Strattec Security Corp. (STRT, Financial) filed Quarterly Report for the period ended 2008-12-28.
Strattec Security Corporation designs develops manufactures and markets mechanical locks electro-mechanical locks and related products for automotive manufacturers with operations in the United States Canada and Mexico. The company also produces precision zinc die castings for the transportation security and small engine industries. The company's principal products are locks and keys for cars and trucks. Strattec Security Corp. has a market cap of $36.4 million; its shares were traded at around $10.05 with a P/E ratio of 45.1 and P/S ratio of 0.23. The dividend yield of Strattec Security Corp. stocks is 5.39%.
Gross profit as a percentage of net sales was 8.5 percent in the current quarter compared to 17.3 percent in the prior year quarter. The reduction in the gross profit margin was primarily attributed to reduced customer production volumes. The current quarter also included approximately $132,000 of relocation costs related to the move from our leased facility in Juarez, Mexico to our new manufacturing facility in Juarez and a non-recurring inventory adjustment of $114,000. Construction of the new facility was completed in November 2008. The non-recurring inventory adjustment related to finished goods inventory acquired in the Delphi Power Products business acquisition. The value of the finished goods inventory acquired was adjusted to its selling price less costs to sell, and gross profit was impacted by the inventory that was sold during the quarter. The impact of the reduced customer production volumes was partially offset by lower purchased material costs for zinc and brass along with a favorable Mexico peso to U.S. dollar exchange rate affecting the U.S. dollar cost of our operations in Mexico. The average zinc price paid per pound decreased to $1.22 in the current quarter from $1.52 in the prior year quarter. During the current quarter, we used approximately 1.5 million pounds of zinc. This resulted in decreased zinc costs of approximately $450,000 in the current quarter compared to the prior year quarter. The average brass price paid per pound decreased to $2.82 in the current quarter from $3.71 in the prior year quarter. During the current quarter, we used approximately 235,000 pounds of brass. This resulted in decreased brass costs of approximately $210,000 in the current quarter compared to the prior year quarter. The inflation rate in Mexico for the twelve months ended December 28, 2008 was approximately 6.5 percent and increased operating costs by approximately $260,000 in the current quarter over the prior year quarter. The average U.S. dollar/Mexican peso exchange rate increased to approximately 12.75 pesos to the dollar in the current quarter from approximately 10.85 pesos to the dollar in the prior year quarter. This resulted in decreased costs related to our Mexican operations of approximately $820,000 in the current quarter over the prior year quarter.
Net other income was $557,000 in the current quarter compared to $158,000 in the prior year quarter. The increase was primarily due to increased transaction gains resulting from foreign currency transactions entered into by our Mexican subsidiaries and was partially offset by losses on the Rabbi trust which funds our supplemental executive retirement plan. Transaction gains were $910,000 in the current quarter compared to losses of $5,000 in the prior year quarter. Losses related to the Rabbi trust totaled $470,000 in the current quarter compared to $30,000 in the prior year quarter. The investments held in the trust are considered trading securities.
Net sales for the six months ended December 28, 2008 were $68.5 million compared to net sales of $82.6 million for the six months ended December 30, 2007. Sales to our largest customers overall were significantly lower in the current period compared to the prior year period. Sales to General Motors Corporation in the current period were $23.9 million compared to $24.4 million in the prior year period due to the takeover of certain passenger car lockset production from another supplier, offset by lower vehicle production volumes, primarily for trucks and SUV s. Sales to Chrysler Corporation were $14.8 million in the current period compared to $20.6 million in the prior year period. This sales reduction was due to a combination of lower vehicle production and reduced component content in the products we supply, offset somewhat by $1.3 million of sales generated by SPA in December 2008. Sales to Ford Motor Company were $5.3 million in the current period compared to $9.9 million in the prior year period and sales to Delphi Corporation were $4.0 million in the current period compared to $7.7 million in the prior year period. The lower sales to Ford and Delphi were due to lower vehicle production volumes. Sales during the current quarter were weaker than initially anticipated for the above four customers due to their additional production cut backs announced after the Thanksgiving holiday. Subsequently, these customers extended their Christmas holiday shutdown downtime and further reduced their production schedules. This will also affect our sales and profitability for the third fiscal quarter ending March 28, 2009.
Gross profit as a percentage of net sales was 12.1 percent in the current period compared to 18.5 percent in the prior year period. The reduction in the gross profit margin was primarily attributed to reduced customer production volumes. The current period also included approximately $132,000 of relocation costs related to the move from our leased facility in Juarez, Mexico to our new manufacturing facility in Juarez and a non-recurring inventory adjustment of $114,000. Construction of the new facility was completed in November 2008. The non-recurring inventory adjustment related to finished goods inventory acquired in the Delphi Power Products business acquisition. The value of the finished goods inventory acquired was adjusted to its selling price less costs to sell, and gross profit was impacted by the inventory that was sold during the period. The impact of the reduced customer production volumes was partially offset by lower purchased material costs for zinc and brass. The favorable Mexico peso to U.S. dollar exchange rate affecting the U.S. dollar cost of our operations in Mexico experienced during the period was mostly offset by cost increases resulting from inflation. The average zinc price paid per pound decreased to $1.22 in the current period from $1.59 in the prior year period. During the current period, we used approximately 3.2 million pounds of zinc. This resulted in decreased zinc costs of approximately $1.2 million in the current period compared to the prior year period. The average brass price paid per pound decreased to $3.26 in the current period from $3.81 in the prior year period. During the current period, we used approximately 495,000 pounds of brass. This resulted in decreased brass costs of approximately $270,000 in the current period compared to the prior year period.
Net other income was $780,000 in the current period compared to $466,000 in the prior year period. The increase was primarily due to increased transaction gains resulting from foreign currency transactions entered into by our Mexican subsidiaries and was partially offset by losses on the Rabbi trust which funds our supplemental executive retirement plan. Transactions gains were $1.1 million in the current period compared to $45,000 in the prior year period. Losses related to the Rabbi trust totaled $530,000 in the current period compared to gains of $15,000 in the prior year period. The investments held in the trust are considered trading securities.
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Strattec Security Corporation designs develops manufactures and markets mechanical locks electro-mechanical locks and related products for automotive manufacturers with operations in the United States Canada and Mexico. The company also produces precision zinc die castings for the transportation security and small engine industries. The company's principal products are locks and keys for cars and trucks. Strattec Security Corp. has a market cap of $36.4 million; its shares were traded at around $10.05 with a P/E ratio of 45.1 and P/S ratio of 0.23. The dividend yield of Strattec Security Corp. stocks is 5.39%.
Highlight of Business Operations:
Net sales for the three months ended December 28, 2008 were $33.8 million compared to net sales of $39.9 million for the three months ended December 30, 2007. Sales to our largest customers overall were significantly lower in the current quarter compared to the prior year quarter. Sales to General Motors Corporation in the current quarter were $11.6 million compared to $11.9 million in the prior year quarter due to the takeover of certain passenger car lockset production from another supplier, offset by lower vehicle production volumes, primarily for trucks and SUV s. Sales to Chrysler Corporation were $7.7 million in the current quarter compared to $10.0 million in the prior year quarter due to a combination of lower vehicle production and reduced component content in the products we supply, offset somewhat by $1.3 million of sales generated by SPA in December 2008. Sales to Ford Motor Company were $3.0 million in the current quarter compared to $4.4 million in the prior year quarter and sales to Delphi Corporation were $2.0 million in the current quarter compared to $3.8 million in the prior year quarter. The lower sales to Ford and Delphi were due to lower vehicle production volumes. Sales during the current quarter were weaker than initially anticipated for the above four customers due to their additional production cut backs announced after the Thanksgiving holiday. Subsequently, these customers extended their Christmas holiday shutdown downtime and further reduced their production schedules. This will affect both our sales and profitability for the third fiscal quarter ending March 28, 2009.Gross profit as a percentage of net sales was 8.5 percent in the current quarter compared to 17.3 percent in the prior year quarter. The reduction in the gross profit margin was primarily attributed to reduced customer production volumes. The current quarter also included approximately $132,000 of relocation costs related to the move from our leased facility in Juarez, Mexico to our new manufacturing facility in Juarez and a non-recurring inventory adjustment of $114,000. Construction of the new facility was completed in November 2008. The non-recurring inventory adjustment related to finished goods inventory acquired in the Delphi Power Products business acquisition. The value of the finished goods inventory acquired was adjusted to its selling price less costs to sell, and gross profit was impacted by the inventory that was sold during the quarter. The impact of the reduced customer production volumes was partially offset by lower purchased material costs for zinc and brass along with a favorable Mexico peso to U.S. dollar exchange rate affecting the U.S. dollar cost of our operations in Mexico. The average zinc price paid per pound decreased to $1.22 in the current quarter from $1.52 in the prior year quarter. During the current quarter, we used approximately 1.5 million pounds of zinc. This resulted in decreased zinc costs of approximately $450,000 in the current quarter compared to the prior year quarter. The average brass price paid per pound decreased to $2.82 in the current quarter from $3.71 in the prior year quarter. During the current quarter, we used approximately 235,000 pounds of brass. This resulted in decreased brass costs of approximately $210,000 in the current quarter compared to the prior year quarter. The inflation rate in Mexico for the twelve months ended December 28, 2008 was approximately 6.5 percent and increased operating costs by approximately $260,000 in the current quarter over the prior year quarter. The average U.S. dollar/Mexican peso exchange rate increased to approximately 12.75 pesos to the dollar in the current quarter from approximately 10.85 pesos to the dollar in the prior year quarter. This resulted in decreased costs related to our Mexican operations of approximately $820,000 in the current quarter over the prior year quarter.
Net other income was $557,000 in the current quarter compared to $158,000 in the prior year quarter. The increase was primarily due to increased transaction gains resulting from foreign currency transactions entered into by our Mexican subsidiaries and was partially offset by losses on the Rabbi trust which funds our supplemental executive retirement plan. Transaction gains were $910,000 in the current quarter compared to losses of $5,000 in the prior year quarter. Losses related to the Rabbi trust totaled $470,000 in the current quarter compared to $30,000 in the prior year quarter. The investments held in the trust are considered trading securities.
Net sales for the six months ended December 28, 2008 were $68.5 million compared to net sales of $82.6 million for the six months ended December 30, 2007. Sales to our largest customers overall were significantly lower in the current period compared to the prior year period. Sales to General Motors Corporation in the current period were $23.9 million compared to $24.4 million in the prior year period due to the takeover of certain passenger car lockset production from another supplier, offset by lower vehicle production volumes, primarily for trucks and SUV s. Sales to Chrysler Corporation were $14.8 million in the current period compared to $20.6 million in the prior year period. This sales reduction was due to a combination of lower vehicle production and reduced component content in the products we supply, offset somewhat by $1.3 million of sales generated by SPA in December 2008. Sales to Ford Motor Company were $5.3 million in the current period compared to $9.9 million in the prior year period and sales to Delphi Corporation were $4.0 million in the current period compared to $7.7 million in the prior year period. The lower sales to Ford and Delphi were due to lower vehicle production volumes. Sales during the current quarter were weaker than initially anticipated for the above four customers due to their additional production cut backs announced after the Thanksgiving holiday. Subsequently, these customers extended their Christmas holiday shutdown downtime and further reduced their production schedules. This will also affect our sales and profitability for the third fiscal quarter ending March 28, 2009.
Gross profit as a percentage of net sales was 12.1 percent in the current period compared to 18.5 percent in the prior year period. The reduction in the gross profit margin was primarily attributed to reduced customer production volumes. The current period also included approximately $132,000 of relocation costs related to the move from our leased facility in Juarez, Mexico to our new manufacturing facility in Juarez and a non-recurring inventory adjustment of $114,000. Construction of the new facility was completed in November 2008. The non-recurring inventory adjustment related to finished goods inventory acquired in the Delphi Power Products business acquisition. The value of the finished goods inventory acquired was adjusted to its selling price less costs to sell, and gross profit was impacted by the inventory that was sold during the period. The impact of the reduced customer production volumes was partially offset by lower purchased material costs for zinc and brass. The favorable Mexico peso to U.S. dollar exchange rate affecting the U.S. dollar cost of our operations in Mexico experienced during the period was mostly offset by cost increases resulting from inflation. The average zinc price paid per pound decreased to $1.22 in the current period from $1.59 in the prior year period. During the current period, we used approximately 3.2 million pounds of zinc. This resulted in decreased zinc costs of approximately $1.2 million in the current period compared to the prior year period. The average brass price paid per pound decreased to $3.26 in the current period from $3.81 in the prior year period. During the current period, we used approximately 495,000 pounds of brass. This resulted in decreased brass costs of approximately $270,000 in the current period compared to the prior year period.
Net other income was $780,000 in the current period compared to $466,000 in the prior year period. The increase was primarily due to increased transaction gains resulting from foreign currency transactions entered into by our Mexican subsidiaries and was partially offset by losses on the Rabbi trust which funds our supplemental executive retirement plan. Transactions gains were $1.1 million in the current period compared to $45,000 in the prior year period. Losses related to the Rabbi trust totaled $530,000 in the current period compared to gains of $15,000 in the prior year period. The investments held in the trust are considered trading securities.
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