STRATTEC SECURITY CORPORATION Reports Fiscal 2021 First Quarter Operating Results
STRATTEC SECURITY CORPORATION (NASDAQ: STRT) reported a strong fiscal first quarter for the period ending September 27, 2020. Net sales increased to $126.2 million, up from $120.0 million a year earlier. Net income surged to $8.0 million compared to $1.2 million, resulting in diluted earnings per share of $2.11 versus $0.33 in the prior year. Improved gross margins of 17.8% and a decline in operating expenses contributed to positive financial performance, despite slight decreases in sales from Fiat Chrysler due to production cuts.
- Net sales increased by $6.2 million year-over-year.
- Net income rose to $8.0 million, a significant improvement from the previous year's $1.2 million.
- Diluted earnings per share jumped to $2.11, up from $0.33.
- Gross profit margins improved to 17.8%, an increase attributed to operational cost improvements.
- Engineering, Selling and Administrative expenses decreased as a percentage of sales, improving cost management.
- Reduced debt by $5 million, enhancing balance sheet strength.
- Sales to Fiat Chrysler Automobiles decreased slightly due to lower production volumes.
- Impact of past General Motors UAW strike reduced sales by an estimated $3.0 million in the prior year.
MILWAUKEE, Oct. 22, 2020 (GLOBE NEWSWIRE) -- STRATTEC SECURITY CORPORATION (“STRATTEC” or the “Company”) (NASDAQ:STRT) today reported operating results for the fiscal first quarter ended September 27, 2020.
First Quarter
Net sales for the first quarter ended September 27, 2020 were
The current year quarter tax provision included a favorable tax adjustment due to recently enacted changes to the Federal tax law generally referred to as the “Tax Cuts and Jobs Act of 2017,” which reduced our income tax provision by
Net sales to each of our customers in the current year quarter and prior year quarter were as follows (in thousands):
| Three Months Ended | |||||
| September 27, 2020 | September 29, 2019 | ||||
| Fiat Chrysler Automobiles | $ | 25,083 | $ | 25,482 | |
| General Motors Company | 37,756 | 33,838 | |||
| Ford Motor Company | 15,846 | 15,812 | |||
| Tier 1 Customers | 17,495 | 17,747 | |||
| Commercial and Other OEM Customers | 21,435 | 21,346 | |||
| Hyundai / Kia | 8,619 | 5,737 | |||
| TOTAL | $ | 126,234 | $ | 119,962 | |
Sales to Fiat Chrysler Automobiles (FCA) in the current year quarter decreased slightly over the same period in the prior year quarter due primarily to lower vehicle production volumes on the FCA minivans for which we supply components. The Dodge Grand Caravan minivan went out of production during July 2020. The increase in sales to General Motors Company in the current year quarter compared to the prior year quarter related primarily to higher production volumes between periods. The impact of the General Motors UAW strike reduced net sales by an estimated
Gross Profit margins improved to
Engineering, Selling and Administrative expenses as a percent of net sales in the current year quarter were
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):
| September 27, 2020 | September 29, 2019 | ||||||
| Equity Earnings of VAST LLC Joint Venture | $ | 825 | $ | 487 | |||
| Net Foreign Currency Transaction Gain (Loss) | (123 | ) | (85 | ) | |||
| Other | (137 | ) | (15 | ) | |||
| $ | 565 | $ | 387 | ||||
The increase in equity earnings of VAST LLC related primarily to higher profitability in our VAST China operation during the current year quarter as compared to the same period in the prior year. VAST LLC (including VAST China) is a crucial part of our global strategy and we anticipate that it will contribute to our overall long term market and financial strength as it continues to grow.
Frank Krejci, President and CEO commented: “As we close out our 25th year as an independent company, spun off from Briggs & Stratton, I am exceptionally proud of the efforts by our team over the last 6 months of the COVID-19 pandemic.
For the quarter ending in June 2020, we had our worst quarter in the history of STRATTEC. Our customers shut down their automotive operations in North America for most of the quarter which impacted our facilities in Milwaukee, WI and Mexico. We used the time to build inventories where we could and make efficiency improvements which has benefited us going forward.
This current quarter ending in September 2020, was the second best in the history of STRATTEC, only exceeded by an unusual quarter when we were very busy making spare service parts for a customer recall campaign. It was a very welcomed turnaround which made up for most of the losses suffered in the previous quarter.
Compared to the same quarter last year, sales were similar, but this year’s quarter net profits were significantly higher. Most of that was the result of improved efficiencies and a permanent reduction in headcount. The temporary wage reductions taken by our salaried workforce on May 1, 2020 have now been restored effective September 1.
During this quarter, we also further strengthened our balance sheet by paying down
The strength of sales was likely due to a combination of market demand and to some degree, trying to restore inventory levels on dealer lots. Industry forecasts currently indicate a continuation of these production levels for the next 2 to 3 quarters, however, this may be modified based on changes in the severity of the COVID-19 pandemic and its impact on STRATTEC and our supply base to meet customer production orders.
Earlier this calendar year, we were one of four companies worldwide to win the General Motors Innovation Award. It recognized our design for a power open and close tailgate on their Silverado pick-up truck. It has proved to not only meet technical hurdles, but it is also rapidly gaining acceptance in the market. This quarter we have begun the launch of a similar product for the market share leading Ford F-150 pick-up truck line.
This year we are also celebrating the 20th anniversary of some other innovative thinking. With two privately held companies, WITTE Automotive of Germany and ADAC Automotive of Michigan, we formed the VAST (Vehicle Access System Technology) Automotive Group. It is a unique partnership where together we have expanded our global footprint in China and India. We have effectively leveraged each other’s technical and manufacturing capabilities for our mutual benefit and increased competitiveness.
The VAST partnership has matured and evolved over these twenty years. Finding ways to work better together has continued to accelerate especially during the last few years. It appears that the idea of partnerships has recently started to gain acceptance in a variety of ways in the automotive industry. Partnerships can come with their challenges, but our 20 year track record has proven that we have found ways to make it work.
All in all, I am very proud of the efforts of our team at STRATTEC and how it has been reflected in our earnings. We have used our time wisely when the industry was shut down, continued the pace of technical innovation in these very rapidly changing markets and are rapidly ramping up production to serve the demanding needs of our customers. I hope that the same pride is being felt by our team, which includes you, our shareholders, and we are grateful for the support that you have provided.”
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 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 (COVID-19) pandemic, 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: Pat Hansen
Senior Vice President and
Chief Financial Officer
414-247-3435
www.strattec.com
| STRATTEC SECURITY CORPORATION | |||||||
| Condensed Results of Operations | |||||||
| (In Thousands except per share amounts) | |||||||
| (Unaudited) | |||||||
| First Quarter Ended | |||||||
| September 27, 2020 | September 29, 2019 | ||||||
| Net Sales | $ | 126,234 | $ | 119,962 | |||
| Cost of Goods Sold | 103,723 | 104,076 | |||||
| Gross Profit | 22,511 | 15,886 | |||||
| Engineering, Selling & | |||||||
| Administrative Expenses | 11,314 | 12,954 | |||||
| Income from Operations | 11,197 | 2,932 | |||||
| Interest Expense | (112 | ) | (340 | ) | |||
| Other Income, Net | 565 | 387 | |||||
| Income before Provision for Income | |||||||
| Taxes and Non-Controlling Interest | 11,650 | 2,979 | |||||
| Provision for Income Taxes | 1,577 | 299 | |||||
| Net Income | 10,073 | 2,680 | |||||
| Net Income Attributable | |||||||
| to Non-Controlling Interest | (2,065 | ) | (1,436 | ) | |||
| Net Income Attributable | |||||||
| to STRATTEC SECURITY CORP. | $ | 8,008 | $ |
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FAQ
What were the net sales for STRATTEC in the first quarter of 2020?
Net sales for STRATTEC in the first quarter ended September 27, 2020, were $126.2 million.
How did STRATTEC's net income change in the first quarter of 2020?
STRATTEC's net income increased to $8.0 million in the first quarter of 2020, compared to $1.2 million in the same quarter of 2019.
What was STRATTEC's diluted earnings per share for Q1 2020?
Diluted earnings per share for STRATTEC in Q1 2020 were $2.11, significantly higher than the $0.33 in Q1 2019.
What improvements did STRATTEC report regarding its gross profit margins?
STRATTEC reported an increase in gross profit margins to 17.8% in Q1 2020, up from 13.2% in the prior year.
How did STRATTEC manage its expenses in the latest quarter?
Engineering, Selling and Administrative expenses as a percentage of net sales decreased to 9.0% in Q1 2020 from 10.8% in the previous year.
Strattec Security Corp
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Auto Parts
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