Strattec Security Corporation Reports Fiscal 2023 Second Quarter Operating Results

MILWAUKEE, Feb. 02, 2023 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal second quarter ended January 1, 2023.

Net sales for the second quarter ended January 1, 2023 were $113.2 million, compared to net sales of $112.9 million for the second quarter ended December 26, 2021. Net loss was $1.8 million in the current year second quarter, compared to net income of $3.4 million in the prior year second quarter. Diluted loss per share for the current year second quarter was $0.47 compared to diluted earnings per share of $0.87 in the prior year second quarter.

For the six months ended January 1, 2023, the Company’s net sales were $233.5 million compared to net sales of $213.2 million in the prior year six-month period. Net loss during the current year six-month period was $1.7 million compared to a net income of $3.5 million during the prior year six-month period. Diluted loss per share was $0.44 during the six-month period ended January 1, 2023 compared to diluted earnings per share of $0.89 during the six-month period ended December 26, 2021. Profitability for both the current year quarter and for the six-month period ended January 1, 2023 was negatively impacted by higher inflationary costs of materials, labor and shipping rates compared with that for the respective prior year periods.

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

		Three Months Ended
		January 1, 2023			December 26, 2021
	General Motors Company	$	35.5		$	31.1
	Ford Motor Company		22.2			21.1
	Stellantis		17.0			23.1
	Tier 1 Customers		16.1			15.6
	Commercial and Other OEM Customers		13.1			16.1
	Hyundai / Kia		9.3			5.9
	TOTAL	$	113.2		$	112.9

 

Overall net sales were stable for the current quarter relative to the prior year quarter. Sales to General Motors Company, Ford Motor Company and Hyundai/Kia were positively impacted in the current year quarter due to higher vehicle production volumes resulting from improved global semiconductor chip availability relative to the prior year quarter. 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. Sales to Hyundai / Kia increased quarter-over-quarter due to higher levels of production of the Kia Carnival minivan in the current year quarter as compared to the prior year quarter.

The decrease in sales to Stellantis resulted primarily from its plant shutdowns in the 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 continued semiconductor chip availability issues, primarily for aftermarket keys. The increases in availability of semiconductor chips were allocated toward the production of components for production vehicles ahead of aftermarket products and therefore, sales to aftermarket customers continued to be negatively impacted in the current year quarter due to these issues.

Gross Profit margins declined to 6.5% in the current year quarter compared to 13.2% in the prior year quarter primarily due to higher costs of raw materials, purchased materials and shipping as well as increased costs in our Mexican operations related to the mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2022.

Engineering, Selling and Administrative expenses increased $780,000 in the current year quarter compared with prior year quarter primarily due to increased salary and recruiting costs in the current year quarter and lower costs in the prior year quarter due to a customer reimbursement of engineering and design costs incurred on a new program

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

		January 1,				December 26,
		2023				2021
	Equity Earnings of VAST LLC Joint Venture	$	588			$	615
	Net Foreign Currency Transaction (Loss)		(195	)		(26		)
	Other		247			(74		)
		$	640			$	515

The equity earnings of VAST LLC in the current year quarter compared to the prior year quarter were slightly lower primarily due to higher engineering spending in China associated with future programs.

Frank Krejci President and CEO commented: “This proved to be a difficult quarter with continued inflationary pressures on both purchased parts from suppliers and the sourcing of raw materials like zinc, steel and resins. Zinc and resin prices remain stubbornly high. The recent relief in steel prices will provide a benefit once we have worked through prior purchase commitments.
Raising our product prices to offset the cost increases has been challenging due to long term contracts with our customers. Nevertheless, 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 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 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 CORPORATION
Condensed Results of Operations
(In Thousands except per share amounts)
(Unaudited)

	Second Quarter Ended								Six Months Ended
	January 1, 2023				December 26, 2021				January 1, 2023				December 26, 2021
Net Sales	$	113,184			$	112,908			$	233,544			$	213,249
Cost of Goods Sold		105,797				97,975				213,661				185,767
Gross Profit		7,387				14,933				19,883				27,482
Engineering, Selling & Administrative Expenses		12,081				11,301				24,781				23,422
(Loss) Income from Operations		(4,694	)			3,632				(4,898	)			4,060
Interest Expense		(196	)			(57	)			(325	)			(105	)
Other Income (Expense), net		640				515				874				390
(Loss) Income Before Provision for Income Taxes and Non-Controlling Interest		(4,250	)			4,090				(4,349	)			4,345
(Benefit) Provision for Income Taxes		(1,735	)			253				(1,771	)			289
Net (Loss) Income		(2,515	)			3,837				(2,578	)			4,056
Net (Loss) Income Attributable to Non-Controlling Interest		(676	)			446				(864	)			567
Net (Loss) Income Attributable to STRATTEC SECURITY CORPORATION	$	(1,839	)		$	3,391			$	(1,714	)		$	3,489
(Loss) Earnings Per Share:
Basic	$	(0.47	)		$	0.88			$	(0.44	)		$	0.91
Diluted	$	(0.47	)		$	0.87			$	(0.44	)		$	0.89
Average Basic Shares Outstanding		3,927				3,866				3,913				3,848
Average Diluted Shares Outstanding		3,927				3,908				3,913				3,901
Other
Capital Expenditures	$	4,759			$	2,573			$	9,477			$	5,362
Depreciation	$	4,301			$	4,911			$	8,798			$	9,968

STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
(Unaudited)

				January 1, 2023				July 3, 2022
ASSETS
	Current Assets:
		Cash and Cash Equivalents		$	13,578			$	8,774
		Receivables, net			73,205				75,827
		Inventories, net			67,851				80,482
		Other Current Assets			34,646				23,149
			Total Current Assets		189,280				188,232
	Investment in Joint Ventures				26,301				26,654
	Other Long-term Assets				12,413				12,519
	Property, Plant and Equipment, net				92,777				91,729
				$	320,771			$	319,134
LIABILITIES AND SHAREHOLDERS' EQUITY
	Current Liabilities:
		Accounts Payable		$	37,292			$	43,950
		Other			42,244				37,579
			Total Current Liabilities		79,536				81,529
	Accrued Pension and Postretirement Obligations				2,671				2,588
	Borrowings Under Credit Facility				17,000				11,000
	Other Long-term Liabilities				3,888				4,070
	Shareholders' Equity				341,850				342,568
	Accumulated Other Comprehensive Loss				(19,226	)			(18,588	)
	Less: Treasury Stock				(135,556	)			(135,580	)
		Total STRATTEC SECURITY
			CORPORATION Shareholders' Equity		187,068				188,400
		Non-Controlling Interest			30,608				31,547
	Total Shareholders' Equity				217,676				219,947
				$	320,771			$	319,134

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

			Second Quarter Ended								Six Months Ended
			January 1, 2023				December 26, 2021				January 1, 2023				December 26, 2021
Cash Flows from Operating Activities:
Net (Loss) Income			$	(2,515	)		$	3,837			$	(2,578	)		$	4,056
Adjustments to Reconcile Net (Loss) Income to Cash Provided by Operating Activities:
		Depreciation		4,301				4,911				8,798				9,968
		Equity Earnings in Joint Ventures		(588	)			(615	)			(1,115	)			(364	)
		Foreign Currency Transaction (Gain) Loss		514				(104	)			585				(243	)
		Unrealized Loss (Gain) on Peso Forward Contracts		(12	)			126				23				224
		Stock Based Compensation Expense		263				238				874				634
		Change in Operating Assets/Liabilities		1,943				1,066				1,898				(14,590	)
	Other, net			128				206				250				333
Net Cash Provided by Operating Activities				4,034				9,665				8,735				18
Cash Flows from Investing Activities:
	Investment in Joint Ventures			(104	)			-				(104	)			-
	Additions to Property, Plant & Equipment			(4,759	)			(2,573	)			(9,477	)			(5,362	)
	Proceeds on Sales of Property, Plant & Equipment			4				-				4				-
Net Cash Used in Investing Activities				(4,859	)			(2,573	)			(9,577	)			(5,362	)
Cash Flows from Financing Activities:
	Borrowings on Line of Credit Facility			4,000				1,000				9,000				8,000
	Payments on Line of Credit Facility			-				(1,000	)			(3,000	)			(3,000	)
	Dividends Paid to Non-Controlling Interest of Subsidiary			-				-				(600	)			(600	)
	Exercise of Stock Options and Employee Stock Purchases			20				20				146				639
Net Cash Provided by Financing Activities				4,020				20				5,546				5,039
Effect of Foreign Currency Fluctuations on Cash				53				(65	)			100				(89	)
Net Increase (Decrease) in Cash & Cash Equivalents				3,248				7,047				4,804				(394	)
Cash & Cash Equivalents:
	Beginning of Period			10,330				7,024				8,774				14,465
	End of Period		$	13,578			$	14,071			$	13,578			$	14,071

Contact: Dennis Bowe
Vice President and
Chief Financial Officer
414-247-3399
www.strattec.com