8-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  August 11, 2022

STRATTEC SECURITY CORPORATION
(Exact name of registrant as specified in charter)
Wisconsin
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(State or other jurisdiction of incorporation)
0-25150	39-1804239
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(Commission File Number)	(I.R.S. Employer I.D. Number)
3333 West Good Hope Road<br><br> <br>Milwaukee, WI	53209
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(Address of Principal Executive Offices)	(Zip Code)
(414) 247-3333
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(Registrant's telephone number; including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of exchange on which registered
Common stock, $.01 par value	STRT	The Nasdaq Global Stock Market

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following

    provisions \(see General Instruction A.2. below\):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company     ☐

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. ☐

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Section 2 – Financial Information

Item 2.02.	Results of Operations and Financial Condition.

On August 11, 2021, STRATTEC SECURITY CORPORATION issued a press release (the "Press Release") announcing results for the fiscal fourth quarter and year ended July 3, 2022.  A copy of the Press Release is attached as Exhibit 99.1 to this report.  The attached Exhibit 99.1 is furnished pursuant to Item 2.02 of Form 8-K.

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

Section 9 - Financial Statements and Exhibits

Item 9.01.	Financial Statements and Exhibits.
(d)	Exhibits
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99.1 ‑‑ Press Release of STRATTEC SECURITY CORPORATION, issued August 11, 2022.

104 – Cover Page Interactive Data File (embedded within the Inline XBRL document).

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	STRATTEC SECURITY CORPORATION
Date:  August 11, 2022
	By:	/s/ Patrick J. Hansen
		Patrick J. Hansen, Senior Vice President and
		Chief Financial Officer

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Exhibit 99.1

FOR RELEASE AT 3:00 PM CST

Contact:  Pat Hansen

Senior Vice President and

Chief Financial Officer

414-247-3435

www.strattec.com

STRATTEC SECURITY CORPORATION

REPORTS FISCAL 2022 FOURTH QUARTER AND

FULL YEAR OPERATING RESULTS

Milwaukee, Wisconsin – August 11, 2022 -- STRATTEC SECURITY CORPORATION (NASDAQ:STRT) today reported operating results for the fiscal fourth quarter and full year ended July 3, 2022. The comparative current year fourth quarter operating results were negatively impacted by higher costs for raw materials and purchased components in our manufacturing operations, reductions in output at some of our OEM customers’ assembly plants and the COVID-19 virus that temporarily shut down our VAST China operations which is further described in this press release.

Fourth Quarter Overview

Net sales for the Company’s fourth quarter ended July 3, 2022 were $123.1 million, compared to net sales of $110.1 million for the fourth quarter ended June 27, 2021.  The 2022 fiscal fourth quarter was a 14 week period while fiscal 2021’s fourth quarter was the typical 13 week period. The impact of the additional week of customer shipments during the current year quarter increased net sales by approximately $7.4 million over the prior year quarter. Net income for the current year quarterly period was $391,000, compared to net income of $2.9 million in the prior year fourth quarter.  Diluted earnings per share for the current year quarterly period were $0.10 compared to diluted earnings per share of $0.75 in the prior year quarter.  Despite higher sales levels in the current year quarter versus the prior year quarter, as noted above, our net income and diluted earnings per share were adversely impacted by higher costs for raw materials and purchased components in the current year quarter.

Full Year Earnings Overview

For the year ended July 3, 2022, the Company’s net sales were $452.3 million compared to net sales of $485.3 million in the prior year period. Net income during the current year was $7.0 million compared to net income of $22.5 million in the prior year period.  Diluted earnings per share were $1.80 for the year ended July 3, 2022 compared to diluted earnings per share of $5.85 during the prior year ended June 27, 2021.

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Discussion of Quarterly Results

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
	July 3, 2022		June 27, 2021
General Motors Company	$	38,633	$	35,225
Stellantis / Fiat Chrysler Automobiles		20,598		15,710
Ford Motor Company		21,808		13,314
Tier 1 Customers		16,443		13,332
Commercial and Other OEM Customers		14,901		18,689
Hyundai / Kia		10,690		13,787
TOTAL	$	123,073	$	110,057

As mentioned previously, the current year quarter sales had one additional week of sales in comparison to the prior year quarter that totaled $7.4 million. Notwithstanding that extra week of sales, the global semiconductor chip shortage and adverse issues impacting the availability of other raw materials and component parts arising from the Coronavirus (COVID-19) pandemic continue to adversely impact our OEM customers’ output at their assembly plants, thereby reducing our potential sales.

Sales to General Motors in the current year quarter increased in comparison to the prior year quarter due to higher production volumes on the Chevrolet Silverado power tailgate and increased sales from several lock set product platforms with General Motors. Sales to Stellantis / Fiat Chrysler Automobiles increased in the current year quarter compared to the prior year quarter due to higher volumes on the Chrysler Pacifica for which we supply power sliding door components and other access control products.  Sales to Ford Motor Company increased in the current year quarter compared to the prior year quarter due to higher production volumes on our lock set product platforms with Ford and increased production for the F-150 pick-up truck for which we supply power tailgate components. Sales to Tier 1 Customers increased in the current year quarter compared to the prior year quarter due to increased volumes on sales of our door handle product.  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 our Aftermarket service keys business between quarters. These Commercial and Other OEM Customers, along with Tier1 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 to complement our historic core business of locks and keys. Sales to Hyundai / Kia were lower in the current year quarter compared to the prior year quarter due to lower production volumes on the Kia Carnival and Hyundai Starex minivans for which we supply primarily power sliding door components.

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Gross profit margins were 11.3 percent in the current year quarter compared to 13.9 percent in the prior year quarter.  The decrease in gross profit margin in the current year quarter compared to the prior year quarter was primarily attributed to higher costs for production materials that impacted the gross profit margin by 340 basis points and the mandatory minimum wage increase enacted by the Mexican Government effective January 1, 2022. Partially offsetting the decreased gross profit margins between periods were improved manufacturing efficiencies both at our Milwaukee and Mexico production facilities, despite the ongoing supply chain disruptions described above, and lower expense provisions for accrual of bonuses under our incentive bonus plans.

Engineering, Selling and Administrative expenses overall were $12.4 million in the current year quarter and $11.2 million in the prior year quarter. As a percent of net sales in the current year quarter (14 weeks) these expenses were 10.1% percent compared to 10.2% in the prior year quarter (13 weeks).

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

	July 3, 2022			June 27, 2021
Equity (Loss) Earnings of VAST LLC Joint Venture	$	(760	)	$	716
(Loss) Gain on Rabbi Trust Assets		(243	)		393
Net Foreign Currency Realized and
Unrealized Transaction Gain (Loss)		358			(231	)
Other (Expense) Income		(12	)		(156	)
	$	(657	)	$	722

The net loss at VAST LLC during the current year quarter related primarily to our VAST China operations being temporarily shut down due to COVID -19 restrictions enacted by the Chinese Government.

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Frank Krejci, President & CEO commented: “We have dealt well with the things we could control.  Unfortunately for our bottom line, there were significant factors which were out of our control like supply chains limiting customer production and spikes in material cost which we were forced to absorb.  In addition, our operations in China were impacted by the aggressive shutdowns imposed by their government to combat the spread of COVID.

The negative impacts were reduced significantly through our cost controls and implementation of efficiency improvements.  Those improvements are beginning to benefit us today and many will have a continuing long-term positive impact.  Strategically, with our strong balance sheet, we have been able to make a significant investment in inventory levels to dampen problems from supply chain issues. Our financial position also allows us to focus on long-term decisions like investing in new opportunities while still remaining ready to deal with current market uncertainties.

We see continuing growth of our award-winning designs for the power tailgates on the Chevrolet Silverado and the Ford F150 pick-up trucks.  As the Electric Vehicle market rapidly grows, we see opportunity for new product development as well as refined versions of much of our present product lines.  We are pleased with the acceptance of our new product by our customers and the new business that has been awarded to us over the last year.

As we complete our first month of a new fiscal year, we are encouraged by the higher production schedules from our customers and their press releases anticipating continuing improvement in the industry during the last half of calendar year 2022”.

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.

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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 or customer cost reimbursement actions, adverse business and operational issues resulting from the global supply chain disruptions, the semiconductor chip shortages and 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 Company’s quarterly and annual filings with the Securities and Exchange Commission.

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STRATTEC SECURITY CORPORATION

Condensed Results of Operations

(In Thousands except per share amounts)

(Unaudited)

	Fourth Quarter Ended						Years Ended
	July 3, 2022			June 27, 2021			July 3, 2022			June 27, 2021
Net Sales	$	123,073		$	110,057		$	452,265		$	485,295
Cost of Goods Sold		109,177			94,805			396,249			406,637
Gross Profit		13,896			15,252			56,016			78,658
Engineering, Selling & Administrative Expenses		12,436			11,200			47,119			44,743
Income from Operations		1,460			4,052			8,897			33,915
Interest Expense		(62	)		(43	)		(221	)		(302	)
Other (Expense) Income, Net		(657	)		722			604			1,395
Income before Provision for Income Taxes and Non- Controlling Interest		741			4,731			9,280			35,008
Provision for Income Taxes		78			390			420			5,111
Net Income		663			4,341			8,860			29,897
Net Income Attributable to Non-Controlling Interest		272			1,415			1,828			7,365
Net Income Attributable to STRATTEC SECURITY CORPORATION	$	391		$	2,926		$	7,032		$	22,532
Net Income Per Share:
Basic	$	0.10		$	0.77		$	1.82		$	5.95
Diluted	$	0.10		$	0.75		$	1.80		$	5.85
Average Basic Shares Outstanding		3,876			3,805			3,861			3,788
Average Diluted Shares Outstanding		3,920			3,890			3,910			3,852
Other
Capital Expenditures	$	4,781		$	2,528		$	14,188		$	8,929
Depreciation	$	4,655		$	5,056		$	19,379		$	19,786

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STRATTEC SECURITY CORPORATION

Condensed Balance Sheet Data

(In Thousands)

	July 3, 2022			June 27, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	8,774		$	14,465
Receivables, net		75,827			69,902
Inventories, net		80,482			70,860
Other current assets		23,149			19,677
Total Current Assets		188,232			174,904
Investment in Joint Ventures		26,344			27,224
Other Long Term Assets		12,375			12,034
Property, Plant and Equipment, Net		91,729			96,401
	$	318,680		$	310,563
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	43,950		$	36,727
Other		37,525			40,845
Total Current Liabilities		81,475			77,572
Accrued Pension and Post Retirement Obligations		1,722			2,933
Borrowings Under Credit Facility		11,000			12,000
Other Long-term Liabilities		4,070			4,625
Shareholders’ Equity		343,103			334,058
Accumulated Other Comprehensive Loss		(18,657	)		(16,797	)
Less:  Treasury Stock		(135,580	)		(135,615	)
Total STRATTEC SECURITY CORPORATION Shareholders’ Equity		188,866			181,646
Non-Controlling Interest		31,547			31,787
Total Shareholders’ Equity		220,413			213,433
	$	318,680		$	310,563

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STRATTEC SECURITY CORPORATION

Condensed Cash Flow Statement Data

(In Thousands)

(Unaudited)

	Fourth Quarter Ended						Years Ended
	July 3, 2022			June 27, 2021			July 3, 2022			June 27, 2021
Cash Flows from Operating Activities:
Net Income	$	663		$	4,341		$	8,860		$	29,897
Adjustment to Reconcile Net Income to Cash (Used In) Provided By Operating Activities:
Equity Loss (Earnings) in Joint Ventures		760			(716	)		(181	)		(2,560	)
Depreciation		4,655			5,056			19,379			19,786
Foreign Currency Transaction (Gain) Loss		(313	)		519			(237	)		2,445
Unrealized Loss (Gain) on Peso
Forward Contracts		116			(211	)		(384	)		(723	)
Stock Based Compensation Expense		267			197			1,140			972
Loss on disposition of property, plant & equipment		39			-			192			1,421
Deferred Income taxes		(1,981	)		1,473			(1,981	)		1,473
Change in Operating Assets/Liabilities		(5,677	)		(1,087	)		(16,837	)		(18,099	)
Other, net		124			182			485			538
Net Cash (Used In) Provided By Operating Activities		(1,347	)		9,754			10,436			35,150
Cash Flows from Investing Activities:
Investment in Joint Ventures		(75	)		-			(150	)		(100	)
Additions to Property, Plant and Equipment		(4,781	)		(2,528	)		(14,188	)		(8,929	)
Other		5			-			5			8
Net Cash Used in Investing Activities		(4,851	)		(2,528	)		(14,333	)		(9,021	)
Cash Flows from Financing Activities:
Borrowings Under Credit Facility		2,000			-			13,000			-
Repayment of Borrowings Under Credit Facility		(3,000	)		(4,000	)		(14,000	)		(23,000	)
Dividends Paid to Non-Controlling
Interests of Subsidiaries		(600	)		-			(1,800	)		(490	)
Exercise of Stock Options and
Employee Stock Purchases		24			19			908			604
Net Cash Used In Financing Activities		(1,576	)		(3,981	)		(1,892	)		(22,886	)
Effect of Foreign Currency Fluctuations on Cash		89			(115	)		98			(552	)
Net (Decrease) Increase in Cash & Cash Equivalents		(7,685	)		3,130			(5,691	)		2,691
Cash and Cash Equivalents:
Beginning of Period		16,459			11,335			14,465			11,774
End of Period	$	8,774		$	14,465		$	8,774		$	14,465

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