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 and
six months ended June 30, 2019.
2nd Quarter 2019 Summary
- Net Sales growth of 3% quarter over quarter versus an
8% quarter over quarter reduction in global light vehicle
production volumes
- Gross margin of 37.7% including negative tariff impact
of 60 basis points
- Sequential gross margin improvement of 150 basis points
compared to the first quarter of 2019
- Quarter over quarter earnings per diluted share growth
of 5% to $0.42
- 3.1 million shares repurchased during the quarter at an
average of $22.72 per share
- Revised 2019 calendar year guidance for improvements in
gross margin, depreciation and amortization, and effective tax rate
ranges
For the second quarter of 2019, the Company
reported net sales of $468.7 million, which was an increase of 3%
compared to net sales of $455.0 million in the second quarter of
2018. This growth was in contrast to global light vehicle
production that declined approximately 8% in the second quarter of
2019 when compared to the second quarter of 2018. The actual global
light vehicle production levels worsened approximately 4% for the
second quarter of 2019, when compared to IHS Markit's mid-April
forecast for the second quarter of 2019.
"The market conditions of the second quarter of
2019 were very similar to those of the first quarter of this year,
with light vehicle production down from the same period last year.
Once again, industry-based vehicle production forecasts were overly
optimistic which resulted in actual new vehicle builds coming in
well below forecast," said President and CEO Steve Downing.
"Despite the current vehicle production environment being down
about 8% from the second quarter of 2018, we were able to
outperform the underlying market by approximately 11%, which
resulted in a quarter over quarter net 3% revenue growth rate. For
the first six months of 2019, global vehicle production levels have
been off by approximately 7% from the same period last year, but we
have been able to maintain our growth targets for the year. In
fact, based on the first six months of the year and our forecast
for the second half, we are raising the bottom of the range and
narrowing our full year revenue guidance to be between $1.87 and
$1.90 billion. Based on our first half of 2019 performance and the
current IHS forecast for the second half of the year, we are poised
to outperform global automotive markets by approximately 7% for the
year."
For the second quarter of 2019, the gross margin
was 37.7%, which increased significantly when compared to a gross
margin of 36.2% in the first quarter of 2019. On a
quarter-over-quarter basis, the gross margin for the second quarter
of 2019 declined slightly compared to a gross margin of 38.0% for
the second quarter of 2018. The quarter-over-quarter gross margin
was negatively impacted by approximately 60 basis points due to
incremental tariffs that became effective at various times starting
in July 2018. "Our sequential gross margin expansion in 2019 was
due to positive product mix shifts, which include Full Display
Mirror and domestic exterior-mirror growth, better than expected
purchasing cost reductions in the first half of calendar year 2019,
cost discipline throughout the Company, and success in mitigating
some of the escalating costs related to tariffs that have been
impacting the Company since July 2018," said Downing. "In fact, if
not for the 60 basis points of margin erosion due to tariffs, our
gross margin would have improved on a quarter over quarter basis.
Our ability to maintain gross margins in a difficult production
environment is a testament to the hard work and cost focus of the
Gentex team."Operating expenses during the second quarter of 2019
were up 5% to $48.6 million when compared to operating expenses of
$46.1 million in the second quarter of 2018. "We continue to manage
our operating costs carefully and with discipline, while
maintaining our focus on future growth. The primary driver of
increases in operating expenses is funding the resources needed for
the development and launch of already sold products including
additional auto-dimming mirror applications, Full Display Mirror,
Integrated Toll Module, and our new aerospace program. In addition,
we are deploying resources to expand the product portfolio in the
areas of connected car, digital vision and large area dimmable
devices, which we believe will provide the potential for long-term
growth," concluded Downing.
Income from operations for the second quarter of
2019 increased 1% to $127.9 million when compared to income from
operations of $126.7 million for the second quarter of 2018. The
increase in income from operations was primarily due to the
increase in revenue on a quarter over quarter basis, but was
partially offset by lower operating margins when compared to the
same period last year.During the second quarter of 2019, the
Company's effective tax rate was 16.4%, up from 15.5% during the
second quarter of 2018, primarily driven by a decrease in discrete
tax benefits related to stock-based compensation.Net income for the
second quarter of 2019 was relatively flat at $109.0 million
compared to the second quarter of 2018.Earnings per diluted share
for the second quarter of 2019 increased 5% to $0.42, when compared
to $0.40 for the second quarter of 2018, primarily as a result of a
6% reduction in diluted shares outstanding from share repurchases,
due to the continued execution of the Company's previously
disclosed capital allocation strategy.
Automotive net sales in the second quarter of
2019 were $456.6 million, compared with automotive net sales of
$444.2 million in the second quarter of 2018. The growth in
automotive sales was driven primarily by strength in Full Display
Mirror and domestic exterior auto-dimming mirror unit shipment
growth.
Other net sales in the second quarter of 2019,
which includes dimmable aircraft windows and fire protection
products, were $12.1 million, an increase of 13% compared to other
net sales of $10.8 million in the second quarter of
2018.Share RepurchasesDuring the second quarter of
2019, the Company repurchased approximately 3.1 million shares of
its common stock at an average price of $22.72 per share, for a
total of $69.9 million of share repurchases. To date for calendar
year 2019, the Company has repurchased approximately 7.8 million
shares of its common stock at an average price of $21.30, for a
total of approximately $166.1 million of share repurchases. As of
June 30, 2019, the Company has approximately 26.0 million shares
remaining available for repurchase pursuant to the previously
announced share repurchase plan. The Company intends to continue to
repurchase additional shares of its common stock in the future in
support of the previously disclosed capital allocation strategy,
but share repurchases may vary from time to time and will continue
to take into account macroeconomic issues, market trends, and other
factors that the Company deems appropriate.
Future EstimatesThe Company’s
forecasts for light vehicle production for the third quarter and
full year of 2019 are based on IHS Markit's mid-July 2019 forecasts
for light vehicle production in North America, Europe, China, and
Japan and Korea and are detailed in the table herein.
Light Vehicle Production (per IHS Markit mid-July light
vehicle production forecast) |
(in Millions) |
Region |
3Q 2019 |
3Q 2018 |
%Change |
|
CalendarYear 2019 |
CalendarYear 2018 |
%Change |
North America |
4.12 |
|
4.03 |
|
2 |
% |
|
16.65 |
|
16.96 |
|
(2 |
)% |
Europe |
4.75 |
|
4.64 |
|
2 |
% |
|
21.44 |
|
21.99 |
|
(3 |
)% |
Japan and Korea |
3.33 |
|
3.06 |
|
9 |
% |
|
13.28 |
|
13.20 |
|
1 |
% |
China |
5.99 |
|
6.23 |
|
(4 |
)% |
|
25.04 |
|
26.85 |
|
(7 |
)% |
Total Light Vehicle
Production |
18.19 |
|
17.96 |
|
1 |
% |
|
76.41 |
|
79.00 |
|
(3 |
)% |
Based on the above IHS Markit light vehicle
production forecasts, current forecasted product mix, expense
growth estimates, and actual performance through the first six
months of 2019, the Company has updated its previously announced
annual guidance for revenue, gross margin, estimated tax rate, and
depreciation and amortization in the table below, and is
maintaining its guidance for operating expenses and capital
expenditures for calendar year 2019.
2019 Calendar Year Guidance |
|
Annual Guidance |
Item |
As of 4/19/19 |
Updated as of 7/19/19 |
Net Sales |
$1.83 - $1.93 billion |
$1.87 - $1.90 billion |
Gross Margin |
36.0% - 37.0% |
36.5% - 37.5% |
Operating Expenses (E,R&D
and S,G&A) |
$195 - $200 million |
No change |
Tax Rate |
16.0% - 18.0% |
16.0% - 17.0% |
Capital Expenditures |
$90 - $100 million |
No change |
Depreciation &
Amortization |
$105 - $115 million |
$100 - $110 million |
Finally, based on 2020 light vehicle production
forecasts and current forecasted product mix, the Company is making
no changes to its previously announced revenue estimates for
calendar year 2020, which continues to be estimated to be over and
above the foregoing 2019 revenue estimates in the range of 3% -
8%.
Safe Harbor for Forward-Looking
Statements
This 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; 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; and negative
impact of any governmental investigations and associated
litigations including securities litigations relating to the
conduct of our business. 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.
Includes content supplied by IHS Markit Light Vehicle Production
Forecast (July 16, 2019)
(http://www.gentex.com/forecast-disclaimer).
Second Quarter Conference
Call
A conference call related to this news release
will be simulcast live on the internet beginning at 9:30 a.m. ET
today, July 19, 2019. The dial-in number to participate in the call
is 844-389-8658, passcode
3547856. Participants may listen to the call via
audio streaming at www.gentex.com or by
visiting https://edge.media-server.com/mmc/p/k75vq3cg. 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 Company
Founded 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 June 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
North American Interior Mirrors |
2,206 |
|
|
2,202 |
|
|
— |
% |
|
4,433 |
|
|
4,528 |
|
|
(2 |
)% |
North American Exterior
Mirrors |
1,320 |
|
|
950 |
|
|
39 |
% |
|
2,549 |
|
|
1,768 |
|
|
44 |
% |
Total North American Mirror Units |
3,526 |
|
|
3,152 |
|
|
12 |
% |
|
6,981 |
|
|
6,296 |
|
|
11 |
% |
International Interior
Mirrors |
5,339 |
|
|
5,299 |
|
|
1 |
% |
|
10,596 |
|
|
10,647 |
|
|
— |
% |
International Exterior
Mirrors |
1,953 |
|
|
2,115 |
|
|
(8 |
)% |
|
3,924 |
|
|
4,227 |
|
|
(7 |
)% |
Total International Mirror Units |
7,293 |
|
|
7,415 |
|
|
(2 |
)% |
|
14,520 |
|
|
14,874 |
|
|
(2 |
)% |
Total Interior Mirrors |
7,545 |
|
|
7,501 |
|
|
1 |
% |
|
15,028 |
|
|
15,175 |
|
|
(1 |
)% |
Total Exterior Mirrors |
3,273 |
|
|
3,066 |
|
|
7 |
% |
|
6,473 |
|
|
5,995 |
|
|
8 |
% |
Total Auto-Dimming Mirror Units |
10,819 |
|
|
10,567 |
|
|
2 |
% |
|
21,501 |
|
|
21,170 |
|
|
2 |
% |
Note: Percent change and amounts may not total due to
rounding. |
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
(Unaudited) |
|
(Unaudited) |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net Sales |
$ |
468,711,354 |
|
|
$ |
454,981,440 |
|
|
$ |
937,300,351 |
|
|
$ |
920,401,545 |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
292,173,750 |
|
|
282,176,968 |
|
|
591,118,243 |
|
|
574,968,672 |
|
Gross Profit |
176,537,604 |
|
|
172,804,472 |
|
|
346,182,108 |
|
|
345,432,873 |
|
|
|
|
|
|
|
|
|
Engineering, Research & Development |
28,359,343 |
|
|
27,200,465 |
|
|
56,448,524 |
|
|
53,249,723 |
|
Selling, General & Administrative |
20,273,295 |
|
|
18,921,003 |
|
|
40,232,286 |
|
|
36,984,813 |
|
Operating Expenses |
48,632,638 |
|
|
46,121,468 |
|
|
96,680,810 |
|
|
90,234,536 |
|
|
|
|
|
|
|
|
|
Income from Operations |
127,904,966 |
|
|
126,683,004 |
|
|
249,501,298 |
|
|
255,198,337 |
|
|
|
|
|
|
|
|
|
Other Income |
2,377,578 |
|
|
2,289,774 |
|
|
5,689,789 |
|
|
5,534,372 |
|
Income before Income
Taxes |
130,282,544 |
|
|
128,972,778 |
|
|
255,191,087 |
|
|
260,732,709 |
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes |
21,323,919 |
|
|
19,948,796 |
|
|
41,952,050 |
|
|
40,459,984 |
|
|
|
|
|
|
|
|
|
Net Income |
$ |
108,958,625 |
|
|
$ |
109,023,982 |
|
|
$ |
213,239,037 |
|
|
$ |
220,272,725 |
|
|
|
|
|
|
|
|
|
Earnings Per Share(1) |
|
|
|
|
|
|
|
Basic |
$ |
0.42 |
|
|
$ |
0.40 |
|
|
$ |
0.82 |
|
|
$ |
0.81 |
|
Diluted |
$ |
0.42 |
|
|
$ |
0.40 |
|
|
$ |
0.82 |
|
|
$ |
0.80 |
|
Weighted Average Shares |
|
|
|
|
|
|
|
Basic |
255,219,868 |
|
|
271,747,049 |
|
|
256,350,600 |
|
|
273,085,191 |
|
Diluted |
256,579,621 |
|
|
274,122,498 |
|
|
257,694,885 |
|
|
275,660,418 |
|
|
|
|
|
|
|
|
|
Cash Dividends Declared per
Share |
$ |
0.115 |
|
|
$ |
0.110 |
|
|
$ |
0.230 |
|
|
$ |
0.220 |
|
|
|
|
|
|
|
|
|
(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) |
|
|
|
June 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
Cash and Cash Equivalents |
$ |
260,332,892 |
|
|
$ |
217,025,278 |
|
Short-Term Investments |
190,565,065 |
|
|
169,412,999 |
|
Accounts Receivable, net |
226,426,332 |
|
|
213,537,799 |
|
Inventories |
225,094,463 |
|
|
225,281,599 |
|
Other Current Assets |
27,984,155 |
|
|
25,672,579 |
|
Total Current Assets |
930,402,907 |
|
|
850,930,254 |
|
|
|
|
|
Plant and Equipment - Net |
501,398,382 |
|
|
498,473,766 |
|
|
|
|
|
Goodwill |
307,365,845 |
|
|
307,365,845 |
|
Long-Term Investments |
121,061,221 |
|
|
137,979,082 |
|
Intangible Assets |
260,025,000 |
|
|
269,675,000 |
|
Patents and Other Assets |
22,549,518 |
|
|
21,010,121 |
|
Total Other Assets |
711,001,584 |
|
|
736,030,048 |
|
|
|
|
|
Total Assets |
$ |
2,142,802,873 |
|
|
$ |
2,085,434,068 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
INVESTMENT |
|
|
|
Current Liabilities |
$ |
177,560,797 |
|
|
$ |
169,160,919 |
|
Other Non-current Liabilities |
6,190,219 |
|
|
— |
|
Deferred Income Taxes |
54,717,622 |
|
|
54,521,489 |
|
Shareholders' Investment |
1,904,334,235 |
|
|
1,861,751,660 |
|
Total Liabilities &
Shareholders' Investment |
$ |
2,142,802,873 |
|
|
$ |
2,085,434,068 |
|
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