Revenues increased during the most recent quarter, but Milwaukee-based Strattec Security Corp. saw earnings and net income fall sharply as higher costs and new product development ate into the top-line gains.
The automotive lock maker reported net income of $3.3 million for the third quarter of fiscal 2016, down 39 percent from the previous year. The company reported earnings of 52 cents per diluted share, down 57 percent from $1.20 the previous year.
Revenue for the quarter was $94 million, up 6 percent from 2015.
The company attributed the lower profit and earnings to a number of factors. Gross profit margin dropped from 17.7 percent to 15.4 percent because of product mix, higher costs associated with diversifying the product portfolio and previously agreed upon customer price reductions that started with the new calendar year.
Engineering, selling and administrative expenses increased from 11.1 percent to 11.4 percent as a percent of net sales. The company attributed the increase to third party vendor costs for new product development.
“We are spending money now on design expenses for programs which we are excited to have recently been awarded,” said Frank Krejci, Strattec president and chief executive officer. “This current activity will be very positive for earnings and strategic growth in the future.”
He also said the company is investing in improving efficiency and quality processes.
“Our efforts to diversify continue to progress, but they are not yet contributing to the bottom line,” he said.
The company saw sales gains which each of the big three North American automakers.
Sales to Fiat Chrysler were up almost 4 percent to $27.2 million. The temporary shutdown of plants in Michigan and Mexico cost Strattec about $4.5 million in sales during the quarter. Fiat Chrysler has since announced plans to lay off workers from the Michigan plant, but Krejci said he expects the revenue impact to be limited as sales shift to different vehicles.
General Motors accounted for $18.7 million in sales, a 9.7 percent jump that was mostly related to a sales concession recorded in 2015.
An increase in sales for F-150 pickup trucks boosted Strattec’s revenue from Ford to $13.9 million. A 26.5 percent increase.
Revenue from Tier 1 customers was down 23.8 percent to $14.2 million because of lower production volumes for passenger cars. Commercial and other OEM sales was up slightly as were sales to Hyundai and Kia.