Gentex Corporation (NASDAQ:GNTX), the Zeeland, Michigan-based
manufacturer of automotive automatic-dimming rearview mirrors,
automotive electronics, dimmable aircraft windows, and fire
protection products, today reported financial results for the three
months ended March 31, 2018.
1st Quarter 2018 Summary
- Net sales growth of 3% quarter over quarter while light
vehicle production in Company's primary markets declined 3% on a
quarter over quarter basis
- Net income increased 14% quarter over
quarter
- Earnings per diluted share increased 21% quarter over
quarter to $.40 per share
- 9.3 million shares repurchased during the quarter at an
average price of $21.71 per share
- $28.0 million of debt repaid during the
quarter
For the first quarter of 2018, the Company
reported net sales of $465.4 million, which was an increase of 3%
compared to net sales of $453.5 million in the first quarter of
2017. When compared with the Company's mid-January forecast for the
first quarter of 2018, light vehicle production in the Company's
primary regions declined in excess of 3%, which resulted in lower
than expected unit shipments and revenue during the quarter for the
Company. On a quarter over quarter basis, automotive light vehicle
production in the Company's primary markets decreased by
approximately 3% versus the previous reported production numbers
from IHS for the first quarter of 2017. Additionally, a supplier
production issue for certain electronic components affected the
Company's ability to meet demand for Full Display Mirrors® which
resulted in a negative impact of approximately 2% on the Company's
revenue during the quarter. Since the end of the first quarter of
2018, the supplier production issue has been remediated and the
Company has resumed normal shipments of the impacted products.
"While we were disappointed with the overall
revenue performance during the first quarter of 2018, we were able
to outperform our underlying markets by approximately 6% taking
into consideration the lower automotive production levels during
the quarter," said President and CEO, Steve Downing. "Despite the
first quarter headwinds, we have a strong product launch cadence of
Full Display Mirror nameplates over the balance of 2018.
Additionally, light vehicle production for the remainder of 2018 is
currently forecasted to improve, especially in the second half of
the year. When you combine these factors, we are pleased to be able
to maintain our revenue and margin guidance for calendar year 2018,
despite the difficulties in the first quarter," added Downing.
When compared with the first quarter of 2017,
the gross margin declined from 38.8% in the first quarter of 2017
to 37.1% in the first quarter of 2018, primarily as a result of an
inability to leverage fixed overhead costs, resulting from the
lower than forecasted sales growth and the Full Display Mirror
shipments that were lower than demand during the quarter due to the
supplier production issue. Additionally, annual customer price
reductions negatively impacted the gross margin because they were
not fully offset by purchasing cost reductions. "As is customary
for the Company, most annual price reductions become effective in
the first quarter, but purchasing cost reductions don't materially
start to help offset that margin pressure until sometime in the
second quarter. We are currently expecting positive leverage on
gross margin based on the timing of purchasing cost reductions and
forecasted revenue growth rates for the remainder of calendar year
2018, allowing us to maintain annual guidance provided," said
Downing.
Operating expenses during the first quarter of
2018 were up 7% to $44.1 million when compared to operating
expenses of $41.4 million in the first quarter of 2017, primarily
due to increased staffing levels.
Income from operations for the first quarter of
2018 decreased 4% to $128.5 million when compared to income from
operations of $134.4 million for the first quarter of 2017,
primarily due to the lower quarter over quarter gross profit margin
percentage.
Other income increased to $3.2 million in the
first quarter of 2018 compared to $0.4 million in the first quarter
of 2017, primarily due to an increased interest net of expense,
foreign exchange gains, and realized gains on sales of equity
investments.
During the first quarter of 2018, the Company's
effective tax rate was 15.6%, down from 27.7% during the first
quarter of 2017, primarily driven by the impacts of the Tax Cuts
and Jobs Act of 2017.
Net income for the first quarter of 2018
increased 14% to $111.2 million compared with net income of $97.6
million in the first quarter of 2017.
Earnings per diluted share in the first quarter
of 2018 increased 21% to $0.40, compared with earnings per diluted
share of $0.33 in the first quarter of 2017, as a result of the
lower effective tax rate and a reduction in diluted shares
outstanding on a quarter over quarter basis.
Automotive net sales in the first quarter of
2018 were $455.0 million, an increase of 2% compared with
automotive net sales of $445.6 million in the first quarter of
2017, driven by a 7% increase in auto-dimming mirror unit shipments
on a quarter over quarter basis.
Other net sales in the first quarter of 2018,
which includes dimmable aircraft windows and fire protection
products, were $10.4 million, an increase of 33%, compared to other
net sales of $7.9 million in the first quarter of 2017.
Share RepurchasesDuring the
first quarter of 2018, the Company repurchased 9.3 million shares
of its common stock at an average price of $21.71 per share. Of
these share repurchases, 5.5 million shares were repurchased from
the former CEO, pursuant to the previously disclosed retirement
agreement, at a price of $20.98 per share. As previously announced,
these share repurchases were separately approved by the Company's
Board of Directors and were not a part of the Company’s existing
publicly announced share repurchase plan. As of March 31, 2018, the
Company has approximately 26.0 million shares remaining available
for repurchase pursuant to the previously announced share
repurchase plan, which is now a part of the broader publicly
disclosed capital allocation strategy. The Company intends to
continue to repurchase additional shares of its common stock in the
future in support of such capital allocation strategy, but share
repurchases may vary from time to time and will take into account
macroeconomic issues, market trends, and other factors that the
Company has deemed appropriate.
Debt RepaymentDuring the first
quarter of 2018, the Company paid down $26.1 million of debt on the
Company's term loan, which in combination with its normally
scheduled principal repayment of $1.9 million resulted in a total
repayment of $28.0 million during the quarter. The Company expects
to continue, based on previously disclosed factors, to pay
additional principal during the second and third quarters of 2018,
in anticipation of such debt maturing on September 27, 2018.
Future EstimatesThe Company’s
forecasts for light vehicle production for the second quarter and
full year of 2018 are based on the IHS Automotive April 2018
forecast for light vehicle production in North America, Europe,
Japan and Korea.
Light Vehicle Production (per IHS Automotive
April light vehicle production forecast) |
(in Millions) |
Region |
2Q 2018 |
2Q 2017 |
%Change |
|
CalendarYear 2018 |
CalendarYear 2017 |
%Change |
North America |
4.50 |
|
4.57 |
|
(2)% |
|
17.33 |
17.26 |
|
—% |
Europe |
5.81 |
|
6.03 |
|
(4)% |
|
22.83 |
22.78 |
|
—% |
Japan and Korea |
3.17 |
|
3.16 |
|
—% |
|
12.93 |
12.91 |
|
—% |
Total Light Vehicle
Production |
13.48 |
|
13.76 |
|
(2)% |
|
53.09 |
52.95 |
|
—% |
Based on the April 2018 IHS light vehicle
production forecast, current forecasted product mix and expense
growth estimates, the Company continues to maintain its previously
announced annual guidance for revenue, gross margin, operating
expenses, capital expenditures and depreciation and amortization
for calendar year 2018 and annual revenue guidance for calendar
year 2019. After further analysis and refinement, the Company is
lowering its estimated effective annual tax rate for calendar year
2018 from previous guidance of 18 - 21% for calendar year 2018, to
a range of 15 - 18% for the year. This is primarily as a result of
further detailed analysis of components of legislation related to
the Tax Cuts and Jobs Act of 2017, R&D tax credits, as well as
discrete tax benefits related to equity
compensation.
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”, “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.
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 20, 2018.
The dial-in number to participate in the call is
844-389-8658, passcode 2094828.
Participants may listen to the call via audio streaming at
www.gentex.com or by visiting
https://edge.media-server.com/m6/p/wecpv9ox. 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 supplier of automatic-dimming rearview mirrors and electronics to
the automotive industry, dimmable aircraft windows for aviation
markets, and fire protection products to the fire protection
market. Visit the Company’s web site at www.gentex.com.
Contact Information:Gentex Investor &
Media ContactJosh O'Berski(616) 772-1590 x5814
GENTEX CORPORATION |
AUTO-DIMMING MIRROR SHIPMENTS |
(Thousands) |
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
|
% Change |
North American Interior
Mirrors |
2,326 |
|
2,359 |
|
(1)% |
North American Exterior
Mirrors |
818 |
|
916 |
|
(11)% |
Total North American Mirror Units |
3,143 |
|
3,276 |
|
(4)% |
International Interior
Mirrors |
5,348 |
|
4,818 |
|
11% |
International Exterior
Mirrors |
2,112 |
|
1,826 |
|
16% |
Total International Mirror Units |
7,459 |
|
6,643 |
|
12% |
Total Interior
Mirrors |
7,673 |
|
7,177 |
|
7% |
Total Exterior
Mirrors |
2,930 |
|
2,742 |
|
7% |
Total Auto-Dimming Mirror Units |
10,603 |
|
9,919 |
|
7% |
Note: Percent change and amounts may not total due to
rounding.
|
GENTEX CORPORATION AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME |
|
|
(Unaudited) |
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
Net Sales |
$ |
465,420,105 |
|
$ |
453,535,250 |
|
|
|
|
Cost of
Goods Sold |
292,791,704 |
|
277,734,465 |
Gross
profit |
172,628,401 |
|
175,800,785 |
|
|
|
|
Engineering, Research & Development |
26,049,258 |
|
25,152,257 |
Selling,
General & Administrative |
18,063,810 |
|
16,221,408 |
Operating
Expenses |
44,113,068 |
|
41,373,665 |
|
|
|
|
Income
from operations |
128,515,333 |
|
134,427,120 |
|
|
|
|
Other
Income (Expense) |
3,244,598 |
|
437,784 |
Income before Income
Taxes |
131,759,931 |
|
134,864,904 |
|
|
|
|
Provision for Income
Taxes |
20,511,188 |
|
37,308,163 |
|
|
|
|
Net Income |
$ |
111,248,743 |
|
$ |
97,556,741 |
|
|
|
|
Earnings Per Share |
|
|
|
Basic |
$ |
0.40 |
|
$ |
0.34 |
Diluted |
$ |
0.40 |
|
$ |
0.33 |
Weighted Average
Shares |
|
|
|
Basic |
274,759,516 |
|
287,408,900 |
Diluted |
277,509,428 |
|
291,479,838 |
|
|
|
|
Cash Dividends Declared
per Share |
$ |
0.110 |
|
$ |
0.090 |
|
|
|
|
|
|
|
GENTEX CORPORATION AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
|
(Unaudited) |
|
|
|
March 31, 2018 |
|
December 31, 2017 |
ASSETS |
|
|
|
Cash and Cash
Equivalents |
$ |
524,323,560 |
|
$ |
569,734,496 |
Short-Term
Investments |
152,179,408 |
|
152,538,054 |
Accounts Receivable,
net |
246,427,239 |
|
231,121,788 |
Inventories |
207,232,952 |
|
216,765,583 |
Other Current
Assets |
11,531,029 |
|
14,403,902 |
Total Current
Assets |
1,141,694,188 |
|
1,184,563,823 |
|
|
|
|
Plant and Equipment -
Net |
496,274,467 |
|
492,479,330 |
|
|
|
|
Goodwill |
307,365,845 |
|
307,365,845 |
Intangible Assets |
284,150,000 |
|
288,975,000 |
Patents and Other
Assets |
24,867,968 |
|
78,669,914 |
Total Other Assets |
616,383,813 |
|
675,010,759 |
|
|
|
|
Total Assets |
$ |
2,254,352,468 |
|
$ |
2,352,053,912 |
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' INVESTMENT |
|
|
|
Current
Liabilities |
$ |
228,169,606 |
|
$ |
243,647,007 |
Deferred Income
Taxes |
56,205,366 |
|
58,888,644 |
Shareholders'
Investment |
1,969,977,496 |
|
2,049,518,261 |
Total Liabilities &
Shareholders' Investment |
$ |
2,254,352,468 |
|
$ |
2,352,053,912 |
|
|
|
|
|
|
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