UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 6, 2015
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STRATTEC SECURITY CORPORATION
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(Exact name of registrant as specified in charter)
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Wisconsin
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(State or other jurisdiction of incorporation)
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0-25150
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39-1804239
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(Commission File Number)
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(I.R.S. Employer I.D. Number)
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3333 West Good Hope Road
Milwaukee, WI
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53209
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(Address of Principal Executive Offices)
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(Zip Code)
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(414) 247-3333
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(Registrant's telephone number; including area code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition.
On August 6, 2015, STRATTEC SECURITY CORPORATION issued a press release (the "Press Release") announcing results for the fiscal fourth quarter and year ended June 28, 2015. A copy of the Press Release is attached as Exhibit 99.1 to this report. The attached Exhibit 99.1 is furnished pursuant to Item 2.02 of Form 8-K.
The information in this Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.
Section 9 - Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 -- Press Release of STRATTEC SECURITY CORPORATION, issued August 6, 2015.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
STRATTEC SECURITY CORPORATION
Date: August 6, 2015
By: _/s/ Patrick J. Hansen_____________________
Patrick J. Hansen, Senior Vice President and
Chief Financial Officer
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 2015 FOURTH QUARTER
OPERATING RESULTS
Milwaukee, Wisconsin – August 6, 2015-- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal fourth quarter and year ended June 28, 2015.
Fourth Quarter
Net sales for the fourth quarter ended June 28, 2015 were $98.4 million, compared to net sales of $102.1 million for the fourth quarter ended June 29, 2014. Net income was $1.2 million in the current year quarter compared to $5.7 million in the prior year quarter. Diluted earnings per share for the 2015 fourth quarter were $0.33 compared to $1.58 in the prior year quarter.
The lower net income for the current year quarter was attributed to an $8.5 million provision we recorded during the current year fourth quarter to increase our customer warranty reserves for expected
warranty payments to be settled in future periods and a combination of operating losses and impairment write-downs related to STRATTEC Advanced Logic, LLC (formerly NextLock), our biometric joint venture, which totaled $1.4 million. These two items were partially offset by the reversal of $3.7 million of incentive bonus plan provisions we recorded in previous quarters during fiscal year 2015. These items in total resulted in a reduction during the current year quarter of pre-tax income of $6.2 million and reduced diluted earnings per share by $1.11.
Net sales to each of our customers in the current year quarter and prior year quarter were as follows (in thousands):
| Three Months Ended | ||||||||
| June 28, 2015 | June 29, 2014 | |||||||
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Fiat Chrysler Automobiles
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$ | 25,980 | $ | 33,036 | ||||
| General Motors Company | 20,145 | 30,308 | ||||||
| Ford Motor Company | 13,451 | 12,198 | ||||||
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Tier 1 Customers
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18,674 | 15,425 | ||||||
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Commercial and Other OEM Customers
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10,894 | 9,016 | ||||||
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Hyundai/Kia
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9,282 | 2,079 | ||||||
| Total | $ | 98,426 | $ | 102,062 | ||||
Decreased sales to Fiat Chrysler Automobiles in the current year quarter were primarily due to the temporary shutdown of Fiat Chrysler's Windsor, Canada assembly plant during the quarter to re-tool the plant for production of the new Chrysler minivan, which decreased our net sales during the current year quarter by $10 million. The negative effect of this shutdown was partially offset by increased service sales in comparison to the prior year quarter. The decrease in sales to General Motors Company in the current year quarter was anticipated and primarily attributed to incremental service parts sales of $11 million that were shipped during the prior year quarter. These service part shipments were part of a short term program which ended during the first half in our current fiscal year. Sales to Ford Motor Company in the current year quarter were slightly higher due to increased product content. Sales to Tier 1 Customers during the current year quarter increased in comparison to the prior year
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quarter. These customers primarily represent purchasers of other vehicle access control products, such as latches, fobs, and driver controls, that we have developed in recent years to complement our historic core business of locks and keys. The increase in sales to Hyundai / Kia in the current year quarter was principally due to the continued ramp-up of the new Kia Sedona minivan for which we supply components.
Gross profit margins were 10.6 percent in the current year quarter compared to 20.0 percent in the prior year quarter. The decrease in gross profit margin in the current year quarter was primarily attributed to the $8.5 million pre-tax warranty provision as discussed previously. Items favorably impacting gross margin during the current year quarter were a favorable Mexican Peso to U.S. Dollar exchange rate affecting our operations in Mexico and lower expense provisions under our incentive bonus plans as compared to the prior year quarter.
Operating expenses were $8.0 million in the current year quarter and $10.8 million in the prior year quarter. As a percent of net sales in the current year quarter operating expenses decreased to 8.1% from 10.6% in comparison to the prior year quarter. The major contributor to the decreased spending on operating expenses during the current year quarter were lower expense provisions under our incentive bonus programs.
Included in Other (Expense) Income, Net in the current year quarter compared to the prior year quarter were the following items (in thousands of dollars):
,
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June 28, 2015
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June 29, 2014
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Equity Earnings of VAST LLC Joint Venture
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$ | 432 | $ | 218 | ||||
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Equity Loss of STRATTEC Advanced Logic, LLC
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(1,082 | ) | (119 | ) | ||||
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Foreign Currency Transaction Gain (Loss)
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71 | (110 | ) | |||||
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Other
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101 | 86 | ||||||
| $ | (478 | ) | $ | 75 |
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During the current year quarter STRATTEC contributed $3.0 million to its Defined Benefit Pension Trust to improve the overall funded status of the Plan.
Full Year
STRATTEC’s fiscal 2015 net sales and diluted earnings per share each reached a record high, exceeding the prior year record by approximately 18% and 23%, respetively.
For the fiscal year ended June 28, 2015, net sales were $411.5 million compared to net sales of $348.4 million during fiscal 2014. Net income for fiscal 2015 was $20.7 million compared to net income of $16.4 million in the prior year period. Diluted earnings per share for the current year were $5.66 compared to diluted earnings per share of $4.59 in the prior year.
Frank Krejci, President and CEO commented: “After STRATTEC Associates performed at an exceptionally high level throughout the year, I am disappointed to end the year with poor reported earnings for the 4th quarter. The underlying business and performance remains strong. However, in addition to the Chrysler Windsor Assembly Plant shutdown, significant unusual charges drastically hurt the quarter. Despite all of that, we still chalked up a year of both record sales and record profits for STRATTEC.
Throughout the automotive industry there has been a heightened focus on supplier cost-sharing in vehicle manufacturers’ warranty repairs and vehicle recalls. The larger charge of $8.5 million of warranty expenses reflects this new reality. While we expect this trend to continue, we do not expect the magnitude of the impact on our financial results to continue. For example, one particularly
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impactful problem this past year was the result of a new vehicle launch with significant time pressures and customer-driven late design changes. We have learned from it and will make it an area of focus for this upcoming year. Some of the charges relate to our efforts to diversify our business. We recognized nearly $2 million of start-up and impairment costs in the current quarter relating to STRATTEC Component Solutions and STRATTEC Advanced Logic. We are still optimistic about these initiatives, but the birthing process has been more costly than we expected.
Lastly, this past quarter, along with our VAST partners, we acquired a 50% ownership interest in Minda VAST Access Systems. The company is based in Pune, India, has approximately $40 million in annual sales and will be an important strategic investment to support our global customers and future growth.”
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” brand name. STRATTEC’s history in the automotive business spans over 100 years.
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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 customers’ 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.
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STRATTEC SECURITY CORPORATION
Condensed Results of Operations
(In Thousands, except per share amounts)
| Fourth Quarter Ended | Years Ended | |||||||||||||||
| June 28, 2015 June 29, 2014 | June 28, 2015 June 29, 2014 | |||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
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Net Sales
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$ | 98,426 | $ | 102,062 | $ | 411,475 | $ | 348,419 | ||||||||
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Cost of Goods Sold
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88,026 | 81,614 | 338,815 | 282,621 | ||||||||||||
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Gross Profit
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10,400 | 20,448 | 72,660 | 65,798 | ||||||||||||
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Engineering, Selling & Administrative Expenses
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8,010 | 10,797 | 41,534 | 39,274 | ||||||||||||
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Income from Operations
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2,390 | 9,651 | 31,126 | 26,524 | ||||||||||||
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Interest Income
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59 | 42 | 185 | 106 | ||||||||||||
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Interest Expense
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(32 | ) | (8 | ) | (71 | ) | (45 | ) | ||||||||
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Other (Expense) Income, Net
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(478 | ) | 75 | 2,693 | 1,229 | |||||||||||
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Income before Provision for
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Income Taxes and
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Non-Controlling Interest
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1,939 | 9,760 | 33,933 | 27,814 | ||||||||||||
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Provision for Income
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Taxes
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4 | 3,372 | 9,382 | 8,674 | ||||||||||||
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Net Income
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$ | 1,935 | $ | 6,388 | $ | 24,551 | $ | 19,140 | ||||||||
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Net Income Attributable
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to Non-Controlling Interest
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735 | 649 | 3,897 | 2,716 | ||||||||||||
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Net Income Attributable
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to STRATTEC SECURITY
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CORPORATION
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$ | 1,200 | $ | 5,739 | $ | 20,654 | $ | 16,424 | ||||||||
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Earnings Per Share:
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Basic
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$ | 0.33 | $ | 1.62 | $ | 5.80 | $ | 4.70 | ||||||||
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Diluted
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$ | 0.33 | $ | 1.58 | $ | 5.66 | $ | 4.59 | ||||||||
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Average Basic
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Shares Outstanding
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3,525 | 3,476 | 3,515 | 3,428 | ||||||||||||
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Average Diluted
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Shares Outstanding
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3,609 | 3,571 | 3,604 | 3,513 | ||||||||||||
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Other
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Capital Expenditures
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$ | 4,446 | $ | 3,431 | $ | 26,097 | $ | 12,812 | ||||||||
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Depreciation & Amortization
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$ | 2,348 | $ | 2,054 | $ | 8,815 | $ | 8,267 | ||||||||
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STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
| June 28, 2015 | June 29, 2014 | |||||||
| (Unaudited) | ||||||||
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ASSETS
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Current Assets:
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Cash and cash equivalents
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$ | 25,695 | $ | 19,756 | ||||
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Receivables, net
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58,807 | 68,822 | ||||||
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Inventories, net
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34,786 | 30,502 | ||||||
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Other current assets
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18,873 | 16,559 | ||||||
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Total Current Assets
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138,161 | 135,639 | ||||||
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Investment in Joint Ventures
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15,326 | 9,977 | ||||||
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Other Long Term Assets
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10,816 | 11,639 | ||||||
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Property, Plant and Equipment, Net
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71,126 | 55,781 | ||||||
| $ | 235,429 | $ | 213,036 | |||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current Liabilities:
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Accounts Payable
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27,838 | $ | 36,053 | |||||
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Other
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36,897 | 29,210 | ||||||
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Total Current Liabilities
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64,735 | 65,263 | ||||||
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Accrued Pension and Post Retirement Obligations
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2,988 | 3,842 | ||||||
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Borrowings Under Credit Facility
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10,000 | 2,500 | ||||||
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Deferred Income Taxes
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4,595 | 5,127 | ||||||
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Other Long-term Liabilities
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710 | 1,401 | ||||||
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Shareholders’ Equity
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303,073 | 281,623 | ||||||
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Accumulated Other Comprehensive Loss
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(26,859 | ) | (20,198 | ) | ||||
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Less: Treasury Stock
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(135,902 | ) | (135,919 | ) | ||||
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Total STRATTEC SECURITY
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CORPORATION Shareholders’ Equity
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140,312 | 125,506 | ||||||
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Non-Controlling Interest
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12,089 | 9,397 | ||||||
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Total Shareholders’ Equity
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152,401 | 134,903 | ||||||
| $ | 235,429 | $ | 213,036 | |||||
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STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
| Fourth Quarter Ended | Years Ended | |||||||||||||||
| June 28, 2015 | June 29, 2014 | June 28, 2015 | June 29, 2014 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
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Cash Flows from Operating Activities:
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Net Income
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$ | 1,935 | $ | 6,388 | $ | 24,551 | $ | 19,140 | ||||||||
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Adjustment to Reconcile Net Income to
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Cash Provided by Operating Activities:
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Equity Loss (Earnings) in Joint Ventures
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650 | (99 | ) | 788 | (957 | ) | ||||||||||
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Depreciation and Amortization
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2,348 | 2,054 | 8,815 | 8,267 | ||||||||||||
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Foreign Currency Transaction (Gain) Loss
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(71 | ) | 110 | (3,075 | ) | 36 | ||||||||||
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Deferred Income Taxes
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(3,330 | ) | 1,447 | (3,330 | ) | 1,447 | ||||||||||
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Stock Based Compensation Expense
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310 | 248 | 1,323 | 1,128 | ||||||||||||
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Change in Operating Assets/Liabilities
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5,733 | (8,113 | ) | 1,926 | (17,828 | ) | ||||||||||
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Other, net
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289 | 172 | 461 | 286 | ||||||||||||
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Net Cash Provided by Operating Activities
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7,864 | 2,207 | 31,459 | 11,519 | ||||||||||||
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Cash Flows from Investing Activities:
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Investment in Joint Ventures
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(4,000 | ) | - | (4,384 | ) | - | ||||||||||
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Additions to Property, Plant and Equipment
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(4,446 | ) | (3,431 | ) | (26,097 | ) | (12,812 | ) | ||||||||
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Proceeds from Sale of Property, Plant
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and Equipment
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1 | 25 | 1 | 71 | ||||||||||||
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Other
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(100 | ) | - | (315 | ) | (285 | ) | |||||||||
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Net Cash Used in Investing Activities
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(8,545 | ) | (3,406 | ) | (30,795 | ) | (13,026 | ) | ||||||||
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Cash Flows from Financing Activities:
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Borrowings Under Credit Facility
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- | - | 9,000 | 1,250 | ||||||||||||
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Repayments Under Credit Facility
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(1,000 | ) | - | (1,500 | ) | (1,000 | ) | |||||||||
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Dividends Paid
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(429 | ) | (390 | ) | (1,711 | ) | (1,542 | ) | ||||||||
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Dividends Paid to Non-Controlling Interest
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Of Subsidiaries
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- | - | (882 | ) | (984 | ) | ||||||||||
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Excess Tax Benefits from Stock Based Compensation
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52 | 40 | 367 | 495 | ||||||||||||
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Exercise of Stock Options and Employee
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Stock Purchases
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134 | 769 | 553 | 2,742 | ||||||||||||
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Net Cash (Used in) Provided by Financing Activities
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(1,243 | ) | 419 | 5,827 | 961 | |||||||||||
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Foreign Currency Impact on Cash
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(416 | ) | 42 | (552 | ) | (5 | ) | |||||||||
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Net (Decrease) Increase in Cash & Cash Equivalents
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(2,340 | ) | (738 | ) | 5,939 | (551 | ) | |||||||||
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Cash and Cash Equivalents:
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Beginning of Period
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28,035 | 20,494 | 19,756 | 20,307 | ||||||||||||
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End of Period
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$ | 25,695 | $ | 19,756 | $ | 25,695 | $ | 19,756 | ||||||||
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