STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”)
(NASDAQ:STRT) today reported operating results for the fiscal
second quarter ended December 27, 2020.
Net sales for the second quarter ended December
27, 2020 were $127.4 million, compared to net sales of $106.3
million for the second quarter ended December 29, 2019. The impact
of the General Motors UAW strike reduced the prior year quarter net
sales by approximately $7.0 million. Net income was $7.1 million in
the current year quarter, compared to a net loss of $1,341,000 in
the prior year quarter. Diluted earnings per share for the current
year second quarter were $1.85 compared to diluted loss per share
of $0.36.
The current year quarter included a customer
reimbursement for engineering development costs previously incurred
in prior periods that totaled $1,546,000. This reimbursement was
recorded as a reduction of engineering expense in the current
quarter and increased our diluted earnings per share by $0.26 in
the current year quarter in comparison to the prior year quarter.
The prior year quarter also was negatively impacted by a $2,245,000
non-cash compensation expense charge relating to the termination of
our Defined Benefit Pension Plan which reduced diluted earnings per
share in the prior year quarter by $0.46.
For the six months ended December 27, 2020, the
Company’s net sales were $253.6 million compared to net sales of
$226.2 million in the prior year six month period. The impact of
the General Motors UAW strike reduced net sales in the prior six
month period by approximately $10.0 million. Net income during the
current year six month period was $15.1 million compared to a net
loss of $97,000 during the prior year six month period. Diluted
earnings per share were $3.96 during the six month period ended
December 27, 2020 compared to a diluted loss per share of $.03
during the six month period ended December 29, 2019. The prior year
six month period was negatively impacted by a $4,473,000 non-cash
compensation charge relating to the termination of our Defined
Benefit Pension Plan mentioned above which reduced our diluted
earnings per share by $.92 in the prior year period.
Net sales to each of our customers in the
current year quarter and prior year quarter were as follows (in
millions):
|
Three Months
Ended |
|
December 27,
2020 |
|
December 29,
2019 |
|
|
|
|
|
|
Fiat
Chrysler Automobiles |
$ |
23.2 |
|
$ |
27.2 |
General
Motors Company |
|
39.0 |
|
|
25.4 |
Ford
Motor Company |
|
16.8 |
|
|
15.3 |
Tier 1
Customers |
|
18.7 |
|
|
14.7 |
Commercial and Other OEM Customers |
|
19.6 |
|
|
21.4 |
Hyundai /
Kia |
|
10.1 |
|
|
2.3 |
TOTAL |
$ |
127.4 |
|
$ |
106.3 |
Sales to Fiat Chrysler Automobiles (FCA) in the
current year quarter decreased over the same period in the prior
year quarter due primarily to lower production of the FCA minivan
vehicles for which we supply components. The increase in sales to
General Motors Company in the current year quarter compared to the
prior year quarter related primarily to higher volumes and content
on products we supply to their business, and in particular on the
Chevrolet Silverado. The impact of the General Motors UAW strike
resulted in lower net sales by an estimated $7.0 million in the
prior year quarter. Sales to the Ford Motor Company increased in
the current year quarter compared to the prior year quarter due
primarily to higher product content in particular for the new power
tailgate program on the F-150 pickup trucks starting production
during the current year quarter. Sales to Tier 1 customers
increased in the current year quarter in comparison to the prior
year quarter mainly due to higher sales volume on product
ultimately used on General Motors and FCA vehicles.
Sales to Commercial and Other OEM Customers during the current year
quarter were slightly lower in comparison to the prior year
quarter. These customers, along with the Tier 1 Customers,
primarily represent purchasers of vehicle access control products,
such as latches, fobs, driver controls 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 minivan for
which we supply components.
Our Gross Profit margins improved to 17.5% in
the current year quarter compared to 9.7% in the prior year
quarter. This margin improvement was generated primarily as a
result of cost reductions implemented in our operations in
Milwaukee, WI and at our facilities in Mexico, a favorable Mexican
Peso to US dollar exchange rate affecting the cost of our Mexican
operations between periods and by favorable changes in product
sales mix between periods. The prior year quarter gross profit
margin was reduced by 1.3% due to a non-cash compensation charge of
$1,376,000 relating to the termination of our Defined Benefit
Pension Plan.
Engineering, Selling and Administrative expenses
as a percent of net sales in the current year quarter were 8.1%
compared to 11.4% in the prior year quarter. This decrease in
overall Selling, Engineering and Administrative expenses in the
current year quarter compared to the prior year quarter was
primarily attributed to the customer reimbursement of engineering
development costs of $1,546,000 or 1.2% previously mentioned in
this press release, and overall improved operating expense
management between periods. The prior year quarter Engineering,
Selling and Administrative expenses were also higher by .8% due to
a non-cash compensation charge of $869,000 relating to the
termination of our Defined Benefit Pension Plan.
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):
|
December 27,
2020 |
|
December
29,2019 |
|
|
|
|
|
|
Equity
Earnings of VAST LLC Joint Venture |
$ |
1,075 |
|
$ |
496 |
Net
Foreign Currency Transaction (Loss) Gain |
|
(1,633) |
|
|
(363) |
Other |
|
267 |
|
|
382 |
|
$ |
(291) |
|
$ |
515 |
The increase in equity earnings of VAST LLC in
the current year quarter compared to the prior year quarter
primarily related to higher net sales and profitability in our VAST
China operation. VAST China’s profitability in the current quarter
was partially offset with startup costs for their new plant in
Jingzhou, China and by the closure of our VAST China plant in
Fuzhou, China which operations were consolidated into the new
Jingzhou facility. We continue to believe these actions will give
VAST China added capacity, greater operating efficiencies and a
broader geographic footprint in the China market going forward.
VAST LLC (including VAST China) is a crucial part of our global
strategy and we anticipate that it will contribute to our overall
long term market and financial strength as it continues to
grow.
Frank Krejci President and CEO commented: “We
are extremely pleased with our performance for the first six months
of our new fiscal year. Not only as we continue to manage through
challenging times with COVID-19 but we also took that time to
effectively launch new product introductions and improve
operational efficiencies in our Milwaukee, WI and Mexican
operations. At the same time, our VAST LLC operations in China
opened a new plant and made significant progress in restoring
profitability. Our STRATTEC and VAST associates deserve credit for
their efforts to our overall improvement.
We are beginning to see the fruits of years of
our new product development efforts. We were one of four companies
in the world to win the General Motors Innovation Award in our case
for our power tailgate offered on the Chevrolet Silverado pick-up
truck. As a customer option, the take rate is exceeding initial
sales projections. In addition, a similar product for the market
share leader Ford F-150 pick-up is just beginning to be
introduced.
We also continue to strengthen our balance
sheet. Two years ago we transferred our fully funded pension
obligations to an insurance company. Even though we were required
to take non-cash charges to our earnings in previous periods, this
action eliminated the significant future liabilities associated
with the pension obligations. In the last 6 months, we have paid
down $13 million of debt, reducing our debt to equity ratio from
23% to 13%.
Lastly, thanks to our shareholders who supported
us in our efforts to improve the Company’s financial performance
and shareholder value.”
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 the
coronavirus (COVID-19) pandemic and costs of operations (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
CORPORATIONResults of
Operations(In Thousands except per share
amounts)(Unaudited)
|
Second Quarter Ended |
|
Six Months Ended |
|
December 27, 2020 |
|
December 29, 2019 |
|
December 27, 2020 |
|
December 29, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
$ |
127,360 |
|
$ |
106,283 |
|
$ |
253,594 |
|
$ |
226,245 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Goods Sold |
|
105,119 |
|
|
95,950 |
|
|
208,842 |
|
|
200,026 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit |
|
22,241 |
|
|
10,333 |
|
|
44,752 |
|
|
26,219 |
|
|
|
|
|
|
|
|
|
|
|
|
Engineering,
Selling & |
|
|
|
|
|
|
|
|
|
|
|
Administrative Expenses |
|
10,302 |
|
|
12,094 |
|
|
21,616 |
|
|
25,048 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Operations |
|
11,939 |
|
|
(1,761) |
|
|
23,136 |
|
|
1,171 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense |
|
(84) |
|
|
(248) |
|
|
(196) |
|
|
(588) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(Expense) Income, Net |
|
(291) |
|
|
515 |
|
|
274 |
|
|
902 |
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Provision |
|
|
|
|
|
|
|
|
|
|
|
(Benefit) for Income Taxes and |
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interest |
|
11,564 |
|
|
(1,494) |
|
|
23,214 |
|
|
1,485 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision
(Benefit) for Income Taxes |
|
1,991 |
|
|
(399) |
|
|
3,568 |
|
|
(100) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) |
|
9,573 |
|
|
(1,095) |
|
|
19,646 |
|
|
1,585 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
Attributable |
|
|
|
|
|
|
|
|
|
|
|
to Non-Controlling Interest |
|
(2,460) |
|
|
(246) |
|
|
(4,525) |
|
|
(1,682) |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) Attributable to |
|
|
|
|
|
|
|
|
|
|
|
STRATTEC SECURITY |
|
|
|
|
|
|
|
|
|
|
|
CORPORATION |
$ |
7,113 |
|
$ |
(1,341) |
|
$ |
15,121 |
|
$ |
(97) |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) Per Share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.88 |
|
$ |
(0.36) |
|
$ |
4.01 |
|
$ |
(0.03) |
Diluted |
$ |
1.85 |
|
$ |
(0.36) |
|
$ |
3.96 |
|
$ |
(0.03) |
|
|
|
|
|
|
|
|
|
|
|
|
Average
Basic |
|
|
|
|
|
|
|
|
|
|
|
Shares Outstanding |
|
3,786 |
|
|
3,741 |
|
|
3,775 |
|
|
3,725 |
|
|
|
|
|
|
|
|
|
|
|
|
Average
Diluted |
|
|
|
|
|
|
|
|
|
|
|
Shares Outstanding |
|
3,842 |
|
|
3,741 |
|
|
3,815 |
|
|
3,725 |
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
$ |
3,079 |
|
$ |
3,086 |
|
$ |
4,593 |
|
$ |
7,384 |
Depreciation |
$ |
4,912 |
|
$ |
4,847 |
|
$ |
9,797 |
|
$ |
9,580 |
STRATTEC SECURITY
CORPORATIONCondensed Balance Sheet
Data(In Thousands)
|
|
December 27, 2020 |
|
|
December 29, 2019 |
|
|
(Unaudited) |
|
|
|
ASSETS |
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
10,432 |
|
$ |
11,774 |
|
Receivables, net |
|
85,796 |
|
|
41,955 |
|
Inventories, net |
|
56,333 |
|
|
54,400 |
|
Other current assets |
|
13,348 |
|
|
17,239 |
|
Total Current Assets |
|
165,909 |
|
|
125,368 |
|
Investment in Joint Ventures |
|
25,759 |
|
|
22,068 |
|
Other
Long Term Assets |
|
13,482 |
|
|
12,961 |
|
Property,
Plant and Equipment, Net |
|
101,819 |
|
|
105,148 |
|
|
$ |
306,969 |
|
$ |
265,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
Current
Liabilities: |
|
|
|
Accounts Payable |
$ |
39,148 |
|
$ |
18,549 |
|
Other |
|
37,507 |
|
|
29,591 |
|
Total Current Liabilities |
|
76,655 |
|
|
48,140 |
|
Accrued
Pension and Post Retirement Obligations |
|
1,980 |
|
|
1,956 |
|
Borrowings Under Credit Facility |
|
22,000 |
|
|
35,000 |
|
Other
Long-term Liabilities |
|
4,861 |
|
|
5,008 |
|
Shareholders’ Equity |
|
325,706 |
|
|
309,991 |
|
Accumulated Other Comprehensive Loss |
|
(17,492) |
|
|
(22,113) |
|
Less:
Treasury Stock |
|
(135,629) |
|
|
(135,656) |
|
Total STRATTEC SECURITY |
|
|
|
|
|
|
CORPORATION Shareholders’ Equity |
|
172,585 |
|
|
152,222 |
|
Non-Controlling Interest |
|
28,888 |
|
|
23,219 |
|
Total
Shareholders’ Equity |
|
201,473 |
|
|
175,441 |
|
|
$ |
306,969 |
|
$ |
265,545 |
STRATTEC SECURITY
CORPORATIONCondensed Cash Flow Statement
Data(In Thousands)(Unaudited)
|
Second Quarter Ended |
|
Six Months Ended |
|
December 27, 2020 |
|
December 29, 2019 |
|
December 27, 2020 |
|
December 29, 2019 |
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) |
$ |
9,573 |
|
$ |
(1,095) |
|
$ |
19,646 |
|
$ |
1,585 |
Adjustments
to Reconcile Net Income (Loss) to |
|
|
|
|
|
|
|
|
|
|
|
Cash Provided by Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
4,912 |
|
|
4,847 |
|
|
9,797 |
|
|
9,580 |
Non-cash Compensation Expense |
|
- |
|
|
2,245 |
|
|
- |
|
|
4,473 |
Equity Earnings in Joint Ventures |
|
(1,075) |
|
|
(492) |
|
|
(1,900) |
|
|
(976) |
Loss on disposition of property, plant & equipment |
|
1,203 |
|
|
88 |
|
|
1,426 |
|
|
283 |
Foreign Currency Transaction Gain |
|
1,913 |
|
|
363 |
|
|
2,312 |
|
|
448 |
Unrealized Gain on Peso Forward |
|
|
|
|
|
|
|
|
|
|
|
Contracts |
|
(145) |
|
|
- |
|
|
(480) |
|
|
- |
Deferred Income Taxes |
|
- |
|
|
(508) |
|
|
- |
|
|
(1,032) |
Stock Based Compensation Expense |
|
374 |
|
|
211 |
|
|
582 |
|
|
624 |
Change in Operating Assets/Liabilities |
|
(7,119) |
|
|
(160) |
|
|
(14,562) |
|
|
5,478 |
Other, net |
|
120 |
|
|
101 |
|
|
235 |
|
|
145 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Provided by Operating Activities |
|
9,756 |
|
|
5,600 |
|
|
17,056 |
|
|
20,608 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows
from Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
Investment in Joint Ventures |
|
(100) |
|
|
- |
|
|
(100) |
|
|
- |
Additions to Property, Plant and Equipment |
|
(3,079) |
|
|
(3,086) |
|
|
(4,593) |
|
|
(7,384) |
Proceeds Received on Sale of |
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment |
|
- |
|
|
- |
|
|
3 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Used in Investing Activities |
|
(3,179) |
|
|
(3,086) |
|
|
(4,690) |
|
|
(7,369) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows
from Financing Activities: |
|
|
|
|
|
|
|
|
|
Payments on Line of Credit Facility |
|
(8,000) |
|
|
(4,000) |
|
|
(13,000) |
|
|
(10,000) |
Dividends Paid to Non-Controlling Interest |
|
|
|
|
|
|
|
|
|
|
|
of Subsidiary |
|
- |
|
|
- |
|
|
(490) |
|
|
(980) |
Dividends Paid |
|
- |
|
|
(525) |
|
|
- |
|
|
(1,047) |
Exercise of Stock Options and |
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchases |
|
21 |
|
|
280 |
|
|
40 |
|
|
519 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash
Used in Financing Activities |
|
(7,979) |
|
|
(4,245) |
|
|
(13,450) |
|
|
(11,508) |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
Foreign Currency Fluctuations on Cash |
|
(149) |
|
|
(225) |
|
|
(258) |
|
|
(255) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash & Cash Equivalents |
|
(1,551) |
|
|
(1,956) |
|
|
(1,342) |
|
|
1,476 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
Cash Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
Beginning of Period |
|
11,983 |
|
|
11,241 |
|
|
11,774 |
|
|
7,809 |
End of Period |
$ |
10,432 |
|
$ |
9,285 |
|
$ |
10,432 |
|
$ |
9,285 |
Contact: Pat HansenSenior Vice President andChief Financial
Officer414-247-3435www.strattec.com
Strattec Security (NASDAQ:STRT)
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Strattec Security (NASDAQ:STRT)
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