STRATTEC SECURITY CORPORATION Reports Fiscal First Quarter Results
MILWAUKEE, Oct. 19, 2006 -- STRATTEC SECURITY CORPORATION today reported sales and operating results for the fiscal first quarter ended October 1, 2006.
Net sales for the three months ended October 1, 2006 were $38.1 million compared to net sales of $44.8 million for the three months ended October 2, 2005. Net income for the period was $.7 million, compared to $1.7 million in the prior year quarter. Diluted earnings per share for the period were $.21 compared to $.46 in the prior year quarter.
The significant change in sales and profitability for the current quarter compared to last year is primarily the result of two factors. First, the Company's four largest customers have suffered dramatically declining sales over the past several months, and have begun to reduce their production accordingly. This affected the demand for the products we supply to them, reducing our sales volumes for these customers by nearly 19% and hampering our production efficiencies. Second, the cost of the main raw materials (zinc and brass) used in our products has approximately doubled over the prior year, negatively impacting our gross profit margins.
In comparing results for the current and prior year quarters it should be noted that the prior year included a $3.2 million ($2.02 million after tax) charge to increase the Company's reserve for uncollectible trade accounts receivable related to the October 2005 filing for Chapter 11 bankruptcy protection by Delphi Corporation which reduced earnings per share by $.54. Further, the prior year quarter included a state refund claim recovery that positively impacted prior year quarter earnings per share by $.13. The provision for income taxes during the current quarter is our normal 37 percent effective tax rate.
Sales to DaimlerChrysler in the current quarter compared to the prior year quarter levels were $12.5 million compared to $14.6 million, and sales to General Motors Corporation were $7.9 million compared to $8.2 million due to lower production levels of the vehicles we supply. Sales to Delphi Corporation were $4.5 million compared to $6.2 million due to a combination of lower levels of production and reduced component content. Sales to Ford Motor Company were $4.6 million compared to $6.6 million, due to price reductions and lower vehicle production. The full effect of these four customers' announced production cuts will be felt in our 2nd fiscal quarter ending December 31, 2006. Sales to Mitsubishi Motors Manufacturing of America, Inc. were $.7 million compared to $1.6 million as we wind down our relationship with this customer. We previously announced that Mitsubishi would cease to be a customer by the end of this calendar year. However, we now anticipate that a modest level of sales will continue through February 2007.
Gross profit margin was 13.9 percent in the current quarter compared to 21.8 percent in the prior year quarter. As stated earlier, the decrease in gross profit margin was primarily attributed to higher purchased material costs for zinc and brass that reduced gross profit margins by $2.3 million or approximately 6 percent from the prior year quarter. The remaining decrease was attributed to lower production.
Normal operating expenses were $5.1 million in the current quarter, compared to $5.3 million in the prior year quarter.
During the current quarter, the Company contributed $1.5 million to its Pension Fund and repurchased 84,900 STRATTEC SECURITY CORPORATION shares under the Company's stock repurchase program at a cost of $3.3 million.
At the Company's 2006 Annual Meeting held October 3, 2006, STRATTEC shareholders elected Mr. David Zimmer to a two year term and re-elected Mr. Harold Stratton and Mr. Robert Feitler to the Company's Board of Directors for an additional three-year term.
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)
First Quarter Ended
October 1, 2006 October 2, 2005
(Unaudited)
Net Sales $38,050 $44,793
Cost of Goods Sold 32,768 35,019
Gross Profit 5,282 9,774
Engineering, Selling & Administrative
Expenses 5,056 5,285
Provision for Doubtful Accounts - 3,200
Income from Operations 226 1,289
Interest Income 922 489
Other Income, Net 28 40
Income Before Provision for Income Taxes 1,176 1,818
Provision for Income Taxes 435 78
Net Income $741 $1,740
Earnings Per Share:
Basic $.21 $.46
Diluted $.21 $.46
Average Basic
Shares Outstanding 3,598 3,746
Average Diluted
Shares Outstanding 3,600 3,754
Other:
Capital Expenditures $915 $1,580
Depreciation & Amortization $1,749 $1,824
STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
October 1, 2006 July 2, 2006
ASSETS
Current Assets:
Cash and cash equivalents $64,417 $65,712
Receivables, net 19,815 25,357
Inventories 8,309 9,337
Other current assets 10,670 10,468
Total Current Assets 103,211 110,874
Investment in Joint Ventures 2,272 2,202
Prepaid Pension Obligations 8,725 7,602
Other Long Term Assets 193 197
Property, Plant and Equipment, Net 26,946 27,764
$141,347 $148,639
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $13,236 $17,701
Other 11,085 11,825
Total Current Liabilities 24,321 29,526
Borrowings Under Line of Credit - -
Deferred Income Taxes 4,266 4,266
Accrued Postretirement Obligations 4,667 4,572
Shareholders' Equity 235,928 234,989
Accumulated Other Comprehensive Loss (2,757) (2,958)
Less: Treasury Stock (125,078) (121,756)
Total Shareholders' Equity 108,093 110,275
$141,347 $148,639
STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
First Quarter Ended
October 1, 2006 October 2, 2005
(Unaudited)
Cash Flows from Operating Activities:
Net Income $741 1,740
Adjustments to Reconcile Net Income to
Cash Used in Operating Activities:
Depreciation 1,749 1,824
Stock Based Compensation Expense 193 209
Tax Benefit from Options Exercised - 61
Provision for Doubtful Accounts - 3,200
Change in Operating Assets/Liabilities 134 (14,413)
Other, net 99 (84)
Net Cash Provided (Used) in Operating
Activities 2,916 (7,463)
Cash Flows from Investing Activities:
Additions to Property, Plant and
Equipment (915) (1,580)
Proceeds received from sale of
property, plant and equipment 21 -
Net Cash Used in Investing Activities (894) (1,580)
Cash Flow from Financing Activities:
Purchase of Common Stock (3,326) (1,196)
Reissue/Exercise of Stock Options 9 1,060
Net Cash Used in Financing Activities (3,317) (136)
Net Decrease in Cash and Cash
Equivalents (1,295) (9,179)
Cash and Cash Equivalents:
Beginning of Period 65,712 56,950
End of Period $64,417 $47,771