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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):  January 26, 2017

 
STRATTEC SECURITY CORPORATION
  
 
(Exact name of registrant as specified in charter)
  

 
Wisconsin
  
 
(State or other jurisdiction of incorporation)
  

 
0-25150
  
39-1804239
  
 
(Commission File Number)
  
(I.R.S. Employer I.D. Number)
  

 
3333 West Good Hope Road
Milwaukee, WI
  
 
53209
  
 
(Address of Principal Executive Offices)
  
(Zip Code)
  
 
 
(414) 247-3333
 
 
(Registrant's telephone number; including area code)
 
 
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):

☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐
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 January 26, 2017, STRATTEC SECURITY CORPORATION issued a press release (the "Press Release") announcing results for the fiscal 2017 second quarter ended January 1, 2017.  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 January 26, 2017.
 
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:  January 26, 2017
    
 
By:
/s/ Patrick J. Hansen
   
Patrick J. Hansen, Senior Vice President and Chief Financial Officer
 
 
Exhibit 99.1
 
 
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 2017 SECOND QUARTER OPERATING RESULTS

Milwaukee, Wisconsin – January 26, 2017 -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal second quarter ended January 1, 2017.

Net sales for the Company’s fiscal second quarter ended January 1, 2017 were $98.9 million, compared to net sales of $102.5 million for the prior year quarter ended December 27, 2015.  Net income for the current year quarter was $398,000, compared to net income of $3.4 million in the prior year quarter.  Diluted earnings per share for the current year quarter were $0.11 compared to diluted earnings per share of $0.93 in the prior year quarter.

For the six months ended January 1, 2017, net sales were $199.2 million compared to net sales of $199.0 million during the prior year six month period. Net income during the current year six month period was $1.9 million compared to net income of $6.7 million during the prior year six month period. Diluted earnings per share were $0.53 for the current year six month period ended January 1, 2017 compared to diluted earnings per share of $1.83 for the prior year six month period ended December 27, 2015.
 
Net sales to each of our customers or customer groups in the current year quarter and prior year quarter were as follows (in millions):
 
   
Three Months Ended
  
   
January 1, 2017
    
December 27, 2015
  
             
Fiat Chrysler Automobiles
  
$
22.8
    
$
31.8
  
General Motors Company
    
22.2
      
20.7
  
Ford Motor Company
    
14.3
      
14.1
  
Tier 1 Customers
    
17.3
      
15.7
  
Commercial and Other OEM Customers
    
13.6
      
11.5
  
Hyundai / Kia
    
8.7
      
8.7
  
TOTAL
  
$
98.9
    
$
102.5
  

The sales to Fiat Chrysler Automobiles in the current year quarter decreased due to lower customer vehicle production volume and content on components we supply, in particular on the Chrysler 200 which was discontinued during December 2016 and lower volume on the new Pacifica minivan.

The increase in sales to General Motors Company in the current year quarter was primarily attributed to higher customer vehicle production volume. Sales to Ford Motor Company and Hyundai/Kia in the current year quarter were flat compared to the prior year quarter.  Sales to Tier 1 Customers and Commercial and Other OEM Customers during the current year quarter each increased in comparison to the prior year quarter.  These customers primarily represent purchasers of 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 gross profit margin was 13.6 percent in the current year quarter compared to 18.2 percent in the prior year quarter.  The decrease gross profit margin in the current year quarter compared to the prior year quarter was attributed to agreed upon customer price reductions that became effective at the start of the 2016 calendar year, a less favorable product sales mix, additional costs incurred to improve quality of our production processes and start up of our new Leon, Mexico facility. The above items were partially offset by a more favorable Mexican Peso to U.S. Dollar exchange rate affecting our operations in Mexico.

Engineering, Selling and Administrative expenses as a percentage of net sales increased to 11.4 percent in the current year quarter from 10.9 percent in the prior year quarter. Overall, expenses were relatively flat in the current year quarter compared to the prior year quarter.

Included in “Other Income, Net” in the current year quarter compared to the prior year quarter were the following items (in thousands of dollars):
 
   
January 1, 2017
    
December 27, 2015
  
             
Equity Earnings of VAST LLC Joint Venture
  
$
642
    
$
345
  
Equity Loss of STRATTEC Advanced Logic LLC Joint Venture
    
(413
)
    
(367
)
Net Foreign Currency Transaction Gain
    
568
      
215
  
Other
    
143
      
135
  
   
$
940
    
$
328
  

The higher income tax provision in the current year quarter compared to the prior year quarter  related to a dividend paid from our Mexican subsidiaries to our U.S. parent company that increased our income tax expense by $424,000 in the current year quarter and reduced diluted earnings per share by $0.12.
 
During the current year quarter, STRATTEC contributed $2.0 million to its Defined Benefit Pension Trust to improve the funded status of the Plan.
 
Frank Krejci, President and CEO commented:  “After winning record amounts of new business last fiscal year, we are faced with additional costs in executing new programs which have a negative impact now, but should create positive results when those programs go into production. We are also actively adding new capital equipment, building a new facility in Leon, Mexico, plus investing in people and manufacturing processes to improve quality which will benefit us in the future. Earnings are currently being impacted for these reasons.”

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 our companies' products to global customers under the “VAST” brand name.  STRATTEC’s history in the automotive business spans over 105 years.
 
Certain statements contained in this release are “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 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.
 
STRATTEC SECURITY CORPORATION
 
Results of Operations
(In Thousands except per share amounts)
(Unaudited)

   
Second Quarter Ended
    
Six Months Ended
  
   
January 1, 2017
    
December 27, 2015
    
January 1, 2017
    
December 27, 2015
  
                         
Net Sales
  
$
98,945
    
$
102,511
    
$
199,189
    
$
199,024
  
Cost of Goods Sold
    
85,450
      
83,901
      
171,089
      
163,915
  
Gross Profit
    
13,495
      
18,610
      
28,100
      
35,109
  
                                 
Engineering, Selling & Administrative Expenses
    
11,329
      
11,196
      
22,699
      
21,770
  
Income from Operations
    
2,166
      
7,414
      
5,401
      
13,339
  
                                 
Interest Income
    
39
      
8
      
80
      
15
  
Interest Expense
    
(98
)
    
(23
)
    
(176
)
    
(44
)
Other Income, Net
    
940
      
328
      
1,045
      
3
  
Income Before Provision for Income Taxes and Non-Controlling Interest
    
3,047
      
7,727
      
6,350
      
13,313
  
                                 
Provision for Income Taxes
    
1,410
      
2,514
      
2,308
      
4,268
  
                                 
Net Income
    
1,637
      
5,213
      
4,042
      
9,045
  
Net Income Attributable to Non-Controlling Interest
    
(1,239
)
    
(1,810
)
    
(2,102
)
    
(2,369
)
                                 
Net Income Attributable to STRATTEC SECURITY CORPORATION
  
$
398
    
$
3,403
    
$
1,940
    
$
6,676
  
Earnings Per Share:
                                
Basic
  
$
0.11
    
$
0.95
    
$
0.54
    
$
1.87
  
Diluted
  
$
0.11
    
$
0.93
    
$
0.53
    
$
1.83
  
Average Basic Shares Outstanding
    
3,589
      
3,563
      
3,583
      
3,553
  
                                 
Average Diluted Shares Outstanding
    
3,667
      
3,624
      
3,664
      
3,621
  
                                 
Other
                                
Capital Expenditures
  
$
8,883
    
$
4,230
    
$
16,329
    
$
8,095
  
Depreciation & Amortization
  
$
2,887
    
$
2,679
    
$
5,647
    
$
5,075
  
 
STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data
(In Thousands)

 
January 1, 2017
    
July 3, 2016
  
 
(Unaudited)
        
ASSETS
            
Current Assets:
            
Cash and cash equivalents
  
$
8,190
    
$
15,477
  
Receivables, net
    
59,393
      
63,726
  
Inventories, net
    
39,086
      
38,683
  
Other current assets
    
14,966
      
16,565
  
Total Current Assets
    
121,635
      
134,451
  
Investment in Joint Ventures
    
14,713
      
14,168
  
Other Long Term Assets
    
13,113
      
8,408
  
Property, Plant and Equipment, Net
    
91,141
      
85,149
  
   
$
240,602
    
$
242,176
  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current Liabilities:
                
Accounts Payable
  
$
32,294
    
$
32,416
  
Other
    
28,857
      
31,799
  
Total Current Liabilities
    
61,151
      
64,215
  
Accrued Pension and Post Retirement Obligations
    
2,661
      
2,728
  
Borrowings Under Credit Facility
    
20,000
      
20,000
  
Other Long-term Liabilities
    
1,195
      
721
  
Shareholders’ Equity
    
314,742
      
312,876
  
Accumulated Other Comprehensive Loss
    
(40,752
)
    
(37,673
)
Less:  Treasury Stock
    
(135,850
)
    
(135,871
)
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity
    
138,140
      
139,332
  
Non-Controlling Interest
    
17,455
      
15,180
  
Total Shareholders’ Equity
    
155,595
      
154,512
  
   
$
240,602
    
$
242,176
  
 
STRATTEC SECURITY CORPORATION
 
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)

   
Second Quarter Ended
    
Six Months Ended
  
   
January 1, 2017
    
December 27, 2015
    
January 1, 2017
    
December 27, 2015
  
                         
Cash Flows from Operating Activities:
                        
Net Income
  
$
1,637
    
$
5,213
    
$
4,042
    
$
9,045
  
Adjustments to Reconcile Net Income to Cash Provided by (Used In) Operating Activities:
                                
Equity (Earnings) Loss in Joint Ventures
    
(229
)
    
22
      
(291
)
    
315
  
Depreciation and Amortization
    
2,887
      
2,679
      
5,647
      
5,075
  
Foreign Currency Transaction Gain
    
(1,808
)
    
(364
)
    
(2,497
)
    
(1,321
)
Unrealized Loss (Gain) on Peso Forward Contracts
    
664
      
(29
)
    
1,563
      
867
  
Stock Based Compensation Expense
    
364
      
372
      
792
      
870
  
Change in Operating Assets/Liabilities
    
1,433
      
(8,649
)
    
893
      
(11,631
)
Other, net
    
24
      
(35
)
    
(148
)
    
-
  
                                 
Net Cash Provided by (Used In) Operating Activities
    
4,972
      
(791
)
    
10,001
      
3,220
  
                                 
Cash Flows from Investing Activities:
                                
Investment in Joint Ventures
    
(100
)
    
(220
)
    
(100
)
    
(220
)
Loan to Joint Venture
    
(550
)
    
-
      
(1,400
)
    
(150
)
Repayment of Loan to Joint Venture
    
-
      
-
      
75
      
-
  
Additions to Property, Plant and Equipment
    
(8,883
)
    
(4,230
)
    
(16,329
)
    
(8,095
)
Net Cash Used in Investing Activities
    
(9,533
)
    
(4,450
)
    
(17,754
)
    
(8,465
)
                                 
Cash Flow from Financing Activities:
                                
Borrowings on Line of Credit Facility
    
13,000
      
4,500
      
21,000
      
5,500
  
Payments on Line of Credit Facility
    
(17,000
)
    
(1,000
)
    
(21,000
)
    
(5,500
)
Dividends Paid to Non-Controlling Interest of Subsidiary
    
-
      
-
      
(1,764
)
    
(1,568
)
Contribution from Non-Controlling Interest
    
-
      
-
      
2,940
      
-
  
Dividends Paid
    
(503
)
    
(466
)
    
(1,006
)
    
(932
)
Exercise of Stock Options and Employee Stock Purchases
    
86
      
101
      
160
      
584
  
                                 
Net Cash (Used in) Provided by Financing
    
(4,417
)
    
3,135
      
330
      
(1,916
)
                                 
Effect of Foreign Currency Fluctuations on Cash
    
99
      
62
      
136
      
(611
)
                                 
Net Decrease in Cash & Cash Equivalents
    
(8,879
)
    
(2,044
)
    
(7,287
)
    
(7,772
)
                                 
Cash and Cash Equivalents:
                                
Beginning of Period
    
17,069
      
19,967
      
15,477
      
25,695
  
End of Period
  
$
8,190
    
$
17,923
    
$
8,190
    
$
17,923