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Strattec Security Corporation Reports Fiscal 2023 Second Quarter Operating Results

STRATTEC SECURITY CORPORATION
STRATTEC SECURITY CORPORATION

MILWAUKEE, Feb. 02, 2023 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal second quarter ended January 1, 2023.

Net sales for the second quarter ended January 1, 2023 were $113.2 million, compared to net sales of $112.9 million for the second quarter ended December 26, 2021. Net loss was $1.8 million in the current year second quarter, compared to net income of $3.4 million in the prior year second quarter. Diluted loss per share for the current year second quarter was $0.47 compared to diluted earnings per share of $0.87 in the prior year second quarter.

For the six months ended January 1, 2023, the Company’s net sales were $233.5 million compared to net sales of $213.2 million in the prior year six-month period. Net loss during the current year six-month period was $1.7 million compared to a net income of $3.5 million during the prior year six-month period. Diluted loss per share was $0.44 during the six-month period ended January 1, 2023 compared to diluted earnings per share of $0.89 during the six-month period ended December 26, 2021. Profitability for both the current year quarter and for the six-month period ended January 1, 2023 was negatively impacted by higher inflationary costs of materials, labor and shipping rates compared with that for the respective prior year periods.

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

 

 

Three Months Ended

 

 

January 1, 2023

 

December 26, 2021

 

 

 

 

 

 

 

 

 

General Motors Company

$

35.5

 

$

31.1

 

 

Ford Motor Company

 

22.2

 

 

21.1

 

 

Stellantis

 

17.0

 

 

23.1

 

 

Tier 1 Customers

 

16.1

 

 

15.6

 

 

Commercial and Other OEM Customers

 

13.1

 

 

16.1

 

 

Hyundai / Kia

 

9.3

 

 

5.9

 

 

TOTAL

$

113.2

 

$

112.9

 


Overall net sales were stable for the current quarter relative to the prior year quarter. Sales to General Motors Company, Ford Motor Company and Hyundai/Kia were positively impacted in the current year quarter due to higher vehicle production volumes resulting from improved global semiconductor chip availability relative to the prior year quarter. Specifically, sales growth to General Motors Company in the current year quarter was attributed to higher production volumes of their GM and Chevrolet pickup trucks and SUVs. Sales to Hyundai / Kia increased quarter-over-quarter due to higher levels of production of the Kia Carnival minivan in the current year quarter as compared to the prior year quarter.

The decrease in sales to Stellantis resulted primarily from its plant shutdowns in the quarter, which reduced production volumes compared to the prior year quarter. Sales to Commercial and Other OEM Customers, which are comprised of aftermarket products and vehicle access control products, such as latches, fobs, driver controls and door handles, declined in the current year quarter as compared to the prior year quarter due to continued semiconductor chip availability issues, primarily for aftermarket keys. The increases in availability of semiconductor chips were allocated toward the production of components for production vehicles ahead of aftermarket products and therefore, sales to aftermarket customers continued to be negatively impacted in the current year quarter due to these issues.

Gross Profit margins declined to 6.5% in the current year quarter compared to 13.2% in the prior year quarter primarily due to higher costs of raw materials, purchased materials and shipping as well as increased costs in our Mexican operations related to the mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2022.

Engineering, Selling and Administrative expenses increased $780,000 in the current year quarter compared with prior year quarter primarily due to increased salary and recruiting costs in the current year quarter and lower costs in the prior year quarter due to a customer reimbursement of engineering and design costs incurred on a new program

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

 

 

January 1,

 

 

December 26,

 

 

 

2023

 

 

2021

 

 

 

 

 

 

 

 

 

 

Equity Earnings of VAST LLC Joint Venture

$

588

 

 

$

615

 

 

Net Foreign Currency Transaction (Loss)

 

(195

)

 

(26

)

 

Other

 

247

 

 

 (74

)

 

 

$

640

 

 

$

515

 

 

 

 

 

 

 

 

 

The equity earnings of VAST LLC in the current year quarter compared to the prior year quarter were slightly lower primarily due to higher engineering spending in China associated with future programs.

Frank Krejci President and CEO commented: “This proved to be a difficult quarter with continued inflationary pressures on both purchased parts from suppliers and the sourcing of raw materials like zinc, steel and resins. Zinc and resin prices remain stubbornly high. The recent relief in steel prices will provide a benefit once we have worked through prior purchase commitments.
Raising our product prices to offset the cost increases has been challenging due to long term contracts with our customers. Nevertheless, our Team continues to focus on securing price increases, implementing efficiency improvements, launching significant new business won over the last two years and pursuing new business with a heightened focus on Electric Vehicle opportunities.”

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 customers’ 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 reaction to same from foreign countries, the volume and scope of product returns or customer cost reimbursement actions, adverse business and operational issues resulting from semiconductor chip supply shortages and the coronavirus (COVID-19) pandemic and costs of operations (including fluctuations in the cost, and factors impacting the availability, of necessary 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)

 

Second Quarter Ended

 

Six Months Ended

 

January 1, 2023

 

December 26, 2021

 

January 1, 2023

 

December 26, 2021

 

 

 

 

 

 

 

 

Net Sales

$

113,184

 

 

$

112,908

 

 

$

233,544

 

 

$

213,249

 

 

 

 

 

 

 

 

 

Cost of Goods Sold

 

105,797

 

 

 

97,975

 

 

 

213,661

 

 

 

185,767

 

 

 

 

 

 

 

 

 

Gross Profit

 

7,387

 

 

 

14,933

 

 

 

19,883

 

 

 

27,482

 

 

 

 

 

 

 

 

 

Engineering, Selling & Administrative Expenses

 

12,081

 

 

 

11,301

 

 

 

24,781

 

 

 

23,422

 

 

 

 

 

 

 

 

 

(Loss) Income from Operations

 

(4,694

)

 

 

3,632

 

 

 

(4,898

)

 

 

4,060

 

 

 

 

 

 

 

 

 

Interest Expense

 

(196

)

 

 

(57

)

 

 

(325

)

 

 

(105

)

 

 

 

 

 

 

 

 

Other Income (Expense), net

 

640

 

 

 

515

 

 

 

874

 

 

 

390

 

 

 

 

 

 

 

 

 

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

 

(4,250

)

 

 

4,090

 

 

 

(4,349

)

 

 

4,345

 

 

 

 

 

 

 

 

 

(Benefit) Provision for Income Taxes

 

(1,735

)

 

 

253

 

 

 

(1,771

)

 

 

289

 

 

 

 

 

 

 

 

 

Net (Loss) Income

 

(2,515

)

 

 

3,837

 

 

 

(2,578

)

 

 

4,056

 

 

 

 

 

 

 

 

 

Net (Loss) Income Attributable to Non-Controlling Interest

 

(676

)

 

 

446

 

 

 

(864

)

 

 

567

 

 

 

 

 

 

 

 

 

Net (Loss) Income Attributable to STRATTEC SECURITY CORPORATION

$

(1,839

)

 

$

3,391

 

 

$

(1,714

)

 

$

3,489

 

 

 

 

 

 

 

 

 

(Loss) Earnings Per Share:

 

 

 

 

 

 

 

Basic

$

(0.47

)

 

$

0.88

 

 

$

(0.44

)

 

$

0.91

 

Diluted

$

(0.47

)

 

$

0.87

 

 

$

(0.44

)

 

$

0.89

 

 

 

 

 

 

 

 

 

Average Basic Shares Outstanding

 

3,927

 

 

 

3,866

 

 

 

3,913

 

 

 

3,848

 

 

 

 

 

 

 

 

 

Average Diluted Shares Outstanding

 

3,927

 

 

 

3,908

 

 

 

3,913

 

 

 

3,901

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Capital Expenditures

$

4,759

 

 

$

2,573

 

 

$

9,477

 

 

$

5,362

 

Depreciation

$

4,301

 

 

$

4,911

 

 

$

8,798

 

 

$

9,968

 



STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data
(In Thousands)
(Unaudited)

 

 

 

 

January 1, 2023

 

July 3, 2022

 

 

 

 

 

 

 

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and Cash Equivalents

$

13,578

 

 

$

8,774

 

 

 

Receivables, net

 

73,205

 

 

 

75,827

 

 

 

Inventories, net

 

67,851

 

 

 

80,482

 

 

 

Other Current Assets

 

34,646

 

 

 

23,149

 

 

 

 

Total Current Assets

 

189,280

 

 

 

188,232

 

 

Investment in Joint Ventures

 

26,301

 

 

 

26,654

 

 

Other Long-term Assets

 

12,413

 

 

 

12,519

 

 

Property, Plant and Equipment, net

 

92,777

 

 

 

91,729

 

 

 

 

 

$

320,771

 

 

$

319,134

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts Payable

$

37,292

 

 

$

43,950

 

 

 

Other

 

42,244

 

 

 

37,579

 

 

 

 

Total Current Liabilities

 

79,536

 

 

 

81,529

 

 

Accrued Pension and Postretirement Obligations

 

2,671

 

 

 

2,588

 

 

Borrowings Under Credit Facility

 

17,000

 

 

 

11,000

 

 

Other Long-term Liabilities

 

3,888

 

 

 

4,070

 

 

Shareholders' Equity

 

341,850

 

 

 

342,568

 

 

Accumulated Other Comprehensive Loss

 

(19,226

)

 

 

(18,588

)

 

Less: Treasury Stock

 

(135,556

)

 

 

(135,580

)

 

 

Total STRATTEC SECURITY

 

 

 

 

 

 

CORPORATION Shareholders' Equity

 

187,068

 

 

 

188,400

 

 

 

Non-Controlling Interest

 

30,608

 

 

 

31,547

 

 

Total Shareholders' Equity

 

217,676

 

 

 

219,947

 

 

 

 

 

$

320,771

 

 

$

319,134

 



STRATTEC SECURITY CORPORATION

Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)

 

 

 

Second Quarter Ended

 

Six Months Ended

 

 

 

January 1, 2023

 

December 26, 2021

 

January 1, 2023

 

December 26, 2021

 

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net (Loss) Income

$

(2,515

)

 

$

3,837

 

 

$

(2,578

)

 

$

4,056

 

Adjustments to Reconcile Net (Loss) Income to Cash Provided by Operating Activities:

 

 

 

 

 

 

 

 

 

Depreciation

 

4,301

 

 

 

4,911

 

 

 

8,798

 

 

 

9,968

 

 

 

Equity Earnings in Joint Ventures

 

(588

)

 

 

(615

)

 

 

(1,115

)

 

 

(364

)

 

 

Foreign Currency Transaction (Gain) Loss

 

514

 

 

 

(104

)

 

 

585

 

 

 

(243

)

 

 

Unrealized Loss (Gain) on Peso Forward Contracts

 

(12

)

 

 

126

 

 

 

23

 

 

 

224

 

 

 

Stock Based Compensation Expense

 

263

 

 

 

238

 

 

 

874

 

 

 

634

 

 

 

Change in Operating Assets/Liabilities

 

1,943

 

 

 

1,066

 

 

 

1,898

 

 

 

(14,590

)

 

Other, net

 

128

 

 

 

206

 

 

 

250

 

 

 

333

 

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by Operating Activities

 

4,034

 

 

 

9,665

 

 

 

8,735

 

 

 

18

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Investment in Joint Ventures

 

(104

)

 

 

-

 

 

 

(104

)

 

 

-

 

 

Additions to Property, Plant & Equipment

 

(4,759

)

 

 

(2,573

)

 

 

(9,477

)

 

 

(5,362

)

 

Proceeds on Sales of Property, Plant & Equipment

 

4

 

 

 

-

 

 

 

4

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Net Cash Used in Investing Activities

 

(4,859

)

 

 

(2,573

)

 

 

(9,577

)

 

 

(5,362

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Borrowings on Line of Credit Facility

 

4,000

 

 

 

1,000

 

 

 

9,000

 

 

 

8,000

 

 

Payments on Line of Credit Facility

 

-

 

 

 

(1,000

)

 

 

(3,000

)

 

 

(3,000

)

 

Dividends Paid to Non-Controlling Interest of Subsidiary

 

-

 

 

 

-

 

 

 

(600

)

 

 

(600

)

 

Exercise of Stock Options and Employee Stock Purchases

 

20

 

 

 

20

 

 

 

146

 

 

 

639

 

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by Financing Activities

 

4,020

 

 

 

20

 

 

 

5,546

 

 

 

5,039

 

Effect of Foreign Currency Fluctuations on Cash

 

53

 

 

 

(65

)

 

 

100

 

 

 

(89

)

Net Increase (Decrease) in Cash & Cash Equivalents

 

3,248

 

 

 

7,047

 

 

 

4,804

 

 

 

(394

)

Cash & Cash Equivalents:

 

 

 

 

 

 

 

 

Beginning of Period

 

10,330

 

 

 

7,024

 

 

 

8,774

 

 

 

14,465

 

 

End of Period

$

13,578

 

 

$

14,071

 

 

$

13,578

 

 

$

14,071

 


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