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 SECOND QUARTER OPERATING RESULTS

Milwaukee, Wisconsin – January 25, 2018 -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal second quarter ended December 31, 2017.

Net sales for the Company’s fiscal second quarter ended December 31, 2017 were $103.2 million, compared to net sales of $98.9 million for the prior year quarter ended January 1, 2017.  Net income for the current year quarter was $2.9 million, compared to net income of $398,000 in the prior year quarter.  Diluted earnings per share for the current year quarter were $0.78 compared to diluted earnings per share of $0.11 in the prior year quarter.

For the six months ended December 31, 2017, net sales were $205.6 million compared to net sales of $199.2 million during the prior year six month period. Net income during the current year six month period was $5.3 million compared to net income of $1.9 million during the prior year six month period. Diluted earnings per share were $1.44 for the current year six month period ended December 31, 2017 compared to diluted earnings per share of $0.53 for the prior year six month period ended January 1, 2017.
 
 

Net sales to each of our customers or customer groups in the current year quarter and prior year quarter were as follows (in millions):
 
   
Three Months Ended
 
   
December 31, 2017
   
January 1, 2017
 
             
Fiat Chrysler Automobiles
 
$
22.0
   
$
22.8
 
General Motors Company
   
21.4
     
22.2
 
Ford Motor Company
   
16.1
     
14.3
 
Tier 1 Customers
   
16.5
     
17.3
 
Commercial and Other OEM Customers
   
19.8
     
13.6
 
Hyundai / Kia
   
7.4
     
8.7
 
TOTAL
 
$
103.2
   
$
98.9
 

The sales to Fiat Chrysler Automobiles in the current year quarter decreased compared to the prior year quarter due to a combination of lower content on the components we supply on certain vehicles, the discontinuation of the Chrysler 200 in December 2016 and lower production volume on the  Chrysler Pacifica minivan. The decrease in sales to General Motors Company in the current year quarter was primarily attributed to lower vehicle production volumes and content on products we supplied Opel Automotive GmbH as part of our General Motors business in the prior year quarter. We now supply these products directly to Opel Automotive which sales are now included under “Commercial and Other OEM Customers” above.  Sales to Ford Motor Company increased in the current year quarter due to a combination of higher production volumes and content on components we supply compared to the prior year quarter.  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 mainly due to new customer programs at Honda of America Manufacturing, Inc.  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 decrease in sales to Hyundai / Kia in the current year quarter was principally due to lower levels of production on vehicles for which components we supply.
 
 

The gross profit margins were 12.3 percent in the current year quarter compared to 13.8 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 a continuation from our previous quarter 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 paint facility in Leon, Mexico. The gross profit margins in the current quarter were also impacted by an unfavorable Mexican Peso to U.S. Dollar exchange rate affecting our operations in Mexico.

Engineering, Selling and Administrative expenses as a percentage of net sales decreased to 9.8 percent in the current year quarter from 11.4 percent in the prior year quarter. Overall, expenses were lower in the current year quarter primarily due to utilizing fewer third party vendors for a portion of our new product development work as compared to the prior year quarter.

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

   
December 31,
2017
   
January 1,
2017
 
             
Equity Earnings of VAST LLC Joint Venture
 
$
1,404
   
$
642
 
Equity Earnings (Loss) of STRATTEC Advanced Logic LLC Joint Venture
    69       (413 )
Net Foreign Currency Transaction (Loss) Gain
   
(64
)
   
568
 
Other
   
173
     
(142
)
   
$
1,582
   
$
655
 

The increase in equity earnings of VAST LLC in the current year quarter compared to the prior year quarter relates primarily to higher sales and profitability at our VAST China operations.

The estimated impact of the new Federal tax law change “Tax Cuts and Jobs Act” in the current year quarter reduced income tax expense by $545,000 and increased diluted earnings per share by $0.15. The higher income tax provision in the prior year quarter compared to the current year quarter related to a dividend paid from our Mexican subsidiaries to our U.S. parent company that increased our income tax expense by $424,000 in the prior year quarter and reduced diluted earnings per share by $0.12.

Frank Krejci, President and CEO commented:  “Profitability was negatively impacted beginning last fiscal year, in part due to additional engineering expenses related to record amounts of new business won. While the additional engineering activities continue at a significantly lower level, we are now in the manufacturing development and start- up phases of this new business and look forward to moving into full production. In addition, we continue to ramp up our new Leon, Mexico facility for painting and assembling vehicle door handles.

Last quarter, our Invis-A-Rise Power Liftgate system for the Honda Odyssey made us a finalist for the prestigious PACE Awards, which will be announced in April. Its quiet operation and cleaner look, due to the elimination of added spindles which are now commonplace, make it a market leading design.

Innovation at STRATTEC was demonstrated again this quarter. Our power system to both raise and lower the tail gate on new pick-up trucks, like the 2019 Chevrolet Silverado, debuted at the Detroit Auto Show. The product was prominently featured in a Motor Trend magazine article about exciting new designs and was also noted in Automotive News”.
 
 

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” 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, 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)
(Unaudited)

   
Second Quarter Ended
   
Six Months Ended
 
   
December 31, 2017
   
January 1, 2017
   
December 31, 2017
   
January 1, 2017
 
                         
Net Sales
 
$
103,182
   
$
98,945
   
$
205,642
   
$
199,189
 
Cost of Goods Sold
   
90,536
     
85,251
     
179,533
     
170,692
 
Gross Profit
   
12,646
     
13,694
     
26,109
     
28,497
 
                                 
Engineering, Selling & Administrative Expenses
   
10,152
     
11,243
     
20,194
     
22,526
 
Income from Operations
   
2,494
     
2,451
     
5,915
     
5,971
 
                                 
Interest Income
   
3
     
39
     
7
     
80
 
Interest Expense
   
(253
)
   
(98
)
   
(456
)
   
(176
)
Other Income, Net
   
1,582
     
655
     
2,695
     
475
 
Income Before Provision for Income Taxes and Non-Controlling Interest
   
3,826
     
3,047
     
8,161
     
6,350
 
                                 
(Benefit) Provision for Income Taxes
   
(9
)
   
1,410
     
1,057
     
2,308
 
                                 
Net Income
   
3,835
     
1,637
     
7,104
     
4,042
 
Net Income Attributable to Non-Controlling Interest
   
(953
)
   
(1,239
)
   
(1,766
)
   
(2,102
)
                                 
Net Income Attributable to STRATTEC SECURITY CORPORATION
 
$
2,882
   
$
398
   
$
5,338
   
$
1,940
 
Earnings Per Share:
                               
Basic
 
$
0.79
   
$
0.11
   
$
1.47
   
$
0.54
 
Diluted
 
$
0.78
   
$
0.11
   
$
1.44
   
$
0.53
 
Average Basic Shares Outstanding
   
3,631
     
3,589
     
3,621
     
3,583
 
                                 
Average Diluted Shares Outstanding
   
3,715
     
3,667
     
3,698
     
3,664
 
                                 
Other
                               
Capital Expenditures
 
$
6,778
   
$
8,883
   
$
14,349
   
$
16,329
 
Depreciation & Amortization
 
$
3,572
   
$
2,887
   
$
6,667
   
$
5,647
 
 
 

STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data
(In Thousands)

   
December 31, 2017
   
July 2, 2017
 
   
(Unaudited)
       
ASSETS
           
Current Assets:
           
Cash and cash equivalents
 
$
8,385
   
$
8,361
 
Receivables, net
   
60,587
     
64,933
 
Inventories, net
   
42,287
     
35,476
 
Other current assets
   
23,278
     
20,235
 
Total Current Assets
   
134,537
     
129,005
 
Investment in Joint Ventures
   
19,724
     
16,840
 
Other Long Term Assets
   
18,740
     
16,278
 
Property, Plant and Equipment, Net
   
115,521
     
111,591
 
   
$
288,522
   
$
273,714
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
Accounts Payable
 
$
37,405
   
$
39,679
 
Other
   
24,792
     
28,216
 
Total Current Liabilities
   
62,197
     
67,895
 
Accrued Pension and Post Retirement Obligations
   
2,408
     
2,495
 
Borrowings Under Credit Facility
   
46,000
     
30,000
 
Other Long-term Liabilities
   
2,061
     
610
 
Shareholders’ Equity
   
324,909
     
319,798
 
Accumulated Other Comprehensive Loss
   
(33,676
)
   
(32,888
)
Less:  Treasury Stock
   
(135,801
)
   
(135,822
)
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity
   
155,432
     
151,008
 
Non-Controlling Interest
   
20,424
     
21,626
 
Total Shareholders’ Equity
   
175,856
     
172,714
 
   
$
288,522
   
$
273,714
 
 
 

STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)

   
Second Quarter Ended
   
Six Months Ended
 
   
December 31, 2017
   
January 1, 2017
   
December 31, 2017
   
January 1, 2017
 
                         
                         
Cash Flows from Operating Activities:
                       
Net Income
 
$
3,835
   
$
1,637
     
7,104
   
$
4,042
 
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities:
                               
Equity Earnings in Joint Ventures
   
(1,473
)
   
(229
)
   
(2,499
)
   
(291
)
Depreciation and Amortization
   
3,572
     
2,887
     
6,667
     
5,647
 
Foreign Currency Transaction Gain
   
(556
)
   
(1,808
)
   
(419
)
   
(2,497
)
Unrealized Loss on Peso Forward Contracts
   
821
     
664
     
1,079
     
1,563
 
Deferred Income Taxes
   
(1,710
)
   
-
     
(1,710
)
   
-
 
Stock Based Compensation Expense
   
250
     
364
     
621
     
792
 
Change in Operating Assets/Liabilities
   
(4,027
)
   
1,433
     
(9,772
)
   
893
 
Other, net
   
(28
)
   
24
     
(33
)
   
(148
)
                                 
Net Cash Provided by Operating Activities
   
684
     
4,972
     
1,038
     
10,001
 
                                 
Cash Flows from Investing Activities:
                               
Investment in Joint Ventures
   
-
     
(100
)
   
-
     
(100
)
Loan to Joint Venture
   
-
     
(550
)
   
-
     
(1,400
)
Repayment of Loan to Joint Venture
   
150
     
-
     
150
     
75
 
Additions to Property, Plant and Equipment
   
(6,778
)
   
(8,883
)
   
(14,349
)
   
(16,329
)
Proceeds Received on Sale of Property, Plant and Equipment
   
2
     
-
     
2
     
-
 
Net Cash Used in Investing Activities
   
(6,626
)
   
(9,533
)
   
(14,197
)
   
(17,754
)
                                 
Cash Flow from Financing Activities:
                               
Borrowings on Line of Credit Facility
   
6,000
     
13,000
     
18,000
     
21,000
 
Payments on Line of Credit Facility
   
-
     
(17,000
)
   
(2,000
)
   
(21,000
)
Dividends Paid to Non-Controlling Interest of Subsidiary
   
-
     
-
     
(2,017
)
   
(1,764
)
Contribution from Non-Controlling Interest
   
-
     
-
     
-
     
2,940
 
Dividends Paid
   
(509
)
   
(503
)
   
(1,017
)
   
(1,006
)
Exercise of Stock Options and
                               
Employee Stock Purchases
   
165
     
86
     
190
     
160
 
                                 
Net Cash Provided by (Used in) Financing Activities
   
5,656
     
(4,417
)
   
13,156
     
330
 
                                 
Effect of Foreign Currency Fluctuations on Cash
   
173
     
99
     
27
     
136
 
                                 
Net (Decrease) Increase in Cash & Cash Equivalents
   
(113
)
   
(8,879
)
   
24
     
(7,287
)
                                 
Cash and Cash Equivalents:
                               
Beginning of Period
   
8,498
     
17,069
     
8,361
     
15,477
 
End of Period
 
$
8,385
   
$
8,190
   
$
8,385
   
$
8,190
 
 
 
 
 


The following information was filed by Strattec Security Corp (STRT) on Thursday, January 25, 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-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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