STRATTEC Security Corporation Reports Fiscal 2022 First Quarter Operating Results

Thursday, 21. October 2021 22:00

MILWAUKEE, Wis., Oct. 21, 2021 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended September 26, 2021.

First Quarter
Net sales for the first quarter ended September 26, 2021 were $100.3 million, compared to net sales of $126.2 million for the first quarter ended September 27, 2020. Net income was $101,000 in the current year first quarter, compared to net income of $8.0 million in the prior year first quarter. Diluted earnings per share for the first quarter were $0.03 compared to diluted earnings per share of $2.11 in the prior year first quarter.

The current year quarter net sales and profitability were significantly impacted by the global semiconductor chip shortage that temporarily closed several of our customer’s assembly plants in North America for extended periods of time resulting in significantly reduced sales during the current year quarter.

Additionally, the prior year quarter tax results included a favorable tax adjustment due to changes to the Federal tax law generally referred to as the “Tax Cuts and Jobs Act of 2017”, which reduced our income tax provision by $675,000 and increased our diluted earnings per share by $0.18 in the prior year quarter in comparison to the current year quarter.

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

   Three Months Ended  
    September 26, 2021   September 27, 2020  
           
 Stellantis / Fiat Chrysler Automobiles $16,560  $25,083  
 General Motors Company  25,684   37,756  
 Ford Motor Company  17,695   15,846  
 Tier 1 Customers  11,975   17,495  
 Commercial and Other OEM Customers  17,412   21,435  
 Hyundai / Kia  11,015   8,619  
 TOTAL $100,341  $126,234  


 

Sales to Stellantis / Fiat Chrysler Automobiles (FCA) and General Motors Company in the current year quarter decreased over the same period in the prior year quarter due primarily to lower vehicle production volumes for which we supply components due to the continuing impact of the global semiconductor chip shortage. Sales to the Ford Motor Company in the current quarter increased primarily due to the increased content on the F-150 pick-up truck for which we supply components. Tier 1 Customers and Commercial and Other OEM Customers were down in the current year quarter compared to the prior year quarter due to lower production vehicle volumes relating to the semiconductor chip shortage referenced above. Sales to Tier 1 Customers, Commercial and Other OEM 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 Carnival, formerly the Kia Sedona and Hyundai Starex minivans for which we supply components.

Gross Profit margins declined to 12.5% in the current year quarter compared to 17.8% in the prior year quarter primarily due to lower customer vehicle production volumes, higher costs for both raw materials and purchased components, an unfavorable Mexican Peso to US dollar exchange rate affecting the cost of our Mexican operations and the mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2021.

Engineering, Selling and Administrative expenses as a percent of net sales in the current year quarter were 12.1% compared to 9.0% in the prior year quarter. This increase in overall operating expense spending in the current year quarter was primarily due to higher costs for our salaried work force as the prior year quarter had temporary wage reductions that we implemented to address the impact of the COVID-19 pandemic on our operations.

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):

    September 26,   September 27,  
    2021   2020  
         
 Equity (Loss) Earnings of VAST LLC Joint Venture $(251) $825  
 Net Foreign Currency Transaction Gain (Loss)  180   (123) 
 Other  (50)  (137) 
   $(121) $565  
         

The equity loss of VAST LLC in the current year quarter related primarily to the global semiconductor chip shortage referred to above that impacted profitability in our VAST China operation as compared to the same period in the prior year quarter. 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.

Frank Krejci, President and CEO commented: “This has been a very challenging quarter. For example, industry vehicle build rates in September 2021 were 34% below those in April 2021 due to supply chain issues, forcing many temporary assembly plant closures by our customers during the current quarter.

"There has been some recent improvement in supply chain issues, a trend that will hopefully continue. Longer term, reasons for optimism remain because of continued consumer demand, extremely thin industry inventory levels and recent reductions of assembly plant closures.

"We were still able to remain profitable through operational adjustments and cost containment efforts. This was in the face of efficiency disruptions from unexpected customer shipping curtailments, a 20% decline in sales versus last year, added logistics costs, price increases from suppliers and losses in our China operations. Much credit is due to the efforts of our Associates. With a strong balance sheet and lower production pressures, we kept a long-term perspective and maintained a view of this situation as an opportunity to continue to invest in our future products and operational efficiencies."

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 continuing effects of the coronavirus (COVID-19) pandemic, matters adversely impacting the timing and availability of component parts and raw materials needed 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)
       
  First Quarter Ended
       
  September 26, 2021 September 27, 2020
       
Net Sales $100,341  $126,234 
Cost of Goods Sold  87,792   103,723 
Gross Profit  12,549   22,511 
       
Engineering, Selling &      
Administrative Expenses  12,121   11,314 
Income from Operations  428   11,197 
       
Interest Expense  (48)  (112)
Other (Expense) Income, Net  (121)  565 
Income before Provision for Income      
Taxes and Non-Controlling Interest  259   11,650 
       
Provision for Income Taxes  37   1,577 
       
Net Income  222   10,073 
Net Income Attributable      
to Non-Controlling Interest  (121)  (2,065)
       
Net Income Attributable      
to STRATTEC SECURITY CORP. $101  $8,008 
Earnings Per Share:      
Basic $0.03  $2.13 
Diluted $0.03  $2.11 
Average Basic      
Shares Outstanding  3,830   3,765 
       
Average Diluted      
Shares Outstanding  3,893   3,788 
       
Other      
Capital Expenditures $2,789  $1,514 
Depreciation $5,057  $4,885 



STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
       
       
       
       
   September 26, 2021  June 27, 2021
   (Unaudited)   
ASSETS      
Current Assets:      
Cash and cash equivalents $7,024  $14,465 
Receivables, net  66,614   69,902 
Inventories, net  77,707   70,860 
Other current assets  24,295   19,677 
Total Current Assets  175,640   174,904 
Investment in Joint Ventures  26,617   27,224 
Other Long Term Assets  11,874   12,034 
Property, Plant and Equipment, Net  94,213   96,401 
  $308,344  $310,563 
       
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current Liabilities:      
Accounts Payable $34,533  $36,727 
Other  35,901   40,845 
Total Current Liabilities  70,434   77,572 
Accrued Pension and Post Retirement Obligations  2,923   2,933 
Borrowings Under Credit Facility  17,000   12,000 
Other Long-term Liabilities  4,548   4,625 
Shareholders’ Equity  335,167   334,058 
Accumulated Other Comprehensive Loss  (17,278)  (16,797)
Less: Treasury Stock  (135,608)  (135,615)
Total STRATTEC SECURITY      
  CORPORATION Shareholders’ Equity  182,281   181,646 
Non-Controlling Interest  31,158   31,787 
Total Shareholders’ Equity  213,439   213,433 
  $308,344  $310,563 



STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)
       
  First Quarter Ended
       
   September 26, 2021   September 27, 2020 
       
       
Cash Flows from Operating Activities:      
Net Income $222  $10,073 
Adjustment to Reconcile Net Income to Net      
Cash Provided by Operating Activities:      
Depreciation  5,057   4,885 
Equity Loss (Earnings) in Joint Ventures  251   (825)
Foreign Currency Transaction (Gain) Loss  (139)  399 
Unrealized Gain on Peso Forward Contracts  98   (335)
Stock Based Compensation Expense  396   208 
Change in Operating Assets/Liabilities  (15,659)  (7,443)
Other, net  127   338 
       
Net Cash (Used In) Provided by Operating Activities  (9,647)  7,300 
       
Cash Flows from Investing Activities:      
Additions to Property, Plant and Equipment  (2,789)  (1,514)
Proceeds Received on Sale of Property, Plant      
and Equipment  -   3 
Net Cash Used in Investing Activities  (2,789)  (1,511)
       
Cash Flow from Financing Activities:      
Borrowings on Credit Facility  7,000   - 
Repayment of Borrowings under Credit Facility  (2,000)  (5,000)
Dividends Paid to Non-Controlling Interest of Subsidiaries  (600)  (490)
Exercise of Stock Options and Employee      
Stock Purchases  619   19 
       
Net Cash Provided (Used In) Financing Activities  5,019   (5,471)
       
Foreign Currency Impact on Cash  (24)  (109)
       
Net (Decrease) Increase in Cash & Cash Equivalents  (7,441)  209 
       
Cash and Cash Equivalents:      
Beginning of Period  14,465   11,774 
End of Period $7,024  $11,983 

 

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


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