Gentex Corporation (NASDAQ: GNTX), a leading supplier of
digital vision, connected car, dimmable glass and fire protection
technologies, today reported financial results for the three months
ended March 31, 2020.
1st Quarter 2020 Summary
- Net Sales decline of 3% quarter over quarter versus a
24% quarter over quarter reduction in global light vehicle
production volumes
- Novel coronavirus pandemic (COVID-19) negatively
impacted first quarter net sales by approximately 9%
- Gross margin of 34.5% for the first
quarter
- 7.0 million shares repurchased during the
quarter
For the first quarter of 2020, the Company reported net sales of
$453.8 million, which was a decrease of 3% compared to net sales of
$468.6 million in the first quarter of 2019. The impact of the
COVID-19 pandemic created shutdowns in the automotive industry in
various parts of Asia, Europe, and North America, which resulted in
an estimated negative impact on net sales of approximately $40
million dollars for the first quarter of 2020. Global light vehicle
production ended the first quarter of 2020 down 24% when compared
to the first quarter of 2019.
"For the first two months of the first quarter, top-line revenue
growth was progressing in line with our forecasts, with modest
negative impacts coming from reductions in China as a result of the
pandemic," said President and CEO, Steve Downing. "By mid-March,
the pandemic was negatively affecting European OEM’s more
significantly and then the North American production environment
was brought to a grinding halt. The vast majority of the $40
million dollar shortfall in sales occurred during the last 2 weeks
of March."
For the first quarter of 2020, the gross margin was 34.5%,
compared to a gross margin of 36.2% for the first quarter of 2019.
On a quarter-over-quarter basis, the gross margin was impacted
primarily by lost sales due to the pandemic and annual customer
price reductions. When compared to the first quarter of 2019,
product mix improved which partially offset some of the sales
losses and price reductions. The improvement in product mix was
primarily driven by Full Display Mirror® and exterior mirror
growth.
"The gross margin for the quarter held up well when considering
the significance of the lost sales and how quickly and unexpectedly
the demand from our customers changed," said Downing. “In fact,
through the first two months of the quarter our gross margin
performance was on pace to position the Company to be in the range
of our original annual guidance for gross margin."
Operating expenses during the first quarter of 2020 were up 7%
to $51.6 million when compared to operating expenses of $48.0
million in the first quarter of 2019. "The quarter over quarter
increase in operating expenses continues to be driven by headcount
and other resources focused on new product launches, as well as
research and development of new products. CES 2020 created
significant interest in our existing and new technologies, and we
continue to believe in the long-term value that our new product
offerings and technologies will create for our customers and the
resultant trajectory that this can create for our business. It is
important to note that the operating expense growth rate in the
quarter was in-line with our original guidance for operating
expenses for the year, which were planned to increase at
approximately the same rate as sales for the year," concluded
Downing.
Income from operations for the first quarter of 2020 decreased
14% to $105.0 million when compared to income from operations of
$121.6 million for the first quarter of 2019. The reduction in
operating income was primarily the result of the lost sales due to
the pandemic and the impact this had on gross margins in the
quarter.
During the first quarter of 2020, the Company's effective tax
rate was 16.6%, up slightly from 16.5% during the first quarter of
2019.
Net income for the first quarter of 2020 decreased by 14% to
$89.5 million when compared to net income of $104.3 million in the
first quarter of 2019. The reduction in net income was driven by
the lost sales due to the pandemic and the impact this had on gross
margins.
Earnings per diluted share for the first quarter of 2020
decreased 10% to $0.36, when compared to $0.40 for the first
quarter of 2019, primarily as a result of the impacts of the
COVID-19 pandemic on net income.
Automotive net sales in the first quarter of 2020 were $439.9
million, compared with automotive net sales of $455.8 million in
the first quarter of 2019. The 3% quarter over quarter decrease in
automotive sales was driven primarily by a 6% quarter over quarter
decrease in interior auto-dimming mirror unit shipments due to a
24% reduction in global light vehicle production.
Other net sales in the first quarter of 2020, which includes
dimmable aircraft windows and fire protection products, were $13.9
million, an increase of 9% compared to other net sales of $12.8
million in the first quarter of 2019.
Capital AllocationThe Company remains committed
to its previously announced capital allocation strategy. As of
March 31, 2020, the Company drew-down $75 million on its $150
million line of credit, which further increased the Company's cash
and investments to $587 million as of March 31, 2020, with the
ability to draw an additional $75 million as needed. The decision
to draw on the line of credit was a precautionary step given
volatile market conditions and the unknown impact of the pandemic
on our customers and our industries.
In the first quarter of 2020, the Company announced a 4%
increase in its dividend rate, marking ten straight years of year
over year dividend increases. Also during the first quarter of
2020, the Company repurchased approximately 7.0 million shares of
its common stock at an average price of $25.48 per share. As of
March 31, 2020, the Company has 13.0 million shares remaining
available for repurchase under the previously announced share
repurchase plan.
Future EstimatesThe Company’s current forecast
for light vehicle production for 2020 is based on the mid-April
2020 IHS Markit forecast for light vehicle production in North
America, Europe, Japan/Korea and China. The Company's forecast also
takes into account the fact that many of our customers are in full
or partial shutdown, with certain customers not scheduled to resume
operations until mid-May or later. Based on this information, light
vehicle production for calendar year 2020 in the Company's primary
regions is expected to decline 20% compared to 2019 as detailed
below:
Light Vehicle Production (per IHS Markit mid-April light
vehicle production forecast) |
(in Millions) |
Region |
2Q 2020 |
2Q 2019 |
% Change |
|
Calendar Year 2020 |
Calendar Year 2019 |
% Change |
North America |
1.37 |
4.24 |
(68)% |
|
12.22 |
16.31 |
(25)% |
Europe |
2.50 |
5.61 |
(55)% |
|
15.98 |
21.08 |
(24)% |
Japan and
Korea |
2.16 |
3.36 |
(36)% |
|
10.77 |
13.11 |
(18)% |
China |
4.86 |
5.50 |
(12)% |
|
20.81 |
24.67 |
(16)% |
Total Light Vehicle Production |
10.89 |
18.71 |
(42)% |
|
59.78 |
75.17 |
(20)% |
Based on this light vehicle production forecast,
the Company's current estimate is that net sales for 2020 will be
down between 10 and 15 percent, when compared with 2019. The
Company is also providing additional updated guidance for calendar
year 2020 as shown in the table below:
2020 Annual Guidance |
Item |
As of January 31, 2020 |
Updated as of April 24, 2020 |
Net Sales |
$1.91 - $2.0 billion |
$1.58 - $1.67 billion |
Gross
Margin |
36%
-37% |
34% -35% |
Operating
Expenses |
$205 -
$215 million |
$195 - $205 million |
Tax
Rate |
15% -
17% |
16% - 17% |
Capital
Expenditures |
$85 - $95
million |
$60 - $70 million |
Depreciation & Amortization |
$105 - $110 million |
$102 - $107 million |
Based on the difficulty and uncertainty of global light vehicle
production data for 2021, the Company is withdrawing its revenue
guidance for 2021 until better data becomes available. Despite the
fact that the Company is withdrawing guidance for 2021, the Company
remains confident in its ability to continue to outperform the
underlying market.
"Over the last several weeks, COVID-19 has created unprecedented
circumstances for our industries, which include massive changes to
production levels at our customers. Our industries have also been
significantly influenced by federal, state and local governments in
each of the countries where our customers operate. Unfortunately,
many of these changes have come with little or no advanced warning,
which makes it very difficult to forecast sales or build a
sustainable operating model. Our focus over the last few weeks was
directed at protecting our employees, while still supporting our
global customer base from our centralized manufacturing footprint.
Over the coming months we will continue to work to ensure that our
cost structure accurately reflects industry production changes and
new business realities. Our overall commitment to new product
research and development will remain one of our top priorities for
investment even as we look to optimize our cost structure. We
remain optimistic that we can continue to provide above market
returns for our shareholders by leveraging our current product
strategy and through the execution of our lean organizational
structure, which provides the speed and agility necessary to
respond quickly to and manage through this new business
environment,” concluded Downing.
Safe Harbor for Forward-Looking StatementsThis
news release contains forward-looking statements within the meaning
of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The statements contained in this communication
that are not purely historical are forward-looking statements.
Forward-looking statements give the Company’s current expectations
or forecasts of future events. These forward-looking statements
generally can be identified by the use of words such as
“anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”,
“goal”, “hope”, “may”, “plan”, “poised”, “project”, “will”, and
variations of such words and similar expressions. Such statements
are subject to risks and uncertainties that are often difficult to
predict and beyond the Company’s control, and could cause the
Company’s results to differ materially from those described. These
risks and uncertainties include, without limitation: changes in
general industry or regional market conditions; changes in consumer
and customer preferences for our products (such as cameras
replacing mirrors and/or autonomous driving); our ability to be
awarded new business; continued uncertainty in pricing negotiations
with customers; loss of business from increased competition;
changes in strategic relationships; customer bankruptcies or
divestiture of customer brands; fluctuation in vehicle production
schedules (including the impact of customer employee strikes);
changes in product mix; raw material shortages; higher raw
material, fuel, energy and other costs; unfavorable fluctuations in
currencies or interest rates in the regions in which we operate;
costs or difficulties related to the integration and/or ability to
maximize the value of any new or acquired technologies and
businesses; changes in regulatory conditions; warranty and recall
claims and other litigation and customer reactions thereto;
possible adverse results of pending or future litigation or
infringement claims; changes in tax laws; import and export duty
and tariff rates in or with the countries with which we conduct
business; negative impact of any governmental investigations and
associated litigation including securities litigation relating to
the conduct of our business; the length and severity of the
COVID-19 (coronavirus) pandemic, including its impact across our
business on demand, operations, and the global supply chain.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date they
are made. The Company undertakes no obligation to publicly update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by law
or the rules of the NASDAQ Global Select Market. Accordingly, any
forward-looking statement should be read in conjunction with the
additional information about risks and uncertainties identified
under the heading “Risk Factors” in the Company’s latest Form 10-K
and Form 10-Q filed with the SEC, which risks and uncertainties now
include the impacts of COVID - 19 (coronavirus) pandemic that has
affected, and will continue to affect, general economic and
industry conditions, customers, suppliers, and the regulatory
environment in which the Company operates. Includes content
supplied by IHS Markit Light Vehicle Production Forecast of April
17, 2020 (http://www.gentex.com/forecast-disclaimer).
First Quarter Conference CallA conference call
related to this news release will be simulcast live on the internet
beginning at 9:30 a.m. ET today, April 24, 2020. The dial-in number
to participate in the call is 844-389-8658,
passcode 4182544. Participants may listen to the
call via audio streaming at www.gentex.com or by
visiting https://edge.media-server.com/mmc/p/f2wkbro9. A
webcast replay will be available approximately 24 hours after the
conclusion of the call
at http://ir.gentex.com/events-and-presentations/upcoming-past-events.
About the CompanyFounded in 1974, Gentex
Corporation (The NASDAQ Global Select Market: GNTX) is a leading
supplier of digital vision, connected car, dimmable glass and fire
protection technologies. Visit the Company’s web site at
www.gentex.com.
Contact Information:Gentex Investor & Media ContactJosh
O'Berski(616)772-1590 x5814
GENTEX
CORPORATIONAUTO-DIMMING MIRROR
SHIPMENTS(Thousands)
|
|
Three months ended March 31, |
|
|
2020 |
|
2019 |
|
% Change |
North American Interior
Mirrors |
|
2,019 |
|
|
2,227 |
|
|
(9)% |
North American Exterior
Mirrors |
|
1,234 |
|
|
1,229 |
|
|
—% |
Total North American Mirror Units |
|
3,253 |
|
|
3,455 |
|
|
(6)% |
International Interior
Mirrors |
|
5,032 |
|
|
5,256 |
|
|
(4)% |
International Exterior
Mirrors |
|
2,108 |
|
|
1,971 |
|
|
7% |
Total International Mirror Units |
|
7,141 |
|
|
7,227 |
|
|
(1)% |
Total Interior Mirrors |
|
7,051 |
|
|
7,483 |
|
|
(6)% |
Total Exterior Mirrors |
|
3,343 |
|
|
3,199 |
|
|
5% |
Total Auto-Dimming Mirror Units |
|
10,394 |
|
|
10,682 |
|
|
(3)% |
Note: Percent change and amounts may not total due
to rounding.
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
(Unaudited) |
|
Three months ended March 31, |
|
2020 |
|
2019 |
Net Sales |
$ |
453,761,726 |
|
|
$ |
468,588,997 |
|
|
|
|
|
Cost of Goods Sold |
297,174,245 |
|
|
298,944,494 |
|
Gross Profit |
156,587,481 |
|
|
169,644,503 |
|
|
|
|
|
Engineering, Research & Development |
29,615,422 |
|
|
28,089,181 |
|
Selling, General & Administrative |
21,944,892 |
|
|
19,958,991 |
|
Operating Expenses |
51,560,314 |
|
|
48,048,172 |
|
|
|
|
|
Income from Operations |
105,027,167 |
|
|
121,596,331 |
|
|
|
|
|
Other Income |
2,247,482 |
|
|
3,312,210 |
|
Income before Income
Taxes |
107,274,649 |
|
|
124,908,541 |
|
|
|
|
|
Provision for Income
Taxes |
17,768,848 |
|
|
20,628,130 |
|
|
|
|
|
Net Income |
$ |
89,505,801 |
|
|
$ |
104,280,411 |
|
|
|
|
|
Earnings Per Share(1) |
|
|
|
Basic |
$ |
0.36 |
|
|
$ |
0.40 |
|
Diluted |
$ |
0.36 |
|
|
$ |
0.40 |
|
Weighted Average Shares |
|
|
|
Basic |
246,309,869 |
|
|
257,822,836 |
|
Diluted |
247,616,443 |
|
|
259,105,232 |
|
|
|
|
|
Cash Dividends Declared per
Share |
$ |
0.120 |
|
|
$ |
0.115 |
|
|
|
|
|
(1) Earnings Per Share has been adjusted to exclude the portion of
net income allocated to participating securities as a result of
share-based payment awards. |
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
|
(Unaudited) |
|
|
|
March 31, 2020 |
|
December 31, 2019 |
ASSETS |
|
|
|
Cash and Cash Equivalents |
$ |
278,524,928 |
|
|
$ |
296,321,622 |
|
Short-Term Investments |
131,078,039 |
|
|
140,384,053 |
|
Accounts Receivable, net |
233,578,125 |
|
|
235,410,326 |
|
Inventories |
251,006,414 |
|
|
248,941,855 |
|
Other Current Assets |
16,539,990 |
|
|
29,319,036 |
|
Total Current Assets |
910,727,496 |
|
|
950,376,892 |
|
|
|
|
|
Plant and Equipment - Net |
493,114,501 |
|
|
498,316,100 |
|
|
|
|
|
Goodwill |
307,365,845 |
|
|
307,365,845 |
|
Long-Term Investments |
177,794,760 |
|
|
139,909,323 |
|
Intangible Assets |
245,550,000 |
|
|
250,375,000 |
|
Patents and Other Assets |
23,550,490 |
|
|
22,460,033 |
|
Total Other Assets |
754,261,095 |
|
|
720,110,201 |
|
|
|
|
|
Total Assets |
$ |
2,158,103,092 |
|
|
$ |
2,168,803,193 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
INVESTMENT |
|
|
|
Current Liabilities |
$ |
263,957,904 |
|
|
$ |
171,846,800 |
|
Other Non-current Liabilities |
9,091,509 |
|
|
7,414,424 |
|
Deferred Income Taxes |
50,448,046 |
|
|
51,454,149 |
|
Shareholders' Investment |
1,834,605,633 |
|
|
1,938,087,820 |
|
Total Liabilities &
Shareholders' Investment |
$ |
2,158,103,092 |
|
|
$ |
2,168,803,193 |
|
Gentex (NASDAQ:GNTX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Gentex (NASDAQ:GNTX)
Historical Stock Chart
From Apr 2023 to Apr 2024