STRT Strattec Security Corporation

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