STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”)
(NASDAQ:STRT) today reported operating results for the fiscal
fourth quarter ended July 2, 2023. Despite higher net sales, the
comparative current year fourth quarter operating profit results
were lower than the results in the same period for the prior year
due to higher manufacturing input costs and a stronger Mexican Peso
against the U.S. dollar, which was partially offset by lower
engineering costs associated with a customer reimbursement of
engineering development costs.
Fourth Quarter OverviewNet
sales for the fourth quarter ended July 2, 2023 were $132.2
million, compared to net sales of $123.1 million for the fourth
quarter ended July 3, 2022. Net loss was $2.7 million in the
current year fourth quarter, compared to net income of $384,000 in
the prior year fourth quarter. Diluted loss per share for the
current year fourth quarter was $0.69 compared to diluted earnings
per share of $0.10 in the prior year fourth quarter. The current
year fourth quarter included a $4.7 million net loss associated
with an Equity Restructuring Agreement (described below) equating
to a loss per share of $1.19.
On June 30th, the Company announced that it had
entered into and subsequently completed the transactions
contemplated by an Equity Restructuring Agreement (Restructuring
Agreement) between the Company and WITTE Automotive GmbH (WITTE)
related to both the Company's Vehicle Access Systems Technologies
LLC (VAST LLC) joint venture and its STRATTEC Power Access LLC
(SPA) joint venture. Under the terms of the Restructuring
Agreement, the Company agreed to sell to WITTE its one-third
interest in VAST LLC for a net purchase price of $18,500,000 plus
the Company received ownership of: (1) WITTE's 20% minority
interest in STRATTEC Power Access LLC (SPA); and (2) the net assets
of VAST LLC's Korea branch office, which now operates as a newly
registered Korea branch of the Company. Of the aforementioned $4.7
million net loss for the Equity Restructuring Agreement, $4.4
million was related to tax effects, primarily a $2.2 million China
non-resident capital gain tax and a valuation allowance of $1.4
million related to our assessment of the future realization of U.S.
capital loss carryforwards.
Full Year Earnings OverviewFor
the year ended July 2, 2023, the Company’s net sales were $492.9
million compared to net sales of $452.3 million in the prior year.
Net loss during the current year was $6.7 million compared to net
income of $7.0 million in the prior year. Diluted loss per share
was $1.70 for the year ended July 2, 2023 compared to diluted
earnings per share of $1.79 during the prior year ended July 3,
2022. As referenced in the fourth quarter overview, the current
year included a $4.7 million net loss associated with the
aforementioned Equity Restructuring Agreement equating to a loss
per share of $1.20.
Discussion of Quarterly
ResultsNet sales to each of our customers in the current
year quarter and prior year quarter were as follows (in
millions):
|
Three Months Ended |
|
July 2, 2023 |
|
July 3, 2022 |
|
|
|
|
General Motors Company |
$ |
39.1 |
|
$ |
38.6 |
Ford Motor Company |
26.6 |
|
21.8 |
Stellantis |
22.3 |
|
20.6 |
Tier 1 Customers |
20.1 |
|
16.5 |
Commercial and Other OEM Customers |
14.5 |
|
14.9 |
Hyundai / Kia |
9.6 |
|
10.7 |
TOTAL |
$ |
132.2 |
|
$ |
123.1 |
|
|
|
|
It is important to note that the prior year
quarter sales included an additional 53rd week of sales. The
quarter-over-quarter sales increase of $9.1 million would have been
$16.7 million had the prior year not included that extra week. The
increase in net sales between quarters 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, Stellantis and Tier
1 Customers. Specifically, sales growth to General Motors Company
in the current year quarter was attributed to higher production
volumes of pickup trucks and SUVs for which we supply components.
The increased sales between quarters for Ford Motor Company was due
to higher production volumes of their pickup trucks, while
Stellantis’s growth was attributed to higher production volumes of
their minivan. The increased sales for Tier One customers includes
other components sold for both the GM Pickup Trucks and SUVs and
the Stellantis minivan. The decrease in sales for Hyundai/Kia was
due to lower production volumes in the quarter for the Kia
minivan.
Despite improved fixed cost absorption
associated with 7.4% higher net sales in the current year quarter
compared to the prior year quarter, gross profit margins declined
to 9.3% from 11.3% 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.
Engineering, Selling, and Administrative
expenses decreased $1.5 million in the current year quarter
compared with the prior year quarter due to a customer
reimbursement of engineering development costs, which costs were
mostly incurred during the nine-month period ended April 2,
2023.
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):
|
July 2, |
|
July 3, |
|
2023 |
|
2022 |
|
|
|
|
|
|
Equity Loss of VAST LLC Joint Venture |
$ |
(375 |
) |
|
$ |
(764 |
) |
Net Foreign Currency Transaction (Loss) Gain |
(725 |
) |
|
358 |
|
Other |
11 |
|
|
(260 |
) |
|
$ |
(1,089 |
) |
|
$ |
(666 |
) |
|
The equity loss of VAST LLC in the current year
quarter compared to the prior year quarter was lower due to
improved profitability in VAST China partially offset by a loss of
$466,000 on the disposition of VAST LLC’s Brazilian subsidiary.
Frank Krejci, STRATTEC President and CEO
commented: “While the fourth quarter generated positive operational
results, 2023 has been a challenging fiscal year for us
financially. However, the restructuring of our partnership within
VAST provides us with a stronger balance sheet, 100% ownership in
our award-winning power products business, and greater focus on our
strategic initiatives in the years ahead while still being able to
collaborate with our former VAST partners on mutually beneficial
opportunities.
In the quarter we grew our sales compared to the
prior year quarter and saw improvement in the cost of some key raw
materials. However, those positives were offset by continued
inflationary pressure from our component suppliers, significantly
higher government mandated wages in our Mexican operations and a
weakening U.S. dollar against the Mexican peso. For the year the
Mexican government mandated wage increases and a weaker U.S.
Dollar/Mexican Peso relationship resulted in more than a $10
million deterioration in our margins.
Our Team has demonstrated great resiliency
overcoming adversity during these difficult times. As we enter a
new fiscal year, we will remain highly motivated to continue
improving the overall profitability of the business. Final
resolution of the protracted inflation related pricing negotiations
with our customers is particularly important and impactful. We will
continue implementing new ideas for additional cost efficiencies,
adding vertical integration opportunities, and launching new
products and programs with improved economics and margins.”
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 strategic and supply relationship with WITTE
Automotive of Velbert, Germany and ADAC Automotive of Grand Rapids,
Michigan. Under this relationship, STRATTEC, WITTE and ADAC market
and manufacture 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)
|
Fourth Quarter Ended |
|
Year Ended |
|
July 2, 2023 |
|
July 3, 2022 |
|
July 2, 2023 |
|
July 3, 2022 |
|
|
|
|
|
|
|
|
Net Sales |
$ |
132,219 |
|
|
$ |
123,073 |
|
|
$ |
492,946 |
|
|
$ |
452,265 |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
|
119,951 |
|
|
|
109,177 |
|
|
|
450,794 |
|
|
|
396,249 |
|
|
|
|
|
|
|
|
|
Gross Profit |
|
12,268 |
|
|
|
13,896 |
|
|
|
42,152 |
|
|
|
56,016 |
|
|
|
|
|
|
|
|
|
Engineering, Selling &
Administrative Expenses |
|
10,975 |
|
|
|
12,436 |
|
|
|
48,241 |
|
|
|
47,119 |
|
|
|
|
|
|
|
|
|
Income (Loss) from
Operations |
|
1,293 |
|
|
|
1,460 |
|
|
|
(6,089 |
) |
|
|
8,897 |
|
|
|
|
|
|
|
|
|
Interest Expense |
|
(369 |
) |
|
|
(62 |
) |
|
|
(960 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
Other (Expense) Income,
net |
|
(1,089 |
) |
|
|
(666 |
) |
|
|
(619 |
) |
|
|
583 |
|
|
|
|
|
|
|
|
|
(Loss) Income Before Provision
for Income Taxes and Non-Controlling Interest |
|
(165 |
) |
|
|
732 |
|
|
|
(7,668 |
) |
|
|
9,259 |
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes |
|
2,919 |
|
|
|
76 |
|
|
|
1,281 |
|
|
|
415 |
|
|
|
|
|
|
|
|
|
Net (Loss) Income |
|
(3,084 |
) |
|
|
656 |
|
|
|
(8,949 |
) |
|
|
8,844 |
|
|
|
|
|
|
|
|
|
Net (Loss) Income Attributable
to Non-Controlling Interest |
|
(384 |
) |
|
|
272 |
|
|
|
(2,279 |
) |
|
|
1,828 |
|
|
|
|
|
|
|
|
|
Net (Loss) Income Attributable
to STRATTEC SECURITY CORPORATION |
$ |
(2,700 |
) |
|
$ |
384 |
|
|
$ |
(6,670 |
) |
|
$ |
7,016 |
|
|
|
|
|
|
|
|
|
(Loss) Earnings Per
Share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.69 |
) |
|
$ |
0.10 |
|
|
$ |
(1.70 |
) |
|
$ |
1.82 |
|
Diluted |
$ |
(0.69 |
) |
|
$ |
0.10 |
|
|
$ |
(1.70 |
) |
|
$ |
1.79 |
|
|
|
|
|
|
|
|
|
Average Basic Shares
Outstanding |
|
3,928 |
|
|
|
3,876 |
|
|
|
3,921 |
|
|
|
3,861 |
|
|
|
|
|
|
|
|
|
Average Diluted Shares
Outstanding |
|
3,928 |
|
|
|
3,920 |
|
|
|
3,921 |
|
|
|
3,910 |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
Capital Expenditures |
$ |
3,646 |
|
|
$ |
4,781 |
|
|
$ |
17,370 |
|
|
$ |
14,188 |
|
Depreciation |
$ |
4,340 |
|
|
$ |
4,655 |
|
|
$ |
17,485 |
|
|
$ |
19,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STRATTEC SECURITY
CORPORATIONCondensed Balance Sheet
Data(In Thousands)(Unaudited)
|
July 2, 2023 |
|
July 3, 2022 |
|
|
|
|
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and Cash Equivalents |
$ |
20,571 |
|
|
$ |
8,774 |
|
Receivables, net |
|
89,811 |
|
|
|
75,827 |
|
Inventories, net |
|
77,597 |
|
|
|
80,482 |
|
Customer Tooling in Progress, net |
|
20,800 |
|
|
|
10,828 |
|
Other Current Assets |
|
17,003 |
|
|
|
12,321 |
|
Total Current Assets |
|
225,782 |
|
|
|
188,232 |
|
Investment in Joint Ventures |
|
- |
|
|
|
26,654 |
|
Other Long-term Assets |
|
20,702 |
|
|
|
12,519 |
|
Property, Plant and Equipment, net |
|
94,446 |
|
|
|
91,729 |
|
|
$ |
340,930 |
|
|
$ |
319,134 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
Current Liabilities: |
|
|
|
Accounts Payable |
$ |
57,927 |
|
|
$ |
43,950 |
|
Other |
|
51,059 |
|
|
|
37,579 |
|
Total Current Liabilities |
|
108,986 |
|
|
|
81,529 |
|
Accrued Pension and Postretirement Obligations |
|
2,363 |
|
|
|
2,588 |
|
Borrowings Under Credit Facility |
|
13,000 |
|
|
|
11,000 |
|
Other Long-term Liabilities |
|
5,557 |
|
|
|
4,070 |
|
Shareholders' Equity |
|
334,683 |
|
|
|
342,568 |
|
Accumulated Other Comprehensive Loss |
|
(14,194 |
) |
|
|
(18,588 |
) |
Less: Treasury Stock |
|
(135,526 |
) |
|
|
(135,580 |
) |
Total STRATTEC SECURITY |
|
|
|
CORPORATION Shareholders' Equity |
|
184,963 |
|
|
|
188,400 |
|
Non-Controlling Interest |
|
26,061 |
|
|
|
31,547 |
|
Total Shareholders' Equity |
|
211,024 |
|
|
|
219,947 |
|
|
$ |
340,930 |
|
|
$ |
319,134 |
|
|
STRATTEC SECURITY
CORPORATIONCondensed Cash Flow Statement
Data(In Thousands)(Unaudited)
|
Fourth Quarter Ended |
|
Year Ended |
|
July 2, 2023 |
|
July 3, 2022 |
|
July 2, 2023 |
|
July 3, 2022 |
Cash Flows from Operating
Activities: |
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income |
$ |
(3,084 |
) |
|
$ |
656 |
|
|
$ |
(8,949 |
) |
|
$ |
8,844 |
|
Adjustments to Reconcile Net
(Loss) Income to |
|
|
|
|
|
|
|
|
|
|
|
Cash Provided by (Used in) Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
4,340 |
|
|
4,655 |
|
|
17,485 |
|
|
19,379 |
|
Equity Loss (Earnings) in Joint Ventures |
375 |
|
|
764 |
|
|
(1,559 |
) |
|
(177 |
) |
Foreign Currency Transaction Loss (Gain) |
821 |
|
|
(313 |
) |
|
2,935 |
|
|
(237 |
) |
Unrealized Loss (Gain) on Peso Contracts |
534 |
|
|
116 |
|
|
627 |
|
|
(384 |
) |
Stock Based Compensation Expense |
327 |
|
|
267 |
|
|
1,466 |
|
|
1,140 |
|
Loss on Settlement of Pension Obligation |
- |
|
|
- |
|
|
217 |
|
|
- |
|
Deferred Income Taxes |
(4,937 |
) |
|
(1,986 |
) |
|
(4,937 |
) |
|
(1,986 |
) |
Change in Operating Assets/Liabilities |
4,437 |
|
|
(5,669 |
) |
|
2,670 |
|
|
(16,820 |
) |
Other, net |
(230 |
) |
|
163 |
|
|
140 |
|
|
677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in)
Operating Activities |
2,583 |
|
|
(1,347 |
) |
|
10,095 |
|
|
10,436 |
|
Cash Flows from Investing
Activities: |
|
|
|
|
|
|
|
|
|
|
|
Investment in Joint Ventures |
(41 |
) |
|
(75 |
) |
|
(278 |
) |
|
(150 |
) |
Proceeds from Sale of VAST LLC |
26,170 |
|
|
- |
|
|
26,170 |
|
|
- |
|
Purchase of VAST Korea |
354 |
|
|
- |
|
|
354 |
|
|
- |
|
Additions to Property, Plant & Equipment |
(3,646 |
) |
|
(4,781 |
) |
|
(17,370 |
) |
|
(14,188 |
) |
Proceeds on Sales of Property, Plant & Equipment |
10 |
|
|
5 |
|
|
25 |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in)
Investing Activities |
22,847 |
|
|
(4,851 |
) |
|
8,901 |
|
|
(14,333 |
) |
Cash Flows from Financing
Activities: |
|
|
|
|
|
|
|
|
|
|
|
Borrowings on Line of Credit Facility |
4,000 |
|
|
2,000 |
|
|
17,000 |
|
|
13,000 |
|
Payments on Line of Credit Facility |
(12,000 |
) |
|
(3,000 |
) |
|
(15,000 |
) |
|
(14,000 |
) |
Purchase of Non-Controlling Interest |
(9,019 |
) |
|
- |
|
|
(9,019 |
) |
|
- |
|
Dividends Paid to Non-controlling Interest |
- |
|
|
(600 |
) |
|
(600 |
) |
|
(1,800 |
) |
Option Exercises & Employee Stock Purchases |
19 |
|
|
24 |
|
|
183 |
|
|
908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Financing
Activities |
(17,000 |
) |
|
(1,576 |
) |
|
(7,436 |
) |
|
(1,892 |
) |
Effect of Foreign Currency
Fluctuations on Cash |
55 |
|
|
89 |
|
|
237 |
|
|
98 |
|
Net Increase (Decrease) in
Cash & Cash Equivalents |
8,485 |
|
|
(7,685 |
) |
|
11,797 |
|
|
(5,691 |
) |
Cash & Cash
Equivalents: |
|
|
|
|
|
|
|
|
|
|
|
Beginning of Period |
12,086 |
|
|
16,459 |
|
|
8,774 |
|
|
14,465 |
|
End of Period |
$ |
20,571 |
|
|
$ |
8,774 |
|
|
$ |
20,571 |
|
|
$ |
8,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact: Dennis BoweVice President andChief
Financial Officer414-247-3399www.strattec.com
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