STRATTEC SECURITY CORP
For the period ended Mar 31, 2024. Filed May 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 9, 2024
STRT$61.96+2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-08.
0000950170-24-012813
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0000950170-24-056833
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 88 previous paragraphs and 97 current paragraphs.
33 unchanged; 43 reworded; 18 added; 11 removed; 1 previous and 3 current paragraphs rearranged.
Tables are not compared: 16 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
When excluding the $7.0 million of customer pricing from our third quarter net sales growth over prior year, we saw an increase in sales of 5.2% primarily driven by the launch of new product programs. We anticipate such growth will continue into the fourth quarter and into fiscal 2025.
Current report
From a cost of sales perspective, we anticipate continued cost pressures on our Mexican operations due to the current strength of the Mexican Peso relative to the U.S. Dollar and higher wages in Mexico driven by the Mexican government’s minimum wage increases, which have increased manufacturing costs fiscal year-to-date by $7.9 million and $4.6 million respectively. Additionally, we have experienced higher shipping costs fiscal year-to-date of $3.1 million, primarily driven by expedited shipping associated with the launch of new product programs. We expect some continuation of these higher costs while we implement the launch of the remaining new products.
Current report
Sales to General Motors Company were positively impacted by a favorable shift in product mix with increased sales of higher priced power access and user interface control products and reduced sales of lower priced key and lockset products.
Current report
Cost Increases:
Current report
The current year quarter includes expense provisions of $942,000 under our incentive bonus plan. No bonus expense provisions were recorded in the prior year quarter.
Current report
Cost Decreases:
Current report
The prior year quarter included a $1.3 million warranty provision associated with a customer's specific warranty claim involving our product.
Current report
Engineering, selling and administrative expenses were consistent between quarterly periods. Reductions in new product development costs with third-party vendors in the current year quarter as compared to the prior year quarter were offset by current year quarter expense provisions of $817,000 under our incentive bonus plan. No bonus expense provisions were recorded in the prior year quarter.
Current report
Sales to General Motors Company were positively impacted by a favorable shift in product mix with increased sales of higher priced power access and user interface control products and reduced sales of lower priced key and lockset products.
Current report
Sales to Ford Motor Company were positively impacted by added power end gate content we supply on the F-Series Super Duty Pickup and by new tailgate latch content supplied on the Ford F-Series Pickups.
Current report
Cost Increases:
Current report
The current year period includes expense provisions of $942,000 under our incentive bonus plan. No bonus expense provisions were recorded in the prior year period.
Current report
Cost Decreases:
Current report
The prior year period included a $1.3 million warranty provision associated with a customer's specific warranty claim involving our product.
Current report
Engineering, selling and administrative expenses increased $1.5 million between year-to-date periods. The current year period includes one-time charges of approximately $1 million associated with the transition of our Chief Executive Officer and expense provisions of $817,000 under our incentive bonus plan. No bonus expense provisions were recorded in the prior year period.
Current report
Accounts receivable balances increased in the current year period and in the prior year period. The increases reflect increased sales levels as of the end of our third quarter during both fiscal periods.
Current report
The change in inventory levels reflected a decrease during the prior year period as a result of efforts to align inventory balances with historical customer production patterns during the March 2023 quarter.
Current report
Accounts payable and accrued liability balances increased in the prior year period. The increased accounts payable balances reflected the timing of purchases and payments with our vendors based on normal, established payment terms. Additionally, the accrued liability balances included an increase in value-added tax payable balances related to our operations in Mexico due to filed returns that were under audit and pending settlement. The prior year audits have since been closed.
Removed paragraphs (11)
Previous report
Although net sales in the first half of the year were relatively unchanged versus prior year after adjusting for the aforementioned pricing achieved, we anticipate modest sales growth in the remainder of the fiscal year due to the launch of various customer programs in our second half of fiscal 2024, which is evidenced by the abnormally high level of recoverable customer tooling on our balance sheet awaiting program production starts relative to historical levels.
Previous report
From a cost of sales perspective, anticipated key challenges persist, namely a strong Mexican Peso relative to the U.S. Dollar and the December 2023 Mexican government's announcement of another 20 percent mandated minimum wage increase starting in January 2024, both of which increase the cost of our Mexican operations. In our current fiscal year-to-date period the U.S. dollar to Mexican Peso exchange rate averaged 17.21 compared with a rate of 19.88 in the prior year period, resulting in approximately a $5.8 million increase in the cost of our Mexican operations. Meanwhile the Mexican government mandated minimum wage increase of January 2023 resulted in approximately $2.8 million higher wages and benefits in our fiscal year-to-date results and we expect the newly announced minimum wage increases for 2024 to have a similar financial effect on the back half of our fiscal year.
Previous report
$3.8 million of ongoing increases in current part prices for parts shipped during the current year quarter.
Previous report
$2.6 million of ongoing increases in current part prices for parts shipped during our fiscal 2024 first quarter for which the price increases were finalized during the current quarter.
Previous report
$1.6 million of one-time retroactive price increases for parts shipped in our prior fiscal year for which the price increases were finalized during the current quarter.
Previous report
Quarter-over-quarter sales were not materially impacted by the UAW strike. Net customer production volume and content changes resulted in net sales reductions, which partially offset the net price increases discussed above. The following volume and content changes specifically impacted sales to the noted customer groups between quarters:
Previous report
Engineering, selling and administrative expenses increased $1.3 million between quarterly periods due to one-time charges of approximately $900,000 associated with the transition of our Chief Executive Officer position as well as higher outside expenditures for new product development costs associated with utilizing third-party vendors for a portion of our development work.
Previous report
Engineering, selling and administrative expenses increased $1.3 million between year-to-date periods due to one-time charges of approximately $900,000 associated with the transition of our Chief Executive Officer position as well as higher outside expenditures for new product development costs associated with utilizing third-party vendors for a portion of our development work.
Previous report
Accounts receivable balances decreased in the current year period due a reduction in sales in the December 2023 quarter as compared to the June 2023 quarter and the collection of billings for customer tooling, which were outstanding as of June 2023.
Previous report
The change in inventory levels reflected an increase during the current year period and a decrease during the prior year period. The current year period increase in finished, in-process and purchased material inventory balances is due to actual December 2023 sales volumes being lower than customer planned releases and the initial purchase of materials required for new program launches, which are scheduled during the remainder of our fiscal 2024. The prior year period decrease was due to a reduction in inventory balances to align with historical customer production patterns.
Previous report
Accounts payable and accrued liability balances decreased in the current year period. Accounts payable balances for each period reflected the timing of purchases and payments with our vendors based on normal, established payment terms. The current year period reduction is primarily due to a change in inventory management, shipping terms, and payment terms with a significant vendor during the fourth quarter of our fiscal 2023. Increased accounts payable balances as of June 2023 that resulted from the change were paid during the current year period.
Reworded paragraphs (43)
Previous wording
The following Management’s Discussion and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s accompanying Condensed Consolidated Financial Statements and Notes thereto and its 2023 Form 10-K, which was filed with the Securities and Exchange Commission on September 7, 2023. Also, refer to discussion of prior period corrections under Basis of Financial Statements included in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q. Unless otherwise indicated, all references to quarters and years refer to fiscal quarters and fiscal years.
Current wording
The following Management’s Discussion and Analysis should be read in conjunction with STRATTEC SECURITY CORPORATION’s accompanying Condensed Consolidated Financial Statements and Notes thereto and its 2023 Form 10-K, which was filed with the SEC on September 7, 2023. Also, refer to discussion of prior period corrections under Basis of Financial Statements included in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q. Unless otherwise indicated, all references to quarters and years refer to fiscal quarters and fiscal years.
Previous wording
The key highlight of our fiscal year-to-date results has been $18.8 million of customer pricing increases, equating to $15.5 million gross margin improvement after factoring in the $3.3 million paid to key suppliers for negotiated price increases. Furthermore, of this $15.5 million gross margin improvement, $7.8 million is considered “ongoing” as it relates to present program price increases that will carry forward to subsequent years. For full fiscal year 2024, we now anticipate an annualized increase in “ongoing” pricing, net of higher costs paid to suppliers, to be at the higher end of our originally targeted $10.0 million to $15.0 million. We do not anticipate any further material one-time retroactive pricing adjustments for the remainder of the fiscal year.
Current wording
The key highlight of our fiscal year-to-date results has been $25.8 million of customer pricing increases, equating to $21.3 million gross margin improvement after factoring in the $4.5 million paid to key suppliers for negotiated price increases. Furthermore, of this $21.3 million gross margin improvement, $13.2 million is considered “ongoing” as it relates to present program price increases that will carry forward to subsequent years. For full fiscal year 2024, we now anticipate an annualized increase in “ongoing” pricing, net of higher costs paid to suppliers, to exceed the higher end of our originally targeted range of $10.0 million to $15.0 million. We do not anticipate any further material one-time retroactive pricing adjustments for the remainder of the fiscal year.
Previous wording
To help offset the increased cost of labor and overhead in our Mexican operations, we implemented a salaried staffing reduction in our Mexican operations in the 2024 first quarter that is projected to reduce costs by an annualized amount of approximately $800,000. Our results year-to-date on reducing non-employee cost of sales has been mixed, as the team has made meaningful progress on reducing material costs, notably for raw materials. In spite of these efforts, much of this benefit has been offset by higher shipping costs. Despite these results, we continue to target a net $3 million savings in non-employee cost of sales for the full 2024 fiscal year.
Current wording
To help offset the increased costs of our Mexican operations, we implemented a salaried staffing reduction in our Mexican operations in the 2024 first quarter that is projected to reduce costs by an annualized amount of approximately $800,000. Additionally, we anticipate our focus on reducing non-employee cost of sales will generate between $4 million and $5 million in savings in the full fiscal year, excluding the aforementioned higher shipping costs, driven by improved cost of raw materials and production efficiencies.
Previous wording
Regarding the balance sheet, we anticipate the balance of reimbursable customer tooling will remain increased over historical levels until later in the fiscal year at which time we expect a normalization to near historical levels with the launch of the associated programs. We expect the Mexican value-added tax (see Note on page 8) will return to historical levels in first quarter of fiscal 2025. As for net inventory, we saw an increase of $8 million in our inventory balances since the end of the 2024 first quarter due to delays in new product launches and lower than anticipated sales in December. However, we remain committed to improving our inventory turn in the second half of the fiscal year. Lastly, we plan on renewing our ADAC-STRATTEC credit facility within the fiscal year as the joint venture’s profitability improves through higher customer pricing and cost cutting measures.
Current wording
Regarding the balance sheet, we expect the balance of reimbursable customer tooling will begin to decrease significantly in the fourth quarter and continue decreasing in the first half of fiscal 2025 as we normalize to near historical levels by the end of the calendar year 2024 with the completed launch of the associated programs. We expect the Mexican VAT (see Note on page 8) will return to historical levels in first half of fiscal 2025 with the closing of the periods under audit. As for net inventory, we reduced our inventory balance by $10.8 million in the third quarter as we worked to reverse the inventory build that occurred in the first half of the fiscal year due to delays in new product launches and lower than anticipated sales. We remain committed to improving our inventory turn over the coming quarters. Lastly, we plan on renewing our ADAC-STRATTEC credit facility in the fourth quarter.
Previous wording
For our fiscal 2024 capital expenditures, we have reduced our anticipated expenditures from $14 million to between $9 million and $12 million due to retiming and re-estimates.
Current wording
For our fiscal 2024 capital expenditures, we continue to anticipate to spend between $9 million to $12 million.
Previous wording
Sales to Ford Motor Company were positively impacted due to new power end gate content we supply on the F-Series Super Duty Pickup.
Current wording
Sales to Ford Motor Company were positively impacted by added power end gate content we supply on the F-Series Super Duty Pickup and by new tailgate latch content supplied on the Ford F-Series Pickups.
Previous wording
Sales to Stellantis were negatively impacted by reduced customer vehicle production volumes, specifically related to several passenger car programs ending and customer plant closures during the current year quarter affecting Chrysler Pacifica minivan production.
Current wording
Sales to Stellantis were negatively impacted by reduced customer vehicle production volumes and reduced content we supply for the Dodge Ram Pickup and several passenger car programs ending.
Previous wording
Sales to Commercial and Other OEM Customers, which are comprised of aftermarket products and vehicle access control products, such as latches, fobs, driver controls and door handles, increased slightly between year-to-date periods. Increased sales in the current year period for new business awarded from Aston Martin was mostly offset by decreased sales between periods due to door handle programs ending with Honda Motor Company.
Current wording
Sales to Commercial and Other OEM Customers, which are comprised of aftermarket products and vehicle access control products, such as latches, fobs, driver controls and door handles, were positively impacted by sales for new business awarded from Aston Martin.
Previous wording
Total cost of goods sold decreased $800,000 between quarterly periods. The quarter-over-quarter reduction in direct material costs of $2.4 million was the result of the net reduction in sales volumes, as discussed above, and reduced zinc costs of approximately $870,000 in the current year quarter as compared to the prior year quarter. These favorable impacts were partially offset by $1.8 million of negotiated material price increases paid to key suppliers. Price increases paid to suppliers attributed to ongoing operations totaled $880,000, while the remaining $910,000 relates to one-time retroactive price increases. The quarter-over-quarter increase in labor and overhead costs of $1.6 million was impacted by the following:
Current wording
Total cost of goods sold increased $8.9 million between quarterly periods. The quarter-over-quarter increase in direct material costs of $3.5 million was the result of the net increase in sales volumes and content we supply, as discussed above, and $1.2 million of negotiated material price increases paid to key suppliers, which were primarily attributable to ongoing operations. These unfavorable impacts were partially offset by reduced zinc costs of approximately $850,000 in the current year quarter as compared to the prior year quarter. The quarter-over-quarter increase in labor and overhead costs of $5.4 million was impacted by the following:
Previous wording
The U.S. dollar value of our Mexican operations was negatively impacted by approximately $2.5 million in the current year quarter as compared to the prior year quarter due to an unfavorable Mexican peso to U.S. dollar exchange rate between periods. The average U.S. dollar / Mexican peso exchange rate decreased to approximately 17.28 pesos to the dollar in the current year quarter from approximately 19.57 pesos to the dollar in the prior year quarter.
Current wording
The U.S. dollar value of our Mexican operations was negatively impacted by approximately $2.1 million in the current year quarter as compared to the prior year quarter due to an unfavorable Mexican peso to U.S. dollar exchange rate between periods. The average U.S. dollar / Mexican peso exchange rate decreased to approximately 16.97 pesos to the dollar in the current year quarter from approximately 18.56 pesos to the dollar in the prior year quarter.
Previous wording
Mexico wages and benefits increased $1.3 million in the current year quarter as compared to the prior year quarter as a result of a January 1, 2023 20 percent government mandated minimum wage increase. This increase was partially offset by $780,000 due to a September 2023 salaried staff reduction in Mexico and current year quarter production efficiencies that controlled headcount and hours worked.
Current wording
Mexico wages and benefits increased $1.8 million in the current year quarter as compared to the prior year quarter as a result of annual wage increases, including a January 1, 2024 20 percent government mandated minimum wage increase.
Previous wording
Freight costs increased $1.3 million between quarterly periods due to an increase in shipments from foreign vendors, a change in shipping terms with a major supplier that occurred in June 2023, and an increase in expedited shipments.
Current wording
Freight costs increased $778,000 between quarterly periods due to a change in shipping terms with a major supplier that occurred in June 2023 and an increase in expedited shipments.
Previous wording
The unfavorable impact of specific labor and overhead cost increases noted above was partially offset by favorable absorption of our fixed overhead costs in the current year quarter as compared to the prior year quarter due to higher production volumes between quarters associated with increases in finished and work in process inventories during the current year quarter and reductions in finished and work in process inventories during the prior year quarter.
Current wording
Current year quarter reductions in our finished and work in process inventories resulted in unfavorable absorption of labor and overhead costs in the current year quarter as compared to the prior year quarter.
Previous wording
Gross profit margin improvement between quarterly periods was driven by pricing increases achieved during the current year quarter as discussed above. The net impact of customer and supplier pricing for parts shipped during our fiscal 2024 first quarter and our prior fiscal year for which the price increases were finalized during the current quarter increased the current year quarter gross profit margin percentage by 2.4 percentage points. Additionally, favorable impacts of ongoing customer price increases for parts shipped during the current year quarter, reduced zinc costs between quarterly periods, favorable absorption resulting from increased production and production efficiencies in Mexico were partially offset by an unfavorable U.S. dollar to Mexican peso exchange rate combined with the mandatory Mexican minimum wage increase in 2023 and higher freight costs, all as discussed above.
Current wording
Gross profit margin improvement between quarterly periods was driven by pricing increases achieved during the current year quarter, as discussed above, reduced zinc and warranty costs between quarterly periods and production efficiencies in Mexico. These favorable impacts were partially offset by an unfavorable U.S. dollar to Mexican peso exchange rate combined with Mexico wage increases, higher freight costs, bonus expense provisions recorded in the current year quarter and unfavorable absorption of our fixed overhead costs in the current year quarter as compared to the prior year quarter, all as discussed above.
Previous wording
Income from operations was $58,000 in the current year quarter compared to loss from operations of $4.7 million in the prior year quarter due to improvement in gross profit margin dollars partially offset by an increase in engineering, selling and administrative expenses as discussed above.
Current wording
Income from operations was $2.0 million in the current year quarter compared to loss from operations of $2.5 million in the prior year quarter due to improvement in gross profit margin dollars as discussed above.
Previous wording
Effective June 30, 2023, STRATTEC sold its one-third interest in VAST LLC to WITTE. Refer to the discussion of the Equity Restructuring Agreement within Joint Ventures and Majority Owned Subsidiaries included in the Notes to Financial Statements within this Form 10-Q for additional information regarding the sale of STRATTEC's VAST LLC interest to WITTE Automotive. The equity loss of joint ventures was $4,000 in the current year quarter compared to equity earnings of joint ventures of $588,000 in the prior year quarter. The current year quarter equity loss of joint ventures was the result of additional professional fees incurred during the period related to the sale of STRATTEC's investment in VAST LLC. The $4,000 is an adjustment to the gain on sale of VAST LLC, which was recorded in our fiscal 2023. Our adjusted loss on sale of VAST LLC totals $159,000.
Current wording
Equity earnings of joint ventures was $819,000 in the prior year quarter. Effective June 30, 2023, STRATTEC sold its one-third interest in VAST LLC to WITTE. Refer to the discussion of the Equity Restructuring Agreement within Joint Ventures and Majority Owned Subsidiaries included in the Notes to Financial Statements within this Form 10-Q for additional information regarding the sale of STRATTEC's VAST LLC interest to WITTE Automotive.
Previous wording
Included in Other Income (Expense), net in the current year quarter and prior year quarter were the following items (in thousands):
Current wording
Included in Other (Expense) Income, net in the current year quarter and prior year quarter were the following items (in thousands):
Previous wording
Set forth below is a discussion of the items comprising certain of the components of our Other Income (Expense), net:
Current wording
Set forth below is a discussion of the items comprising certain of the components of our Other (Expense) Income, net:
Previous wording
Our effective tax rate was 24.0 percent and 40.7 percent for the six-month periods ended December 31, 2023 and January 1, 2023, respectively. The higher effective tax rate in the prior year six-month period was due to the impact of available R&D and foreign tax credits on projected pre-tax book losses for the fiscal year. The change in our effective tax rate between quarterly periods was also impacted by the sale of our interest in VAST LLC and the purchase of the remaining non-controlling interest in SPA, which were both effective June 30, 2023. Our prior year period effective tax rate differs from the statutory tax rate due to the application of the Global Intangible Low Taxed Income (GILTI) tax provisions, our available R&D tax credit and the non-controlling interest portion of our pre-tax income. The non-controlling interest portion impacts the effective tax rate as ADAC-STRATTEC LLC is taxed as a partnership for U.S. tax purposes. SPA was taxed as a partnership in our fiscal 2023.
Current wording
Our effective tax rate was 32.7 percent and (4.2) percent for the three-month periods ended March 31, 2024 and April 2, 2023, respectively. The effective rate estimate for the three-month period ended March 31, 2024 increased as compared to the prior year quarter as a result of a shift in our global earnings mix. The effective tax rate for the three-month period ended April 2, 2023 was impacted by an increase in our fiscal year 2023 pre-tax net loss estimate as of the end of our April 2, 2023 quarter as compared to our estimate as of our January 1, 2023 quarter. The change in our effective tax rate between quarterly periods was also impacted by the sale of our interest in VAST LLC and the purchase of the remaining non-controlling interest in SPA, which were both effective June 30, 2023. Our prior year period effective tax rate differs from the statutory tax rate due to the application of the Global Intangible Low Taxed Income (GILTI) tax provisions, our available R&D tax credit and the non-controlling interest portion of our pre-tax income. The non-controlling interest portion impacts the effective tax rate as ADAC-STRATTEC LLC is taxed as a partnership for U.S. tax purposes. SPA was taxed as a partnership in our fiscal 2023.
Previous wording
Six months ended December 31, 2023 compared to the six months ended January 1, 2023
Current wording
Nine months ended March 31, 2024 compared to the nine months ended April 2, 2023
Previous wording
The period-over-period sales increase of $20.4 million reflects net price increases from our major OEM customers of $18.8 million of which $9.3 million is attributed to ongoing increases in current part prices and $9.5 million relates to one-time retroactive price increases for parts shipped in the prior fiscal year for which the price increases were finalized during the current year-to-date period. Period-over-period sales were not materially impacted by the UAW strike. In addition to the net price increases, the following items specifically impacted sales to the noted customer groups between year-to-date periods:
Current wording
The period-over-period sales increase of $34.0 million reflects net price increases from our major OEM customers of $25.8 million of which $15.9 million is attributed to ongoing increases in current part prices and $9.9 million relates to one-time retroactive price increases for parts shipped in the prior fiscal year for which the price increases were finalized during the current year-to-date period. Period-over-period sales were not materially impacted by the UAW strike. In addition to the net price increases, the following items specifically impacted sales to the noted customer groups between year-to-date periods:
Previous wording
Excluding the impact of net price increases described above, sales to Stellantis were negatively impacted by reduced customer vehicle production volumes, specifically related to several passenger car programs ending and customer plant shutdowns during the current year period affecting Chrysler Pacifica minivan production.
Current wording
Excluding the impact of net price increases described above, sales to Stellantis were negatively impacted by several passenger car programs ending during the current year period, customer plant shutdowns during the current year period negatively impacting Chrysler Pacifica minivan production, and reduced customer vehicle production volumes and reduced content we supply on the Dodge Ram Pickup.
Previous wording
Sales to Commercial and Other OEM Customers, which are comprised of aftermarket products and vehicle access control products, such as latches, fobs, driver controls and door handles, increased between quarterly periods. The current year quarter includes sales for new business awarded from Aston Martin.
Current wording
Sales to Commercial and Other OEM Customers, which are comprised of aftermarket products and vehicle access control products, such as latches, fobs, driver controls and door handles, were positively impacted by sales for new business awarded from Aston Martin in the current year period.
Previous wording
Sales to Hyundai / Kia were positively impacted due to an overall increase in customer vehicle production volumes.
Current wording
Sales to Hyundai / Kia were positively impacted due to an overall increase in customer vehicle production volumes between year-to-date period.
Previous wording
Total cost of goods sold increased $8.0 million between year-to-date periods. The period-over-period increase in direct material costs of $1.3 million was the result of $3.3 million of negotiated material price increases paid to key suppliers. Price increases paid to suppliers attributed to ongoing operations totaled $1.5 million, while the remaining $1.8 million relates to one-time retroactive price increases. The impact of material price increases paid to suppliers was partially offset by reduced zinc costs of approximately $1.6 million in the current year period as compared to the prior year period. The period-over-period increase in labor and overhead costs of $6.7 million was impacted by the following:
Current wording
Total cost of goods sold increased $17.0 million between year-to-date periods. The period-over-period increase in direct material costs of $4.8 million was the result of the net increase in sales volumes and content we supply, as discussed above, and $4.5 million of negotiated material price increases paid to key suppliers. Price increases paid to suppliers attributed to ongoing operations totaled $2.7 million while the remaining $1.8 million relates to one-time retroactive price increases. The impact of material price increases paid to suppliers was partially offset by reduced zinc costs of approximately $2.4 million in the current year period as compared to the prior year period. The period-over-period increase in labor and overhead costs of $12.2 million was impacted by the following:
Previous wording
The U.S. dollar value of our Mexican operations was negatively impacted by approximately $5.8 million in the current year period as compared to the prior year period due to an unfavorable Mexican peso to U.S. dollar exchange rate between periods. The average U.S. dollar / Mexican peso exchange rate decreased to approximately 17.21 pesos to the dollar in the current year period from approximately 19.88 pesos to the dollar in the prior year period.
Current wording
The U.S. dollar value of our Mexican operations was negatively impacted by approximately $7.9 million in the current year period as compared to the prior year period due to an unfavorable Mexican peso to U.S. dollar exchange rate between periods. The average U.S. dollar / Mexican peso exchange rate decreased to approximately 17.13 pesos to the dollar in the current year period from approximately 19.44 pesos to the dollar in the prior year period.
Previous wording
Mexico wages and benefits increased $2.8 million in the current year period as compared to the prior year period as a result of a January 1, 2023 20 percent government mandated minimum wage increase. This increase was partially offset by $1.2 million due to a September 2023 salaried staff reduction in Mexico and current year period production efficiencies that controlled headcount and hours worked.
Current wording
Mexico wages and benefits increased $4.6 million in the current year period as compared to the prior year period as a result of annual wage increases, including January 1, 2023 and January 1, 2024 20 percent government mandated minimum wage increases.
Previous wording
Freight costs increased $2.3 million between year-to-date periods due to an increase in shipments from foreign vendors, a change in shipping terms with a major supplier that occurred in June 2023, and an increase in expedited shipments.
Current wording
Freight costs increased $3.1 million between year-to-date periods due to an increase in shipments from foreign vendors, a change in shipping terms with a major supplier that occurred in June 2023, and an increase in expedited shipments.
Previous wording
The unfavorable impact of specific labor and overhead cost increases noted above was partially offset by favorable absorption of our fixed overhead costs in the current year period as compared to the prior year period due to higher production volumes between year-to-date periods associated with increases in finished and work in process inventories during the current year-to-date period and reductions in finished and work in process inventories during the prior year-to-date period.
Current wording
Absorption of our labor and overhead costs was favorable in the current year period as compared to the prior year period due to larger reductions in finished and work in process inventories in the prior year period.
Previous wording
Gross profit margin improvement between year-to-date periods was driven by pricing increases achieved during the current year period as discussed above. The net impact of one-time retroactive customer and supplier pricing in the current year period increased the gross profit margin percentage by 2.7 percentage points. Additional current year period favorable impacts of ongoing customer price increases, reduced zinc costs between year-to-date periods, favorable absorption resulting from increased production and production efficiencies in Mexico were partially offset by ongoing price increases paid to suppliers, an unfavorable U.S. dollar to Mexican peso exchange rate combined with the mandatory Mexican minimum wage increase in 2023, and higher freight costs, all as discussed above.
Current wording
Gross profit margin improvement between year-to-date periods was driven by pricing increases achieved during the current year period as discussed above. The net impact of one-time retroactive customer and supplier pricing in the current year period increased the gross profit margin percentage by 1.8 percentage points. Additional current year period favorable impacts to the gross profit margin included ongoing customer price increases and other sales increases, as discussed above, reduced zinc and warranty costs between year-to-date periods, favorable absorption resulting from increased production and production efficiencies in Mexico. These favorable impacts were partially offset by ongoing price increases paid to suppliers, an unfavorable U.S. dollar to Mexican peso exchange rate combined with the mandatory Mexican minimum wage increase in 2023, higher freight costs, and bonus expense provisions recorded in the current year period, all as discussed above.
Previous wording
Income from operations was $6.2 million in the current year period compared to loss from operations of $4.9 million in the prior year period due to improvement in gross profit margin dollars partially offset by an increase in engineering, selling and administrative expenses as discussed above.
Current wording
Income from operations was $8.1 million in the current year period compared to loss from operations of $7.4 million in the prior year period due to improvement in gross profit margin dollars partially offset by an increase in engineering, selling and administrative expenses as discussed above.
Previous wording
Effective June 30, 2023, STRATTEC sold its one-third interest in VAST LLC to WITTE. Refer to the discussion of the Equity Restructuring Agreement within Joint Ventures and Majority Owned Subsidiaries included in the Notes to Financial Statements within this Form 10-Q for additional information regarding the sale of STRATTEC's VAST LLC interest to WITTE Automotive. The equity loss of joint ventures was $269,000 in the current year period compared to equity earnings of joint ventures of $1.1 million in the prior year period. The current year period equity loss of joint ventures was the result of additional professional fees incurred during the period related to the sale of STRATTEC's interest in VAST LLC. The $269,000 is an adjustment to the gain on sale of VAST LLC of $110,000, which was recorded in our fiscal 2023. Our adjusted loss on sale of VAST LLC totals $159,000.
Current wording
Effective June 30, 2023, STRATTEC sold its one-third interest in VAST LLC to WITTE. Refer to the discussion of the Equity Restructuring Agreement within Joint Ventures and Majority Owned Subsidiaries included in the Notes to Financial Statements within this Form 10-Q for additional information regarding the sale of STRATTEC's VAST LLC interest to WITTE Automotive. The equity loss of joint ventures was $269,000 in the current year period compared to equity earnings of joint ventures of $1.9 million in the prior year period. The current year period equity loss of joint ventures was the result of additional professional fees incurred during the period related to the sale of STRATTEC's interest in VAST LLC. The $269,000 is an adjustment to the gain on sale of VAST LLC of $110,000, which was recorded in our fiscal 2023. Our adjusted loss on sale of VAST LLC totals $159,000.
Previous wording
Included in Other Income (Expense), net in the current year period and prior year period were the following items (in thousands):
Current wording
Included in Other (Expense) Income, net in the current year period and prior year period were the following items (in thousands):
Previous wording
Set forth below is a discussion of the items comprising certain of the components of our Other Income (Expense), net:
Current wording
Set forth below is a discussion of the items comprising certain of the components of our Other (Expense) Income, net:
Previous wording
Our effective tax rate was 25.3 percent and 40.8 percent for the three-month periods ended December 31, 2023 and January 1, 2023, respectively. The higher effective tax rate in the prior year three-month period was due to the impact of available R&D and foreign tax credits on projected pre-tax book losses for the fiscal year. The change in our effective tax rate between quarterly periods was also impacted by the sale of our interest in VAST LLC and the purchase of the remaining non-controlling interest in SPA, which were both effective June 30, 2023. Our prior year period effective tax rate differs from the statutory tax rate due to the application of the Global Intangible Low Taxed Income (GILTI) tax provisions, our available R&D tax credit and the non-controlling interest portion of our pre-tax income. The non-controlling interest portion impacts the effective tax rate as ADAC-STRATTEC LLC is taxed as a partnership for U.S. tax purposes. SPA was taxed as a partnership in our fiscal 2023.
Current wording
Our effective tax rate was 25.7 percent and 21.8 percent for the nine-month periods ended March 31, 2024 and April 2, 2023, respectively. The change in our effective tax rate between periods was impacted by the sale of our interest in VAST LLC and the purchase of the remaining non-controlling interest in SPA, which were both effective June 30, 2023. Our prior year period effective tax rate differs from the statutory tax rate due to the application of the Global Intangible Low Taxed Income (GILTI) tax provisions, our available R&D tax credit and the non-controlling interest portion of our pre-tax income. The non-controlling interest portion impacts the effective tax rate as ADAC-STRATTEC LLC is taxed as a partnership for U.S. tax purposes. SPA was taxed as a partnership in our fiscal 2023.
Previous wording
We earn a portion of our operating income in Mexico. As of December 31, 2023, $3.3 million of our $11.6 million cash and cash equivalents balance was held in Mexico. These funds are available for repatriation as deemed necessary.
Current wording
We earn a portion of our operating income in Mexico. As of March 31, 2024, $1.7 million of our $9.6 million cash and cash equivalents balance was held in Mexico. These funds are available for repatriation as deemed necessary.
Previous wording
The change in other assets includes an increase in balances during both the current and prior year to date periods. Customer tooling balances increased during both periods. Additionally, the current year period includes an increase in value-added tax recoverable balances related to our operations in Mexico. Customer tooling balances changed due to the timing of tooling development spending required to meet customer production requirements and the timing of related customer billings for tooling cost reimbursement. Value-added tax recoverable balances increased $10.0 million during the current year period due to a temporary issue with our Mexican tax certification. Although the certification issue was resolved during the quarter ended December 31, 2023, we were required to pay VAT on all parts temporarily imported into Mexico before seeking reimbursement for periods in which the certification issue was outstanding, which periods are now open to audit with the Mexican tax authority. The temporary increases in the VAT recoverable balance will remain elevated until the periods under audit are closed.
Current wording
The change in other assets includes an increase in balances during both the current and prior year to date periods. Customer tooling balances and value-added tax recoverable balances related to our operations in Mexico increased during both periods. Customer tooling balances changed due to the timing of tooling development spending required to meet customer production requirements and the timing of related customer billings for tooling cost reimbursement. Value-added tax recoverable balances increased $11.4 million during the current year period due to a temporary issue with our Mexican tax certification. Although the certification issue was resolved during the quarter ended December 31, 2023, we were required to pay VAT on all parts temporarily imported into Mexico before seeking reimbursement for periods in which the certification issue was outstanding, which periods are now open to audit with the Mexican tax authority. The temporary increases in the VAT recoverable balance will remain elevated until the periods under audit are closed. Value-added tax recoverable balances increased during the prior year period due to filed returns that were under audit and pending settlement. The prior year audits have since been closed.
Previous wording
Net cash used in investing activities during the current year period of $2.4 million included capital expenditures made in support of requirements for new product programs and the upgrade and replacement of existing equipment of $4.4 million, offset by $2.0 million in proceeds received from the sale of our investment in VAST LLC, which sale was effective during the fourth quarter of our fiscal 2023. Net cash used in investing activities during the prior year period of $9.6 million included capital expenditures made in support of requirements for new product programs and the upgrade and replacement of existing equipment of $9.5 million and an investment in our VAST LLC joint venture of $104,000.
Current wording
Net cash used in investing activities during the current year period of $4.1 million included capital expenditures made in support of requirements for new product programs and the upgrade and replacement of existing equipment of $6.1 million, offset by $2.0 million in proceeds received from the sale of our investment in VAST LLC, which sale was effective during the fourth quarter of our fiscal 2023. Net cash used in investing activities during the prior year period of $13.9 million included capital expenditures made in support of requirements for new product programs and the upgrade and replacement of existing equipment of $13.7 million and investments in our VAST LLC joint venture of $237,000.
Previous wording
Net cash provided by financing activities of $37,000 during the current year period included $2 million of borrowings under our credit facility, which borrowings were repaid during the period resulting in no net impact to the change in cash during the period, and $37,000 received for purchases under our employee stock purchase plan. Net cash provided by financing activities of $5.5 million during the prior year period included $9 million of additional borrowings under our credit facility and $146,000 received for the exercise of stock options under our stock incentive plan and purchases under our employee stock purchase plan, partially offset by $3.0 million of repayments of borrowings under our credit facilities and $600,000 of dividend payments to non-controlling interests in our subsidiaries.
Current wording
Net cash provided by financing activities of $55,000 during the current year period included $2 million of borrowings under our credit facility, which borrowings were repaid during the period resulting in no net impact to the change in cash during the period, and $55,000 received for purchases under our employee stock purchase plan. Net cash provided by financing activities of $9.6 million during the prior year period included $13 million of additional borrowings under our credit facility and $164,000 received for the exercise of stock options under our stock incentive plan and purchases under our employee stock purchase plan, partially offset by $3.0 million of repayments of borrowings under our credit facilities and $600,000 of dividend payments to non-controlling interests in our subsidiaries.
Previous wording
We anticipate total capital expenditures will be approximately $9 million to $12 million in fiscal 2024, of which $4.4 million has been made through December 31, 2023, in support of requirements for new product programs and the upgrade and replacement of existing equipment.
Current wording
We anticipate total capital expenditures will be approximately $9 million to $12 million in fiscal 2024, of which $6.1 million has been made through March 31, 2024, in support of requirements for new product programs and the upgrade and replacement of existing equipment.
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
The quarter-over-quarter sales increase of $13.6 million reflects net price increases from our major OEM customers of $7.0 million, which is primarily attributed to ongoing increases in current part prices. In addition to the net price increases, the following items specifically impacted sales to the noted customer groups between quarters:
Current report — wording carried from elsewhere
Mexico wages and benefits decreased by $384,000 due to a September 2023 salaried staff reduction in Mexico and current year period production efficiencies that controlled headcount and hours worked.
Current report — wording carried from elsewhere
Mexico wages and benefits decreased by $1.5 million due to a September 2023 salaried staff reduction in Mexico and current year period production efficiencies that controlled headcount and hours worked.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The quarter-over-quarter sales increase of $5.3 million reflects net price increases from our major OEM customers of $8.0, which includes the following: