STRATTEC SECURITY CORPORATION Reports Fiscal 2022 Third Quarter Operating Results

Milwaukee, Wisconsin, UNITED STATES


MILWAUKEE, Wis., April 21, 2022 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal third quarter ended March 27, 2022.

Net sales for the Company’s third quarter ended March 27, 2022 were $115.9 million, compared to net sales of $121.6 million for the third quarter ended March 28, 2021.

Net income for the current year quarterly period was $3.1 million, compared to net income of $4.5 million in the prior year quarter. Diluted earnings per share for the current year quarterly period were $0.80 compared to diluted earnings per share of $1.15 in the prior year quarter.

For the nine months ended March 27, 2022, the Company’s net sales were $329.2 million compared to net sales of $375.2 million in the prior year nine month period.

Net income during the current year nine month period was $6.6 million compared to net income of $19.6 million in the prior year nine month period. Diluted earnings per share were $1.70 for the nine month period ended March 27, 2022 compared to diluted earnings per share of $5.11 during the nine month period ended March 28, 2021.

Net sales and profitability for both our current year quarter and for the year to date period continued to be impacted by supply chain shortages (including semiconductor chip shortages) that resulted in several of our customers shutting down certain plants and/or production lines for periods of time during our fiscal 2022.

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

 Three Months Ended
 March 27, 2022 March 28, 2021
      
Stellantis / Fiat Chrysler Automobiles$23,047 $21,685
General Motors Company 34,738  34,544
Ford Motor Company 19,162  21,721
Tier 1 Customers 15,279   17,289
Commercial and Other OEM Customers 16,518  17,241
Hyundai / Kia 7,199  9,164
TOTAL$115,943  $121,644


Sales to Stellantis / Fiat Chrysler Automobiles in the current year quarter increased in comparison to the prior year quarter due to higher production volumes on Chrysler Pacifica power sliding doors and for several lock set product platforms. Sales to General Motors Company in the current year quarter were flat compared to the prior year quarter. Sales to Ford Motor Company decreased in the current year quarter compared to the prior year quarter due primarily to lower production volumes on the F-150 pickup trucks. Sales to Tier 1 Customers decreased in the current year quarter compared to the prior year quarter primarily due to lower volumes on our driver control steering column lock products. Sales to Commercial and Other OEM Customers during the current year quarter decreased in comparison to the prior year quarter mainly due to decreases in sales related to door handle products sold to Volkswagen. These Commercial and Other OEM Customers, along with the Tier 1 Customers, primarily represent purchasers of vehicle access control products, such as latches, key fobs, driver controls, steering column locks and door handles that we have developed in recent years to complement our historic core business of locks and keys. The decreased sales to Hyundai / Kia in the current year quarter were principally due to lower levels of production on the Kia Carnival, formerly the Kia Sedona and Hyundai Starex minivans, for which we supply primarily power sliding door components.

Gross profit margins were 12.6 percent in the current year quarter compared to 15.3 percent in the prior year quarter. The decrease in gross profit margin in the current year quarter compared to the prior year quarter was primarily attributed to higher costs for raw material and purchased components and the mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2022. Partially offsetting the decreased gross profit margins between periods were improved manufacturing efficiencies both at our Milwaukee and Mexico production facilities, despite the ongoing supply chain disruptions described above, and lower expense provisions for accrual of bonuses.

Engineering, Selling and Administrative expenses represented 9.7 percent in the current year quarter as a percent of net sales compared to 9.8 percent in the prior year quarter. The decrease in overall operating expenses in the current year quarter was primarily due to lower expense provisions for accrual of bonuses between quarters.

Included in Other Income, Net in the current year quarter compared to the prior year quarter were the following items (in thousands of dollars):

 March 27, 2022 March 28, 2021
      
Equity Earnings (Loss) of VAST LLC Joint Venture$577 $(56)
Net Foreign Currency Realized and     
Unrealized Transaction Gain 470  429
Other (185)  26
 $862 $399


The increase in Other Income, Net in the current year quarter was primarily related to improved profitability in our VAST LLC China operation which had supply chain issues and extended OEM customer plant shutdowns associated with the coronavirus (COVID-19) pandemic in the prior year quarter. In addition, during the current year quarter VAST China’s plant in Taicang experienced a fire in its painting facility. As a result, certain door handle and painting operations were subsequently transferred to VAST China’s new Jingzhou facility that impacted the current quarter profitability.

The favorable tax provision in the current year quarter compared to the prior year quarter relates primarily to favorable tax adjustments from foreign tax credits.

Frank Krejci, President & CEO commented: “I am pleased with the efforts of our team over the last few quarters. We have effectively dealt with supply chain challenges and cut expenses to align with lower production volumes forced upon our customers. While facing inflationary material costs, we have implemented efficiency improvements to somewhat offset the spikes in costs. Those efficiency improvements will provide long term benefits for us.

Unfortunately, the challenges are not yet behind us. Our operations in China and their customers are now facing COVID lockdowns. Those lockdowns will impact supply chain challenges world-wide.

Despite the current challenges, we see good things on the horizon. Customer inventories are very low. There is excellent acceptance by consumers of our award-winning products like the power tailgates on pick-up trucks. There is significant opportunity with our product variations for the rapidly expanding electric vehicle market. We continue to win new business and use these production slowdowns as an opportunity to continue to improve our operations.”

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 or customer cost reimbursement actions, adverse business and operational issues resulting from the global supply chain and semiconductor chip shortages and the coronavirus pandemic, matters adversely impacting the timing and availability of material component parts and raw materials 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)

 Third Quarter Ended Nine Months Ended
 March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021
Net Sales$115,943 $121,644 $329,192 $375,238
            
Cost of Goods Sold 101,305  102,990  287,072  311,832
            
Gross Profit 14,638  18,654  42,120  63,406
            
Engineering, Selling &
           
Administrative Expenses 11,261  11,927  34,683
  33,543
            
Income from Operations 3,377  6,727  7,437  29,863
            
Interest Expense (54)  (63)  (159)  (259)
            
Other Income, Net 862  399  1,261  673
            
Income before Provision           
for Income Taxes           
and Non-Controlling Interest 4,185  7,063  8,539  30,277
            
Provision for Income Taxes 50  1,153  342  4,721
            
Net Income 4,135  5,910  8,197  25,556
            
Net Income Attributable to           
Non-Controlling Interest (989)  (1,425)  (1,556)  (5,950)
            
Net Income Attributable to           
STRATTEC SECURITY           
CORPORATION$3,146 $4,485 $6,641 $19,606
            
Earnings (Loss) Per Share:           
Basic$0.81 $1.18 $1.72 $5.18
Diluted$0.80 $1.15 $1.70 $5.11
Average Basic           
Shares Outstanding 3,871  3,797  3,856  3,783
            
Average Diluted           
Shares Outstanding 3,916  3,886  3,906  3,839
            
Other           
Capital Expenditures$4,045 $
1,808 $
9,407 $
6,401
Depreciation$
4,135 $
4,933 $
14,724 $
14,730


STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data
(In Thousands)

 March 27, 2022 June 27, 2021
 (Unaudited)   
ASSETS     
Current Assets:     
Cash and cash equivalents$16,459 $14,465
Receivables, net 76,526  69,902
Inventories, net 73,310  70,860
Other current assets 23,422  19,677
Total Current Assets 189,717  174,904
Investment in Joint Ventures 28,405  27,224
Other Long-Term Assets 11,619  12,034
Property, Plant and Equipment, Net 91,423  96,401
 $321,164 $310,563


LIABILITIES AND SHAREHOLDERS’ EQUITY     
Current Liabilities:     
Accounts Payable$43,513 $36,727
Other 36,479  40,845
Total Current Liabilities 79,992  77,572
Accrued Pension and Post Retirement Obligations 2,937  2,933
Borrowings Under Credit Facility 12,000  12,000
Other Long-Term Liabilities 4,381  4,625
Shareholders’ Equity 342,432  334,058
Accumulated Other Comprehensive Loss (17,000)  (16,797)
Less: Treasury Stock (135,591)  (135,615)
Total STRATTEC SECURITY     
CORPORATION Shareholders’ Equity  189,841  181,646
Non-Controlling Interest 32,013   31,787
Total Shareholders’ Equity 221,854   213,433
 $321,164 $310,563



STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)

       

  Third Quarter Ended  Nine Months Ended
 March 27, 2022 March 28, 2021  March 27, 2022 March 28, 2021
Cash Flows from Operating Activities:           
Net Income$4,135 $5,910 $8,197 $25,556
Adjustment to Reconcile Net Income to           
Cash Provided by Operating Activities:           
Equity (Earnings) Loss in Joint Ventures (577)  56  (941)  (1,844)
Depreciation 4,756  4,933  14,724  14,730
Foreign Currency Transaction Loss (Gain) 319  (386)  76  1,926
Unrealized Gain on Peso           
Forward Contracts (724)  (32)  (500)  (512)
Stock Based Compensation Expense 239  193  873  775
Loss (Gain) on disposition of property,           
plant & equipment 60  (5)  153  1,421
Change in Operating Assets/Liabilities 3,436  (2,450)  (11,160)  (17,012)
Other, net 121  121  361  356
            
Net Cash Provided by Operating Activities 11,765  8,340  11,783  25,396
            
Cash Flows from Investing Activities:           
Investment in Joint Ventures (75)  -  (75)  (100)
Additions to Property, Plant and Equipment (4,045)  (1,808)  (9,407)  (6,401)
Proceeds from Sale of Property, Plant           
and Equipment -  5  -  8
Net Cash Used in Investing Activities (4,120)  (1,803)   (9,482)   (6,493)
            
Cash Flows from Financing Activities:           
Borrowings Under Credit Facility 3,000  -  11,000  -
Repayment of Borrowings Under Credit Facility (8,000)  (6,000)  (11,000)  (19,000)
Dividends Paid to Non-Controlling           
Interests of Subsidiaries (600)  -  (1,200)  (490)
Dividends Paid -  -  -  -
Exercise of Stock Options and           
Employee Stock Purchases 245  545  884  585
            
Net Cash Used In Financing Activities (5,355)  (5,455)  (316)  (18,905)
            
Effect of Foreign Currency Fluctuations on Cash 98  (179)  9  (437)
            
Net Increase (Decrease) in Cash & Cash Equivalents 2,388  903  1,994  (439)
            
Cash and Cash Equivalents:           
Beginning of Period 14,071  10,432  14,465  11,774
End of Period$16,459 $11,335  $ 16,459 $11,335




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