STRATTEC Security Corporation Reports Fiscal 2022 First Quarter Operating Results

·8 min read

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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