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
CORPORATIONCondensed 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
CORPORATIONCondensed 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
CORPORATIONCondensed 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 BoweVice President andChief Financial
Officer414-247-3399www.strattec.com
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