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
nine months ended September 30, 2019.
3rd Quarter 2019 Summary
- Net Sales growth of 4% quarter over quarter versus a 3%
quarter over quarter reduction in global light vehicle production
volumes
- GM strike negatively impacted quarterly net sales by
approximately 2%
- Gross margin of 37.7% includes tariff impact of 110
basis points
- Quarter over quarter earnings per diluted share growth
of 5% to $0.44
- 3.6 million shares repurchased during the
quarter
For the third quarter of 2019, the Company
reported net sales of $477.8 million, which was an increase of 4%
compared to net sales of $460.3 million in the third quarter of
2018. The 4% quarter over quarter growth was accomplished
despite global light vehicle production declining approximately 3%
in the third quarter of 2019 when compared to the third quarter of
2018. The actual global light vehicle production levels also
worsened in excess of 3% for the third quarter of 2019 when
compared to IHS Markit's mid-July forecast for the third quarter of
2019.
"For much of the year, actual light vehicle
production levels have fallen well short of estimates and this
trend unfortunately continued in the third quarter of 2019.
This lower than expected performance in vehicle production in the
third quarter of 2019 was despite the fact that the third quarter
of 2019 had easier comparisons on a quarter over quarter basis,”
said President and CEO, Steve Downing. “We were, however,
able to grow net sales 4% quarter over quarter despite the fact
that the underlying global light vehicle production in the quarter
declined approximately 3% compared to the same quarter last
year. Additionally, the GM strike negatively impacted sales
by 2% in the quarter. This total growth rate of 4% means that
we effectively outperformed our underlying markets by 7% - 9%
during the third quarter of 2019."
For the third quarter of 2019, the gross margin
was 37.7% which improved when compared with a gross margin of 37.6%
for the third quarter of 2018. The third quarter of 2019
gross margin was negatively impacted by tariffs that in total
represented 110 basis points of headwind. "The gross margin
in the third quarter of 2019 improved 10 basis points versus the
same quarter last year, despite the fact that escalating tariff
costs negatively impacted gross margin by an additional 50 basis
points versus the same time last year. The overall gross margin
improvement was driven by our solid, mid-single digit growth rate,
positive product mix, better than expected purchasing cost
reductions, and the team’s success in mitigating some of the costs
related to the tariffs that have been impacting the Company since
July 2018," said Downing.
Operating expenses during the third quarter of
2019 were up 15% to $52.2 million when compared to operating
expenses of $45.6 million in the third quarter of 2018.
"Operating expenses ran slightly ahead of our expectations for the
third quarter of 2019, but we believe that operating expenses in
the fourth quarter will be more in line with the growth rates from
the first half of 2019 and within our annual guidance range
provided. The quarter over quarter increase in operating
expense was driven by headcount and other resources required to
fund development and launch of new products, travel and other
resources associated with mitigation of tariffs, increased legal
and professional fees associated with a minor acquisition of new
technology, and ongoing focus on tax planning," concluded
Downing.
Income from operations for the third quarter of
2019 increased 1% to $128.1 million when compared to income from
operations of $127.4 million for the third quarter of 2018.
The quarter over quarter increase in income from operations was
primarily due to the increase in net sales on a quarter over
quarter basis, but was partially offset by lower operating margins
when compared to the same quarter last year.
During the third quarter of 2019, the Company's
effective tax rate was 15.0%, which is up slightly from 14.7%
during the third quarter of 2018. This rate, however, is down
from the 16.4% tax rate for the first half of 2019. These
effective tax rates were driven below the statutory rate in such
periods due to tax planning strategies, the foreign-derived
intangible income deduction, and discrete benefits related to
stock-based compensation.
Net income for the third quarter of 2019
increased by 1% to $111.9 million compared with net income of
$111.3 million in the third quarter of 2018.
Earnings per diluted share for the third quarter
of 2019 increased 5% to $0.44, when compared to $0.42 for the third
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 third quarter of
2019 were $464.3 million, compared with automotive net sales of
$449.2 million in the third quarter of 2018. The 3% quarter
over quarter growth in automotive sales was driven primarily by
strength in Full Display Mirror® shipments, as well as an 18%
quarter over quarter increase in exterior auto-dimming mirror unit
shipments. This quarter over quarter growth in revenue was
partially offset by Company specific product revenue headwinds of
approximately 350 basis points when compared to the same prior year
quarter, in addition to the previously mentioned 200 basis points
in lost revenue in the third quarter of 2019 due to the GM
strike.
Other net sales in the third quarter of 2019,
which includes dimmable aircraft windows and fire protection
products, were $13.5 million, an increase of 22% compared to other
net sales of $11.1 million in the third quarter of 2018.
Share Repurchases
During the third quarter of 2019, the Company
repurchased approximately 3.6 million shares of its common stock at
an average price of $27.07 per share, for a total of $96.6 million
of share repurchases. To date for calendar year 2019, the
Company has repurchased approximately 11.4 million shares of its
common stock at an average price of $23.11, for a total of $262.7
million of share repurchases. As of September 30, 2019, the
Company has approximately 22.5 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 Estimates
The Company’s forecasts for light vehicle
production for the fourth quarter and full year of 2019 are based
on IHS Markit's mid-October 2019 forecasts for light vehicle
production in North America, Europe, China, and Japan and Korea
with certain adjustments, as described below, including the
Company’s estimate of the impact of the ongoing GM strike.
Light Vehicle Production (per IHS Markit mid-October light
vehicle production forecast) |
(in Millions) |
|
Region |
4Q 2019 |
4Q 2018 |
% Change |
|
Calendar Year 2019 |
Calendar Year 2018 |
% Change |
North America |
3.78 |
|
4.19 |
|
(10 |
)% |
|
16.27 |
|
16.96 |
|
(4 |
)% |
Europe |
5.30 |
|
5.44 |
|
(3 |
)% |
|
21.21 |
|
21.99 |
|
(4 |
)% |
Japan and Korea |
3.25 |
|
3.56 |
|
(9 |
)% |
|
13.18 |
|
13.20 |
|
— |
% |
China |
7.06 |
|
7.12 |
|
(1 |
)% |
|
24.53 |
|
26.85 |
|
(9 |
)% |
Total Light Vehicle
Production |
19.39 |
|
20.31 |
|
(5 |
)% |
|
75.19 |
|
79.00 |
|
(5 |
)% |
Based on the above IHS Markit light vehicle
production forecasts, current forecasted product mix, expense
growth estimates, actual performance through the first nine months
of 2019, and estimates regarding the impact of the GM strike that
are detailed herein, the Company is providing certain updates for
the fourth quarter 2019 as well as its previously announced annual
guidance ranges in the table below.
Guidance for the fourth quarter of 2019 reflects
the Company's best estimate of the impact of the ongoing GM strike,
as well as changes to the IHS Markit's estimates for light vehicle
production for the fourth quarter. Based on order changes
over the last several weeks from GM, the Company estimates the
impact to be approximately $7 - $8 million in lost sales, per week
of the strike. Based on the lost sales to date, the Company's
estimate of additional lost revenue before the GM strike ends, and
changes to IHS estimates, the Company now estimates that net sales
will be between $430 million and $455 million for the fourth
quarter of 2019. Based on this updated net sales guidance,
the Company is estimating that the gross margin for the fourth
quarter will be between 35% and 36%.
2019 Calendar Year Guidance |
|
Annual Guidance |
Item |
As of 7/19/19 |
Updated as of 10/18/19 |
Net Sales |
$1.87 - $1.90 billion |
$1.84 -
$1.87 billion |
Gross Margin |
36.5% - 37.5% |
36.6% -
37.0% |
Operating Expenses (E,R&D and S,G&A) |
$195 - $200 million |
$198 -
$200 million |
Tax Rate |
16.0% - 17.0% |
16.0% -
16.5% |
Capital Expenditures |
$90 - $100 million |
No
Change |
Depreciation & Amortization |
$100 -
$110 million |
$104 - $107 million |
Lastly, 2020 light vehicle production forecasts have continued
to worsen as the year has progressed; however, the Company is not
changing its previously announced range of revenue guidance for
calendar year 2020, which is estimated to be over and above the
foregoing 2019 revenue estimates by 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
(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; 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 (October 16, 2019)
(http://www.gentex.com/forecast-disclaimer).
Third 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, October 18, 2019. The dial-in number to participate in the
call is 844-389-8658, passcode
7489315. Participants may listen to the call
via audio streaming at www.gentex.com or by
visiting https://edge.media-server.com/mmc/p/qtuvni76. 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 September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
North American Interior Mirrors |
2,139 |
|
|
2,108 |
|
|
1 |
% |
|
6,571 |
|
|
6,636 |
|
|
(1 |
)% |
North American Exterior
Mirrors |
1,412 |
|
|
1,103 |
|
|
28 |
% |
|
3,961 |
|
|
2,871 |
|
|
38 |
% |
Total North American Mirror Units |
3,551 |
|
|
3,211 |
|
|
11 |
% |
|
10,532 |
|
|
9,507 |
|
|
11 |
% |
International Interior
Mirrors |
5,189 |
|
|
5,154 |
|
|
1 |
% |
|
15,785 |
|
|
15,801 |
|
|
— |
% |
International Exterior
Mirrors |
2,101 |
|
|
1,864 |
|
|
13 |
% |
|
6,025 |
|
|
6,091 |
|
|
(1 |
)% |
Total International Mirror Units |
7,290 |
|
|
7,018 |
|
|
4 |
% |
|
21,810 |
|
|
21,892 |
|
|
— |
% |
Total Interior Mirrors |
7,328 |
|
|
7,262 |
|
|
1 |
% |
|
22,356 |
|
|
22,437 |
|
|
— |
% |
Total Exterior Mirrors |
3,513 |
|
|
2,967 |
|
|
18 |
% |
|
9,986 |
|
|
8,962 |
|
|
11 |
% |
Total Auto-Dimming Mirror Units |
10,841 |
|
|
10,229 |
|
|
6 |
% |
|
32,342 |
|
|
31,399 |
|
|
3 |
% |
Note: Percent change and
amounts may not total due to rounding.
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
(Unaudited) |
|
(Unaudited) |
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net Sales |
$ |
477,761,417 |
|
|
$ |
460,253,433 |
|
|
$ |
1,415,061,768 |
|
|
$ |
1,380,654,978 |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
297,440,131 |
|
|
287,263,147 |
|
|
888,558,373 |
|
|
862,231,819 |
|
Gross Profit |
180,321,286 |
|
|
172,990,286 |
|
|
526,503,395 |
|
|
518,423,159 |
|
|
|
|
|
|
|
|
|
Engineering, Research & Development |
29,398,725 |
|
|
26,888,999 |
|
|
85,847,249 |
|
|
80,138,722 |
|
Selling, General & Administrative |
22,786,881 |
|
|
18,673,376 |
|
|
63,019,167 |
|
|
55,658,189 |
|
Operating Expenses |
52,185,606 |
|
|
45,562,375 |
|
|
148,866,416 |
|
|
135,796,911 |
|
|
|
|
|
|
|
|
|
Income from Operations |
128,135,680 |
|
|
127,427,911 |
|
|
377,636,979 |
|
|
382,626,248 |
|
|
|
|
|
|
|
|
|
Other Income |
3,443,833 |
|
|
3,106,704 |
|
|
9,133,621 |
|
|
8,641,076 |
|
Income before Income
Taxes |
131,579,513 |
|
|
130,534,615 |
|
|
386,770,600 |
|
|
391,267,324 |
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes |
19,681,661 |
|
|
19,198,798 |
|
|
61,633,712 |
|
|
59,658,782 |
|
|
|
|
|
|
|
|
|
Net Income |
$ |
111,897,852 |
|
|
$ |
111,335,817 |
|
|
$ |
325,136,888 |
|
|
$ |
331,608,542 |
|
|
|
|
|
|
|
|
|
Earnings Per Share(1) |
|
|
|
|
|
|
|
Basic |
$ |
0.44 |
|
|
$ |
0.42 |
|
|
$ |
1.27 |
|
|
$ |
1.23 |
|
Diluted |
$ |
0.44 |
|
|
$ |
0.42 |
|
|
$ |
1.26 |
|
|
$ |
1.22 |
|
Weighted Average Shares |
|
|
|
|
|
|
|
Basic |
251,075,859 |
|
|
265,607,128 |
|
|
252,811,950 |
|
|
270,366,996 |
|
Diluted |
252,578,982 |
|
|
267,595,142 |
|
|
254,267,851 |
|
|
272,733,502 |
|
|
|
|
|
|
|
|
|
Cash Dividends Declared per
Share |
$ |
0.115 |
|
|
$ |
0.110 |
|
|
$ |
0.345 |
|
|
$ |
0.330 |
|
|
|
|
|
|
|
|
|
(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) |
|
|
|
September 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
Cash and Cash Equivalents |
$ |
260,151,083 |
|
|
$ |
217,025,278 |
|
Short-Term Investments |
207,156,287 |
|
|
169,412,999 |
|
Accounts Receivable, net |
253,108,715 |
|
|
213,537,799 |
|
Inventories |
238,676,795 |
|
|
225,281,599 |
|
Other Current Assets |
28,402,524 |
|
|
25,672,579 |
|
Total Current Assets |
987,495,404 |
|
|
850,930,254 |
|
|
|
|
|
Plant and Equipment - Net |
491,968,638 |
|
|
498,473,766 |
|
|
|
|
|
Goodwill |
307,365,845 |
|
|
307,365,845 |
|
Long-Term Investments |
103,025,468 |
|
|
137,979,082 |
|
Intangible Assets |
255,200,000 |
|
|
269,675,000 |
|
Patents and Other Assets |
22,241,049 |
|
|
21,010,121 |
|
Total Other Assets |
687,832,362 |
|
|
736,030,048 |
|
|
|
|
|
Total Assets |
$ |
2,167,296,404 |
|
|
$ |
2,085,434,068 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
INVESTMENT |
|
|
|
Current Liabilities |
$ |
182,304,131 |
|
|
$ |
169,160,919 |
|
Other Non-current Liabilities |
6,952,703 |
|
|
— |
|
Deferred Income Taxes |
56,711,307 |
|
|
54,521,489 |
|
Shareholders' Investment |
1,921,328,263 |
|
|
1,861,751,660 |
|
Total Liabilities &
Shareholders' Investment |
$ |
2,167,296,404 |
|
|
$ |
2,085,434,068 |
|
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