STRATTEC SECURITY CORPORATION Reports Fiscal Second Quarter Results
MILWAUKEE, Jan. 19, 2006 -- STRATTEC SECURITY CORPORATION today reported operating results for the fiscal second quarter ended January 1, 2006.
Net sales for the Company's second quarter ended January 1, 2006 were $43.3 million, compared to net sales of $48.4 million for the second quarter ended December 26, 2004. Based on the timing of the Company's quarter end and holiday shutdown, the 2006 fiscal second quarter had 12 customer shipping weeks while 2005 fiscal second quarter had 13 weeks. The impact of one less week of customer shipments during the current quarter reduced sales by approximately $2.4 million. Net income for the period was $2.7 million, compared to $4.4 million in the prior year quarter. Diluted earnings per share for the period were $.71 compared to $1.15 in the prior year quarter.
For the six months ended January 1, 2006, net sales were $88.1 million compared to net sales of $93.0 million in the prior year period. Net income was $4.4 million compared to net income of $8.1 million in the prior year period and diluted earnings per share were $1.17 compared to $2.09. The current six months operating results includes a $3.2 million ($2.02 million after tax) charge to increase the Company's reserve for uncollectible trade accounts receivable related to the filing for Chapter 11 bankruptcy protection by Delphi Corporation. This reduced the first quarter and six months earnings per share by $.54.
Overall sales to STRATTEC's largest customers decreased in the current quarter compared to the prior year quarter levels. Sales to DaimlerChrysler Corporation increased slightly during the current quarter to $13.1 million compared to $12.8 million due to a more favorable vehicle content mix. Sales to Mitsubishi Motor Manufacturing of America, Inc. were $1.3 million compared to $1.0 million due to higher vehicle production volumes and product content. Sales to Ford Motor Company were $6.8 million compared to $8.5 million due to pre-programmed price reductions, discontinued models and lower levels of vehicle production. Sales to General Motors Corporation were $7.9 million compared to $10.8 million due to a combination of price reductions, discontinued models and lower levels of production on General Motors full-size SUV's due to change-over to new models and inventory balancing on certain other vehicles. Sales to Delphi Corporation were $7.1 million compared to $8.0 million due to pre-programmed price reductions and lower levels of production.
Gross profit margins were 19.7 percent in the current quarter compared to 23.7 percent in the prior year quarter. The gross profit margin decline during the current quarter was attributed to lower production volumes, higher purchased material costs for brass, zinc, and magnesium along with an unfavorable Mexico peso to U.S. dollar exchange rate affecting the Company's Mexico Operations.
Operating expenses were $5.5 million in the current quarter, compared to $4.8 million in the prior year quarter. Increase in operating expense during the current quarter was attributed primarily to recognizing stock based compensation expense under Financial Accounting Standard 123(R). The impact of adopting this new financial accounting standard at the beginning of fiscal year 2006 reduced current quarter earnings per share by $.06.
The provision for income taxes in the current quarter includes a favorable foreign tax adjustment that positively impacted earnings per share by $.08.
STRATTEC designs, develops, manufacturers and markets mechanical locks, electro-mechanical locks, latches, and related access control products for global automotive manufacturers. Its products are shipped to customers in the United States, Mexico, Europe and South America. The Company's history in the automotive business spans more than 95 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, foreign currency fluctuations, and costs of operations. 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
Results of Operations
(In Thousands except per share amounts)
Second Quarter Ended Six Months Ended
January 1, December 26, January 1, December 26,
2006 2004 2006 2004
(Unaudited) (Unaudited)
Net Sales $43,278 $48,436 $88,071 $93,027
Cost of Goods Sold 34,736 36,947 69,755 70,768
Gross Profit 8,542 11,489 18,316 22,259
Engineering, Selling &
Administrative
Expenses 5,494 4,848 10,779 10,014
Provision for
Doubtful Accounts - 43 3,200 40
Income from Operations 3,048 6,598 4,337 12,205
Interest Income 574 233 1,063 416
Interest Expense - - - -
Other Income, Net 124 196 164 159
3,746 7,027 5,564 12,780
Provision for
Income Taxes 1,090 2,600 1,168 4,729
Net Income $2,656 $4,427 $4,396 $8,051
Earnings Per Share:
Basic $.71 $1.16 $1.17 $2.12
Diluted $.71 $1.15 $1.17 $2.09
Average Basic
Shares Outstanding 3,744 3,806 3,745 3,806
Average Diluted
Shares Outstanding 3,748 3,840 3,751 3,847
Other
Capital Expenditures $2,260 $1,322 $3,840 $2,020
Depreciation &
Amortization $1,808 $1,817 $3,632 $3,681
STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
January 1, 2006 July 3, 2005
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $55,168 $56,950
Receivables, net 20,588 26,053
Inventories 12,337 11,654
Other Current Assets 11,244 10,030
Total Current Assets 99,337 104,687
Deferred Income Taxes 1,796 1,796
Investment in Joint Venture 1,614 1,412
Other Long Term Assets 596 603
Property, Plant and Equipment, Net 29,648 29,592
$132,991 $138,090
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $14,742 $17,218
Other 10,054 12,850
Total Current Liabilities 24,796 30,068
Borrowings Under Line of Credit - -
Accrued Pension and Post Retirement Obligations 11,471 16,271
Shareholders' Equity 226,339 220,261
Accumulated Other Comprehensive Loss (11,962) (12,047)
Less: Treasury Stock (117,653) (116,463)
Total Shareholders' Equity 96,724 91,751
$132,991 $138,090
STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
Second Quarter Ended Six Months Ended
January 1, December 26, January 1, December 26,
2006 2004 2006 2004
(Unaudited) (Unaudited)
Cash Flows from
Operating
Activities:
Net Income $2,656 $4,427 $4,396 $8,051
Adjustment to Reconcile
Net Income to Cash Used
in Operating Activities:
Depreciation 1,808 1,817 3,632 3,681
Stock Based Compensation
Expense 351 - 560 -
Tax Benefit from
Options Exercised - 267 61 672
Change in Operating
Assets/Liabilities 4,701 (823) (6,512) (11,479)
Other, net 149 208 65 224
Net Cash Provided by
Operating Activities 9,665 5,896 2,202 1,149
Cash Flows from
Investing Activities:
Investment in
Joint Ventures (50) - (50) (75)
Additions to Property,
Plant and Equipment (2,260) (1,322) (3,840) (2,020)
Proceeds from Sale
of Property, Plant
and Equipment 22 - 22 -
Net Cash Used in
Investing Activities (2,288) (1,322) (3,868) (2,095)
Cash Flow from
Financing Activities:
Purchase of Common Stock - (787) (1,196) (6,254)
Reissue/Exercise of
Stock Options 20 1,083 1,080 3,132
Net Cash Provided by
(Used in) Financing
Activities 20 296 (116) (3,122)
Net Increase (Decrease)
in Cash & Cash
Equivalents 7,397 4,870 (1,782) (4,068)
Cash and Cash
Equivalents:
Beginning of Period 47,771 45,293 56,950 54,231
End of Period $55,168 $50,163 $55,168 $50,163