10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023

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 0-25150

STRATTEC SECURITY CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Wisconsin

39-1804239

(State of Incorporation)

(I.R.S. Employer Identification No.)

3333 West Good Hope Road, Milwaukee, WI 53209

(Address of Principal Executive Offices)

(414) 247-3333

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class

 

Trading Symbol

 

Name of exchange on which registered

Common stock, $.01 par value

 

STRT

 

The Nasdaq Global Stock Market

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. Yes No

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). Yes No

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

Accelerated filer

 

Non-accelerated filer

Smaller Reporting Company

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

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: 4,067,570 shares outstanding as of January 2, 2024 (which number includes all restricted shares previously awarded that have not vested as of such date).

 

 


 

STRATTEC SECURITY CORPORATION

FORM 10-Q

December 31, 2023

INDEX

 

 

Page

Part I - FINANCIAL INFORMATION

 

Item 1

Financial Statements

 

 

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Unaudited)

3

 

Condensed Consolidated Balance Sheets (Unaudited)

4

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

5

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

6-20

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21-29

Item 3

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4

Controls and Procedures

30

 

 

 

Part II - OTHER INFORMATION

 

Item 1

Legal Proceedings

31

Item 1A

Risk Factors

31

Item 2

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

31

Item 3

Defaults Upon Senior Securities

31

Item 4

Mine Safety Disclosures

31

Item 5

Other Information

31

Item 6

Exhibits

32

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, delays and restrictions impacting the import of goods and components stemming from heightened security procedures implemented by the U.S. Government related to U.S.-Mexico border crossings, 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 any material global supply chain and logistics disruption, the ongoing and lingering effects of 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 7, 2023 with the Securities and Exchange Commission for the year ended July 2, 2023.

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 Income (Loss) and Comprehensive Income (Loss)

(In Thousands, Except Per Share Amounts)

(Unaudited)

 

Three Months Ended

 

 

Six Months Ended

 

 

December 31,
2023

 

 

January 1,
2023

 

 

December 31,
2023

 

 

January 1,
2023

 

Net sales

$

118,532

 

 

$

113,184

 

 

$

253,938

 

 

$

233,544

 

Cost of goods sold

 

105,035

 

 

 

105,797

 

 

 

221,721

 

 

 

213,661

 

Gross profit

 

13,497

 

 

 

7,387

 

 

 

32,217

 

 

 

19,883

 

Engineering, selling and administrative expenses

 

13,439

 

 

 

12,081

 

 

 

26,053

 

 

 

24,781

 

Income (loss) from operations

 

58

 

 

 

(4,694

)

 

 

6,164

 

 

 

(4,898

)

Equity (loss) earnings of joint ventures

 

(4

)

 

 

588

 

 

 

(269

)

 

 

1,115

 

Interest expense

 

(219

)

 

 

(196

)

 

 

(439

)

 

 

(325

)

Interest income

 

107

 

 

 

 

 

 

194

 

 

 

 

Other income (expense), net

 

1,102

 

 

 

52

 

 

 

1,236

 

 

 

(241

)

Income (loss) before provision for
      income taxes and non-controlling interest

 

1,044

 

 

 

(4,250

)

 

 

6,886

 

 

 

(4,349

)

Provision (benefit) for income taxes

 

264

 

 

 

(1,735

)

 

 

1,651

 

 

 

(1,771

)

Net income (loss)

 

780

 

 

 

(2,515

)

 

 

5,235

 

 

 

(2,578

)

Net (loss) income attributable to non-
      controlling interest

 

(242

)

 

 

(676

)

 

 

48

 

 

 

(864

)

Net income (loss) attributable to STRATTEC
      SECURITY CORPORATION

$

1,022

 

 

$

(1,839

)

 

$

5,187

 

 

$

(1,714

)

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

780

 

 

$

(2,515

)

 

$

5,235

 

 

$

(2,578

)

Pension and postretirement plans, net of tax

 

47

 

 

 

70

 

 

 

93

 

 

 

140

 

Currency translation adjustments

 

1,014

 

 

 

429

 

 

 

365

 

 

 

(253

)

Other comprehensive income (loss), net of tax

 

1,061

 

 

 

499

 

 

 

458

 

 

 

(113

)

Comprehensive income (loss)

 

1,841

 

 

 

(2,016

)

 

 

5,693

 

 

 

(2,691

)

Comprehensive income (loss) attributable to
       non-controlling interest

 

170

 

 

 

(207

)

 

 

190

 

 

 

(339

)

Comprehensive income (loss) attributable to
      STRATTEC SECURITY CORPORATION

$

1,671

 

 

$

(1,809

)

 

$

5,503

 

 

$

(2,352

)

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to
      STRATTEC SECURITY CORPORATION:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.26

 

 

$

(0.47

)

 

$

1.31

 

 

$

(0.44

)

Diluted

$

0.26

 

 

$

(0.47

)

 

$

1.30

 

 

$

(0.44

)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

3,976

 

 

 

3,927

 

 

 

3,962

 

 

 

3,913

 

Diluted

 

3,998

 

 

 

3,927

 

 

 

3,986

 

 

 

3,913

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

3


 

STRATTEC SECURITY CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Amounts)

(Unaudited)

 

December 31,
2023

 

 

July 2,
2023

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

$

11,575

 

 

$

20,571

 

Receivables, net

 

70,802

 

 

 

89,811

 

Inventories:

 

 

 

 

 

Finished products

 

18,688

 

 

 

17,196

 

Work in process

 

19,374

 

 

 

17,492

 

Purchased materials

 

58,182

 

 

 

50,024

 

Excess and obsolete reserve

 

(6,805

)

 

 

(7,115

)

Inventories, net

 

89,439

 

 

 

77,597

 

Customer tooling in progress, net

 

24,951

 

 

 

20,800

 

Value-added tax recoverable

 

17,906

 

 

 

7,912

 

Other current assets

 

7,624

 

 

 

9,091

 

Total current assets

 

222,297

 

 

 

225,782

 

Deferred income taxes

 

13,625

 

 

 

13,619

 

Other long-term assets

 

5,692

 

 

 

7,083

 

Property, plant and equipment

 

304,239

 

 

 

300,176

 

Less: accumulated depreciation

 

(214,102

)

 

 

(205,730

)

Net property, plant and equipment

 

90,137

 

 

 

94,446

 

 

$

331,751

 

 

$

340,930

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

$

41,308

 

 

$

57,927

 

Accrued Liabilities:

 

 

 

 

 

Payroll and benefits

 

23,110

 

 

 

22,616

 

Value-added tax payable

 

7,122

 

 

 

6,499

 

Environmental

 

1,390

 

 

 

1,390

 

Warranty

 

9,083

 

 

 

9,725

 

Other

 

11,323

 

 

 

10,829

 

Total accrued liabilities

 

52,028

 

 

 

51,059

 

Borrowings under credit facilities – current

 

13,000

 

 

 

 

Total current liabilities

 

106,336

 

 

 

108,986

 

Borrowings under credit facilities – long-term

 

 

 

 

13,000

 

Accrued pension obligations

 

1,286

 

 

 

1,206

 

Accrued postretirement obligations

 

1,154

 

 

 

1,157

 

Other long-term liabilities

 

5,334

 

 

 

5,557

 

Shareholders’ Equity:

 

 

 

 

 

Common stock, authorized 18,000,000 shares, $.01 par value, 7,586,920
   issued shares at December 31, 2023 and
7,530,170 issued shares at
   July 2, 2023

 

76

 

 

 

75

 

Capital in excess of par value

 

101,207

 

 

 

100,309

 

Retained earnings

 

239,486

 

 

 

234,299

 

Accumulated other comprehensive loss

 

(13,878

)

 

 

(14,194

)

Less: treasury stock, at cost (3,599,575 shares at December 31, 2023 and
   
3,601,124 shares at July 2, 2023)

 

(135,501

)

 

 

(135,526

)

Total STRATTEC SECURITY CORPORATION shareholders’ equity

 

191,390

 

 

 

184,963

 

Non-controlling interest

 

26,251

 

 

 

26,061

 

Total shareholders’ equity

 

217,641

 

 

 

211,024

 

 

$

331,751

 

 

$

340,930

 

 

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

 

 

December 31,
2023

 

 

January 1,
2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

$

5,235

 

 

$

(2,578

)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

 

 

 

 

 

Depreciation

 

8,715

 

 

 

8,798

 

Foreign currency transaction (gain) loss

 

(349

)

 

 

585

 

Unrealized (gain) loss on peso forward contracts

 

(826

)

 

 

23

 

Stock-based compensation expense

 

984

 

 

 

874

 

Equity loss (earnings) of joint ventures

 

269

 

 

 

(1,115

)

Change in operating assets and liabilities:

 

 

 

 

 

Receivables

 

19,178

 

 

 

2,702

 

Inventories

 

(11,842

)

 

 

12,631

 

Other assets

 

(12,404

)

 

 

(11,177

)

Accounts payable and accrued liabilities

 

(16,031

)

 

 

(2,258

)

Other, net

 

157

 

 

 

250

 

Net cash (used in) provided by operating activities

 

(6,914

)

 

 

8,735

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Proceeds from sale of interest in VAST LLC

 

2,000

 

 

 

 

Investment in joint ventures

 

 

 

 

(104

)

Purchase of property, plant and equipment

 

(4,393

)

 

 

(9,477

)

Proceeds received on sale of property, plant and equipment

 

 

 

 

4

 

Net cash used in investing activities

 

(2,393

)

 

 

(9,577

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Borrowings under credit facilities

 

2,000

 

 

 

9,000

 

Repayment of borrowings under credit facilities

 

(2,000

)

 

 

(3,000

)

Dividends paid to non-controlling interests of subsidiaries

 

 

 

 

(600

)

Exercise of stock options and employee stock purchases

 

37

 

 

 

146

 

Net cash provided by financing activities

 

37

 

 

 

5,546

 

Foreign currency impact on cash

 

274

 

 

 

100

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(8,996

)

 

 

4,804

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

Beginning of period

 

20,571

 

 

 

8,774

 

End of period

$

11,575

 

 

$

13,578

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Income taxes

$

1,446

 

 

$

946

 

Interest

$

440

 

 

$

244

 

Non-cash investing activities:

 

 

 

 

 

Change in capital expenditures in accounts payable

$

(175

)

 

$

(553

)

 

 

 

 

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, fobs, 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, which has been restructured effective as of June 30, 2023 as described elsewhere herein. Under this relationship, STRATTEC, WITTE and ADAC market the products of each company to global customers as cooperating partners of 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 WITTE and ADAC, provide full service and aftermarket support for each VAST Automotive Group partner’s products. As noted below, effective as of June 30, 2023, we sold our one-third ownership interest in Vehicle Access Systems Technologies LLC ("VAST LLC") to WITTE and entered into a cooperation framework agreement with WITTE related to VAST LLC which provides an ongoing framework for the parties to collaborate on global programs related to product development and manufacturing.

The accompanying condensed consolidated financial statements reflect the consolidated results of STRATTEC SECURITY CORPORATION, its wholly owned subsidiaries STRATTEC de Mexico and STRATTEC POWER ACCESS LLC ("SPA"), and its majority owned subsidiary, ADAC-STRATTEC, LLC. Effective June 30, 2023, SPA became a wholly owned subsidiary of STRATTEC as a result of the purchase of its remaining non-controlling interest. Prior to June 30, 2023, STRATTEC owned 80 percent of SPA. STRATTEC is headquartered in Milwaukee, Wisconsin. STRATTEC de Mexico is located in Juarez, Mexico. ADAC-STRATTEC, LLC and SPA have operations in El Paso, Texas and Juarez and Leon, Mexico. Effective June 30, 2023, we sold our equity investment in VAST LLC to WITTE. Prior to the sale, our equity investment in VAST LLC, for which we exercised significant influence but did not control and was not a variable interest entity of STRATTEC, was accounted for using the equity method. VAST LLC consisted primarily of four wholly owned subsidiaries in China, one wholly owned subsidiary in Brazil and one joint venture entity in India. The results of the VAST LLC foreign subsidiaries and joint venture were reported on a one-month lag basis. We have one reporting segment.

In the opinion of management, the accompanying condensed consolidated balance sheets as of December 31, 2023 and July 2, 2023, 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 2023 Form 10-K, which was filed with the Securities and Exchange Commission on September 7, 2023.

During December 2022, management determined that a previously unrecorded liability for postretirement death benefits was 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, prior period amounts have been corrected to include the actuarially calculated liability and the unrecognized actuarial losses impacting Accumulated Other Comprehensive Loss in the Condensed Consolidated Balance Sheets.

Additionally, management identified a correction to 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 components of Stockholders’ Equity and the related components of Accumulated Other Comprehensive Loss was as follows (thousands of dollars):

 

 

July 3, 2022

 

 

October 2, 2022

 

 

Previously Reported

 

Adjustment

 

As Reported

 

 

Previously Reported

 

Adjustment

 

As Reported

 

Retained earnings

$

241,504

 

$

(535

)

$

240,969

 

 

$

241,632

 

$

(538

)

$

241,094

 

Accumulated other comprehensive loss

 

(18,657

)

 

69

 

 

(18,588

)

 

 

(19,320

)

 

64

 

 

(19,256

)

Total STRATTEC SECURITY
     CORPORATION shareholders' equity

 

188,866

 

 

(466

)

 

188,400

 

 

 

189,068

 

 

(474

)

 

188,594

 

Total shareholders' equity

$

220,413

 

$

(466

)

$

219,947

 

 

$

219,883

 

$

(474

)

$

219,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

$

(16,723

)

$

(10

)

$

(16,733

)

 

$

(17,461

)

$

(10

)

$

(17,471

)

Retirement and postretirement benefit
     plans

 

(1,934

)

 

79

 

 

(1,855

)

 

 

(1,859

)

 

74

 

 

(1,785

)

Accumulated other comprehensive loss

$

(18,657

)

$

69

 

$

(18,588

)

 

$

(19,320

)

$

64

 

$

(19,256

)

 

The correction of prior period amounts had no impact on amounts previously reported in the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) or in the Condensed Consolidated Statements of Cash Flows during the three-month and six-month periods ended January 1, 2023. In conjunction with the correction of the prior period amounts, the Shareholders’ Equity and Accumulated Other Comprehensive Loss footnotes were impacted by the above adjustments.

Risks and Uncertainties

STRATTEC’s operating performance is subject to global economic conditions, inflationary pressures and levels of consumer spending specifically within the automotive industry. In our fiscal year 2023, the inflationary pressures negatively affected the areas of raw materials, purchased materials and wage rates in Mexico, resulting in increased raw material and purchase part costs in the year. While our results for the six-month period ended December 2023 reflect reduced raw material costs as compared to prior year period, inflationary pressures on purchased materials and wage rates in Mexico persist, thus continuing to negatively impact our operating results for fiscal 2024.

Additionally, unforeseen global economic conditions may adversely impact our supply chain and operations, including impacting our customers, workforce and suppliers, any of which may disrupt and limit sourcing of critical supply chain components needed by us and our customers to meet expected production schedules. Moreover, these events may create added inflationary pressures on our operations, including further increases in wages and the prices of raw materials and purchased parts. All of these foregoing matters, including their scope and duration, are uncertain and cannot be predicted as to timing and cost impacts upon our operations. These changing conditions may also affect the estimates and assumptions made by our management in our financial statements. Such estimates and assumptions affect, among other things, our long-lived asset valuations, assessment of our annual effective tax rate, valuation of deferred income taxes, assessment of excess and obsolete inventory reserves, and assessment of collectability of trade receivables.

New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The update revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. Originally, the update was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. In November 2019, FASB issued ASU 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases. This ASU defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We adopted this standard in the first quarter of our fiscal 2024. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. The update incorporates into the Codification several disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K. The effective date of ASU 2023-06 will be the date that the SEC eliminates the corresponding disclosure requirement from Regulation S-X and Regulation S-K. All amendments must be applied prospectively. The adoption of this pronouncement is not expected to have a material impact on our consolidated financial statements.

7


 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The update enhances annual and interim reportable segment disclosures primarily by requiring disclosures about significant reportable segment expenses and provides new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for public business entities for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This update is to be applied retrospectively to all periods presented in the financial statements. As a result of this update, we will be required to provide single reportable segment disclosure. Annual reporting under this update becomes effective for us in our fiscal 2025. Interim reporting under this update becomes effective for us in our fiscal 2026. We are currently assessing the required disclosure impacts of this update.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. The update requires greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024, with early adoption permitted. This update is to be applied on a prospective basis. Retrospective application is permitted. Annual reporting under this update becomes effective for us in our fiscal 2026. We are currently assessing the required disclosure impacts of this update.

Value-Added Tax

Our Mexican entities are subject to value-added tax ("VAT"). VAT is paid on goods and services and collected on sales. A VAT certification generally allows for relief from VAT tax for temporarily imported goods. Our VAT recoverable and payable balances were increased as of July 2, 2023 due to several monthly tax periods being open to audit by the Mexican tax authority. As of December 31, 2023, the audits for periods prior to July 2023 have been closed. VAT recoverable balances increased $10.0 million during the six-month period ended December 31, 2023 mostly due a temporary issue with our VAT 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. Temporary increases in the VAT recoverable and payable balances will remain elevated until the periods under audit are closed.

Derivative Instruments

We own and operate manufacturing operations in Mexico. As a result, a portion of our manufacturing costs are incurred in Mexican pesos, which causes our earnings and cash flows to fluctuate due to changes in the U.S. dollar/Mexican peso exchange rate. During fiscal 2024, we entered into monthly Mexican peso currency forward contracts with Bank of Montreal for a portion of our estimated peso denominated operating costs during the period January 2024 through June 2024. We also had contracts with Bank of Montreal that provided for monthly Mexican peso currency forward contracts for a portion of our estimated peso denominated operating costs during our fiscal 2023. Our objective in entering into currency forward contracts is to minimize our earnings volatility resulting from changes in exchange rates affecting the U.S. dollar cost of our Mexican operations. The Mexican peso forward contracts are not used for speculative purposes and are not designated as hedges. As a result, all currency forward contracts are recognized in our accompanying condensed consolidated financial statements at fair value and changes in the fair value are reported in current earnings as part of Other Income (Expense), net.

The following table quantifies the outstanding Mexican peso forward contracts as of December 31, 2023 (thousands of dollars, except with respect to the average forward contractual exchange rate):

 

 

Effective Dates

 

Notional Amount

 

 

Average Forward Contractual Exchange Rate

 

 

Fair Value

 

Buy MXP/Sell USD

 

January 9, 2024 − June 11, 2024

 

$

12,000

 

 

 

18.366

 

 

$

826

 

 

 

The fair market value of all outstanding Mexican peso forward contracts in the accompanying Condensed Consolidated Balance Sheets as of the dates specified was as follows (thousands of dollars):

 

 

December 31,
2023

 

 

July 2,
2023

 

Not designated as hedging instruments:

 

 

 

 

 

Other current assets:

 

 

 

 

 

Mexican peso forward contracts

$

826

 

 

$

 

 

8


 

 

The pre-tax effects of the Mexican peso forward contracts are included in Other Income (Expense), net on the accompanying Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) and consisted of the following for the periods indicated below (thousands of dollars):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

December 31,
2023

 

 

January 1,
2023

 

 

December 31,
2023

 

 

January 1,
2023

 

Not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

Realized and unrealized gain, net

$

826

 

 

$

319

 

 

$

826

 

 

$

522

 

 

Fair Value of Financial Instruments

The fair value of our cash and cash equivalents, accounts receivable, accounts payable and borrowings under our credit facilities approximated book value as of December 31, 2023 and July 2, 2023. Fair value is defined as the exchange price that would be received for an asset or paid for a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 (in thousands):

 

 

Fair Value Inputs

 

 

Level 1 Assets:
Quoted Prices
In
Active Markets

 

 

Level 2 Assets:
Observable
Inputs Other
Than Market
Prices

 

 

Level 3 Assets:
Unobservable
Inputs

 

Assets:

 

 

 

 

 

 

 

 

Rabbi trust assets:

 

 

 

 

 

 

 

 

Stock Index Funds:

 

 

 

 

 

 

 

 

Small cap

$

83

 

 

$

 

 

$

 

Mid cap

 

156

 

 

 

 

 

 

 

Large cap

 

304

 

 

 

 

 

 

 

International

 

379

 

 

 

 

 

 

 

Fixed income funds

 

453

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

1,346

 

 

 

 

Mexican peso forward contracts

 

 

 

 

826

 

 

 

 

Total assets at fair value

$

1,375

 

 

$

2,172

 

 

$

 

 

The Rabbi Trust assets fund our Amended and Restated Supplemental Executive Retirement Plan. As of December 31, 2023, $1.2 million of the Rabbi Trust asset balance was included in Other Current Assets and $1.5 million was included in Other Long-Term Assets in the accompanying Condensed Consolidated Balance Sheets.

Investment in Joint Ventures and Majority Owned Subsidiaries

Prior to June 30, 2023, we participated in certain Alliance Agreements with WITTE Automotive (“WITTE”) and ADAC Automotive (“ADAC”). WITTE, of Velbert, Germany, is a privately held automotive supplier. WITTE designs, manufactures and markets automotive components, including hood latches, rear compartment latches, seat back latches, door handles and specialty fasteners. WITTE’s primary market for these products has been Europe. ADAC, of Grand Rapids, Michigan, is a privately held automotive supplier and manufactures engineered products, including door handles and other automotive trim parts, utilizing plastic injection molding, automated painting and various assembly processes.

 

9


 

The Alliance Agreements included a set of cross-licensing agreements for the manufacture, distribution and sale of WITTE products by STRATTEC and ADAC in North America, and the manufacture, distribution and sale of STRATTEC and ADAC products by WITTE in Europe. Additionally, a joint venture company, Vehicle Access Systems Technology LLC (“VAST LLC”), in which WITTE, STRATTEC and ADAC each held a one-third equity interest, existed to seek opportunities to manufacture and sell each company’s products in areas of the world outside of North America and Europe. As a result of these relationships, the entities involved purchased component products from each other for use in end products assembled and sold in their respective home markets. STRATTEC purchased such component parts from WITTE. These purchases totaled $142,000 and $277,000 during the three- and six-month periods ended January 1, 2023. WITTE was no longer a related party as of July 2, 2023 as a result of the Equity Restructuring Agreement discussed below.

VAST LLC had investments in Sistema de Acesso Veicular Ltda, VAST China (Taicang), VAST Jingzhou Co. Ltd., VAST Shanghai Co., VAST Fuzhou and Minda-VAST Access Systems. The operations under VAST Fuzhou closed during our fiscal 2021. Sistema de Acesso Veicular Ltda was located in Brazil and serviced customers in South America. VAST LLC disposed of Sistema de Acesso Veicular Ltda in June 2023. VAST China (Taicang), VAST Jingzhou Co. Ltd, and VAST Shanghai Co. (collectively known as VAST China), provided a base of operations to service each VAST partner’s automotive customers in the Asian market. Minda-VAST Access Systems is based in Pune, India and is a 50:50 joint venture between VAST LLC and Minda Management Services Limited, an affiliate of both Minda Corporation Limited and Spark Minda, Ashok Minda Group of New Delhi, India (collectively “Minda”). Minda and its affiliates cater to the needs of all major car, motorcycle, commercial vehicle, tractor and off-road vehicle manufacturers in India. VAST LLC also maintained branch offices in South Korea and Japan in support of customer sales and engineering requirements.

Effective June 30, 2023, we entered into and completed transactions contemplated by an Equity Restructuring Agreement ("Restructuring Agreement") between STRATTEC and WITTE. Pursuant to the terms of the Restructuring Agreement, STRATTEC sold its one-third interest in VAST LLC to WITTE and STRATTEC purchased WITTE's 20 percent non-controlling interest in STRATTEC POWER ACCESS LLC ("SPA") along with the net assets of VAST LLC's Korea branch office. As of June 30, 2023, the Korean branch office is wholly owned by STRATTEC and its subsequent financial results are consolidated with the financial results of STRATTEC. We believe the Restructuring Agreement positions STRATTEC to redeploy assets, both financial and technical, to create greater focus on STRATTEC-specific strategic growth opportunities in North America and around the world. We also expect that this transaction allows STRATTEC to be well-positioned to take advantage of new opportunities, including more of our product applications on Electric Vehicles, growing consumer demand for Power Access products, expansion of electronics capabilities and other new automotive products. Moreover, we expect it to also give us greater resources to further explore diversification of markets, complimentary technology and regions outside of North America. As part of the Restructuring Agreement, STRATTEC also entered into a cooperation framework agreement with WITTE related to VAST LLC which provides a framework for the parties to collaborate on global automotive programs related to product development and manufacturing.

Prior to the restructuring agreement, VAST LLC investments were accounted for using the equity method of accounting. Results of the VAST LLC foreign subsidiaries and joint venture were reported on a one-month lag basis. The activities of the VAST LLC foreign subsidiaries and joint ventures resulted in equity loss of joint ventures of $269,000 during the six-month period ended December 31, 2023, which loss was the result of additional professional fees incurred related to the Restructuring Agreement. The current period loss 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 as of December 31, 2023. During July 2023, the final $2.0 million net purchase price due to STRATTEC under the Restructuring Agreement was received. The activities of the VAST LLC foreign subsidiaries and joint ventures resulted in equity earnings of joint ventures to STRATTEC of approximately $1.1 million during the six-month period ended January 1, 2023. During the six-month period ended January 1, 2023, capital contributions totaling $312,000 were made to VAST for purposes of funding operations in Brazil. STRATTEC's portion of the capital contributions totaled $104,000. As of June 30, 2023, STRATTEC had no continuing involvement in VAST LLC other than under the cooperation framework agreement described above.

STRATTEC POWER ACCESS LLC (“SPA”) was formed in fiscal year 2009 to supply the North American portion of the power sliding door, lift gate, tail gate and deck lid system access control products which were acquired from Delphi Corporation. Prior to the Restructuring Agreement, SPA was 80 percent owned by STRATTEC and 20 percent owned by WITTE. As a result of the Restructuring Agreement, STRATTEC purchased the remaining 20 percent interest in SPA, and SPA became a wholly owned subsidiary of STRATTEC. An additional Mexican entity, STRATTEC POWER ACCESS de Mexico, is wholly owned by SPA. The financial results of SPA are consolidated with the financial results of STRATTEC.

10


 

ADAC-STRATTEC LLC, a Delaware limited liability company, was formed in fiscal year 2007 to support injection molding and door handle assembly operations in Mexico. ADAC-STRATTEC LLC was 51 percent owned by STRATTEC and 49 percent owned by ADAC for all periods presented in this report. An additional Mexican entity, ADAC-STRATTEC de Mexico, is wholly owned by ADAC-STRATTEC LLC. ADAC-STRATTEC LLC’s financial results are consolidated with the financial results of STRATTEC and resulted in increased net sales and net income to STRATTEC of approximately $62.9 million and $234,000, respectively, during the six-month period ended December 31, 2023 and increased net sales and reduced net income to STRATTEC of approximately $58.5 million and $950,000, respectively, during the six-month period ended January 1, 2023.

ADAC charges ADAC STRATTEC LLC an engineering, research and design fee as well as a sales fee. Such fees are calculated as a percentage of net sales and are included in the consolidated results of STRATTEC. Additionally, ADAC-STRATTEC LLC sells production parts to ADAC. Sales to ADAC are included in the consolidated results of STRATTEC. The following table summarizes these related party transactions for the periods indicated below (in thousands):

 

Three Months Ended

 

 

Six Months Ended

 

 

December 31,
2023

 

 

January 1,
2023

 

 

December 31,
2023

 

 

January 1,
2023

 

Engineering, research and design fee charged to
   ADAC-STRATTEC LLC

$

2,111

 

 

$

1,990

 

 

$

4,405

 

 

$

4,098

 

Sales to ADAC

$

2,021

 

 

$

2,528

 

 

$

4,855

 

 

$

5,320

 

 

Equity (Loss) Earnings of Joint Ventures

As discussed above within Investment in Joint Ventures and Majority Owned Subsidiaries, effective June 30, 2023, we sold our one-third ownership interest in VAST LLC, for which we exercised significant influence but did not control. VAST LLC was not a variable interest entity of STRATTEC. Until the effective date of the sale, our investment in VAST LLC was accounted for using the equity method. Prior to the effective date of the sale, the results of the VAST LLC foreign subsidiaries and joint venture were reported on a one-month lag basis.

The following are summarized statements of operations for VAST LLC (in thousands):

 

Three Months Ended

 

 

Six Months Ended

 

 

December 31,
2023

 

 

January 1,
2023

 

 

December 31,
2023

 

 

January 1,
2023

 

Net sales

$

 

 

$

56,953

 

 

$

 

 

$

123,099

 

Cost of goods sold

 

 

 

 

45,969

 

 

 

 

 

 

101,751

 

Gross profit

 

 

 

 

10,984

 

 

 

 

 

 

21,348

 

Engineering, selling and administrative expenses

 

 

 

 

9,227

 

 

 

 

 

 

17,759

 

 Income from operations

 

 

 

 

1,757

 

 

 

 

 

 

3,589

 

Other income, net

 

 

 

 

386

 

 

 

 

 

 

458

 

Income before provision for income taxes

 

 

 

 

2,143

 

 

 

 

 

 

4,047

 

Provision for income taxes

 

 

 

 

382

 

 

 

 

 

 

750

 

Net income

$

 

 

$

1,761

 

 

$

 

 

$

3,297

 

STRATTEC's share of VAST LLC net income

 

 

 

 

587

 

 

 

 

 

 

1,099

 

Intercompany profit elimination

 

 

 

 

1

 

 

 

 

 

 

16

 

STRATTEC’s equity earnings of VAST LLC
     prior to impact of sale of VAST LLC

 

 

 

 

588

 

 

 

 

 

 

1,115

 

Loss on sale of VAST LLC

 

(4

)

 

 

 

 

 

(269

)

 

 

 

STRATTEC’s equity (loss) earnings of VAST LLC

$

(4

)

 

$

588

 

 

$

(269

)

 

$

1,115

 

 

11


 

We had sales of component parts to VAST LLC, purchases of component parts from VAST LLC, expenses charged to VAST LLC for engineering and accounting services and expenses charged to us from VAST LLC for general headquarters expenses. As a result of the sales of our VAST LLC ownership interest to WITTE, VAST LLC was no longer a related party as of June 30, 2023. The following table summarizes these related party transactions with VAST LLC for the periods indicated below (in thousands):

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,
2023

 

 

January 1,
2023

 

 

December 31,
2023

 

 

January 1,
2023

 

 

Sales to VAST LLC

$

 

 

$

17

 

 

$

 

 

$

27

 

 

Purchases from VAST LLC

$

 

 

$

13

 

 

$

 

 

$

27

 

 

Expenses charged to VAST LLC

$

 

 

$

161

 

 

$

 

 

$

242

 

 

Expenses charged from VAST LLC

$

 

 

$

209

 

 

$

 

 

$

452

 

 

 

Leases

Our right-of-use operating lease assets are recorded at the present value of future minimum lease payments, net of amortization. We have an operating lease for our El Paso, Texas finished goods and service parts distribution warehouse. This lease has a current lease term through December 2028 and does not include any options to extend the lease term beyond such timeframe. We have two operating leases for office space at our Korean branch office. Both of these leases have a lease term through June 2024 with automatic renewal. For purposes of calculating operating lease obligations, we included an extension of four years after June 2024 as it is reasonably certain that we will exercise such automatic renewals. Our leases do not contain material residual value guarantees or restrictive covenants. Operating lease expense is recognized on a straight-line basis over the lease term.

As the leases do not provide an implicit rate, we used our incremental borrowing rate at lease commencement to determine the present value of our lease payments. The incremental borrowing rate is an entity-specific rate which represents the rate of interest we would pay to borrow over a similar term with similar payments. The operating lease asset and obligation related to our operating leases included in the accompanying Condensed Consolidated Balance Sheets are presented below (in thousands):

 

 

December 31,
2023

 

Right-of use asset under operating lease:

 

 

Other long-term assets

$

4,162

 

Lease obligation under operating lease:

 

 

Current liabilities: Accrued liabilities: other

$

737

 

Other long-term liabilities

 

3,742

 

 

$

4,479

 

 

Future minimum lease payments, by our fiscal year, including options to extend that are reasonably certain to be exercised, under these non-cancelable leases are as follows as of December 31, 2023 (in thousands):

 

2024 (for the remaining six months)

$

478

 

2025

 

979

 

2026

 

1,026

 

2027

 

1,075

 

2028

 

1,127

 

Thereafter

 

558

 

Total future minimum lease payments

 

5,243

 

Less: Imputed interest

 

(764

)

Total lease obligations

$

4,479

 

Cash flow information related to the operating lease is shown below (in thousands):

 

 

Six Months Ended

 

 

December 31,
2023

 

 

January 1,
2023

 

Operating cash flows:

 

 

 

 

 

Cash paid related to operating lease obligation

$

291

 

 

$

247

 

 

12


 

 

The weighted average lease term and discount rate for our operating leases are shown below:

 

 

December 31,
2023

 

Weighted average remaining lease term (in years)

 

5.0

 

Weighted average discount rate

 

6.2

%

 

Operating lease expense was as follows for the periods presented below (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

December 31,
2023

 

 

January 1,
2023

 

 

December 31,
2023

 

 

January 1,
2023

 

Operating lease expense

$

248

 

 

$

125

 

 

$

495

 

 

$

247

 

 

Credit Facilities

STRATTEC has a $40 million secured revolving credit facility (the “STRATTEC Credit Facility”) with BMO Harris Bank N.A. ADAC-STRATTEC LLC has a $25 million secured revolving credit facility (the “ADAC-STRATTEC Credit Facility”) with BMO Harris Bank N.A., which is guaranteed by STRATTEC. The STRATTEC Credit Facility expires August 1, 2026. The ADAC-STRATTEC Credit Facility expires August 1, 2024. Borrowings under either credit facility are secured by our U.S. cash balances, accounts receivable, inventory, and fixed assets. Interest on borrowings under the STRATTEC Credit Facility were at varying rates based, at our option, on the bank's prime rate or LIBOR plus 1.25 percent through February 22, 2023, SOFR plus 1.35 percent for the period February 23, 2023 through September 5, 2023, and SOFR plus 1.85 percent subsequent to September 5, 2023. Interest on borrowings under the ADAC-STRATTEC Credit Facility were at varying rates based, at our option, on the bank's prime rate or LIBOR plus 1.25 percent through February 6, 2023 and SOFR plus 1.35 percent subsequent to February 6, 2023. Both credit facilities contain a restrictive financial covenant that requires the applicable borrower to maintain a minimum net worth level. The ADAC-STRATTEC Credit Facility includes an additional restrictive financial covenant that requires the maintenance of a minimum fixed charge coverage ratio. As of December 31, 2023, we were in compliance with all financial covenants required by these credit facilities.

Outstanding borrowings under the credit facilities were as follows (in thousands):

 

December 31,
2023

 

 

July 2,
2023

 

STRATTEC Credit Facility

$

 

 

$

 

ADAC-STRATTEC Credit Facility

 

13,000

 

 

 

13,000

 

 

$

13,000

 

 

$

13,000

 

 

Average outstanding borrowings and the weighted average interest rate under each credit facility referenced above were as follows for each period presented (in thousands):

 

 

Six Months Ended

 

 

Average Outstanding Borrowings

 

 

Weighted Average Interest Rate

 

 

December 31,
2023

 

 

January 1,
2023

 

 

December 31,
2023

 

 

January 1,
2023

 

STRATTEC Credit Facility

$

66

 

 

$

3,121

 

 

 

8.5

%

 

 

4.4

%

ADAC-STRATTEC Credit Facility

$

13,000

 

 

$

11,852

 

 

 

6.7

%

 

 

4.3

%

 

Commitments and Contingencies

We are from time to time subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, alleged breaches of contracts, product warranties, intellectual property matters and employment related matters. It is our opinion that the outcome of such matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. With respect to warranty matters, although we cannot ensure that future costs of warranty claims by customers will not be material, we believe our established reserves are adequate to cover potential warranty settlements.

13


 

In 1995, we recorded a provision for estimated costs to remediate an environmental contamination site at our Milwaukee facility. The facility was contaminated by a solvent spill, which occurred in 1985, from a former above ground solvent storage tank located on the east side of the facility. The reserve was originally established based on third party estimates to adequately cover the cost for active remediation of the contamination. Due to changing technology and related costs associated with active remediation of the contamination, in fiscal years 2010, 2016, and 2021, we obtained updated third party estimates of projected costs to adequately cover the cost for active remediation of this contamination and adjusted the reserve as needed. We monitor and evaluate the site with the use of groundwater monitoring wells. An environmental consultant samples these wells one or two times a year to determine the status of the contamination and the potential for remediation of the contamination by natural attenuation, the dissipation of the contamination over time to concentrations below applicable standards. If such sampling evidences a sufficient degree of and trend toward natural attenuation of the contamination at the site, we may be able to obtain a closure letter from the regulatory authorities resolving the issue without the need for active remediation. If a sufficient degree and trend toward natural attenuation is not evidenced by sampling, a more active form of remediation beyond natural attenuation may be required. The sampling has not yet satisfied all of the requirements for closure by natural attenuation. As a result, sampling continues and the reserve remains at an amount to reflect our estimated cost of active remediation. The reserve is not measured on a discounted basis. We believe, based on findings-to-date and known environmental regulations, that the environmental reserve of $1.4 million at December 31, 2023 is adequate.

Shareholders’ Equity

A summary of activity impacting shareholders’ equity for the three- and six-month periods ended December 31, 2023 and January 1, 2023 were as follows (in thousands):

 

 

Three months ended December 31, 2023

 

 

Total
Shareholders’
Equity

 

 

Common Stock

 

 

Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Accumulated Other Comprehensive Loss

 

 

Treasury Stock

 

 

Non-Controlling Interest

 

Balance, October 1, 2023

$

215,301

 

 

$

76

 

 

$

100,721

 

 

$

238,464

 

 

$

(14,527

)

 

$

(135,514

)

 

$

26,081

 

Net income

 

780

 

 

 

 

 

 

 

 

 

1,022

 

 

 

 

 

 

 

 

 

(242

)

Translation adjustments

 

1,014