Lower prices for customers and increased product development costs cut in to profits for Strattec Security Corp., but the Glendale-based company did increase revenue during the first quarter of fiscal 2017.
Strattec reported net income of $1.5 million, down 52 percent from the prior year, with earnings of 42 cents, down from 90 cents per diluted share.
Previously agreed to customer price reductions started at the beginning of 2016 and production and expediting costs increased to meet customer schedules were partially responsible for the reduction. Engineering, selling and administrative expenses also increased, partially from using third party vendors for a portion of new product development.
“The results of this last quarter have been impacted by both a combination of business challenges and investments in the future,” said Frank Krejci, Strattec president and chief executive officer. “We are focused on finding ways to reduce costs, improve quality of our products and capture efficiencies to offset price reductions to customers. In addition, we are investing in the future through product development costs necessary to support a record amount of new business won last year, construction of our new plant in Leon, Mexico driven by incremental business awards and adding people to implement process improvements.”
The company reported spending $7.4 million on capital expenditures, including the new facility in Mexico.
Revenue during the quarter was $100.2 million, a 3.9 percent increase. Sales to Strattec’s largest customer, Fiat Chrysler Automobiles, were down 16 percent to $23.9 million as a result of lower production for the soon-to-be discontinued Chrysler 200 and Chrysler Pacifica Minivan.
Sales to General Motors jumped 17 percent to $22 million on the strength of higher production volumes.
Increased product content on locksets and latches for the F-150 pick-up truck helped increase sales to Ford by 9.8 percent to $14.9 million.
Sales to tier 1, commercial and other original equipment manufacturer customers were also up, along with Hyundai and Kia.