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STRATTEC SECURITY CORPORATION Reports Fiscal 2015 Fourth Quarter Operating Results

20:00 EDT 5 Aug 2015 | Globe Newswire

MILWAUKEE, Aug. 06, 2015 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal fourth quarter and year ended June 28, 2015.

Fourth Quarter

Net sales for the fourth quarter ended June 28, 2015 were $98.4 million, compared to net sales of $102.1 million for the fourth quarter ended June 29, 2014. Net income was $1.2 million in the current year quarter compared to $5.7 million in the prior year quarter. Diluted earnings per share for the 2015 fourth quarter were $0.33 compared to $1.58 in the prior year quarter.

The lower net income for the current year quarter was attributed to an $8.5 million provision we recorded during the current year fourth quarter to increase our customer warranty reserves for expected warranty payments to be settled in future periods and a combination of operating losses and impairment write-downs related to STRATTEC Advanced Logic, LLC (formerly NextLock), our biometric joint venture, which totaled $1.4 million. These two items were partially offset by the reversal of $3.7 million of incentive bonus plan provisions we recorded in previous quarters during fiscal year 2015. These items in total resulted in a reduction during the current year quarter of pre-tax income of $6.2 million and reduced diluted earnings per share by $1.11.

Net sales to each of our customers in the current year quarter and prior year quarter were as follows (in thousands):

   
 Three Months Ended
   June 28, 2015 June 29, 2014
   
Fiat Chrysler Automobiles$25,980 $33,036 
General Motors Company 20,145  30,308 
Ford Motor Company 13,451  12,198 
Tier 1 Customers  18,674  15,425 
Commercial and Other OEM Customers 10,894  9,016 
Hyundai / Kia 9,282  2,079 
TOTAL$98,426 $102,062 
       

Decreased sales to Fiat Chrysler Automobiles in the current year quarter were primarily due to the temporary shutdown of Fiat Chrysler's Windsor, Canada assembly plant during the quarter to re-tool the plant for production of the new Chrysler minivan, which decreased our net sales during the current year quarter by $10 million. The negative effect of this shutdown was partially offset by increased service sales in comparison to the prior year quarter. The decrease in sales to General Motors Company in the current year quarter was anticipated and primarily attributed to incremental service parts sales of $11 million that were shipped during the prior year quarter. These service part shipments were part of a short term program which ended during the first half in our current fiscal year. Sales to Ford Motor Company in the current year quarter were slightly higher due to increased product content. Sales to Tier 1 Customers during the current year quarter increased in comparison to the prior year quarter. These customers primarily represent purchasers of other vehicle access control products, such as latches, fobs, and driver controls, that we have developed in recent years to complement our historic core business of locks and keys. The increase in sales to Hyundai / Kia in the current year quarter was principally due to the continued ramp-up of the new Kia Sedona minivan for which we supply components.

Gross profit margins were 10.6 percent in the current year quarter compared to 20.0 percent in the prior year quarter. The decrease in gross profit margin in the current year quarter was primarily attributed to the $8.5 million pre-tax warranty provision as discussed previously. Items favorably impacting gross margin during the current year quarter were a favorable Mexican Peso to U.S. Dollar exchange rate affecting our operations in Mexico and lower expense provisions under our incentive bonus plans as compared to the prior year quarter.

Operating expenses were $8.0 million in the current year quarter and $10.8 million in the prior year quarter. As a percent of net sales in the current year quarter operating expenses decreased to 8.1% from 10.6% in comparison to the prior year quarter. The major contributor to the decreased spending on operating expenses during the current year quarter were lower expense provisions under our incentive bonus programs.

Included in Other (Expense) Income, Net in the current year quarter compared to the prior year quarter were the following items (in thousands of dollars):

   
 June 28,June 29,
  2015  2014 
   
Equity Earnings of VAST LLC Joint Venture$ 432  $ 218  
Equity Loss of STRATTEC Advanced Logic, LLC  (1,082)   (119) 
Foreign Currency Transaction Gain (Loss)  71    (110) 
Other  101    86  
 $ (478) $ 75  
           

During the current year quarter STRATTEC contributed $3.0 million to its Defined Benefit Pension Trust to improve the overall funded status of the Plan.

Full Year

STRATTEC’s fiscal 2015 net sales and diluted earnings per share each reached a record high, exceeding the prior year record by approximately 18% and 23% respectively.

For the fiscal year ended June 28, 2015, net sales were $411.5 million compared to net sales of $348.4 million during fiscal 2014.  Net income for fiscal 2015 was $20.7 million compared to net income of $16.4 million in the prior year period. Diluted earnings per share for the current year were $5.66 compared to diluted earnings per share of $4.59 in the prior year. 

Frank Krejci, President and CEO commented: “After STRATTEC Associates performed at an exceptionally high level throughout the year, I am disappointed to end the year with poor reported earnings for the 4th quarter. The underlying business and performance remains strong. However, in addition to the Chrysler Windsor Assembly Plant shutdown, significant unusual charges drastically hurt the quarter. Despite all of that, we still chalked up a year of both record sales and record profits for STRATTEC.

Throughout the automotive industry there has been a heightened focus on supplier cost-sharing in vehicle manufacturers’ warranty repairs and vehicle recalls. The larger charge of $8.5 million of warranty expenses reflects this new reality. While we expect this trend to continue, we do not expect the magnitude of the impact on our financial results to continue. For example, one particularly impactful problem this past year was the result of a new vehicle launch with significant time pressures and customer-driven late design changes. We have learned from it and will make it an area of focus for this upcoming year. Some of the charges relate to our efforts to diversify our business. We recognized nearly $2 million of start-up and impairment costs in the current quarter relating to STRATTEC Component Solutions and STRATTEC Advanced Logic. We are still optimistic about these initiatives, but the birthing process has been more costly than we expected.

Lastly, this past quarter, along with our VAST partners, we acquired a 50% ownership interest in Minda VAST Access Systems. The company is based in Pune, India, has approximately $40 million in annual sales and will be an important strategic investment to support our global customers and future growth.”

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
  June 28, 2015  June 29, 2014  June 28, 2015  June 29, 2014 
     (Unaudited)       (Unaudited)        
                     
                     
Net Sales$ 98,426  $ 102,062  $ 411,475  $ 348,419  
Cost of Goods Sold  88,026    81,614    338,815    282,621  
Gross Profit  10,400    20,448    72,660    65,798  
     
Engineering, Selling &    
Administrative Expenses  8,010    10,797    41,534    39,274  
Income from Operations  2,390    9,651    31,126    26,524  
     
Interest Income  59    42    185    106  
Interest Expense  (32)   (8)   (71)   (45) 
Other (Expense) Income, Net  (478)   75    2,693    1,229  
Income before Provision for    
Income Taxes and    
Non-Controlling Interest  1,939    9,760    33,933    27,814  
     
Provision for Income    
Taxes  4    3,372    9,382    8,674  
     
Net Income $ 1,935  $ 6,388  $ 24,551  $ 19,140  
     
Net Income Attributable    
to Non-Controlling Interest  735    649    3,897    2,716  
     
Net Income Attributable    
to STRATTEC SECURITY    
CORPORATION$ 1,200  $ 5,739  $ 20,654  $ 16,424  
     
     
Earnings Per Share:    
Basic$ 0.33  $ 1.62  $ 5.80  $ 4.70  
Diluted$ 0.33  $ 1.58  $ 5.66  $ 4.59  
Average Basic    
Shares Outstanding  3,525    3,476    3,515    3,428  
     
Average Diluted    
Shares Outstanding  3,609    3,571    3,604    3,513  
     
Other    
Capital Expenditures$ 4,446  $ 3,431  $ 26,097  $ 12,812  
Depreciation & Amortization$ 2,348  $ 2,054  $ 8,815  $ 8,267  


       
STRATTEC SECURITY CORPORATION
       
Condensed Balance Sheet Data
(In Thousands)
       
       
    June 28, 2015   June 29, 2014
    (Unaudited)   
       
ASSETS      
Current Assets:          
Cash and cash equivalents $ 25,695  $ 19,756 
Receivables, net   58,807    68,822 
Inventories, net   34,786    30,502 
Other current assets   18,873    16,559 
Total Current Assets   138,161    135,639 
Investment in Joint Ventures   15,326    9,977 
Other Long Term Assets   10,816    11,639 
Property, Plant and Equipment, Net   71,126    55,781 
  $ 235,429  $ 213,036 
       
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current Liabilities:      
Accounts Payable $ 27,838  $ 36,053 
Other   36,897    29,210 
Total Current Liabilities   64,735    65,263 
Accrued Pension and Post Retirement Obligations   2,988    3,842 
Borrowings Under Credit Facility   10,000    2,500 
Deferred Income Taxes   4,595    5,127 
Other Long-term Liabilities   710    1,401 
Shareholders’ Equity   303,073    281,623 
Accumulated Other Comprehensive Loss   (26,859)   (20,198)
Less:  Treasury Stock   (135,902)   (135,919)
Total STRATTEC SECURITY      
CORPORATION Shareholders’ Equity   140,312    125,506 
Non-Controlling Interest   12,089    9,397 
Total Shareholders’ Equity   152,401    134,903 
  $ 235,429  $ 213,036 
       


STRATTEC SECURITY CORPORATION 
Condensed Cash Flow Statement Data 
(In Thousands) 
 
  Fourth Quarter Ended   Years Ended 
  June 28, 2015  June 29, 2014  June 28, 2015 June 29, 2014 
  (Unaudited)  (Unaudited)   
                   
Cash Flows from Operating Activities:                  
Net Income$ 1,935  $  6,388  $24,551 $19,140  
Adjustment to Reconcile Net Income to     
Cash Provided by Operating Activities:     
Equity Loss (Earnings)  in Joint Ventures  650     (99  788  (957 
Depreciation and Amortization  2,348     2,054   8,815  8,267  
Foreign Currency Transaction (Gain) Loss  (71)    110   (3,075) 36  
Deferred Income Taxes  (3,330)    1,447   (3,330) 1,447  
Stock Based Compensation Expense  310     248   1,323  1,128  
Change in Operating Assets/Liabilities  5,733     (8,113  1,926  (17,828) 
Other, net  289     172   461  286  
      
Net Cash Provided by Operating Activities  7,864     2,207   31,459  11,519  
      
Cash Flows from Investing Activities:     
Investment in Joint Ventures  (4,000    -   (4,384 -  
Additions to Property, Plant and Equipment  (4,446    (3,431  (26,097 (12,812 
Proceeds from Sale of Property, Plant     
and Equipment  1     25   1  71  
Other  (100)       -    (315) (285) 
Net Cash Used in Investing Activities  (8,545)    (3,406  (30,795) (13,026) 
      
Cash Flows from Financing Activities:     
Borrowings Under Credit Facility  -     -   9,000  1,250  
Repayments Under Credit Facility  (1,000)    -   (1,500) (1,000 
Dividends Paid  (429)    (390  (1,711 (1,542) 
Dividends Paid to Non-Controlling Interest     
Of Subsidiaries   -     -   (882) (984) 
Excess Tax Benefits from Stock Based Compensation  52     40   367  495  
Exercise of Stock Options and Employee     
Stock Purchases  134     769   553  2,742  
     
Net Cash (Used in) Provided by Financing Activities  (1,243)    419   5,827  961  
     
Foreign Currency Impact on Cash  (416)    42   (552 (5) 
      
Net (Decrease) Increase in Cash & Cash Equivalents  (2,340)    (738)  5,939  (551) 
      
Cash and Cash Equivalents:     
Beginning of Period  28,035     20,494   19,756  20,307  
End of Period$   25,695  $    19,756  $  25,695 $  19,756  
                   

 

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

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