STRATTEC SECURITY CORPORATION Reports Fiscal 2024 First Quarter Operating Results
Press Releases

STRATTEC SECURITY CORPORATION Reports Fiscal 2024 First Quarter Operating Results

MILWAUKEE, Wis., Oct. 26, 2023 (GLOBE NEWSWIRE) — STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended October 1, 2023.

Net sales for the first quarter ended October 1, 2023 were $135.4 million, compared to net sales of $120.4 million for the first quarter ended October 2, 2022. Net income was $4.2 million in the current year first quarter, compared to net income of $125,000 in the prior year first quarter. Diluted earnings per share for the current year quarter were $1.05 and for the prior year first quarter were $0.03.

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

  Three Months Ended
    October 1, 2023     October 2, 2022
General Motors Company $ 40,505   $ 38,150
Stellantis   27,297     17,155
Ford Motor Company   26,909     24,616
Tier 1 Customers   18,122     17,309
Commercial and Other OEM Customers   14,197     14,826
Hyundai / Kia   8,376     8,304
TOTAL $ 135,406   $ 120,360

The higher revenues this quarter reflect $10.8 million of negotiated pricing relief, $8.0 million of which relates to one-time retroactive pricing for parts shipped in the prior fiscal year, while the remaining $2.8 million is attributable to ongoing increases in current part prices.   In addition, the company benefited from increased sales to Ford Motor Company of new power end gate content for their new F-Series Super Duty Pickup. The same vehicle also drove increased sales of new door hardware sold through Tier 1 Customers.   Higher sales to Stellantis reflects increased vehicle production of their minivan, while sales to Commercial and Other OEM Customers declined year-over-year due to the ending of a door handle program with Honda.

Gross Profit margins improved to 13.8% compared with 10.4% in the prior year driven primarily by the pricing relief achieved, of which 4.7 percentage points was one-time retroactive pricing related. Major offsetting items to the positive margin effect of pricing in the quarter were an unfavorable U.S. dollar to Mexican Peso exchange rate combined with a mandatory 20% Mexican minimum wage increase in 2023 and higher freight costs.

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

    October 1,        October 2,  
    2023       2022   
Equity (Loss) Earnings of VAST LLC Joint Venture $ (265 )   $ 527  
Net Foreign Currency Transaction Gain    226       132  
Other   (92 )     (425 )
  $ (131 )   $ 234  

Effective June 30, 2023, STRATTEC sold its one-third interest in VAST LLC in an agreement that bolstered our balance sheet with $18.5 million of cash, captured the remaining 20% ownership of STRATTEC Power Access Group not owned by STRATTEC and created greater flexibility for STRATTEC to enter new segments and markets in the future. The current year quarter equity loss of the joint venture was the result of additional professional fees incurred during the current period related to the VAST transaction.

Frank Krejci, President and CEO commented: “I am very proud of our entire team for the results in the quarter. The team was able to capture inflationary price increases in the form of one-time recoveries as well as enhanced margins for the future. Additionally, the higher sales beyond the pricing relief achieved in the quarter reflected our ability to increase the reach of our most successful products across the product line-ups of our customers. And in support of our effort to protect margins, we implemented a salaried staff reduction in our Mexican operations. Like everyone connected to the auto industry, we are concerned about the UAW strike. While the strike only modestly affected our sales in September, the situation has changed considerably in October as the strike escalated to include the manufacturing of high-volume pickup trucks and SUVs for our three major customers. We will continue to adjust our execution to whatever the outcome, however, our earnings will be negatively impacted until the strike ends, at which time we will work in earnest with our customers to try and recover lost sales and profitability. Fortunately, our exit of a long-standing joint venture arrangement at the end of our prior fiscal year has meaningfully strengthened our balance sheet while providing greater focus on our core business. Now with greater control over our business, we look forward to the future.”

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 as cooperating partners of 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 continuing effects of the coronavirus (COVID-19) pandemic, matters adversely impacting the timing and availability of component parts and raw materials needed 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)

  First Quarter Ended
  October 1, 2023   October 2, 2022
Net Sales $ 135,406     $ 120,360  
Cost of Goods Sold   116,686       107,864  
Gross Profit   18,720       12,496  
Engineering, Selling & Administrative Expenses   12,614       12,700  
Income (Loss) from Operations   6,106       (204 )
Interest Expense   (220 )     (129 )
Interest Income   87        
Other (Expense) Income, net   (131 )     234  
Income (Loss) Before Provision for Income Taxes and    
      Non- Controlling Interest
  5,842       (99 )
Provision (Benefit) for Income Taxes   1,387       (36 )
Net Income (Loss)   4,455       (63 )
Net Income (Loss) Attributable to Non-Controlling
  290       (188 )
Net Income Attributable to STRATTEC SECURITY
$ 4,165     $ 125  
Earnings Per Share:      
Basic $ 1.05     $ 0.03  
Diluted $ 1.05     $ 0.03  
Average Basic Shares Outstanding   3,948       3,899  
Average Diluted Shares Outstanding   3,974       3,929  
Capital Expenditures $ 2,920     $ 4,718  
Depreciation $ 4,385     $ 4,497  

Condensed Balance Sheet Data
(In Thousands)

        October 1, 2023   July 2, 2023
  Current Assets:      
    Cash and Cash Equivalents $      15,665     $ 20,571  
    Receivables, net   87,470       89,811  
    Inventories, net   81,367       77,597  
    Customer Tooling in Progress, net   22,673       20,800  
    Value Added Tax Recoverable   15,054       7,912  
    Other Current Assets                    5,622                       9,091  
      Total Current Assets   227,851       225,782  
  Other Long-term Assets   20,452       20,702  
  Property, Plant and Equipment, net   92,316       94,446  
        $ 340,619     $ 340,930  
  Current Liabilities:      
    Accounts Payable $ 50,297     $ 57,927  
    Value Added Tax Payable   8,473       6,499  
    Borrowings Under Credit Facility – Current   13,000        
    Other                   45,624                        44,560  
      Total Current Liabilities   117,394       108,986  
  Accrued Pension and Postretirement Obligations   2,392       2,363  
  Borrowings Under Credit Facility – Long-Term         13,000  
  Other Long-term Liabilities   5,532       5,557  
  Shareholders’ Equity   339,261       334,683  
  Accumulated Other Comprehensive Loss   (14,527 )     (14,194 )
  Less: Treasury Stock   (135,514 )     (135,526 )
      CORPORATION Shareholders’ Equity   189,220       184,963  
    Non-Controlling Interest   26,081       26,061  
  Total Shareholders’ Equity   215,301       211,024  
        $ 340,619     $    340,930  

Condensed Cash Flow Statement Data
(In Thousands)

        First Quarter Ended
        October 1, 2023   October 2, 2022
Cash Flows from Operating Activities:      
Net Income (Loss) $ 4,455     $ (63 )
Adjustments to Reconcile Net Income (Loss) to      
  Cash (Used in) Provided by Operating Activities:      
    Depreciation   4,385       4,497  
    Equity Loss (Earnings) in Joint Ventures   265       (527 )
    Foreign Currency Transaction (Gain) Loss   (226 )     71  
    Unrealized Gain on Peso Forward Contracts         35  
    Stock Based Compensation Expense   505       611  
    Change in Operating Assets/Liabilities   (13,156 )     (45 )
  Other, net   (100 )     122  
Net Cash (Used in) Provided by Operating Activities   (3,872 )     4,701  
Cash Flows from Investing Activities:      
  Proceeds from Sale of Interest in VAST LLC   2,000        
  Additions to Property, Plant & Equipment   (2,920 )     (4,718 )
Net Cash Used in Investing Activities   (920 )     (4,718 )
Cash Flows from Financing Activities:      
  Borrowings on Line of Credit Facility   2,000       5,000  
  Payments on Line of Credit Facility   (2,000 )     (3,000 )
  Dividends Paid to Non-Controlling Interest of
        (600 )
  Exercise of Stock Options and Employee Stock
  17       126  
Net Cash Provided by Financing Activities   17       1,526  
Effect of Foreign Currency Fluctuations on Cash   (131 )     47  
Net (Decrease) Increase in Cash & Cash Equivalents   (4,906 )     1,556  
Cash & Cash Equivalents:      
  Beginning of Period   20,571       8,774  
  End of Period $ 15,665     $ 10,330  

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