Exhibit 99.1
 


FOR RELEASE AT 3:00 PM CDT

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

STRATTEC SECURITY CORPORATION

REPORTS FISCAL 2018 FOURTH QUARTER AND FULL YEAR

 OPERATING RESULTS
 
Milwaukee, Wisconsin – August 9, 2018 -- 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 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
 
 
 


The following information was filed by Strattec Security Corp (STRT) on Thursday, August 9, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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