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STRATTEC SECURITY CORPORATION Reports Fiscal 2022 Fourth Quarter and Full Year Operating Results
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STRATTEC SECURITY CORPORATION Reports Fiscal 2022 Fourth Quarter and Full Year Operating Results

MILWAUKEE, Wis., Aug. 11, 2022 (GLOBE NEWSWIRE) — STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal fourth quarter and full year ended July 3, 2022. The comparative current year fourth quarter operating results were negatively impacted by higher costs for raw materials and purchased components in our manufacturing operations, reductions in output at some of our OEM customers’ assembly plants and the COVID-19 virus that temporarily shut down our VAST China operations which is further described in this press release.

Fourth Quarter Overview
Net sales for the Company’s fourth quarter ended July 3, 2022 were $123.1 million, compared to net sales of $110.1 million for the fourth quarter ended June 27, 2021. The 2022 fiscal fourth quarter was a 14 week period while fiscal 2021’s fourth quarter was the typical 13 week period. The impact of the additional week of customer shipments during the current year quarter increased net sales by approximately $7.4 million over the prior year quarter. Net income for the current year quarterly period was $391,000, compared to net income of $2.9 million in the prior year fourth quarter. Diluted earnings per share for the current year quarterly period were $0.10 compared to diluted earnings per share of $0.75 in the prior year quarter. Despite higher sales levels in the current year quarter versus the prior year quarter, as noted above, our net income and diluted earnings per share were adversely impacted by higher costs for raw materials and purchased components in the current year quarter.

Full Year Earnings Overview
For the year ended July 3, 2022, the Company’s net sales were $452.3 million compared to net sales of $485.3 million in the prior year period. Net income during the current year was $7.0 million compared to net income of $22.5 million in the prior year period. Diluted earnings per share were $1.80 for the year ended July 3, 2022 compared to diluted earnings per share of $5.85 during the prior year ended June 27, 2021.

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  
  July 3, 2022 June 27, 2021  
       
General Motors Company $ 38,633 $ 35,225  
Stellantis / Fiat Chrysler Automobiles   20,598   15,710  
Ford Motor Company   21,808   13,314  
Tier 1 Customers   16,443   13,332  
Commercial and Other OEM Customers   14,901   18,689  
Hyundai / Kia   10,690   13,787  
TOTAL $ 123,073 $ 110,057  
       

As mentioned previously, the current year quarter sales had one additional week of sales in comparison to the prior year quarter that totaled $7.4 million. Notwithstanding that extra week of sales, the global semiconductor chip shortage and adverse issues impacting the availability of other raw materials and component parts arising from the Coronavirus (COVID-19) pandemic continue to adversely impact our OEM customers’ output at their assembly plants, thereby reducing our potential sales.

Sales to General Motors in the current year quarter increased in comparison to the prior year quarter due to higher production volumes on the Chevrolet Silverado power tailgate and increased sales from several lock set product platforms with General Motors. Sales to Stellantis / Fiat Chrysler Automobiles increased in the current year quarter compared to the prior year quarter due to higher volumes on the Chrysler Pacifica for which we supply power sliding door components and other access control products. Sales to Ford Motor Company increased in the current year quarter compared to the prior year quarter due to higher production volumes on our lock set product platforms with Ford and increased production for the F-150 pick-up truck for which we supply power tailgate components. Sales to Tier 1 Customers increased in the current year quarter compared to the prior year quarter due to increased volumes on sales of our door handle product. 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 our Aftermarket service keys business between quarters. These Commercial and Other OEM Customers, along with Tier1 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 to complement our historic core business of locks and keys. Sales to Hyundai / Kia were lower in the current year quarter compared to the prior year quarter due to lower production volumes on the Kia Carnival and Hyundai Starex minivans for which we supply primarily power sliding door components.

Gross profit margins were 11.3 percent in the current year quarter compared to 13.9 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 production materials that impacted the gross profit margin by 340 basis points 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 under our incentive bonus plans.

Engineering, Selling and Administrative expenses overall were $12.4 million in the current year quarter and $11.2 million in the prior year quarter. As a percent of net sales in the current year quarter (14 weeks) these expenses were 10.1% percent compared to 10.2% in the prior year quarter (13 weeks).

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

  July 3, 2022   June 27, 2021
           
Equity (Loss) Earnings of VAST LLC Joint Venture $ (760 )   $ 716  
(Loss) Gain on Rabbi Trust Assets (243 )     393  
Net Foreign Currency Realized and Unrealized Transaction Gain (Loss)   358       (231 )
Other (Expense) Income   (12 )     (156 )
  $ (657 )   $ 722  
           

 

The net loss at VAST LLC during the current year quarter related primarily to our VAST China operations being temporarily shut down due to COVID -19 restrictions enacted by the Chinese Government.

Frank Krejci, President & CEO commented: “We have dealt well with the things we could control. Unfortunately for our bottom line, there were significant factors which were out of our control like supply chains limiting customer production and spikes in material cost which we were forced to absorb. In addition, our operations in China were impacted by the aggressive shutdowns imposed by their government to combat the spread of COVID.

The negative impacts were reduced significantly through our cost controls and implementation of efficiency improvements. Those improvements are beginning to benefit us today and many will have a continuing long-term positive impact. Strategically, with our strong balance sheet, we have been able to make a significant investment in inventory levels to dampen problems from supply chain issues. Our financial position also allows us to focus on long-term decisions like investing in new opportunities while still remaining ready to deal with current market uncertainties.    

We see continuing growth of our award-winning designs for the power tailgates on the Chevrolet Silverado and the Ford F150 pick-up trucks. As the Electric Vehicle market rapidly grows, we see opportunity for new product development as well as refined versions of much of our present product lines. We are pleased with the acceptance of our new product by our customers and the new business that has been awarded to us over the last year.

As we complete our first month of a new fiscal year, we are encouraged by the higher production schedules from our customers and their press releases anticipating continuing improvement in the industry during the last half of calendar year 2022”.

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 disruptions, the 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)

                   
    Fourth Quarter Ended   Years Ended  
    July 3, 2022   June 27, 2021   July 3, 2022   June 27, 2021  
                   
Net Sales   $ 123,073     $ 110,057     $ 452,265     $ 485,295    
                   
Cost of Goods Sold     109,177       94,805       396,249       406,637    
                   
Gross Profit     13,896       15,252       56,016       78,658    
                   
Engineering, Selling & Administrative Expenses     12,436       11,200       47,119       44,743    
                   
Income from Operations     1,460       4,052       8,897       33,915    
                   
Interest Expense     (62 )     (43 )     (221 )     (302 )  
                   
                   
Other (Expense) Income, Net     (657 )     722       604       1,395    
                   
Income before Provision for Income Taxes and Non-Controlling Interest     741       4,731       9,280       35,008    
                   
Provision for Income Taxes     78       390       420       5,111    
                   
Net Income     663       4,341       8,860       29,897    
                   
Net Income Attributable to Non-Controlling Interest     272       1,415       1,828       7,365    
                   
Net Income Attributable to STRATTEC SECURITY CORPORATION   $ 391     $ 2,926     $ 7,032     $ 22,532    
                   
Net Income Per Share:                  
Basic   $ 0.10     $ 0.77     $ 1.82     $ 5.95    
Diluted   $ 0.10     $ 0.75     $ 1.80     $ 5.85    
                   
Average Basic Shares Outstanding     3,876       3,805       3,861       3,788    
                   
Average Diluted Shares Outstanding     3,920       3,890       3,910       3,852    
                   
Other                  
Capital Expenditures   $ 4,781     $ 2,528     $ 14,188     $ 8,929    
Depreciation   $ 4,655     $ 5,056     $ 19,379     $ 19,786    

 

STRATTEC SECURITY CORPORATION
Condensed Balance Sheet Data
(In Thousands)

      July 3, 2022     June 27, 2021
      (Unaudited)        
ASSETS            
Current Assets:            
Cash and cash equivalents   $ 8,774   $ 14,465
Receivables, net     75,827     69,902
Inventories, net     80,482     70,860
Other current assets     23,149     19,677
Total Current Assets     188,232     174,904
Investment in Joint Ventures     26,344     27,224
Other Long Term Assets     12,375     12,034
Property, Plant and Equipment, Net     91,729     96,401
    $ 318,680   $ 310,563
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
Current Liabilities:            
Accounts Payable   $ 43,950   $ 36,727
Other     37,525     40,845
Total Current Liabilities     81,475     77,572
Accrued Pension and Post Retirement Obligations     1,722     2,933
Borrowings Under Credit Facility     11,000     12,000
Other Long-term Liabilities     4,070     4,625
Shareholders’ Equity     343,103     334,058
Accumulated Other Comprehensive Loss     (18,657)     (16,797)
Less: Treasury Stock     (135,580)     (135,615)
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity   188,866     181,646
Non-Controlling Interest     31,547     31,787
Total Shareholders’ Equity     220,413     213,433
    $ 318,680   $ 310,563
             

 

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

    Fourth Quarter Ended   Years Ended    
    July 3, 2022   June 27, 2021   July 3, 2022   June 27, 2021    
Cash Flows from Operating Activities:                                
Net Income   $ 663     $ 4,341     $ 8,860     $ 29,897      
Adjustment to Reconcile Net Income to                                
Cash (Used In) Provided By Operating Activities:                                
Equity Loss (Earnings) in Joint Ventures     760       (716 )     (181 )     (2,560 )    
Depreciation     4,655       5,056       19,379       19,786      
Foreign Currency Transaction (Gain) Loss     (313 )     519       (237 )     2,445      
Unrealized Loss (Gain) on Peso                                
Forward Contracts     116       (211 )     (384 )     (723 )    
Stock Based Compensation Expense     267       197       1,140       972      
Loss on disposition of property, plant & equipment     39             192       1,421      
Deferred Income taxes     (1,981 )     1,473       (1,981 )     1,473      
Change in Operating Assets/Liabilities     (5,677 )     (1,087 )     (16,837 )     (18,099 )    
Other, net     124       182       485       538      
                                 
Net Cash (Used In) Provided By Operating Activities     (1,347 )     9,754       10,436       35,150      
                                 
Cash Flows from Investing Activities:                                
Investment in Joint Ventures     (75 )           (150 )     (100 )    
Additions to Property, Plant and Equipment     (4,781 )     (2,528 )     (14,188 )     (8,929 )    
Other     5             5       8      
Net Cash Used in Investing Activities     (4,851 )     (2,528 )     (14,333 )     (9,021 )    
                                 
Cash Flows from Financing Activities:                                
Borrowings Under Credit Facility     2,000             13,000            
Repayment of Borrowings Under Credit Facility     (3,000 )     (4,000 )     (14,000 )     (23,000 )    
Dividends Paid to Non-Controlling                                
Interests of Subsidiaries     (600 )           (1,800 )     (490 )    
Exercise of Stock Options and                                
Employee Stock Purchases     24       19       908       604      
                                     
Net Cash Used In Financing Activities     (1,576 )     (3,981 )     (1,892 )     (22,886 )    
                                 
Effect of Foreign Currency Fluctuations on Cash     89       (115 )     98       (552 )    
                                 
Net (Decrease) Increase in Cash & Cash Equivalents     (7,685 )     3,130       (5,691 )     2,691      
                                 
Cash and Cash Equivalents:                                
Beginning of Period     16,459       11,335       14,465       11,774      
End of Period   $ 8,774     $ 14,465     $ 8,774     $ 14,465      
                                 

 

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