GlobeNewswire Inc | Apr 22, 2021 04:00PM EDT

April 22, 2021

MILWAUKEE, April 22, 2021 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal third quarter ended March 28, 2021.

Net sales for the Companys third quarter ended March 28, 2021 were $121.6 million, compared to net sales of $116.9 million for the third quarter ended March 29, 2020.

Net income for the current year quarterly period was $4.5 million, compared to net income of $3.0 million in the prior year quarter. Diluted earnings per share for the current year quarterly period were $1.15 compared to diluted earnings per share of $0.79 in the prior year quarter.

For the nine months ended March 28, 2021, the Companys net sales were $ 375.2 million compared to net sales of $343.2 million in the prior year nine month period.

Net income during the current year nine month period was $19.6 million compared to net income of $2.9 million in the prior year nine month period. Diluted earnings per share were $5.11 for the nine month period ended March 28, 2021 compared to diluted earnings per share of $0.77 during the nine month period ended March 29, 2020. The prior year nine month period was negatively impacted by a pre-tax $4,473,000 non-cash compensation charge relating to the termination of our Defined Benefit Pension Plan and reduced our diluted earnings per share by $.92 in the prior year period.

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 March 28, March 29, 2021 2020 Fiat Chrysler Automobiles $ 21,685 $ 26,050 General Motors Company 34,544 31,656 Ford Motor Company 21,721 15,462 Tier 1 Customers 17,289 17,495 Commercial and Other OEM 17,876 20,184 Customers Hyundai / Kia 8,529 6,091 TOTAL $ 121,644 $ 116,938

Net sales for our current year quarter were impacted by supply chain shortages and resulted in several of our customers shutting down certain plants and/or production lines for periods of time.

Sales to Fiat Chrysler Automobiles in the current year quarter decreased in comparison to the prior year quarter due to lower production volumes of the vehicles we supply, in particular related to Chrysler minivans. The increase in sales to General Motors Company in the current year quarter compared to the prior year quarter related primarily to higher sales content on models for which we supply components, in particular for power access and door handle products. Sales to Ford Motor Company increased in the current year quarter compared to the prior year quarter due primarily to higher product content on models for which we supply components, and in particular for the new power tailgate program on the F-150 pickup trucks. Sales to Tier 1 Customers were flat in the current year quarter compared to the prior year quarter. 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 sales related to door handle products and power access products sold to Honda of America Manufacturing, Inc. and related to reductions in sales of door handle products sold to Volkswagen. These Commercial and Other OEM Customers, along with the Tier 1 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 in recent years to complement our historic core business of locks and keys. The increased sales to Hyundai / Kia in the current year quarter were principally due to higher levels of production on their recently launched new Kia Sedona and Hyundai Starex minivans for which we supply primarily power sliding door components.

Gross profit margins were 15.3 percent in the current year quarter compared to 14.5 percent in the prior year quarter. The increase in gross profit margin in the current year quarter compared to the prior year quarter was primarily attributed to improved manufacturing efficiencies both at our Milwaukee and Mexico production facilities, despite supply chain disruptions. Also reducing gross profit margins in the current year quarter were higher expense provisions for accrual of bonuses and a mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2021. This wage increase was principally offset by a favorable U.S. Dollar to Mexican Peso exchange rate affecting our Mexican operations

Engineering, Selling and Administrative expenses represented 9.8 percent in the current year quarter as a percent of net sales compared to 9.2 percent in the prior year quarter. The increase in overall operating expenses in the current year quarter was primarily due to higher expense provisions for accrual of bonuses and expenditures on new product development costs.

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

March 28, March 29, 2020 2021 Equity (Loss) of VAST LLC Joint $ (56 ) $ (947 ) Venture Net Foreign Currency Realized and Unrealized Transaction Gain 429 1,467 Other 26 (392 ) $ 399 $ 128

The increase in Other Income, Net in the current year quarter was primarily related to improved profitability in our VAST LLC China operation which had extended OEM customer plant shutdowns associated with the coronavirus (COVID-19) pandemic in the prior year quarter.

Frank Krejci, President & CEO commented: For the first six months of our fiscal year, we efficiently supported strong customer orders. During the current quarter there were supply constraints within the industry. Some vehicle assembly plants were temporarily closed and others cut back the number of work shifts despite continued demand from consumers, car rental companies and dealers. While our customers have tried to place production priority on pick-up trucks and sport utility vehicles where we supply significant product content it reduced our sales for this quarter and will impact the upcoming quarter. However, we believe returning to full production should help sustain future volume by refilling the dealer inventory pipeline to adequately support customer demand.

Despite having to manage through semiconductor and other part shortages, we are proud of our Associates efforts to deliver $1.15 in diluted earnings per share for this quarter and $5.11 for the first nine months of our current fiscal year. Positive generation of cash flow remains strong through a combination of operating performance and greater utilization of our capital investments made over the last few years. As a result, we were able to reduce debt by another $6 million this quarter and another $4 million in April 2021. Our debt to equity ratio has now been significantly reduced since the beginning of the fiscal year, thus creating opportunity for strategic investments in product and technology.

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 companys products to global customers under the VAST Automotive Group brand name. STRATTECs 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 Companys operations and business environment. These uncertainties include general economic conditions, in particular, relating to the automotive industry, consumer demand for the Companys 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 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 Companys quarterly and annual filings with the Securities and Exchange Commission.

STRATTEC SECURITY CORPORATIONCondensed Results of Operations(In Thousands except per share amounts)(Unaudited)

Third Quarter Ended Nine Months Ended March March March March 28, 29, 28, 29, 2021 2020 2021 2020Net Sales $ 121,644 $ 116,938 $ 375,238 $ 343,183 Cost of Goods 102,990 99,928 311,832 299,954 Sold Gross Profit 18,654 17,010 63,406 43,229 Engineering,Selling & 11,927 10,727 33,543 35,775 AdministrativeExpenses Income from 6,727 6,283 29,863 7,454 Operations Interest (63 ) (204 ) (259 ) (792 )Expense Other Income, 399 128 673 1,030 Net Income beforeProvision forIncome Taxes 7,063 6,207 30,277 7,692 andNon-ControllingInterest Provision for 1,153 1,294 4,721 1,194 Income Taxes Net Income 5,910 4,913 25,556 6,498 Net IncomeAttributable to (1,425 ) (1,919 ) (5,950 ) (3,601 )Non-ControllingInterest Net IncomeAttributable toSTRATTEC $ 4,485 $ 2,994 $ 19,606 $ 2,897 SECURITYCORPORATION Earnings (Loss) Per Share:Basic $ 1.18 $ 0.80 $ 5.18 $ 0.78 Diluted $ 1.15 $ 0.79 $ 5.11 $ 0.77 Average Basic Shares 3,797 3,748 3,783 3,733 Outstanding Average Diluted Shares 3,886 3,768 3,839 3,752 Outstanding Other Capital $ 1,808 $ 2,923 $ 6,401 $ 10,307 ExpendituresDepreciation $ 4,933 $ 4,769 $ 14,730 $ 14,349

STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data(In Thousands)

March 28, June 28, 2021 2020 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 11,335 $ 11,774 Receivables, net 81,304 41,955 Inventories, net 58,330 54,400 Other current assets 18,051 17,239 Total Current Assets 169,020 125,368 Investment in Joint Ventures 26,051 22,068 Other Long Term Assets 13,390 12,961 Property, Plant and Equipment, Net 97,263 105,148 $ 305,724 $ 265,545 LIABILITIES AND SHAREHOLDERS? EQUITY Current Liabilities: Accounts Payable $ 36,250 $ 18,549 Other 39,248 29,591 Total Current Liabilities 75,498 48,140 Accrued Pension and Post Retirement 1,944 1,956 ObligationsBorrowings Under Credit Facility 16,000 35,000 Other Long-term Liabilities 4,788 5,008 Shareholders? Equity 330,923 309,991 Accumulated Other Comprehensive Loss (17,711 ) (22,113 )Less: Treasury Stock (135,622 ) (135,656 )Total STRATTEC SECURITY CORPORATION Shareholders? Equity 177,590 152,222 Non-Controlling Interest 29,904 23,219 Total Shareholders? Equity 207,494 175,441 $ 305,724 $ 265,545

STRATTEC SECURITY CORPORATIONCondensed Cash Flow Statement Data(In Thousands)(Unaudited)

Third Quarter Ended Nine Months Ended March 28, March March March 2021 29, 28, 29, 2020 2021 2020 Cash Flows fromOperating Activities:Net Income $ 5,910 $ 4,913 $ 25,556 $ 6,498 Adjustment toReconcile Net Income toCash Providedby Operating Activities:Equity Loss(Earnings) in 56 921 (1,844 ) (55 )Joint VenturesDepreciation 4,933 4,769 14,730 14,349 ForeignCurrency (386 ) (2,515 ) 1,926 (2,067 )Transaction(Gain) LossUnrealized(Gain) Loss on PesoForward (32 ) 1,048 (512 ) 1,048 ContractsStock BasedCompensation 193 165 775 789 ExpenseNon-CashCompensation - - - 4,473 ExpenseLoss ondisposition of (5 ) (13 ) 1,421 270 property, plant& equipmentDeferred Income - - - (1,032 )taxesChange inOperating (2,450 ) (69 ) (17,012 ) 5,409 Assets/LiabilitiesOther, net 121 107 356 252 Net CashProvided by 8,340 9,326 25,396 29,934 OperatingActivities Cash Flows fromInvesting Activities:Investment in - - (100 ) - Joint VenturesAdditions toProperty, Plant (1,808 ) (2,923 ) (6,401 ) (10,307 )and EquipmentProceeds fromSale of Property, Plantand Equipment 5 14 8 29 Net Cash Usedin Investing (1,803 ) (2,909 ) (6,493 ) (10,278 )Activities Cash Flows fromFinancing Activities:Repayment ofBorrowings (6,000 ) (5,000 ) (19,000 ) (15,000 )Under CreditFacilityDividends Paidto Non-ControllingInterests of - - (490 ) (980 )SubsidiariesDividends Paid - (525 ) - (1,572 )Employee Stock 545 24 585 543 Purchases Cash Flows fromFinancing (5,455 ) (5,501 ) (18,905 ) (17,009 )Activities: Effect ofForeignCurrency (179 ) (28 ) (437 ) (283 )Fluctuations onCash Net Increase(Decrease) in 903 888 (439 ) 2,364 Cash & CashEquivalents Cash and Cash Equivalents:Beginning of 10,432 9,285 11,774 7,809 PeriodEnd of Period $ 11,335 $ 10,173 $ 11,335 $ 10,173

Contact: Pat HansenSenior Vice President andChief Financial Officer414-247-3435www.strattec.com