027  
Stock Based Compensation Expense     354       378       1,508       1,625  
Change in Operating Assets/Liabilities     3,517       (9,508 )     169       (21,510 )
Other, net     33       311       (110 )     268  
                                 
Net Cash Provided by (Used in) Operating Activities     10,985       (201 )     23,142       8,218  
                                 
Cash Flows from Investing Activities:                                
Investment in Joint Ventures     (150 )     -       (400 )     (1,720 )
Additions to Property, Plant and Equipment     (10,368 )     (9,157 )     (37,010 )     (23,496 )
Other     (278 )     25       (2,128 )     (49 )
Net Cash Used in Investing Activities     (10,796 )     (9,132 )     (39,538 )     (25,265 )
                                 
Cash Flows from Financing Activities:                                
Borrowings Under Credit Facility     6,000       6,000       36,000       26,500  
Repayments Under Credit Facility     (2,000 )     (4,000 )     (26,000 )     (16,500 )
Dividends Paid     (503 )     (467 )     (2,012 )     (1,865 )
Dividends Paid to Non-Controlling Interest                                
Of Subsidiaries     (200 )     -       (1,964 )     (1,568 )
Contribution from Non-Controlling Interest     -       -       2,940       -  
Of Subsidiaries                                
Exercise of Stock Options and Employee                                
Stock Purchases, Including Excess Tax Benefits                                
From Stock Based Compensation     75       34       262       643  
                                 
Net Cash Provided by Financing Activities     3,372       1,567       9,226       7,210  
                                 
Foreign Currency Impact on Cash     (191 )     85       54       (381 )
                                 
Net Increase (Decrease) in Cash & Cash Equivalents     3,370       (7,681 )     (7,116 )     (10,218 )
                                 
Cash and Cash Equivalents:                                
Beginning of Period     4,991       23,158       15,477       25,695  
End of Period   $   8,361     $   15,477     $   8,361     $   15,477  


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

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