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STRATTEC SECURITY CORPORATION Reports Fiscal 2013 Second Quarter Results

Stocks in this article: STRT

Gross profit margins were 17.0 percent in the current quarter compared to 17.1 percent in the prior year quarter.   The benefits of higher volumes on gross profit margin in the current year quarter were negatively impacted by a less favorable product sales mix, an unfavorable Mexico Peso to U.S. Dollar exchange rate affecting the Company's operations in Mexico, higher expense provisions for our pension plan and for the accrual of bonuses earned under our incentive bonus plans.  The Company froze its Defined Benefit Pension Plan for future benefit accruals effective January 1, 2010.  Therefore the increase in pension expense during the current year is attributed to a lower discount rate and the corresponding lower expected return on invested assets that are measured at the end of fiscal year 2012. During the current quarter, the Company contributed $1.75 million to its Defined Benefit Pension Trust.

Operating expenses as a percent of net sales in the current quarter decreased to 11.7% from 12.1% in comparison to the prior year quarter. These expenses would have declined further except for increased costs primarily for our pension and incentive bonus plans as discussed above.

The Company is a partner in VAST LLC, a global alliance of companies involved in the design and manufacture of automotive access products.  As reported in our prior earnings releases, VAST's  operations in China incurred relocation costs associated with moves to a new facility and start-up costs associated with a new product line. The facility move has been completed but we anticipate these start-up costs and losses to continue over the remaining current fiscal year.

Included in Other (Expense) Income in the current quarter compared to the prior year quarter were the following items (in thousands of dollars):

  December 30, January 1,
  2012 2012
Foreign Currency Transaction Gain (Loss) $142 $(95)
Net Realized and Unrealized Gains on Mexican Peso Option Contracts 38 397
Rabbi Trust (Loss) Gain (11) 144
Other 18 57
  $187 $503

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 products to global customers under the "VAST" brand name. STRATTEC's history in the automotive business spans over 100 years.

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