STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”)
(NASDAQ:STRT) today reported operating results for the fiscal third
quarter ended April 2, 2023.
Net sales for the third quarter ended April 2,
2023 were $127.2 million, compared to net sales of $115.9 million
for the third quarter ended March 27, 2022. Net loss was $2.3
million in the current year third quarter, compared to net income
of $3.1 million in the prior year third quarter. Diluted loss per
share for the current year third quarter was $0.57 compared to
diluted earnings per share of $0.80 in the prior year third
quarter.
For the nine months ended April 2, 2023, the
Company’s net sales were $360.7 million compared to net sales of
$329.2 million in the prior year nine-month period. Net loss during
the current year nine-month period was $4.0 million compared to a
net income of $6.6 million during the prior year nine-month period.
Diluted loss per share was $1.01 during the nine-month period ended
April 2, 2023 compared to diluted earnings per share of $1.70
during the nine-month period ended March 27, 2022.
Profitability for both the current year quarter
and for the nine-month period ended April 2, 2023 was negatively
impacted by higher inflationary costs for materials, labor and
shipping compared with that for the respective prior year periods
more than offsetting the higher sales effect.
Net sales to each of our customers in the
current year quarter and prior year quarter were as follows (in
millions):
|
Three Months
Ended |
|
April 2, 2023 |
|
March 27, 2022 |
General Motors
Company |
$ |
37.5 |
|
$ |
34.7 |
Ford Motor Company |
|
23.3 |
|
|
19.2 |
Stellantis |
|
21.6 |
|
|
23.0 |
Tier 1 Customers |
|
19.8 |
|
|
15.3 |
Commercial and Other OEM Customers |
|
13.8 |
|
|
16.5 |
Hyundai / Kia |
|
11.2 |
|
|
7.2 |
TOTAL |
$ |
127.2 |
|
$ |
115.9 |
The quarter-over-quarter sales increase of $11.2
million was due to improved global semiconductor chip availability
in the current year quarter relative to the prior year quarter,
which positively impacted sales to General Motors Company, Ford
Motor Company, Hyundai / Kia and Tier 1 Customers. 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 for which we supply components.
Increased sales to Ford Motor Company in the current year quarter
were due to higher production volumes of their pickup trucks for
which we supply components. And sales to Hyundai / Kia increased in
the current year quarter due to higher production levels of their
minivan.
The decrease in sales to Stellantis resulted
primarily from its plant shutdowns in the current year 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 the allocation of available semiconductor chips
toward the production of components for production vehicles, rather
than these aftermarket products.
Gross Profit margins declined to 7.9% in the
current year quarter compared to 12.6% in the prior year quarter
primarily due to higher cost of purchased materials, increased
costs in our Mexican operations related to the mandatory minimum
wage increase enacted by the Mexican Government effective January
1, 2023, and an unfavorable average U.S. dollar / Mexican Peso
exchange rate between quarters. Additionally, the current year
quarter includes a $1.3 million warranty provision associated with
a customer's specific warranty claim involving our product.
Engineering, Selling and Administrative expenses
increased $1.2 million in the current year quarter compared with
the prior year quarter primarily due to higher outside expenditures
on new product development associated with utilizing third party
vendors for a portion of our development work.
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):
|
April 2, |
|
|
March 27, |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Equity Earnings of VAST LLC Joint Venture |
$ |
819 |
|
|
$ |
577 |
|
Net Foreign Currency Transaction (Loss) |
|
(1,125 |
) |
|
|
470 |
|
Other |
|
(98 |
) |
|
|
(188 |
) |
|
$ |
(404 |
) |
|
$ |
859 |
|
The equity earnings of VAST LLC in the current
year quarter compared to the prior year quarter were higher due to
improved profitability in VAST China.
Frank Krejci President and CEO commented: “This
quarter has proved to be another challenging one. Although shipping
volumes improved from the previous quarter and we began to see
modest relief in the cost of raw materials, the inflationary
pressure from our suppliers continued to escalate. Additionally,
effective January 1 we began to feel the impact of a significant
government mandated wage increase in Mexico. And while the U.S.
dollar remained strong in much of the world, it has continued to
weaken against the Mexican peso which put further pressure on our
profitability. As we look to the near future, the team is hard at
work preparing the launch of new business with more favorable
margins, and we continue to find ways to improve operational
efficiencies, including vertical integration opportunities. We
expect both to benefit our bottom line in the short and the long
term.Raising prices remains challenging due to long term contracts
with our customers. While serious discussions continue with our
customers on obtaining price concessions, the results to date have
had limited financial benefit.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 liftgate systems, power tailgate
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
CORPORATIONCondensed Results of
Operations(In Thousands except per share
amounts)(Unaudited)
|
Third Quarter Ended |
|
Nine Months Ended |
|
April 2, 2023 |
|
March 27, 2022 |
|
April 2, 2023 |
|
March 27, 2022 |
|
|
|
|
|
|
|
|
Net Sales |
$ |
127,183 |
|
|
$ |
115,943 |
|
|
$ |
360,727 |
|
|
$ |
329,192 |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
|
117,182 |
|
|
|
101,305 |
|
|
|
330,843 |
|
|
|
287,072 |
|
|
|
|
|
|
|
|
|
Gross Profit |
|
10,001 |
|
|
|
14,638 |
|
|
|
29,884 |
|
|
|
42,120 |
|
|
|
|
|
|
|
|
|
Engineering, Selling &
Administrative Expenses |
|
12,485 |
|
|
|
11,261 |
|
|
|
37,266 |
|
|
|
34,683 |
|
|
|
|
|
|
|
|
|
(Loss) Income from
Operations |
|
(2,484 |
) |
|
|
3,377 |
|
|
|
(7,382 |
) |
|
|
7,437 |
|
|
|
|
|
|
|
|
|
Interest Expense |
|
(266 |
) |
|
|
(54 |
) |
|
|
(591 |
) |
|
|
(159 |
) |
|
|
|
|
|
|
|
|
Other (Expense) Income,
net |
|
(404 |
) |
|
|
859 |
|
|
|
470 |
|
|
|
1,249 |
|
|
|
|
|
|
|
|
|
(Loss) Income Before Provision
for Income Taxes and Non- Controlling Interest |
|
(3,154 |
) |
|
|
4,182 |
|
|
|
(7,503 |
) |
|
|
8,527 |
|
|
|
|
|
|
|
|
|
Provision (Benefit) for Income
Taxes |
|
133 |
|
|
|
50 |
|
|
|
(1,638 |
) |
|
|
339 |
|
|
|
|
|
|
|
|
|
Net (Loss) Income |
|
(3,287 |
) |
|
|
4,132 |
|
|
|
(5,865 |
) |
|
|
8,188 |
|
|
|
|
|
|
|
|
|
Net (Loss) Income Attributable
to Non-Controlling Interest |
|
(1,031 |
) |
|
|
989 |
|
|
|
(1,895 |
) |
|
|
1,556 |
|
|
|
|
|
|
|
|
|
Net (Loss) Income Attributable
to STRATTEC SECURITY CORPORATION |
$ |
(2,256 |
) |
|
$ |
3,143 |
|
|
$ |
(3,970 |
) |
|
$ |
6,632 |
|
|
|
|
|
|
|
|
|
(Loss) Earnings Per
Share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.57 |
) |
|
$ |
0.81 |
|
|
$ |
(1.01 |
) |
|
$ |
1.72 |
|
Diluted |
$ |
(0.57 |
) |
|
$ |
0.80 |
|
|
$ |
(1.01 |
) |
|
$ |
1.70 |
|
|
|
|
|
|
|
|
|
Average Basic Shares
Outstanding |
|
3,928 |
|
|
|
3,871 |
|
|
|
3,918 |
|
|
|
3,856 |
|
|
|
|
|
|
|
|
|
Average Diluted Shares
Outstanding |
|
3,928 |
|
|
|
3,916 |
|
|
|
3,918 |
|
|
|
3,906 |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Capital Expenditures |
$ |
4,247 |
|
|
$ |
4,045 |
|
|
$ |
13,724 |
|
|
$ |
9,407 |
|
Depreciation |
$ |
4,347 |
|
|
$ |
4,756 |
|
|
$ |
13,145 |
|
|
$ |
14,724 |
|
STRATTEC SECURITY
CORPORATIONCondensed Balance Sheet
Data(In Thousands)(Unaudited)
|
|
|
|
April 2, 2023 |
|
July 3, 2022 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
Current
Assets: |
|
|
|
|
|
Cash and Cash
Equivalents |
$ |
12,086 |
|
|
$ |
8,774 |
|
|
|
Receivables,
net |
|
83,581 |
|
|
|
75,827 |
|
|
|
Inventories,
net |
|
69,615 |
|
|
|
80,482 |
|
|
|
Customer Tooling
in Progress, net |
|
20,516 |
|
|
|
10,828 |
|
|
|
Other Current
Assets |
|
21,227 |
|
|
|
12,321 |
|
|
|
|
Total Current Assets |
|
207,025 |
|
|
|
188,232 |
|
|
Investment in
Joint Ventures |
|
27,773 |
|
|
|
26,654 |
|
|
Other Long-term
Assets |
|
12,565 |
|
|
|
12,519 |
|
|
Property, Plant
and Equipment, net |
|
94,035 |
|
|
|
91,729 |
|
|
|
|
|
$ |
341,398 |
|
|
$ |
319,134 |
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
Accounts
Payable |
$ |
48,546 |
|
|
$ |
43,950 |
|
|
|
Other |
|
47,034 |
|
|
|
37,579 |
|
|
|
|
Total Current Liabilities |
|
95,580 |
|
|
|
81,529 |
|
|
Accrued Pension
and Postretirement Obligations |
|
2,543 |
|
|
|
2,588 |
|
|
Borrowings Under
Credit Facility |
|
21,000 |
|
|
|
11,000 |
|
|
Other Long-term
Liabilities |
|
3,802 |
|
|
|
4,070 |
|
|
Shareholders'
Equity |
|
339,863 |
|
|
|
342,568 |
|
|
Accumulated Other
Comprehensive Loss |
|
(16,572 |
) |
|
|
(18,588 |
) |
|
Less: Treasury
Stock |
|
(135,542 |
) |
|
|
(135,580 |
) |
|
|
Total STRATTEC
SECURITY |
|
|
|
|
|
|
CORPORATION Shareholders'
Equity |
|
187,749 |
|
|
|
188,400 |
|
|
|
Non-Controlling
Interest |
|
30,724 |
|
|
|
31,547 |
|
|
Total
Shareholders' Equity |
|
218,473 |
|
|
|
219,947 |
|
|
|
|
|
$ |
341,398 |
|
|
$ |
319,134 |
|
STRATTEC SECURITY
CORPORATIONCondensed Cash Flow Statement
Data(In Thousands)(Unaudited)
|
|
|
|
Third Quarter Ended |
|
Nine Months Ended |
|
|
|
|
April 2, 2023 |
|
March 27, 2022 |
|
April 2, 2023 |
|
March 27, 2022 |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
Net (Loss)
Income |
$ |
(3,287 |
) |
|
$ |
4,132 |
|
|
$ |
(5,865 |
) |
|
$ |
8,188 |
|
Adjustments to
Reconcile Net (Loss) Income to |
|
|
|
|
|
|
|
|
Cash (Used In)
Provided by Operating Activities: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
4,347 |
|
|
|
4,756 |
|
|
|
13,145 |
|
|
|
14,724 |
|
|
|
Equity Earnings in
Joint Ventures |
|
(819 |
) |
|
|
(577 |
) |
|
|
(1,934 |
) |
|
|
(941 |
) |
|
|
Foreign Currency
Transaction Loss |
|
1,529 |
|
|
|
319 |
|
|
|
2,114 |
|
|
|
76 |
|
|
|
Unrealized Loss
(Gain) on Peso Forward Contracts |
|
70 |
|
|
|
(724 |
) |
|
|
93 |
|
|
|
(500 |
) |
|
|
Stock Based
Compensation Expense |
|
265 |
|
|
|
239 |
|
|
|
1,139 |
|
|
|
873 |
|
|
|
Change in
Operating Assets/Liabilities |
|
(3,665 |
) |
|
|
3,439 |
|
|
|
(1,767 |
) |
|
|
(11,151 |
) |
|
Other, net |
|
337 |
|
|
|
181 |
|
|
|
587 |
|
|
|
514 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used In)
Provided by Operating Activities |
|
(1,223 |
) |
|
|
11,765 |
|
|
|
7,512 |
|
|
|
11,783 |
|
Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
|
Investment in
Joint Ventures |
|
(133 |
) |
|
|
(75 |
) |
|
|
(237 |
) |
|
|
(75 |
) |
|
Additions to
Property, Plant & Equipment |
|
(4,247 |
) |
|
|
(4,045 |
) |
|
|
(13,724 |
) |
|
|
(9,407 |
) |
|
Proceeds on Sales
of Property, Plant & Equipment |
|
11 |
|
|
|
- |
|
|
|
15 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in
Investing Activities |
|
(4,369 |
) |
|
|
(4,120 |
) |
|
|
(13,946 |
) |
|
|
(9,482 |
) |
Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
Borrowings on Line
of Credit Facility |
|
4,000 |
|
|
|
3,000 |
|
|
|
13,000 |
|
|
|
11,000 |
|
|
Payments on Line
of Credit Facility |
|
- |
|
|
|
(8,000 |
) |
|
|
(3,000 |
) |
|
|
(11,000 |
) |
|
Dividends Paid to
Non-Controlling Interest of Subsidiary |
|
- |
|
|
|
(600 |
) |
|
|
(600 |
) |
|
|
(1,200 |
) |
|
Exercise of Stock
Options and Employee Stock Purchases |
|
18 |
|
|
|
245 |
|
|
|
164 |
|
|
|
884 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided
by (Used In) Financing Activities |
|
4,018 |
|
|
|
(5,355 |
) |
|
|
9,564 |
|
|
|
(316 |
) |
Effect of Foreign
Currency Fluctuations on Cash |
|
82 |
|
|
|
98 |
|
|
|
182 |
|
|
|
9 |
|
Net (Decrease)
Increase in Cash & Cash Equivalents |
|
(1,492 |
) |
|
|
2,388 |
|
|
|
3,312 |
|
|
|
1,994 |
|
Cash & Cash
Equivalents: |
|
|
|
|
|
|
|
|
Beginning of
Period |
|
13,578 |
|
|
|
14,071 |
|
|
|
8,774 |
|
|
|
14,465 |
|
|
End of Period |
$ |
12,086 |
|
|
$ |
16,459 |
|
|
$ |
12,086 |
|
|
$ |
16,459 |
|
Contact: Dennis BoweVice President andChief Financial
Officer414-247-3399www.strattec.com
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