STRATTEC SECURITY CORPORATION (NASDAQ:STRT) is a market leader of a comprehensive range of "Smart" Vehicle Power Access and Electronic and Security Solutions, serving the global automotive industry.

Third Quarter Fiscal 2024 Financial Highlights

  • Diluted earnings per share of $0.37 versus $0.57 loss last year
  • Gross Margins expanded to 10.4% compared with 7.9% last year
  • Revenues increased by 10.7%, driven by pricing increases and new product sales

STRATTEC Interim CEO Rolando Guillot said, “This quarter we continued to make progress on our financial performance due to improved pricing and new product introductions that are expanding STRATTEC’s offerings to our customers. We will continue to focus on addressing persistent cost challenges and the opportunities we have to optimize our working capital and a strong balance sheet.”

Third Quarter Fiscal 2024 Financial Summary

    Third Quarter Ending
    Mar 31, 2024   Apr. 2, 2023   Inc (Dec)
(Dollars in thousands, except per share data)            
Net Sales   $ 140,773     $ 127,183     $ 13,590
Gross Profit   $ 14,684     $ 10,001     $ 4,683
Gross Margin     10.4 %     7.9 %    
Operating Expenses   $ 12,725     $ 12,485     $ 240
Operating Income (Loss) from Operations   $ 1,959     $ (2,484 )   $ 4,443
Net Income (Loss)   $ 1,506     $ (2,256 )   $ 3,762
Diluted Earnings (Loss) Per Share   $ 0.37     $ (0.57 )   $ 0.94
 

Revenue growth was driven by $7.0 million of price increases to our major customers and $6.6 million of higher sales associated with the launch of new product programs, the latter representing a 5.2% growth in sales from prior year. The growth in new product sales primarily stems from additional content of our latch and power access product lines on a major truck platform.

Gross margin improvement was driven by pricing increases, higher sales, lower raw material costs, lower warranty costs and $384,000 of workforce and production efficiencies realized from our Mexican operations. Offsetting those positive trends were unfavorable absorption of labor and overhead costs with inventory reductions, $2.1 million of unfavorable U.S. dollar to Mexican peso exchange rate effects, $1.8 million of wage increases due to a mandatory Mexican minimum wage-increase, $1.2 million higher prices paid to certain suppliers and $778,000 of increased freight costs primarily related to the launch of new programs.

Operating expenses increased primarily due to a $817,000 expense associated with the company’s annual incentive bonus plan, which was partially offset with lower new product development costs compared with the prior year period. Net Income was $1.5 million compared to a loss of $2.3 million last year. Fully diluted earnings per share were $0.37 compared with a loss of $0.57 last year.

Balance Sheet & Cash Flow

As of March 31, 2024, the Company’s cash and cash equivalents on hand totaled $9.6 million. Total debt as of March 31, 2024 was $13.0 million, which was all held by the ADAC-STRATTEC LLC joint venture.

For the third quarter of fiscal 2024, operating cash flow was negative $309,000, compared to the prior year quarter operating cash flow of negative $1.2 million. The negative operating cash flow for the current quarter was driven by a temporary increase in working capital, specifically in accounts receivable related to higher sales in the quarter, partially offset by a $10.8 million reduction in inventory. Capital expenditures in the third quarter of fiscal 2024 were $1.7 million, compared with $4.2 million for the third quarter of fiscal 2023.

About STRATTEC

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, power tailgate systems for trucks, 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.

Caution on Forward-Looking Statements

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.

Contact: Dennis BoweVice President andChief Financial Officer414-247-3399www.strattec.com

STRATTEC SECURITY CORPORATIONCondensed Results of Operations(In Thousands except per share amounts)(Unaudited)
 
  Three Months Ended   Nine Months Ended
  March 31, 2024   April 2, 2023   March 31, 2024   April 2, 2023
               
Net Sales $ 140,773     $ 127,183     $ 394,711     $ 360,727  
               
Cost of Goods Sold   126,089       117,182       347,810       330,843  
               
Gross Profit   14,684       10,001       46,901       29,884  
               
Engineering, Selling & Administrative Expenses   12,725       12,485       38,778       37,266  
               
Income (Loss) from Operations   1,959       (2,484 )     8,123       (7,382 )
               
Interest Expense   (222 )     (266 )     (661 )     (591 )
Interest Income   143       -       337       -  
               
Other (Expense) Income, net   (208 )     (404 )     759       470  
               
Income (Loss) Before Provision for Income Taxes and Non-Controlling Interest   1,672       (3,154 )     8,558       (7,503 )
               
Provision (Benefit) for Income Taxes   546       133       2,197       (1,638 )
               
Net Income (Loss)   1,126       (3,287 )     6,361       (5,865 )
               
Net Loss Attributable to Non-Controlling Interest   (380 )     (1,031 )     (332 )     (1,895 )
               
Net Income (Loss) Attributable to STRATTEC SECURITY CORPORATION $ 1,506     $ (2,256 )   $ 6,693     $ (3,970 )
               
Earnings (Loss) Per Share:              
Basic $ 0.38     $ (0.57 )   $ 1.69     $ (1.01 )
Diluted $ 0.37     $ (0.57 )   $ 1.67     $ (1.01 )
               
Average Basic Shares Outstanding   3,988       3,928       3,971       3,918  
               
Average Diluted Shares Outstanding   4,017       3,928       3,996       3,918  
               
Other              
Capital Expenditures $ 1,672     $ 4,247     $ 6,065     $ 13,724  
Depreciation $ 4,059     $ 4,347     $ 12,774     $ 13,145  

STRATTEC SECURITY CORPORATIONCondensed Balance Sheet Data(In Thousands)(Unaudited)
 
        March 31, 2024   July 2, 2023
             
ASSETS      
  Current Assets:      
    Cash and Cash Equivalents $ 9,594     $ 20,571  
    Receivables, net   97,524       89,811  
    Inventories, net   78,612       77,597  
    Customer Tooling in Progress, net   25,505       20,800  
    Value Added Tax Recoverable   19,272       7,912  
    Other Current Assets   10,423       9,091  
      Total Current Assets   240,930       225,782  
  Other Long-term Assets   19,309       20,702  
  Property, Plant and Equipment, net   88,310       94,446  
        $ 348,549     $ 340,930  
             
LIABILITIES AND SHAREHOLDERS' EQUITY      
  Current Liabilities:      
    Accounts Payable $ 50,582     $ 57,927  
    Value Added Tax Payable   8,906       6,499  
    Borrowings Under Credit Facility - Current   13,000       -  
    Other   48,284       44,560  
      Total Current Liabilities   120,772       108,986  
  Accrued Pension and Postretirement Obligations   2,463       2,363  
  Borrowings Under Credit Facility - Long-Term   -       13,000  
  Other Long-term Liabilities   5,200       5,557  
  Shareholders' Equity   342,521       334,683  
  Accumulated Other Comprehensive Loss   (13,205 )     (14,194 )
  Less: Treasury Stock   (135,489 )     (135,526 )
    Total STRATTEC SECURITY      
      CORPORATION Shareholders' Equity   193,827       184,963  
    Non-Controlling Interest   26,287       26,061  
  Total Shareholders' Equity   220,114       211,024  
        $ 348,549     $ 340,930  

STRATTEC SECURITY CORPORATIONCondensed Cash Flow Statement Data(In Thousands)(Unaudited)
 
        Three Months Ended Nine Months Ended
        March 31, 2024   April 2, 2023   March 31, 2024   April 2, 2023
Cash Flows from Operating Activities:              
Net Income (Loss) $ 1,126     $ (3,287 )   $ 6,361     $ (5,865 )
Adjustments to Reconcile Net Income (Loss) to              
  Cash (Used in) Provided by Operating Activities:              
    Depreciation   4,059       4,347       12,774       13,145  
    Equity (Earnings) Loss in Joint Ventures   -       (819 )     269       (1,934 )
    Foreign Currency Transaction Loss   475       1,529       126       2,114  
    Unrealized Loss (Gain) on Peso Forward Contracts   222       70       (604 )     93  
    Loss on Settlement of Pension Obligation   -       217       -       217  
    Stock Based Compensation Expense   240       265       1,224       1,139  
    Change in Operating Assets/Liabilities   (6,676 )     (3,665 )     (27,775 )     (1,767 )
  Other, net   245       120       402       370  
                     
Net Cash (Used in) Provided by Operating Activities   (309 )     (1,223 )     (7,223 )     7,512  
Cash Flows from Investing Activities:              
  Proceeds from sale of interest in VAST LLC   -       -       2,000       -  
  Investment in Joint Ventures   -       (133 )     -       (237 )
  Additions to Property, Plant & Equipment   (1,672 )     (4,247 )     (6,065 )     (13,724 )
  Proceeds on Sales of Property, Plant & Equipment   -       11       -       15  
                     
Net Cash Used in Investing Activities   (1,672 )     (4,369 )     (4,065 )     (13,946 )
Cash Flows from Financing Activities:              
  Borrowings on Line of Credit Facility   -       4,000       2,000       13,000  
  Payments on Line of Credit Facility   -       -       (2,000 )     (3,000 )
  Dividends Paid to Non-Controlling Interest of Subsidiary   -       -       -       (600 )
  Exercise of Stock Options and Employee Stock Purchases   18       18       55       164  
                     
Net Cash Provided by Financing Activities   18       4,018       55       9,564  
Effect of Foreign Currency Fluctuations on Cash   (18 )     82       256       182  
Net (Decrease) Increase in Cash & Cash Equivalents   (1,981 )     (1,492 )     (10,977 )     3,312  
Cash & Cash Equivalents:              
  Beginning of Period   11,575       13,578       20,571       8,774  
  End of Period $ 9,594     $ 12,086     $ 9,594     $ 12,086  
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