EX-99.1 2 ex99-1tostrattecjan20068k.htm EXHIBIT 99.1 TO STRATTEC JANUARY 2006 FORM 8-K Exhibit 99.1 to STRATTEC January 2006 Form 8-K
Exhibit 99.1

FOR RELEASE AT 3:00 PM CST

Contact: Pat Hansen
Senior Vice President and
Chief Financial Officer
414-247-3435
www.strattec.com


STRATTEC SECURITY CORPORATION
REPORTS FISCAL SECOND QUARTER RESULTS


Milwaukee, Wisconsin - January 19, 2006 -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) 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.
 

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 STRATTEC SECURITY CORPORATION
Results of Operations
(In Thousands except per share amounts)
 
   
Second Quarter Ended
  
Six Months Ended
  
   
January 1,
 2006
  
December 26,
2004
  
January 1,
2006
  
December 26,
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
  
                           

3
 
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
  

 
4
 
STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)

   
Second Quarter Ended
 
Six Months Ended
  
   
January 1,
2006
 
December 26,
2004
 
January 1,
2006
 
December 26,
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
  
                           

 
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