STRATTEC SECURITY CORPORATION Reports Fiscal Fourth Quarter and Year End Results
MILWAUKEE, Aug. 1, 2006 -- STRATTEC SECURITY CORPORATION today reported operating results for the fourth quarter and fiscal year ended July 2, 2006.
Net sales for the fourth quarter ended July 2, 2006 were $46.6 million, compared to net sales of $51.2 million for the fourth quarter ended July 3, 2005. The 2006 fiscal fourth quarter was a typical 13 week period while 2005's fourth quarter was a 14 week period. The impact of the additional week of customer shipments during the prior year quarter increased sales by approximately $2.9 million. Net income was $4.0 million, compared to $3.3 million in the prior year quarter. Diluted earnings per share for the fourth quarter were $1.08 compared to $.87 in the prior year quarter. The primary factors contributing to fourth quarter operating results being more favorable than the prior year were a $961,000 ($605,000 after tax) customer reimbursement relating to production capacity constraint issues that were expensed during previous reported periods and a state refund claim recovery along with a favorable foreign tax adjustment. These items increased current quarter earnings per share by $.39.
For the full fiscal year ended July 2, 2006, net sales were $181.2 million, compared to net sales of $190.3 million in the prior year period. The 2006 fiscal year was the typical 52 week period while 2005's fiscal year was a 53 week period. Net income was $12.5 million compared to $15.0 million and diluted earnings per share were $3.35 compared to $3.94.
Sales to STRATTEC's largest customers overall declined in the current quarter compared to the prior year quarter levels. Sales to DaimlerChrysler Corporation increased during the current quarter to $15.2 million compared to $14.7 million primarily due to a more favorable vehicle content mix and higher vehicle production volumes. Sales to Delphi Corporation were $6.6 million compared to $8.0 million primarily due to lower component content. Sales to General Motors Corporation were $8.3 million compared to $10.9 million due to a combination of discontinued models and lower levels of production on certain General Motors vehicles. Sales to Ford Motor Company were $7.0 million compared to $8.2 million due to price reductions and lower production volumes on certain vehicles. Sales to Mitsubishi Motor Manufacturing of America, Inc. were essentially flat between years at $1.2 million in the current quarter compared to $1.1 million in the prior year quarter.
Gross profit margins were 20.6 percent in the current quarter compared to 20.1 percent in the prior year quarter. The higher margins in the current year quarter were primarily the result of the customer capacity claim reimbursement previously noted, offset by higher purchased raw material costs for brass and zinc.
Operating expenses were $5.8 million in the current quarter, compared to $5.9 million in the prior year quarter.
During fiscal 2006, the Company was required under Financial Accounting Standard 123(R) to recognize stock-based compensation expense in its financial statements. The impact of adopting this new financial accounting standard at the beginning of fiscal 2006 reduced the current quarter earnings per share by $.04 and year ended July 2, 2006 earnings per share by $.19.
Provision for income taxes in the current quarter includes a State refund claim recovery and a favorable foreign tax adjustment that positively impacted earnings per share by $.22.
During the fourth quarter, the Company repurchased 63,600 STRATTEC SECURITY CORPORATION shares under the Company's stock repurchase program at a cost of approximately $2.3 million. For the year ended July 2, 2006, a total of 130,995 shares were repurchased at a cost of approximately $5.3 million.
STRATTEC designs, develops, manufacturers and markets mechanical locks and keys, electronically enhanced locks and keys, steering column and instrument panel ignition lock housings, latches and related access control products for North American automotive customers, and for global automotive manufacturers through the VAST Alliance in which it participates with WITTE Automotive of Velbert, Germany and ADAC Plastics, Inc. of Grand Rapids, Michigan. The Company's history in the automotive business spans nearly 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, 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)
Fourth Quarter Ended Years Ended
July 2, 2006 July 3, 2005 July 2, 2006 July 3, 2005
(Unaudited)
Net Sales $46,551 $51,185 $181,197 $190,314
Cost of Goods Sold 36,943 40,878 144,151 147,538
Gross Profit 9,608 10,307 37,046 42,776
Engineering, Selling
& Administrative
Expenses 5,821 5,852 22,067 20,688
Provision for Doubtful
Accounts - 40 1,622 80
Income from Operations 3,787 4,415 13,357 22,008
Interest Income 830 427 2,563 1,169
Interest Expense - - - -
Other Income (Expense),
Net 388 211 960 320
5,005 5,053 16,880 23,497
Provision for Income
Taxes 1,040 1,797 4,403 8,459
Net Income $3,965 $3,256 $12,477 $15,038
Earnings Per Share:
Basic $1.08 $.87 $3.36 $3.97
Diluted $1.08 $.87 $3.35 $3.94
Average Basic
Shares Outstanding 3,650 3,753 3,716 3,790
Average Diluted
Shares Outstanding 3,653 3,761 3,720 3,816
Other
Capital Expenditures $1,043 $2,043 $5,766 $5,498
Depreciation &
Amortization $1,766 $1,785 $7,155 $7,225
STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
July 2, 2006 July 3, 2005
ASSETS
Current Assets:
Cash and cash equivalents $65,712 $56,950
Receivables, net 25,357 26,053
Inventories 9,337 11,654
Other current assets 10,468 10,030
Total Current Assets 110,874 104,687
Deferred Income Taxes - 1,796
Investment in Joint Venture 2,202 1,412
Prepaid Pension Cost (A) 7,602 -
Other Long Term Assets 197 603
Property, Plant and Equipment, Net 27,764 29,592
$148,639 $138,090
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $17,701 $17,218
Other 11,825 12,850
Total Current Liabilities 29,526 30,068
Borrowings Under Line of Credit Facility - -
Deferred Income Taxes 4,266 -
Accrued Pension and Post Retirement
Obligations (A) 4,572 16,271
Shareholders' Equity 234,989 220,261
Accumulated Other Comprehensive Loss (2,958) (12,047)
Less: Treasury Stock (121,756) (116,463)
Total Shareholders' Equity 110,275 91,751
$148,639 $138,090
(A) Includes $242 and $15,804 of additional minimum pension liability
recorded during the fourth quarter of 2006 and 2005, respectively.
STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
Fourth Quarter Ended Years Ended
July 2, 2006 July 3, 2005 July 2, 2006 July 3, 2005
(Unaudited)
Cash Flows from
Operating Activities:
Net Income $3,965 $3,256 $12,477 $15,038
Adjustment to
Reconcile Net Income
to Cash Used in
Operating Activities:
Depreciation and
Amortization 1,766 1,785 7,155 7,225
Deferred Income Taxes 350 2,282 350 2,282
Stock Based
Compensation Expense 257 - 1,118 -
Tax Benefit from
Options Exercised - 7 61 956
Provision for Doubtful
Accounts - 40 1,622 80
Change in Operating
Assets/Liabilities 1,148 2,085 (3,322) (10,303)
Other, net (172) 251 (166) 474
Net Cash Provided by
Operating Activities 7,314 9,706 19,295 15,752
Cash Flows from
Investing Activities:
Investment in Joint
Ventures (519) (50) (569) (125)
Additions to Property,
Plant and Equipment (1,043) (2,043) (5,766) (5,498)
Proceeds from Sale
of Property, Plant
and Equipment - 22 22 22
Net Cash Used in
Investing Activities (1,562) (2,071) (6,313) (5,601)
Cash Flow from
Financing Activities:
Purchase of Common
Stock (2,313) (2,173) (5,306) (10,999)
Reissue/Exercise
of Stock Options 9 131 1,086 3,567
Net Cash Used in
Financing Activities (2,304) (2,042) (4,220) (7,432)
Net Increase in Cash
& Cash Equivalents 3,448 5,593 8,762 2,719
Cash and Cash
Equivalents:
Beginning of Period 62,264 51,357 56,950 54,231
End of Period $65,712 $56,950 $65,712 $56,950