Exhibit 99.1
 
 
FOR RELEASE AT 3:00 PM CST

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

STRATTEC SECURITY CORPORATION

REPORTS FISCAL 2018 THIRD QUARTER OPERATING RESULTS

Milwaukee, Wisconsin – April 26, 2018 -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal third quarter ended April 1, 2018.

Net sales for the Company’s third quarter ended April 1, 2018 were $116.8 million, compared to net sales of $109.7 million for the third quarter ended April 2, 2017. Net income for the current year quarterly period was $3.0 million, compared to net income of $3.5 million in the prior year quarter. Diluted earnings per share for the current year quarterly period were $.80 compared to diluted earnings per share of $.95 in the prior year quarter.
 


For the nine months ended April 1, 2018, the Company’s net sales were $322.5 million compared to net sales of $308.9 million in the prior year nine month period. Net income during the current year nine month period was $8.3 million compared to net income of $5.4 million in the prior year nine month period. Diluted earnings per share were $2.24 for the nine month period ended April 1, 2018 compared to diluted earnings per share of $1.48 during the nine month period ended April 2, 2017.

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

   
Three Months Ended
 
   
April 1, 2018
   
April 2, 2017
 
             
Fiat Chrysler Automobiles
 
$
31,282     $
27,962
 
General Motors Company
   
22,417
     
21,883
 
Ford Motor Company
   
18,062
     
16,788
 
Tier 1 Customers
   
19,027
     
19,618
 
Commercial and Other OEM Customers
   
21,714
     
15,237
 
Hyundai / Kia
   
4,321
     
8,218
 
TOTAL
 
$
116,823
   
$
109,706
 

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 increase in sales to General Motors Company in the current year quarter compared to the prior year quarter related primarily to higher content sales on models for which we supply components, in particular latches. In the prior year quarter we supplied Opel Automotive GmbH as part of our General Motors business. 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. 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 13.0 percent in the current year quarter compared to 16.0 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 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. Also, negatively impacting gross margins in the current quarter were an unfavorable Mexican Peso to US dollar exchange rate affecting our operations in Mexico.

Engineering, Selling and Administrative expenses as a percent of net sales in the current year quarter were 9.3 percent compared to 10.7 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 associated with utilizing third party vendors for a portion of our development work.

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

   
April 1,
   
April 2,
 
   
2018
   
2017
 
             
Equity Earnings of VAST LLC Joint Venture
 
$
703
   
$
451
 
Equity Loss of STRATTEC Advanced Logic LLC Joint Venture
   
(84
)
   
(614
)
Net Foreign Currency Realized and Unrealized Transaction Gain
   
122
     
1,296
 
Other
   
36
     
(104
)
   
$
777
   
$
1,029
 
 


The decrease in Other Income, Net in the current year quarter was primarily related to lower net foreign currency gains, which was partially offset by lower losses from our STRATTEC Advanced Logic LLC joint venture incurred in the current year quarter as we continue to wind down the operation of this joint venture.

Frank Krejci, President & CEO commented: “Due to the added costs of launching significant amounts of new business and the production start-up expenses related to our new Leon, Mexico facility for painting and assembling door handles we continue to feel the negative impacts on our profitability. We believe these impacts will continue over the next two quarters before these efforts will positively contribute to our results.

STRATTEC was recently spotlighted in the automotive industry when we won the very prestigious Automotive News PACE Award for innovation. More can be seen at www.autonews.com/pace. Since we were competing with many much larger companies, we are extremely proud of our team for designing a unique power door lifting system, offering many advantages over competitors’ products. This product is currently featured on the new Honda Odyssey”.
 


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 customer product recall policies, foreign currency fluctuations, and fluctuations in our costs of operation (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)

   
Third Quarter Ended
   
Nine Months Ended
 
                         
   
April 1, 2018
   
April 2, 2017
   
April 1, 2018
   
April 2, 2017
 
                         
Net Sales
 
$
116,823
   
$
109,706
   
$
322,465
   
$
308,895
 
                                 
Cost of Goods Sold
   
101,626
     
92,105
     
281,159
     
262,797
 
                                 
Gross Profit
   
15,197
     
17,601
     
41,306
     
46,098
 
                                 
Engineering, Selling & Administrative Expenses
   
10,839
     
11,782
     
31,033
     
34,308
 
                                 
Income from Operations
   
4,358
     
5,819
     
10,273
     
11,790
 
                                 
Interest Income
   
1
     
52
     
8
     
132
 
                                 
Interest Expense
   
(305
)
   
(100
)
   
(761
)
   
(276
)
                                 
Other Income, Net
   
777
     
1,029
     
3,472
     
1,504
 
                                 
Income before Provision for Income Taxes and Non-Controlling Interest
   
4,831
     
6,800
     
12,992
     
13,150
 
                                 
Provision for Income Taxes
   
899
     
1,752
     
1,956
     
4,060
 
                                 
Net Income
   
3,932
     
5,048
     
11,036
     
9,090
 
                                 
Net Income Attributable to Non-Controlling Interest
   
(963
)
   
(1,566
)
   
(2,729
)
   
(3,668
)
                                 
Net Income Attributable to STRATTEC SECURITY CORPORATION
 
$
2,969
   
$
3,482
   
$
8,307
   
$
5,422
 
                                 
Earnings Per Share:
                               
Basic
 
$
0.82
   
$
0.97
   
$
2.29
   
$
1.51
 
Diluted
 
$
0.80
   
$
0.95
   
$
2.24
   
$
1.48
 
Average Basic Shares Outstanding
   
3,634
     
3,592
     
3,625
     
3,586
 
                                 
Average Diluted Shares Outstanding
   
3,708
     
3,671
     
3,702
     
3,666
 
                                 
Other
                               
Capital Expenditures
 
$
5,033
   
$
10,313
   
$
19,382
   
$
26,642
 
Depreciation & Amortization
 
$
3,884
   
$
2,807
   
$
10,551
   
$
8,454
 
 


STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data
(In Thousands)

   
April 1, 2018
   
July 2, 2017
 
   
(Unaudited)
       
             
ASSETS
           
Current Assets:
           
Cash and cash equivalents
 
$
7,037
   
$
8,361
 
Receivables, net
   
70,527
     
64,933
 
Inventories, net
   
42,981
     
35,476
 
Other current assets
   
27,401
     
20,235
 
Total Current Assets
   
147,946
     
129,005
 
Investment in Joint Ventures
   
21,367
     
16,840
 
Other Long Term Assets
   
19,218
     
16,278
 
Property, Plant and Equipment, Net
   
118,549
     
111,591
 
   
$
307,080
   
$
273,714
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
Accounts Payable
 
$
44,268
   
$
39,679
 
Other
   
27,461
     
28,216
 
Total Current Liabilities
   
71,729
     
67,895
 
Accrued Pension and Post Retirement Obligations
   
2,382
     
2,495
 
Borrowings Under Credit Facility
   
48,000
     
30,000
 
Other Long-term Liabilities
   
1,787
     
610
 
Shareholders’ Equity
   
327,636
     
319,798
 
Accumulated Other Comprehensive Loss
   
(30,782
)
   
(32,888
)
Less: Treasury Stock
   
(135,790
)
   
(135,822
)
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity
   
161,064
     
151,008
 
Non-Controlling Interest
   
22,118
     
21,626
 
Total Shareholders’ Equity
   
183,182
     
172,714
 
   
$
307,080
   
$
273,714
 
 


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

   
Third Quarter Ended
   
Nine Months Ended
 
                         
   
April 1, 2018
   
April 2, 2017
   
April 1, 2018
   
April 2, 2017
 
                         
Cash Flows from Operating Activities:
                       
Net Income
 
$
3,932
   
$
5,048
   
$
11,036
   
$
9,090
 
Adjustment to Reconcile Net Income to Cash Provided by Operating Activities:
                               
Equity (Earnings) Loss in Joint Ventures
   
(619
)
   
163
     
(3,118
)
   
(128
)
Depreciation and Amortization
   
3,884
     
2,807
     
10,551
      8,454  
Foreign Currency Transaction Loss (Gain)
   
592
     
722
     
173
     
(1,775
)
Unrealized (Gain) Loss on Peso
                               
Forward Contracts
   
(392
)
   
(2,710
)
   
687
     
(1,147
)
Stock Based Compensation Expense
   
250
     
362
     
871
     
1,154
 
Deferred Income taxes
   
-
     
-
     
(1,710
)
   
-
 
Change in Operating Assets/Liabilities
   
(4,972
)
   
(4,241
)
   
(14,744
)
   
(3,348
)
Other, net
   
(11
)
   
5
     
(44
)
   
(143
)
                                 
Net Cash Provided by Operating Activities
   
2,664
     
2,156
     
3,702
     
12,157
 
                                 
Cash Flows from Investing Activities:
                               
Investment in Joint Ventures
   
(125
)
   
(150
)
   
(125
)
   
(250
)
Loan to Joint Venture
   
-
     
(525
)
   
-
     
(1,925
)
Repayment of Loan to Joint Venture
   
150
     
-
     
300
     
75
 
Additions to Property, Plant and Equipment
   
(5,033
)
   
(10,313
)
   
(19,382
)
   
(26,642
)
Proceeds from Sale of Property, Plant and Equipment
   
10
     
-
     
12
     
-
 
Net Cash Used in Investing Activities
   
(4,998
)
   
(10,988
)
   
(19,195
)
   
(28,742
)
                                 
Cash Flows from Financing Activities:
                               
Borrowings Under Credit Facility
   
3,000
     
9,000
     
21,000
     
30,000
 
Repayment of Borrowings Under Credit Facility
   
(1,000
)
   
(3,000
)
   
(3,000
)
   
(24,000
)
Dividends Paid to Non-Controlling Interests of Subsidiaries
   
(200
)
   
-
     
(2,217
)
   
(1,764
)
Dividends Paid
   
(508
)
   
(503
)
   
(1,525
)
   
(1,509
)
Contributions from Non-Controlling Interest of Subsidiaries
   
-
     
-
     
-
     
2,940
 
Exercise of Stock Options and Employee Stock Purchases
   
27
     
27
     
217
     
187
 
                                 
Net Cash Provided by Financing Activities
   
1,319
     
5,524
     
14,475
     
5,854
 
                                 
Effect of Foreign Currency Fluctuations on Cash
   
(333
)
   
109
     
(306
)
   
245
 
                                 
Net Decrease in Cash & Cash Equivalents
   
(1,348
)
   
(3,199
)
   
(1,324
)
   
(10,486
)
                                 
Cash and Cash Equivalents:
                               
Beginning of Period
   
8,385
     
8,190
     
8,361
     
15,477
 
End of Period
 
$
7,037
   
$
4,991
   
$
7,037
   
$
4,991
 

 


The following information was filed by Strattec Security Corp (STRT) on Thursday, April 26, 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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