Strattec Security Corp. (STRT, Financial) filed Quarterly Report for the period ended 2010-03-28.
Strattec Security Corp. has a market cap of $76.4 million; its shares were traded at around $23.35 with a P/E ratio of 1167.5 and P/S ratio of 0.6. STRT is in the portfolios of PRIMECAP Management, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Net other income was $120,000 in the current quarter compared to $104,000 in the prior year quarter and consisted primarily of gains and losses on the Rabbi Trust, transaction gains and losses resulting from foreign currency transactions entered into by our Mexican subsidiaries and equity earnings of joint ventures. The Rabbi Trust funds our supplemental executive retirement plan. Gains related to the Rabbi Trust totaled $78,000 in the current quarter compared to losses of $65,000 in the prior year quarter. The investments held in the Trust are considered trading securities. Foreign currency transaction losses totaled $167,000 in the current quarter compared to gains of $86,000 in the prior year quarter. Equity earnings of joint ventures totaled $160,000 in the current quarter compared to $77,000 in the prior year quarter. The improvement in equity earnings of joint ventures is primarily due to the favorable economic conditions in China and an increase in our ownership percentage resulting from the November 20, 2009 purchase by VAST LLC of the non-controlling interest of its two Chinese joint ventures, VAST Fuzhou and VAST Great Shanghai.
Net sales for the nine months ended March 28, 2010 were $146.6 million compared to net sales of $97.9 million for the nine months ended March 29, 2009. Sales to our largest customers overall increased in the current period compared to the prior year period primarily due to higher vehicle production volumes. Sales to Chrysler Group LLC were $46.3 million in the current period compared to $26.1 million in the prior year period. Sales to General Motors Company were $35.6 million in the current period compared to $30.8 million in the prior year period. Included in the current period sales to General Motors were $3.1 million of sales to Nexteer Automotive, formerly a unit of Delphi Corporation, which is now owned by General Motors. Sales to Ford Motor Company increased to $13.4 million in the current period compared to $8.8 million in the prior year period. In the current period, sales generated by SPA to Hyundai Kia were $10.1 million. Also, in the current period historical customer pricing issues were resolved which increased sales approximately $1.2 million. The pricing issues related to a specific vehicle program and have been fully resolved as of March 28, 2010.
Gross profit as a percentage of net sales was 15.9 percent in the current period compared to 10.6 percent in the prior year period. The improvement in the gross profit margin in the current period was primarily the result of favorable customer vehicle production volumes compared to the prior year as well as lower purchased raw material costs for zinc, partially offset by the recording of a $1.2 million warranty reserve, premium freight costs and overtime incurred during the months of September, October and November 2009 to meet significantly increased production requirements from our largest customers as they continued to rebuild retail inventories following the U.S. Government s “Cash for Clunkers” program that ended in August 2009. The decision to establish a warranty reserve is related to new expectations from our customers. Historically, the Company has experienced relatively low warranty related charge backs from our customers due to our contractual arrangements, improvements in quality, reliability and the performance of our products. Currently certain customers have extended their vehicle warranty programs and are demanding higher warranty cost sharing arrangements from suppliers. We therefore believe it prudent to provide this reserve against the warranty exposure. The premium freight and overtime costs reduced the current year period gross profit margin by approximately 2 percentage points. The average zinc price paid per pound decreased to $1.04 in the current period from $1.21 in the prior year period. During the current period, we used approximately 6.1 million pounds of zinc. This resulted in decreased zinc costs of approximately $1.0 million in the current period compared to the prior year period. Also impacting the current period gross margin was a curtailment loss related to the qualified defined benefit pension plan. An amendment to this plan, which was effective January 1, 2010, discontinued the benefit accruals for salary increases and credited service rendered after December 31, 2009. As a result of the amendment, a curtailment loss related to unrecognized prior service cost of $505,000 was recorded, of which approximately $375,000 increased cost of goods sold and approximately $130,000 increased engineering, selling and administrative expenses.
Net other income was $795,000 in the current period compared to $884,000 in the prior year period and consisted primarily of gains and losses on the Rabbi Trust, transaction gains and losses resulting from foreign currency transactions entered into by our Mexican subsidiaries and equity earnings of joint ventures. The Rabbi Trust funds our supplemental executive retirement plan. Gains related to the Rabbi Trust totaled $454,000 in the current period compared to losses of $595,000 in the prior year period. The investments held in the Trust are considered trading securities. Foreign currency transaction losses totaled $324,000 in the current period compared to gains of approximately $1.2 million in the prior year period. Equity earnings of joint ventures totaled $639,000 in the current period compared to $203,000 in the prior year period. The improvement in equity earnings of joint ventures is primarily due to the favorable economic conditions in China and an increase in our ownership percentage resulting from the November 20, 2009 purchase by VAST LLC of the non-controlling interest of its two Chinese joint ventures, VAST Fuzhou and VAST Great Shanghai.
Accounts receivable balances at March 28, 2010 increased $15.9 million from the June 28, 2009 balances. This increase was primarily the result of increased sales during the current quarter as compared to the quarter ended June 28, 2009. The restricted cash balance of $2.1 million and loan to joint ventures balance of $1.5 million at March 28, 2010 relate to the purchase by VAST LLC effective November 20, 2009 of the non-controlling interest of its two Chinese joint ventures, VAST Fuzhou and VAST Great Shanghai, for $9.6 million. Initially, a loan of $2.5 million was made from STRATTEC to VAST LLC to cover STRATTEC s share of a November 2009 $7.5 million payment made in connection with the purchase. The outstanding loan balance at March 28, 2010 was $1.5 million. The remaining purchase price of $2.1 million will be paid by VAST LLC in three installments payable in April 2010, October 2010 and April 2011. A $2.1 million stand-by letter of credit was issued by VAST LLC, and is guaranteed by STRATTEC, related to the future installment payments. Cash of $2.1 million has been transferred to a separate account in support of the stand-by letter of credit guarantee.
Read the The complete Report
Strattec Security Corp. has a market cap of $76.4 million; its shares were traded at around $23.35 with a P/E ratio of 1167.5 and P/S ratio of 0.6. STRT is in the portfolios of PRIMECAP Management, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Net sales for the three months ended March 28, 2010 were $52.9 million compared to net sales of $29.3 million for the three months ended March 29, 2009. Sales to our largest customers overall increased in the current quarter compared to the prior year quarter levels primarily due to higher vehicle production volumes. Sales to Chrysler Group LLC were $17.0 million in the current quarter compared to $11.1 million in the prior year quarter. Sales to General Motors Company were $13.5 million in the current quarter compared to $6.6 million in the prior year quarter. Included in the current quarter sales to General Motors were $1.7 million of sales to Nexteer Automotive, formerly a unit of Delphi Corporation, which is now owned by General Motors. Sales to Ford Motor Company were $4.5 million in the current quarter compared to $3.6 million in the prior year quarter. In the current year quarter, sales generated by SPA to Hyundai Kia were $2.8 million. Also, in the current quarter historical customer pricing issues were resolved which increased sales approximately $1.2 million. The pricing issues related to a specific vehicle program and have been fully resolved as of the end of the current quarter.Net other income was $120,000 in the current quarter compared to $104,000 in the prior year quarter and consisted primarily of gains and losses on the Rabbi Trust, transaction gains and losses resulting from foreign currency transactions entered into by our Mexican subsidiaries and equity earnings of joint ventures. The Rabbi Trust funds our supplemental executive retirement plan. Gains related to the Rabbi Trust totaled $78,000 in the current quarter compared to losses of $65,000 in the prior year quarter. The investments held in the Trust are considered trading securities. Foreign currency transaction losses totaled $167,000 in the current quarter compared to gains of $86,000 in the prior year quarter. Equity earnings of joint ventures totaled $160,000 in the current quarter compared to $77,000 in the prior year quarter. The improvement in equity earnings of joint ventures is primarily due to the favorable economic conditions in China and an increase in our ownership percentage resulting from the November 20, 2009 purchase by VAST LLC of the non-controlling interest of its two Chinese joint ventures, VAST Fuzhou and VAST Great Shanghai.
Net sales for the nine months ended March 28, 2010 were $146.6 million compared to net sales of $97.9 million for the nine months ended March 29, 2009. Sales to our largest customers overall increased in the current period compared to the prior year period primarily due to higher vehicle production volumes. Sales to Chrysler Group LLC were $46.3 million in the current period compared to $26.1 million in the prior year period. Sales to General Motors Company were $35.6 million in the current period compared to $30.8 million in the prior year period. Included in the current period sales to General Motors were $3.1 million of sales to Nexteer Automotive, formerly a unit of Delphi Corporation, which is now owned by General Motors. Sales to Ford Motor Company increased to $13.4 million in the current period compared to $8.8 million in the prior year period. In the current period, sales generated by SPA to Hyundai Kia were $10.1 million. Also, in the current period historical customer pricing issues were resolved which increased sales approximately $1.2 million. The pricing issues related to a specific vehicle program and have been fully resolved as of March 28, 2010.
Gross profit as a percentage of net sales was 15.9 percent in the current period compared to 10.6 percent in the prior year period. The improvement in the gross profit margin in the current period was primarily the result of favorable customer vehicle production volumes compared to the prior year as well as lower purchased raw material costs for zinc, partially offset by the recording of a $1.2 million warranty reserve, premium freight costs and overtime incurred during the months of September, October and November 2009 to meet significantly increased production requirements from our largest customers as they continued to rebuild retail inventories following the U.S. Government s “Cash for Clunkers” program that ended in August 2009. The decision to establish a warranty reserve is related to new expectations from our customers. Historically, the Company has experienced relatively low warranty related charge backs from our customers due to our contractual arrangements, improvements in quality, reliability and the performance of our products. Currently certain customers have extended their vehicle warranty programs and are demanding higher warranty cost sharing arrangements from suppliers. We therefore believe it prudent to provide this reserve against the warranty exposure. The premium freight and overtime costs reduced the current year period gross profit margin by approximately 2 percentage points. The average zinc price paid per pound decreased to $1.04 in the current period from $1.21 in the prior year period. During the current period, we used approximately 6.1 million pounds of zinc. This resulted in decreased zinc costs of approximately $1.0 million in the current period compared to the prior year period. Also impacting the current period gross margin was a curtailment loss related to the qualified defined benefit pension plan. An amendment to this plan, which was effective January 1, 2010, discontinued the benefit accruals for salary increases and credited service rendered after December 31, 2009. As a result of the amendment, a curtailment loss related to unrecognized prior service cost of $505,000 was recorded, of which approximately $375,000 increased cost of goods sold and approximately $130,000 increased engineering, selling and administrative expenses.
Net other income was $795,000 in the current period compared to $884,000 in the prior year period and consisted primarily of gains and losses on the Rabbi Trust, transaction gains and losses resulting from foreign currency transactions entered into by our Mexican subsidiaries and equity earnings of joint ventures. The Rabbi Trust funds our supplemental executive retirement plan. Gains related to the Rabbi Trust totaled $454,000 in the current period compared to losses of $595,000 in the prior year period. The investments held in the Trust are considered trading securities. Foreign currency transaction losses totaled $324,000 in the current period compared to gains of approximately $1.2 million in the prior year period. Equity earnings of joint ventures totaled $639,000 in the current period compared to $203,000 in the prior year period. The improvement in equity earnings of joint ventures is primarily due to the favorable economic conditions in China and an increase in our ownership percentage resulting from the November 20, 2009 purchase by VAST LLC of the non-controlling interest of its two Chinese joint ventures, VAST Fuzhou and VAST Great Shanghai.
Accounts receivable balances at March 28, 2010 increased $15.9 million from the June 28, 2009 balances. This increase was primarily the result of increased sales during the current quarter as compared to the quarter ended June 28, 2009. The restricted cash balance of $2.1 million and loan to joint ventures balance of $1.5 million at March 28, 2010 relate to the purchase by VAST LLC effective November 20, 2009 of the non-controlling interest of its two Chinese joint ventures, VAST Fuzhou and VAST Great Shanghai, for $9.6 million. Initially, a loan of $2.5 million was made from STRATTEC to VAST LLC to cover STRATTEC s share of a November 2009 $7.5 million payment made in connection with the purchase. The outstanding loan balance at March 28, 2010 was $1.5 million. The remaining purchase price of $2.1 million will be paid by VAST LLC in three installments payable in April 2010, October 2010 and April 2011. A $2.1 million stand-by letter of credit was issued by VAST LLC, and is guaranteed by STRATTEC, related to the future installment payments. Cash of $2.1 million has been transferred to a separate account in support of the stand-by letter of credit guarantee.
Read the The complete Report
