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STRATTEC SECURITY CORPORATION Reports Fiscal 2024 First Quarter Operating Results

STRATTEC SECURITY CORPORATION
STRATTEC SECURITY CORPORATION

MILWAUKEE, Wis., Oct. 26, 2023 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended October 1, 2023.

Net sales for the first quarter ended October 1, 2023 were $135.4 million, compared to net sales of $120.4 million for the first quarter ended October 2, 2022. Net income was $4.2 million in the current year first quarter, compared to net income of $125,000 in the prior year first quarter. Diluted earnings per share for the current year quarter were $1.05 and for the prior year first quarter were $0.03.

Net sales to each of our customers in the current year quarter and prior year quarter were as follows (in thousands):

 

Three Months Ended

 

 

October 1, 2023

 

 

October 2, 2022

General Motors Company

$

40,505

 

$

38,150

Stellantis

 

27,297

 

 

17,155

Ford Motor Company

 

26,909

 

 

24,616

Tier 1 Customers

 

18,122

 

 

17,309

Commercial and Other OEM Customers

 

14,197

 

 

14,826

Hyundai / Kia

 

8,376

 

 

8,304

TOTAL

$

135,406

 

$

120,360

 

 

 

 

 

 

The higher revenues this quarter reflect $10.8 million of negotiated pricing relief, $8.0 million of which relates to one-time retroactive pricing for parts shipped in the prior fiscal year, while the remaining $2.8 million is attributable to ongoing increases in current part prices.   In addition, the company benefited from increased sales to Ford Motor Company of new power end gate content for their new F-Series Super Duty Pickup. The same vehicle also drove increased sales of new door hardware sold through Tier 1 Customers.   Higher sales to Stellantis reflects increased vehicle production of their minivan, while sales to Commercial and Other OEM Customers declined year-over-year due to the ending of a door handle program with Honda.

Gross Profit margins improved to 13.8% compared with 10.4% in the prior year driven primarily by the pricing relief achieved, of which 4.7 percentage points was one-time retroactive pricing related. Major offsetting items to the positive margin effect of pricing in the quarter were an unfavorable U.S. dollar to Mexican Peso exchange rate combined with a mandatory 20% Mexican minimum wage increase in 2023 and higher freight costs.

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

 

 

October 1,

 

 

 

October 2,

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Equity (Loss) Earnings of VAST LLC Joint Venture

$

(265

)

 

$

527

 

 

 

 

 

 

 

 

 

Net Foreign Currency Transaction Gain

 

226

 

 

 

132

 

Other

 

(92

)

 

 

(425

)

 

$

(131

)

 

$

234

 

 

 

 

 

 

 

 

 

Effective June 30, 2023, STRATTEC sold its one-third interest in VAST LLC in an agreement that bolstered our balance sheet with $18.5 million of cash, captured the remaining 20% ownership of STRATTEC Power Access Group not owned by STRATTEC and created greater flexibility for STRATTEC to enter new segments and markets in the future. The current year quarter equity loss of the joint venture was the result of additional professional fees incurred during the current period related to the VAST transaction.

Frank Krejci, President and CEO commented: “I am very proud of our entire team for the results in the quarter. The team was able to capture inflationary price increases in the form of one-time recoveries as well as enhanced margins for the future. Additionally, the higher sales beyond the pricing relief achieved in the quarter reflected our ability to increase the reach of our most successful products across the product line-ups of our customers. And in support of our effort to protect margins, we implemented a salaried staff reduction in our Mexican operations. Like everyone connected to the auto industry, we are concerned about the UAW strike. While the strike only modestly affected our sales in September, the situation has changed considerably in October as the strike escalated to include the manufacturing of high-volume pickup trucks and SUVs for our three major customers. We will continue to adjust our execution to whatever the outcome, however, our earnings will be negatively impacted until the strike ends, at which time we will work in earnest with our customers to try and recover lost sales and profitability. Fortunately, our exit of a long-standing joint venture arrangement at the end of our prior fiscal year has meaningfully strengthened our balance sheet while providing greater focus on our core business. Now with greater control over our business, we look forward to the future.”

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 each company’s products to global customers as cooperating partners of the “VAST Automotive Group” brand name. STRATTEC’s history in the automotive business spans over 110 years.

Certain statements contained in this release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” and “would.” Such forward-looking statements in this release are inherently subject to many uncertainties in the Company’s operations and business environment. These uncertainties include general economic conditions, in particular, relating to the automotive industry, consumer demand for the Company’s and its customers’ products, competitive and technological developments, customer purchasing actions, changes in warranty provisions and customer product recall policies, work stoppages at the Company or at the location of its key customers as a result of labor disputes, foreign currency fluctuations, uncertainties stemming from U.S. trade policies, tariffs and reactions to same from foreign countries, the volume and scope of product returns, adverse business and operational issues resulting from the continuing effects of the coronavirus (COVID-19) pandemic, matters adversely impacting the timing and availability of component parts and raw materials needed for the production of our products and the products of our customers and fluctuations in our costs of operation (including fluctuations in the cost of raw materials). Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances occurring after the date of this release. In addition, such uncertainties and other operational matters are discussed further in the Company’s quarterly and annual filings with the Securities and Exchange Commission.

Contact: Dennis Bowe
Vice President and
Chief Financial Officer
414-247-3399
www.strattec.com


STRATTEC SECURITY CORPORATION
Condensed Results of Operations
(In Thousands except per share amounts)
(Unaudited)

 

First Quarter Ended

 

October 1, 2023

 

October 2, 2022

 

 

 

 

Net Sales

$

135,406

 

 

$

120,360

 

 

 

 

 

Cost of Goods Sold

 

116,686

 

 

 

107,864

 

 

 

 

 

Gross Profit

 

18,720

 

 

 

12,496

 

 

 

 

 

Engineering, Selling & Administrative Expenses

 

12,614

 

 

 

12,700

 

 

 

 

 

Income (Loss) from Operations

 

6,106

 

 

 

(204

)

 

 

 

 

Interest Expense

 

(220

)

 

 

(129

)

 

 

 

 

Interest Income

 

87

 

 

 

-

 

 

 

 

 

Other (Expense) Income, net

 

(131

)

 

 

234

 

 

 

 

 

Income (Loss) Before Provision for Income Taxes and    
      Non- Controlling Interest

 

5,842

 

 

 

(99

)

 

 

 

 

Provision (Benefit) for Income Taxes

 

1,387

 

 

 

(36

)

 

 

 

 

Net Income (Loss)

 

4,455

 

 

 

(63

)

 

 

 

 

Net Income (Loss) Attributable to Non-Controlling
      Interest

 

290

 

 

 

(188

)

 

 

 

 

Net Income Attributable to STRATTEC SECURITY
      CORPORATION

$

4,165

 

 

$

125

 

 

 

 

 

Earnings Per Share:

 

 

 

Basic

$

1.05

 

 

$

0.03

 

Diluted

$

1.05

 

 

$

0.03

 

 

 

 

 

Average Basic Shares Outstanding

 

3,948

 

 

 

3,899

 

 

 

 

 

Average Diluted Shares Outstanding

 

3,974

 

 

 

3,929

 

 

 

 

 

Other

 

 

 

Capital Expenditures

$

2,920

 

 

$

4,718

 

Depreciation

$

4,385

 

 

$

4,497

 

 

 

 

 

 

 

 

 

STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
(Unaudited)

 

 

 

 

October 1, 2023

 

July 2, 2023

 

 

 

 

 

 

 

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and Cash Equivalents

$

15,665

 

 

$

20,571

 

 

 

Receivables, net

 

87,470

 

 

 

89,811

 

 

 

Inventories, net

 

81,367

 

 

 

77,597

 

 

 

Customer Tooling in Progress, net

 

22,673

 

 

 

20,800

 

 

 

Value Added Tax Recoverable

 

15,054

 

 

 

7,912

 

 

 

Other Current Assets

 

5,622

 

 

 

9,091

 

 

 

 

Total Current Assets

 

227,851

 

 

 

225,782

 

 

Other Long-term Assets

 

20,452

 

 

 

20,702

 

 

Property, Plant and Equipment, net

 

92,316

 

 

 

94,446

 

 

 

 

 

$

340,619

 

 

$

340,930

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts Payable

$

50,297

 

 

$

57,927

 

 

 

Value Added Tax Payable

 

8,473

 

 

 

6,499

 

 

 

Borrowings Under Credit Facility - Current

 

13,000

 

 

 

-

 

 

 

Other

 

45,624

 

 

 

44,560

 

 

 

 

Total Current Liabilities

 

117,394

 

 

 

108,986

 

 

Accrued Pension and Postretirement Obligations

 

2,392

 

 

 

2,363

 

 

Borrowings Under Credit Facility - Long-Term

 

-

 

 

 

13,000

 

 

Other Long-term Liabilities

 

5,532

 

 

 

5,557

 

 

Shareholders' Equity

 

339,261

 

 

 

334,683

 

 

Accumulated Other Comprehensive Loss

 

(14,527

)

 

 

(14,194

)

 

Less: Treasury Stock

 

(135,514

)

 

 

(135,526

)

 

 

Total STRATTEC SECURITY

 

 

 

 

 

 

CORPORATION Shareholders' Equity

 

189,220

 

 

 

184,963

 

 

 

Non-Controlling Interest

 

26,081

 

 

 

26,061

 

 

Total Shareholders' Equity

 

215,301

 

 

 

211,024

 

 

 

 

 

$

340,619

 

 

$

340,930

 

 

 

 

 

 

 

 

 

 

 

 

STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)

 

 

 

 

First Quarter Ended

 

 

 

 

October 1, 2023

 

October 2, 2022

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

Net Income (Loss)

$

4,455

 

 

$

(63

)

Adjustments to Reconcile Net Income (Loss) to

 

 

 

 

Cash (Used in) Provided by Operating Activities:

 

 

 

 

 

Depreciation

 

4,385

 

 

 

4,497

 

 

 

Equity Loss (Earnings) in Joint Ventures

 

265

 

 

 

(527

)

 

 

Foreign Currency Transaction (Gain) Loss

 

(226

)

 

 

71

 

 

 

Unrealized Gain on Peso Forward Contracts

 

-

 

 

 

35

 

 

 

Stock Based Compensation Expense

 

505

 

 

 

611

 

 

 

Change in Operating Assets/Liabilities

 

(13,156

)

 

 

(45

)

 

Other, net

 

(100

)

 

 

122

 

 

 

 

 

 

 

 

Net Cash (Used in) Provided by Operating Activities

 

(3,872

)

 

 

4,701

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

Proceeds from Sale of Interest in VAST LLC

 

2,000

 

 

 

-

 

 

Additions to Property, Plant & Equipment

 

(2,920

)

 

 

(4,718

)

 

 

 

 

 

 

 

Net Cash Used in Investing Activities

 

(920

)

 

 

(4,718

)

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

Borrowings on Line of Credit Facility

 

2,000

 

 

 

5,000

 

 

Payments on Line of Credit Facility

 

(2,000

)

 

 

(3,000

)

 

Dividends Paid to Non-Controlling Interest of
Subsidiary

 

-

 

 

 

(600

)

 

Exercise of Stock Options and Employee Stock
Purchases

 

17

 

 

 

126

 

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

17

 

 

 

1,526

 

 

 

 

 

 

 

 

Effect of Foreign Currency Fluctuations on Cash

 

(131

)

 

 

47

 

 

 

 

 

 

 

 

Net (Decrease) Increase in Cash & Cash Equivalents

 

(4,906

)

 

 

1,556

 

 

 

 

 

 

 

 

Cash & Cash Equivalents:

 

 

 

 

Beginning of Period

 

20,571

 

 

 

8,774

 

 

End of Period

$

15,665

 

 

$

10,330