UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact Name of Registrant as Specified in Its Charter)
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(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices)
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(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer |
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Non-accelerated filer |
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Smaller Reporting Company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Common stock, par value $0.01 per share:
STRATTEC SECURITY CORPORATION
FORM 10-Q
January 1, 2023
INDEX
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Page |
Part I - FINANCIAL INFORMATION |
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Item 1 |
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Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income (Unaudited) |
3 |
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Condensed Consolidated Balance Sheets (Unaudited) |
4 |
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Condensed Consolidated Statements of Cash Flows (Unaudited) |
5 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
6-22 |
Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23-30 |
Item 3 |
31 |
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Item 4 |
31 |
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Part II - OTHER INFORMATION |
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Item 1 |
32 |
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Item 1A |
32 |
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Item 2 |
32 |
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Item 3 |
32 |
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Item 4 |
32 |
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Item 5 |
32 |
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Item 6 |
33 |
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PROSPECTIVE INFORMATION
A number of the matters and subject areas discussed in this Form 10-Q 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,” or the negative of these terms or words of similar meaning. These statements include expected future financial results, product offerings, global expansion, liquidity needs, financing ability, planned capital expenditures, management’s or the Company’s expectations and beliefs, and similar matters discussed in this Form 10-Q. The discussion of such matters and subject areas contained herein is qualified by the inherent risks and uncertainties surrounding future expectations generally, and also may materially differ from the Company’s actual future experience.
The Company’s business, operations and financial performance are subject to certain risks and uncertainties, which could result in material differences in actual results from the Company’s current expectations. These risks and uncertainties include, but are not limited to, 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 reactions to same from foreign countries, the volume and scope of product returns or customer cost reimbursement actions, changes in the costs of operations, warranty claims, adverse business and operational issues resulting from the global supply chain and logistics disruption, the semiconductor chip supply shortages and the Coronavirus (COVID-19) pandemic, matters adversely impacting the timing, availability and cost of material component parts and raw materials for the production of our products and the products of our customers, or the continuation or worsening thereof, matters related to pricing actions implemented by the Company and customer responses and concessions related to same, and other matters described in the section titled “Risk Factors” in the Company’s Form 10-K report filed on September 8, 2022 with the Securities and Exchange Commission for the year ended July 3, 2022.
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 Form 10-Q 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 Form 10-Q.
Item 1 Financial Statements
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income
(In Thousands, Except Per Share Amounts)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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January 1, |
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December 26, |
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January 1, |
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December 26, |
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Net sales |
$ |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Engineering, selling and administrative expenses |
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(Loss) income from operations |
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( |
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( |
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Equity earnings of joint ventures |
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Interest expense |
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( |
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( |
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( |
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( |
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Other income (expense), net |
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( |
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( |
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(Loss) income before provision for |
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( |
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( |
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(Benefit) provision for income taxes |
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( |
) |
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( |
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Net (loss) income |
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( |
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( |
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Net (loss) income attributable to non- |
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( |
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( |
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Net (loss) income attributable to STRATTEC |
$ |
( |
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$ |
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$ |
( |
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$ |
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Comprehensive (loss) income: |
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Net (loss) income |
$ |
( |
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$ |
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$ |
( |
) |
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$ |
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Pension and postretirement plans, net of tax |
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Currency translation adjustments |
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( |
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( |
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( |
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Other comprehensive income (loss), net of tax |
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( |
) |
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( |
) |
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( |
) |
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Comprehensive (loss) income |
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( |
) |
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( |
) |
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Comprehensive (loss) income attributable to |
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( |
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( |
) |
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Comprehensive (loss) income attributable to |
$ |
( |
) |
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$ |
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$ |
( |
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$ |
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(Loss) earnings per share attributable to |
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Basic |
$ |
( |
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$ |
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$ |
( |
) |
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$ |
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Diluted |
$ |
( |
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$ |
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$ |
( |
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$ |
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Weighted Average shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income.
3
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Amounts)
(Unaudited)
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January 1, |
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July 3, |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
$ |
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$ |
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Receivables, net |
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Inventories: |
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Finished products |
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Work in process |
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Purchased materials |
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Excess and obsolete reserve |
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( |
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( |
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Inventories, net |
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Other current assets |
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Total current assets |
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Investment in joint ventures |
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Deferred Income Taxes |
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Other long-term assets |
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Property, plant and equipment |
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Less: accumulated depreciation |
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( |
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( |
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Net property, plant and equipment |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued Liabilities: |
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Payroll and benefits |
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Environmental |
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Warranty |
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Other |
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Total current liabilities |
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Borrowings under credit facilities |
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Accrued pension obligations |
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Accrued postretirement obligations |
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Other long-term liabilities |
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Shareholders’ Equity: |
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Common stock, authorized |
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Capital in excess of par value |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
) |
Less: treasury stock, at cost ( |
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( |
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( |
) |
Total STRATTEC SECURITY CORPORATION shareholders’ equity |
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Non-controlling interest |
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Total shareholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Balance Sheets.
4
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
|
Six Months Ended |
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January 1, |
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December 26, |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net (loss) income |
$ |
( |
) |
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$ |
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Depreciation |
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Foreign currency transaction loss (gain) |
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( |
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Unrealized loss on peso forward contracts |
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Stock-based compensation expense |
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Equity earnings of joint ventures |
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( |
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( |
) |
Change in operating assets and liabilities: |
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Receivables |
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( |
) |
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Inventories |
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( |
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Other assets |
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( |
) |
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Accounts payable and accrued liabilities |
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( |
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( |
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Other, net |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Investment in joint ventures |
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( |
) |
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— |
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Purchase of property, plant and equipment |
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( |
) |
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( |
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Proceeds received on sale of property, plant and equipment |
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— |
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Net cash used in investing activities |
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( |
) |
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( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
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Borrowings under credit facilities |
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Repayment of borrowings under credit facilities |
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( |
) |
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( |
) |
Dividends paid to non-controlling interests of subsidiaries |
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( |
) |
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( |
) |
Exercise of stock options and employee stock purchases |
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Net cash provided by financing activities |
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Foreign currency impact on cash |
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( |
) |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
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( |
) |
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CASH AND CASH EQUIVALENTS |
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Beginning of period |
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End of period |
$ |
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$ |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid (recovered) during the period for: |
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Income taxes |
$ |
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$ |
( |
) |
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Interest |
$ |
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$ |
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Non-cash investing activities: |
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Change in capital expenditures in accounts payable |
$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these Condensed Consolidated Statements of Cash Flows.
5
STRATTEC SECURITY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Basis of Financial Statements
STRATTEC SECURITY CORPORATION designs, develops, manufactures and markets automotive access control products including mechanical locks and keys, electronically enhanced locks and keys, passive entry passive start systems (PEPS), steering column and instrument panel ignition lock housings, latches, power sliding door systems, power tailgate systems, power lift gate systems, power deck lid systems, door handles and related products for primarily North American automotive customers. We also supply global automotive manufacturers through a unique strategic relationship with WITTE Automotive (“WITTE”) of Velbert, Germany, and ADAC Automotive (“ADAC”) of Grand Rapids, Michigan. Under this relationship, STRATTEC, WITTE and ADAC market the products of each company to global customers under the “VAST Automotive Group” brand name (as more fully described herein). STRATTEC products are shipped to customer locations in the United States, Canada, Mexico, Europe, South America, Korea, China and India, and we, along with our VAST LLC partners, provide full service and aftermarket support for each VAST Automotive Group partner’s products.
The accompanying condensed consolidated financial statements reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly owned Mexican subsidiary, STRATTEC de Mexico, and its majority owned subsidiaries, ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC. STRATTEC SECURITY CORPORATION is located in Milwaukee, Wisconsin. STRATTEC de Mexico is located in Juarez, Mexico. ADAC-STRATTEC, LLC and STRATTEC POWER ACCESS LLC have operations in El Paso, Texas and Juarez and Leon, Mexico. Equity investments in Vehicle Access Systems Technology LLC (“VAST LLC”), for which we exercise significant influence but do not control and are not variable interest entities of STRATTEC, are accounted for using the equity method. VAST LLC consists primarily of
In the opinion of management, the accompanying condensed consolidated balance sheets as of January 1, 2023 and July 3, 2022, which have been derived from our audited financial statements, and the related unaudited interim condensed consolidated financial statements included herein contain all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Rule 10-01 of Regulation S-X. All significant intercompany transactions have been eliminated.
Interim financial results are not necessarily indicative of operating results for an entire year. The information included in this Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the STRATTEC SECURITY CORPORATION 2022 Form 10-K, which was filed with the Securities and Exchange Commission on September 8, 2022.
During December 2022, management determined that a previously unrecorded liability for postretirement death benefits is required to be recognized in accordance with ASC 715. Eligible participants for this death benefit include all salaried retirees who retired prior to October 1, 2001 and all hourly retirees who were hired prior to June 27, 2005 and retired prior to January 1, 2010. As such, the actuarially calculated liability and the unrecognized actuarial losses impacting Accumulated Other Comprehensive Loss will be reported in the Condensed Consolidated Balance Sheets. Additionally, interest cost and amortization of actuarial losses will be reported in the in the Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income.
Additionally, management identified a correction to previously reported Equity Earnings of Joint Ventures in the Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income, which correction also impacts the previously reported Investment in Joint Ventures amount reported in the Condensed Consolidated Balance Sheets. While prior period amounts have been corrected for comparability, the corrections, both individually and in total, were not material to the previously reported condensed consolidated financial statements.
6
The impact of the prior period corrections on the Condensed Consolidated Balance Sheet, the related components of Stockholders’ Equity, and the related components of Accumulate Other Comprehensive Loss is as follows (thousands of dollars):
|
July 3, 2022 |
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Previously Reported |
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Adjustment |
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As Reported |
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ASSETS |
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Investment in joint ventures |
$ |
|
$ |
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$ |
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Deferred income taxes |
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Total assets |
$ |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
|
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Accrued Liabilities: Payroll and |
$ |
|
$ |
|
$ |
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Total current liabilities |
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Accrued postretirement obligations |
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Retained earnings |
|
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( |
) |
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Accumulated other comprehensive loss |
|
( |
) |
|
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( |
) |
|
Total STRATTEC SECURITY |
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( |
) |
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||
Total shareholders' equity |
|
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( |
) |
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||
Total liabilities and shareholders' |
$ |
|
$ |
|
$ |
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|||
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Accumulated Other Comprehensive Loss: |
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|
|||
Foreign currency translation adjustments |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
Retirement and Postretirement Benefit Plans |
|
( |
) |
|
|
|
( |
) |
|
Accumulated other comprehensive loss |
$ |
( |
) |
$ |
|
$ |
( |
) |
|
|
October 2, 2022 |
|
|
December 26, 2021 |
|
||||||||||||||
|
Previously Reported |
|
Adjustment |
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As Reported |
|
|
Previously Reported |
|
Adjustment |
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As Reported |
|
||||||
Retained earnings |
$ |
|
$ |
( |
) |
$ |
|
|
$ |
|
$ |
( |
) |
$ |
|
||||
Accumulated other comprehensive loss |
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
Total STRATTEC SECURITY |
|
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( |
) |
|
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|
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( |
) |
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|
||||
Total shareholders' equity |
$ |
|
$ |
( |
) |
$ |
|
|
$ |
|
$ |
( |
) |
$ |
|
||||
|
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||||||
Accumulated Other Comprehensive Loss: |
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|
|
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|
|
|
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|
||||||
Foreign currency translation adjustments |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
|
Retirement and Postretirement Benefit |
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
Accumulated other comprehensive loss |
$ |
( |
) |
$ |
|
$ |
( |
) |
|
$ |
( |
) |
$ |
( |
) |
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