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STRATTEC SECURITY CORPORATION Reports Fiscal 2021 Third Quarter Operating Results

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STRATTEC SECURITY CORPORATION
·12-min read
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MILWAUKEE, April 22, 2021 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal third quarter ended March 28, 2021.

Net sales for the Company’s third quarter ended March 28, 2021 were $121.6 million, compared to net sales of $116.9 million for the third quarter ended March 29, 2020.

Net income for the current year quarterly period was $4.5 million, compared to net income of $3.0 million in the prior year quarter. Diluted earnings per share for the current year quarterly period were $1.15 compared to diluted earnings per share of $0.79 in the prior year quarter.

For the nine months ended March 28, 2021, the Company’s net sales were $ 375.2 million compared to net sales of $343.2 million in the prior year nine month period.

Net income during the current year nine month period was $19.6 million compared to net income of $2.9 million in the prior year nine month period. Diluted earnings per share were $5.11 for the nine month period ended March 28, 2021 compared to diluted earnings per share of $0.77 during the nine month period ended March 29, 2020. The prior year nine month period was negatively impacted by a pre-tax $4,473,000 non-cash compensation charge relating to the termination of our Defined Benefit Pension Plan and reduced our diluted earnings per share by $.92 in the prior year period.

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

Three Months Ended

March 28, 2021

March 29, 2020

Fiat Chrysler Automobiles

$

21,685

$

26,050

General Motors Company

34,544

31,656

Ford Motor Company

21,721

15,462

Tier 1 Customers

17,289

17,495

Commercial and Other OEM Customers

17,876

20,184

Hyundai / Kia

8,529

6,091

TOTAL

$

121,644

$

116,938

Net sales for our current year quarter were impacted by supply chain shortages and resulted in several of our customers shutting down certain plants and/or production lines for periods of time.

Sales to Fiat Chrysler Automobiles in the current year quarter decreased in comparison to the prior year quarter due to lower production volumes of the vehicles we supply, in particular related to Chrysler minivans. The increase in sales to General Motors Company in the current year quarter compared to the prior year quarter related primarily to higher sales content on models for which we supply components, in particular for power access and door handle products. Sales to Ford Motor Company increased in the current year quarter compared to the prior year quarter due primarily to higher product content on models for which we supply components, and in particular for the new power tailgate program on the F-150 pickup trucks. Sales to Tier 1 Customers were flat in the current year quarter compared to the prior year quarter. Sales to Commercial and Other OEM Customers during the current year quarter decreased in comparison to the prior year quarter mainly due to decreases in sales related to door handle products and power access products sold to Honda of America Manufacturing, Inc. and related to reductions in sales of door handle products sold to Volkswagen. These Commercial and Other OEM Customers, along with the Tier 1 Customers, primarily represent purchasers of vehicle access control products, such as latches, key fobs, driver controls, steering column locks and door handles that we have developed in recent years to complement our historic core business of locks and keys. The increased sales to Hyundai / Kia in the current year quarter were principally due to higher levels of production on their recently launched new Kia Sedona and Hyundai Starex minivans for which we supply primarily power sliding door components.

Gross profit margins were 15.3 percent in the current year quarter compared to 14.5 percent in the prior year quarter. The increase in gross profit margin in the current year quarter compared to the prior year quarter was primarily attributed to improved manufacturing efficiencies both at our Milwaukee and Mexico production facilities, despite supply chain disruptions. Also reducing gross profit margins in the current year quarter were higher expense provisions for accrual of bonuses and a mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2021. This wage increase was principally offset by a favorable U.S. Dollar to Mexican Peso exchange rate affecting our Mexican operations

Engineering, Selling and Administrative expenses represented 9.8 percent in the current year quarter as a percent of net sales compared to 9.2 percent in the prior year quarter. The increase in overall operating expenses in the current year quarter was primarily due to higher expense provisions for accrual of bonuses and expenditures on new product development costs.

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

March 28, 2021

March 29, 2020

Equity (Loss) of VAST LLC Joint Venture

$

(56

)

$

(947

)

Net Foreign Currency Realized and

Unrealized Transaction Gain

429

1,467

Other

26

(392

)

$

399

$

128

The increase in Other Income, Net in the current year quarter was primarily related to improved profitability in our VAST LLC China operation which had extended OEM customer plant shutdowns associated with the coronavirus (COVID-19) pandemic in the prior year quarter.

Frank Krejci, President & CEO commented: “For the first six months of our fiscal year, we efficiently supported strong customer orders. During the current quarter there were supply constraints within the industry. Some vehicle assembly plants were temporarily closed and others cut back the number of work shifts despite continued demand from consumers, car rental companies and dealers. While our customers have tried to place production priority on pick-up trucks and sport utility vehicles where we supply significant product content it reduced our sales for this quarter and will impact the upcoming quarter. However, we believe returning to full production should help sustain future volume by refilling the dealer inventory pipeline to adequately support customer demand.

Despite having to manage through semiconductor and other part shortages, we are proud of our Associates efforts to deliver $1.15 in diluted earnings per share for this quarter and $5.11 for the first nine months of our current fiscal year. Positive generation of cash flow remains strong through a combination of operating performance and greater utilization of our capital investments made over the last few years. As a result, we were able to reduce debt by another $6 million this quarter and another $4 million in April 2021. Our debt to equity ratio has now been significantly reduced since the beginning of the fiscal year, thus creating opportunity for strategic investments in product and technology.”

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 under 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 coronavirus pandemic, matters adversely impacting the timing and availability of material component parts and raw materials 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.


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

Third Quarter Ended

Nine Months Ended

March 28, 2021

March 29, 2020

March 28, 2021

March 29, 2020

Net Sales

$

121,644

$

116,938

$

375,238

$

343,183

Cost of Goods Sold

102,990

99,928

311,832

299,954

Gross Profit

18,654

17,010

63,406

43,229

Engineering, Selling & Administrative Expenses

11,927

10,727

33,543

35,775

Income from Operations

6,727

6,283

29,863

7,454

Interest Expense

(63

)

(204

)

(259

)

(792

)

Other Income, Net

399

128

673

1,030

Income before Provision for Income Taxes and Non-Controlling Interest

7,063

6,207

30,277

7,692

Provision for Income Taxes

1,153

1,294

4,721

1,194

Net Income

5,910

4,913

25,556

6,498

Net Income Attributable to Non-Controlling Interest

(1,425

)

(1,919

)

(5,950

)

(3,601

)

Net Income Attributable to STRATTEC SECURITY CORPORATION

$

4,485

$

2,994

$

19,606

$

2,897

Earnings (Loss) Per Share:

Basic

$

1.18

$

0.80

$

5.18

$

0.78

Diluted

$

1.15

$

0.79

$

5.11

$

0.77

Average Basic

Shares Outstanding

3,797

3,748

3,783

3,733

Average Diluted

Shares Outstanding

3,886

3,768

3,839

3,752

Other

Capital Expenditures

$

1,808

$

2,923

$

6,401

$

10,307

Depreciation

$

4,933

$

4,769

$

14,730

$

14,349

STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data
(In Thousands)

March 28, 2021

June 28, 2020

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

11,335

$

11,774

Receivables, net

81,304

41,955

Inventories, net

58,330

54,400

Other current assets

18,051

17,239

Total Current Assets

169,020

125,368

Investment in Joint Ventures

26,051

22,068

Other Long Term Assets

13,390

12,961

Property, Plant and Equipment, Net

97,263

105,148

$

305,724

$

265,545

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts Payable

$

36,250

$

18,549

Other

39,248

29,591

Total Current Liabilities

75,498

48,140

Accrued Pension and Post Retirement Obligations

1,944

1,956

Borrowings Under Credit Facility

16,000

35,000

Other Long-term Liabilities

4,788

5,008

Shareholders’ Equity

330,923

309,991

Accumulated Other Comprehensive Loss

(17,711

)

(22,113

)

Less: Treasury Stock

(135,622

)

(135,656

)

Total STRATTEC SECURITY

CORPORATION Shareholders’ Equity

177,590

152,222

Non-Controlling Interest

29,904

23,219

Total Shareholders’ Equity

207,494

175,441

$

305,724

$

265,545

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

Third Quarter Ended

Nine Months Ended

March 28, 2021

March 29, 2020

March 28, 2021

March 29, 2020

Cash Flows from Operating Activities:

Net Income

$

5,910

$

4,913

$

25,556

$

6,498

Adjustment to Reconcile Net Income to

Cash Provided by Operating Activities:

Equity Loss (Earnings) in Joint Ventures

56

921

(1,844

)

(55

)

Depreciation

4,933

4,769

14,730

14,349

Foreign Currency Transaction (Gain) Loss

(386

)

(2,515

)

1,926

(2,067

)

Unrealized (Gain) Loss on Peso

Forward Contracts

(32

)

1,048

(512

)

1,048

Stock Based Compensation Expense

193

165

775

789

Non-Cash Compensation Expense

-

-

-

4,473

Loss on disposition of property, plant & equipment

(5

)

(13

)

1,421

270

Deferred Income taxes

-

-

-

(1,032

)

Change in Operating Assets/Liabilities

(2,450

)

(69

)

(17,012

)

5,409

Other, net

121

107

356

252

Net Cash Provided by Operating Activities

8,340

9,326

25,396

29,934

Cash Flows from Investing Activities:

Investment in Joint Ventures

-

-

(100

)

-

Additions to Property, Plant and Equipment

(1,808

)

(2,923

)

(6,401

)

(10,307

)

Proceeds from Sale of Property, Plant

and Equipment

5

14

8

29

Net Cash Used in Investing Activities

(1,803

)

(2,909

)

(6,493

)

(10,278

)

Cash Flows from Financing Activities:

Repayment of Borrowings Under Credit Facility

(6,000

)

(5,000

)

(19,000

)

(15,000

)

Dividends Paid to Non-Controlling

Interests of Subsidiaries

-

-

(490

)

(980

)

Dividends Paid

-

(525

)

-

(1,572

)

Employee Stock Purchases

545

24

585

543

Cash Flows from Financing Activities:

(5,455

)

(5,501

)

(18,905

)

(17,009

)

Effect of Foreign Currency Fluctuations on Cash

(179

)

(28

)

(437

)

(283

)

Net Increase (Decrease) in Cash & Cash Equivalents

903

888

(439

)

2,364

Cash and Cash Equivalents:

Beginning of Period

10,432

9,285

11,774

7,809

End of Period

$

11,335

$

10,173

$

11,335

$

10,173

Contact: Pat Hansen
Senior Vice President and
Chief Financial Officer
414-247-3435
www.strattec.com