STRATTEC SECURITY CORPORATION Reports Fiscal 2022 Second Quarter Operating Results

1/27, 10:00 PM (Source: GlobeNewswire)

MILWAUKEE, Jan. 27, 2022 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal second quarter ended December 26, 2021.

Net sales for the second quarter ended December 26, 2021 were $112.9 million, compared to net sales of $127.4 million for the second quarter ended December 27, 2020. Net income was $3.4 million in the current year second quarter, compared to net income of $7.1 million in the prior year second quarter. Diluted earnings per share for the current year second quarter were $0.87 compared to diluted earnings per share of $1.85 in the prior year second quarter.

Both the current year quarter and for the six month period ended December 26, 2021, net sales and profitability were significantly impacted by the global semiconductor chip shortage that temporarily closed several of our customer assembly plants in North America for extended periods of time resulting in significantly reduced sales of our products to our customers both in the current year second quarter and year to date period.

The prior year quarter included a customer reimbursement for engineering development costs previously incurred in prior periods that totaled $1,546,000. This reimbursement was recorded as a reduction of engineering expense in the prior year quarter and increased our diluted earnings per share by $0.26 in the prior year quarter in comparison to the current year quarter.

For the six months ended December 26, 2021, the Company’s net sales were $213.2 million compared to net sales of $253.6 million in the prior year six month period. Net income during the current year six month period was $3.5 million compared to a net income of $15.1 million during the prior year six month period. Diluted earnings per share were $0.90 during the six month period ended December 26, 2021 compared to diluted earnings per share of $3.96 during the six month period ended December 27, 2020.

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

   Three Months Ended 
    December 26, 2021   December 27, 2020  
           
 Stellantis / Fiat Chrysler Automobiles $23.1  $23.2  
 General Motors Company  31.1   39.0  
 Ford Motor Company  21.1   16.8  
 Tier 1 Customers  15.6   18.7  
 Commercial and Other OEM Customers  16.1   19.6  
 Hyundai / Kia  5.9   10.1  
 TOTAL $112.9  $127.4  
           

Sales to Stellantis / Fiat Chrysler Automobiles (FCA) in the current year quarter were flat compared to the prior year quarter. The decrease in sales to General Motors Company in the current year quarter compared to the prior year quarter related primarily to lower vehicle production volumes on products we supply to their business. Sales to the Ford Motor Company increased in the current year quarter compared to the prior year quarter due primarily to higher product content in particular for the new power tailgate program on the F-150 pickup trucks. Sales to Tier 1 customers decreased in the current year quarter in comparison to the prior year quarter mainly due to lower sales volume on product ultimately used on General Motors and Ford vehicles. Sales to Commercial and Other OEM Customers during the current year quarter were lower in comparison to the prior year quarter due to lower vehicle production volumes on the products we supply. These customers, along with the Tier 1 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 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 components.

Our Gross Profit margins declined to 13.2% in the current year quarter compared to 17.5% in the prior year quarter. The lower gross profit margin during the current year quarter was primarily a result of reduced customer vehicle production volumes, higher costs for both raw materials and purchased components and the mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2021 that adversely impacted margins in our Mexican subsidiaries.

Engineering, Selling and Administrative expenses as a percent of net sales in the current year quarter were 10.0% compared to 8.1% in the prior year quarter. This increase in overall Selling, Engineering and Administrative expenses in the current year quarter compared to the prior year quarter was primarily attributed to the prior year quarter customer reimbursement of engineering development costs of $1,546,000, or 1.2% reduction as a percent of sales, previously mentioned above in this press release.

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):

 

    December 26,
2021
   December 27,
2020
  
           
 Equity Earnings of VAST LLC Joint Venture $615  $1,075  
 Net Foreign Currency Transaction (Loss)  (26)  (1,633) 
 Other  (69)  267  
   $520  $(291) 
           

The decrease in equity earnings of VAST LLC in the current year quarter compared to the prior year quarter primarily related to lower net sales and profitability in our VAST China operation which was also adversely impacted by the current global semiconductor chip shortage described above. VAST China’s profitability in the current quarter was partially offset with startup losses for their new plant in Jingzhou, China. We continue to believe VAST China’s added production capacity will eventually result in greater operating efficiencies and a broader geographic footprint in the China market going forward. VAST LLC (including VAST China) is an important part of our global strategy and we anticipate that it will contribute to our overall long-term market and financial strength as it continues to grow.

Frank Krejci President and CEO commented: “The automotive industry continues to deal with production constraints due to supply issues. Our team has generated reasonable profit while dealing with spikes in material and logistic costs and lower industry volumes impacting fixed overhead cost absorption. The efficiency improvements we have put in place over the past eighteen months contributed to our ability to remain profitable. That bodes well for when the volumes increase.

“Our balance sheet continues to strengthen. We have over $10 million more inventory than typical as a result of our strategy to be prepared for a return to normal vehicle production volumes later this calendar year. It should minimize overtime and avoid premium freight charges as the supply chain issues improve. We also eliminated future financial risk when we terminated our pension plan three years ago. The post termination audit by the PBGC was just completed with no adjustments. That risk has now been permanently eliminated.”

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
 December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020
         
Net Sales$112,908  $127,360  $213,249  $253,594 
              
Cost of Goods Sold 97,975  105,119   185,767  208,842 
         
Gross Profit 14,933  22,241   27,482  44,752 
         
Engineering, Selling &        
Administrative Expenses 11,301  10,302   23,422  21,616 
         
Income from Operations 3,632  11,939   4,060  23,136 
         
Interest Expense (57) (84)  (105) (196)
         
         
Other Income (Expense), Net 520  (291)  399  274 
         
Income Before Provision        
for Income Taxes and        
Non-Controlling Interest 4,095  11,564   4,354  23,214 
         
Provision for Income Taxes 255  1,991   292  3,568 
         
Net Income 3,840  9,573   4,062  19,646 
         
Net Income Attributable        
to Non-Controlling Interest (446) (2,460)  (567) (4,525)
         
Net Income Attributable to        
STRATTEC SECURITY        
CORPORATION$3,394  $7,113  $3,495  $15,121 
         
Earnings Per Share:        
Basic$0.88  $1.88  $0.91  $4.01 
Diluted$0.87  $1.85  $0.90  $3.96 
         
Average Basic        
Shares Outstanding 3,866  3,786   3,848  3,775 
         
Average Diluted        
Shares Outstanding 3,908  3,842   3,901  3,815 
         
Other        
Capital Expenditures$2,573  $3,079  $5,362  $4,593 
Depreciation$4,911  $4,912  $9,968  $9,797 
           

 

 

STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)
 
 December 26, 2021 June 27, 2021
 (Unaudited)   
ASSETS      
Current Assets:      
Cash and cash equivalents$14,071  $14,465 
Receivables, net 72,472   69,902 
Inventories, net 73,243   70,860 
Other current assets 18,129   19,677 
Total Current Assets 177,915   174,904 
Investment in Joint Ventures 27,394   27,224 
Other Long Term Assets 11,719   12,034 
Property, Plant and Equipment, Net 91,285   96,401 
 $308,313  $310,563 
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
Current Liabilities:    
Accounts Payable$31,635  $36,727 
Other 35,202   40,845 
Total Current Liabilities 66,837   77,572 
Accrued Pension and Post Retirement Obligations 2,945   2,933 
Borrowings Under Credit Facility 17,000   12,000 
Other Long-term Liabilities 4,460   4,625 
Shareholders’ Equity 338,810   334,058 
Accumulated Other Comprehensive Loss (17,391)  (16,797)
Less: Treasury Stock (135,599)  (135,615)
Total STRATTEC SECURITY    
    CORPORATION Shareholders’ Equity 185,820   181,646 
Non-Controlling Interest 31,251   31,787 
Total Shareholders’ Equity 217,071   213,433 
 $308,313  $310,563 
        



STRATTEC SECURITY CORPORATION
Condensed Cash Flow Statement Data
(In Thousands)
(Unaudited)
 
 Second Quarter Ended Six Months Ended
 December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020
            
            
Cash Flows from Operating Activities:           
Net Income$3,840  $9,573  $4,062  $19,646 
Adjustments to Reconcile Net Income to           
Cash Provided by Operating Activities:           
Depreciation 4,911   4,912   9,968   9,797 
Equity Earnings in Joint Ventures (615)  (1,075)  (364)  (1,900)
Loss on disposition of property, plant & equipment 85   1,203   93   1,426 
Foreign Currency Transaction (Gain) Loss (104)  1,913   (243)  2,312 
Unrealized Loss (Gain) on Peso Forward           
Contracts 126   (145)  224   (480)
Deferred Income Taxes -   -   -   - 
Stock Based Compensation Expense 238   374   634   582 
Change in Operating Assets/Liabilities 1,063   (7,119)  (14,596)  (14,562)
Other, net 121   120   240   235 
            
Net Cash Provided by Operating Activities 9,665   9,756   18   17,056 
            
Cash Flows from Investing Activities:           
Investment in Joint Ventures -   (100)  -   (100)
Additions to Property, Plant and Equipment (2,573)  (3,079)  (5,362)  (4,593)
Proceeds Received on Sale of           
Property, Plant and Equipment -   -   -   3 
            
Net Cash Used in Investing Activities (2,573)  (3,179)  (5,362)  (4,690)
            
Cash Flows from Financing Activities:           
Borrowings on Line of Credit Facility 1,000   -   8,000   - 
Payments on Line of Credit Facility (1,000)  (8,000)  (3,000)  (13,000)
Dividends Paid to Non-Controlling Interest           
of Subsidiary -   -   (600)  (490)
Exercise of Stock Options and           
Employee Stock Purchases 20   21   639   40 
            
Net Cash Provided by (Used) in Financing Activities 20   (7,979)  5,039   (13,450)
            
Effect of Foreign Currency Fluctuations on Cash (65)  (149)  (89)  (258)
            
Net Increase (Decrease) in Cash & Cash Equivalents 7,047   (1,551)  (394)  (1,342)
            
Cash and Cash Equivalents:           
Beginning of Period 7,024   11,983   14,465   11,774 
End of Period$14,071  $10,432  $14,071  $10,432 
                

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


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