STRATTEC SECURITY CORPORATION Reports Fiscal 2021 Fourth Quarter and Record Full Year Operating Results

8/5/2021, 10:00 PM (Source: GlobeNewswire)

MILWAUKEE, Aug. 05, 2021 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal fourth quarter and full year ended June 27, 2021. The comparative prior year fourth quarter operating results were significantly impacted by the COVID-19 virus which is further described in this press release.

Fourth Quarter Overview
Net sales for the Company’s fourth quarter ended June 27, 2021 were $110.1 million, compared to net sales of $42.1 million for the fourth quarter ended June 28, 2020. Net income for the current year quarterly period was $2.9 million, compared to a net loss of $10.5 million in the prior year fourth quarter. Diluted earnings per share for the current year quarterly period were $0.75 compared to diluted loss per share of $2.80 in the prior year quarter.

Both the current and prior fiscal year fourth quarter had certain items that negatively impacted our operating results. During the current year quarter several of our customer assembly plants were temporarily shut down due to the global semiconductor chip shortage reducing net sales and profitability in the fiscal 2021 fourth quarter. In the prior year fourth quarter, the significantly reduced net sales and net loss was primarily attributed to our customers shutting down their assembly plant operations during April and May due to the impact of the COVID-19 pandemic. Those shutdowns reduced our net sales in the prior year fourth quarter by approximately $72 million. In addition, during our prior year fourth quarter, STRATTEC incurred an impairment charge resulting from its one-third ownership interest in Vehicle Access Systems Technology LLC (“VAST LLC”) related to VAST LLC’s joint venture investment in India, Minda VAST Access Systems. STRATTEC’s one third share of the $2 million non-cash impairment charge related to this joint venture in India amounted to $667,000 on a pre-tax basis or $510,000 on an after tax basis and reduced our diluted earnings per share in the prior year fourth quarter by $0.14.

Full Year Earnings Overview
For the year ended June 27, 2021, the Company’s net sales were $485.3 million compared to net sales of $385.3 million in the prior year period. Net income during the current year was $22.5 million compared to a net loss of $7.6 million in the prior year period. Diluted earnings per share were $5.85 for the year ended June 27, 2021 compared to diluted loss per share of $2.04 during the prior year ended June 28, 2020. Fiscal year 2021 set a Company record for both net income and diluted earnings per share.

Discussion of Quarterly Results
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 
   June 27, 2021 June 28, 2020 
 General Motors Company $35,225 $11,588 
 Fiat Chrysler Automobiles 15,710 6,324 
 Ford Motor Company 13,314 6,139 
 Tier 1 Customers 13,332 5,982 
 Commercial and Other OEM Customers 18,689 8,910 
 Hyundai / Kia 13,787 3,174 
 TOTAL $110,057 $42,117 

As mentioned previously, the current year quarter sales were adversely impacted by the global semiconductor chip shortage and, in the prior year quarter, our global sales were significantly and negatively impacted by the decision of our OEM customers to fully close their assembly plants in April and May 2020 due to the Coronavirus (COVID-19) pandemic. The impact of these production schedule reductions reduced our net sales in the prior year quarter by approximately $72.0 million dollars. Sales to all customer groups in the current year quarter were significantly higher in comparison to the prior year quarter due to the foregoing impact of the COVID-19 virus disruption. Sales to Hyundai / Kia were also exceptionally higher in the current year quarter due to the introduction of the new Kia Sedona and Hyundai Starex minivans for which we supply primarily power sliding door components.

Gross profit margins were 13.9 percent in the current year quarter compared to a negative 18.5 percent in the prior year quarter. The increase in gross profit margin in the current year quarter compared to the prior year quarter was primarily attributed to being more fully operational in the current year quarter as compared to temporarily shutting down our operations at both our Milwaukee and Mexico production facilities due to the COVID-19 virus in the prior year quarter. The current year quarter gross profit margins were also negatively impacted by an unfavorable U.S. Dollar to Mexican Peso exchange rate affecting our operations in Mexico, accruals for bonus expense and higher purchased costs for certain raw materials and components.

Engineering, Selling and Administrative expenses overall were higher in the current year quarter as compared to the prior year quarter. The prior year quarter was significantly lower due to a ten percent reduction in the salaried work force, a temporary reduction in hours worked, and reductions in various other operating costs, many of which were implemented as cost saving measures to mitigate the impact of the COVID-19 pandemic on our reduced sales levels.

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

   June 27, 2021 June 28, 2020  
 Equity Earnings (Loss) of VAST LLC Joint Venture $716 $(601) 
 Equity Earnings of SAL Joint Venture -    337  
 Gain on Rabbi Trust 393 363  
 Net Foreign Currency Realized and      
 Unrealized Transaction (Loss) Gain (231
 Other (Expense) Income (156
   $722 $429  

The lower profitability at our VAST LLC operations during the prior year quarter related primarily to our one third share of the impairment charge, or $667,000, relating to our Minda VAST Access Systems joint venture previously discussed. In addition, our VAST China and Minda VAST Access Systems Operations were impacted by the COVID -19 virus with lower sales and profitability during the prior year quarter. The STRATTEC Advanced Logic (SAL) Joint Venture was dissolved during the prior year quarter.

Frank Krejci, President & CEO commented: “Over the last few months, our sales and profits have been reduced because of customers temporarily shutting down their assembly plants. This is due to the widely reported shortages of semiconductor chips, not because of reduced demand. In fact, inventories on dealer lots and car rental agencies are at abnormally low levels.

Despite these issues, we are pleased to highlight summary results for the year:

  • Diluted earnings per share of $5.85, our highest earnings since our spinoff from Briggs and Stratton Corporation over 26 years ago.
  • Cash flow from operations of $35.2 million or $9.13 per share.
  • $23 million of debt reduction.
  • Significantly improved overall net cash position (cash on-hand less debt outstanding).

After a tumultuous fiscal 2020 in which our Associates worked to overcome the negative effects of the pandemic, we have experienced the positive benefits of their efforts in our financial results for fiscal 2021. We believe their continuing dedicated efforts to win more new business, implement structural efficiencies and pursue new technologies for expanded opportunities will serve the Company well in fiscal 2022 and the years ahead.”

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 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.

Condensed Results of Operations
(In Thousands except per share amounts)

  Fourth Quarter Ended  Years Ended 
  June 27, 2021  June 28, 2020  June 27, 2021  June 28, 2020 
Net Sales $110,057  $42,117  $485,295  $385,300 
Cost of Goods Sold 94,805  49,900  406,637  349,854 
Gross Profit (Loss) 15,252  (7,783) 78,658  35,446 
Engineering, Selling &
   Administrative Expenses
 11,200  8,333  44,743  44,108 
Income (Loss) from Operations 4,052  (16,116) 33,915  (8,662)
Interest Expense (43) (128) (302) (920)
Other Income, Net 722  429  1,395  1,459 
Income (Loss) before Provision (Benefit)
 for Income Taxes
         and Non-Controlling Interest
 4,731  (15,815) 35,008  (8,123)
Provision (Benefit) for Income Taxes 390  (3,460) 5,111  (2,266)
Net Income (Loss) 4,341  (12,355) 29,897  (5,857)
Net Income (Loss) Attributable to
  Non-Controlling Interest
 1,415  (1,853) 7,365  1,748  
Net Income (Loss) Attributable to
 $2,926  $(10,502) $22,532  $(7,605)
Net Income (Loss) Per Share:            
Basic $0.77  $(2.80) $5.95  $(2.04)
Diluted $0.75  $(2.80) $5.85  $(2.04)
Average Basic
   Shares Outstanding
 3,805  3,749  3,788  3,737 
Average Diluted
   Shares Outstanding
 3,890  3,749  3,852  3,737 
Capital Expenditures $2,528  $2,074  $8,929  $12,381 
Depreciation $5,056  $4,980  $19,786  $19,329 


Condensed Balance Sheet Data
(In Thousands)

  June 27, 2021
 June 28, 2020
Current Assets: $14,465 $11,774
Cash and cash equivalents 69,902 41,955
Receivables, net 70,860 54,400
Inventories, net 19,677 17,239
Other current assets 174,904 125,368
Total Current Assets 27,224 22,068
Investment in Joint Ventures 12,034 12,961
Other Long Term Assets 96,401 105,148
Property, Plant and Equipment, Net $310,563 $265,545
Current Liabilities:    
Accounts Payable $36,727 $18,549
Other 40,845 29,591
Total Current Liabilities 77,572 48,140
Accrued Pension and Post Retirement Obligations 2,933 1,956
Borrowings Under Credit Facility 12,000 35,000
Other Long-term Liabilities 4,625 5,008
Shareholders’ Equity 334,058 309,991
Accumulated Other Comprehensive Loss (16,797)(22,113)
Less: Treasury Stock (135,615)(135,656)
   CORPORATION Shareholders’ Equity
 181,646 152,222
Non-Controlling Interest 31,787 23,219
Total Shareholders’ Equity 213,433 175,441
  $310,563 $265,545

Condensed Cash Flow Statement Data
(In Thousands)

     Fourth Quarter Ended       Years Ended   
  June 27, 2021
  June 28, 2020  June 27, 2021
 June 28, 2020
Cash Flows from Operating Activities:             
Net Income (Loss)$4,341 $(12,355)$29,897 $ (5,857
Adjustment to Reconcile Net Income (Loss) to Cash Provided by Operating Activities:             
  Equity (Earnings) Loss in Joint Ventures (716) 264  (2,560  209 
  Depreciation 5,056  4,980  19,786   19,329 
  Foreign Currency Transaction Loss (Gain) 519  85  2,445   (1,982
  Unrealized (Gain) Loss on Peso Forward Contracts (211) (568
) (723
  Stock Based Compensation Expense 197  207  972   996 
  Non-Cash Compensation Expense -  351  -   4,824 
  Loss on disposition of property, plant & equipment -  99  1,421   369 
  Deferred Income taxes 1,473  (2,557 1,473   (3,589
  Change in Operating Assets/Liabilities (1,087 5,207  (18,099  10,616 
  Other, net  182  (223
  538   29 
Net Cash Provided (Used in) by Operating Activities 9,754  (4,510 35,150   25,424 
Cash Flows from Investing Activities:    
  Investment in Joint Ventures -  -  (100  - 
  Additions to Property, Plant and Equipment (2,528 (2,074 (8,929)    (12,381
  Other      -  3
   8   32
Net Cash Used in Investing Activities (2,528 (2,071 (9,021  (12,349
Cash Flows from Financing Activities:    
  Borrowings Under Credit Facility -  8,000  -   8,000 
  Repayment of Borrowings Under Credit Facility (4,000 -  (23,000  (15,000
  Dividends Paid to Non-Controlling Interests of Subsidiaries -  -  (490  (980
  Dividends Paid -  -  -   (1,572
  Exercise of Stock Options and Employee Stock Purchases  19  17
   604   560
Net Cash (Used In) Provided By Financing Activities (3,981 8,017  (22,886  (8,992
Effect of Foreign Currency Fluctuations on Cash  (115 165
   (552  (118
Net Increase in Cash & Cash Equivalents 3,130  1,601  2,691   3,965 
Cash and Cash Equivalents:        
  Beginning of Period  11,335  10,173
   11,774   7,809
  End of Period $14,465 11,774  $14,465  $11,774 

Contact: Pat Hansen
Senior Vice President and
Chief Financial Officer

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