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, 2019.
1st Quarter 2019 Summary
- Net Sales growth of 1% quarter over quarter versus a 7%
quarter over quarter reduction in global light vehicle production
volumes
- Gross Margin of 36.2%, including negative tariff impact
of 90 basis points
- Earnings per Diluted Share at $0.40 per
share
- 4.7 million shares repurchased during the
quarter
For the first quarter of 2019, the Company
reported net sales of $468.6 million, which was an increase of 1%
compared to net sales of $465.4 million in the first quarter of
2018. This growth was in contrast to global light vehicle
production that declined approximately 7% in the first quarter of
2019 when compared to the first quarter of 2018. Additionally, the
actual global light vehicle production levels worsened in excess of
3% for the first quarter of 2019, when compared to IHS Markit's
mid-January forecast for the first quarter of 2019.
"The first quarter of 2019 started off in a very
similar fashion to the second half of 2018, with vehicle production
forecasts being optimistic about growth, but with actual results
coming in well short of those forecasts," said President and CEO
Steve Downing. "Such an environment obviously makes forecasting
difficult and continues to be a reason for our conservative outlook
for the remainder of the year. Despite these vehicle production
volume headwinds and certain Company specific product headwinds,
our revenue outperformed our underlying markets by approximately
8%. Our growth was driven by very solid performance of the Full
Display Mirror which helped us overcome the significant volume
reductions in our primary industry."
For the first quarter of 2019, the gross margin
was 36.2%, which was down when compared to a gross margin of 37.1%
in the first quarter of 2018. The gross margin during the quarter
was negatively impacted by approximately 90 basis points due to
tariffs that became effective in the second half of calendar year
2018. "Our ability to maintain our gross margin on a quarter over
quarter basis, if not for the 90-basis point impact from tariffs,
required a tremendous effort from the team to overcome the
headwinds created from our annual customer price reductions and the
overhead inefficiencies from the slower growth rate. The resiliency
in the gross margin was supported by the positive product mix
shifts during the first quarter of 2019, including continued growth
in Full Display Mirror unit shipments and a 9% quarter over quarter
growth rate in exterior auto-dimming mirrors in the first quarter
of 2019,” said Downing.
Operating expenses during the first quarter of
2019 were up 9% to $48.0 million when compared to operating
expenses of $44.1 million in the first quarter of 2018. "Operating
expenses are in-line with our stated expectations for calendar year
2019 as we continue to focus on increasing our growth rate through
additional launches of Full Display Mirror, Integrated Toll Module
and additional auto-dimming mirror applications. Our operating
expenses are also focused on new product innovation that will allow
us to expand our product portfolio in the areas of connected car,
digital vision and large area dimmable devices. We remain confident
in the potential long-term growth opportunities of these product
areas based on the high level of OEM engagement we received at CES
in January and that has continued since that time," concluded
Downing.
Income from operations for the first quarter of
2019 decreased 5% to $121.6 million when compared to income from
operations of $128.5 million for the first quarter of 2018. The
decrease in income from operations was primarily due to increased
operating expenses and lower gross margin dollars.
Other income increased to $3.3 million in the
first quarter of 2019 compared to $3.2 million in the first quarter
of 2018, primarily due to decreased interest expense.
During the first quarter of 2019, the Company's
effective tax rate was 16.5%, up from 15.6% during the first
quarter of 2018, primarily driven by a decrease in tax benefits
related to stock-based compensation.
Net income for the first quarter of 2019
decreased 6% to $104.3 million compared with net income of $111.2
million in the first quarter of 2018, which is primarily a result
of the increased operating expenses and an increased tax rate on a
quarter over quarter basis.
Earnings per diluted share in the first quarter
of 2019 remained at $0.40, in-line with earnings per diluted share
of $0.40 in the first quarter of 2018, as a result of the 7%
reduction in diluted shares outstanding from share repurchases
which are a part of the execution of the Company's previously
disclosed capital allocation strategy.
Automotive net sales in the first quarter of
2019 were $455.8 million, compared with automotive net sales of
$455.0 million in the first quarter of 2018. Full Display
Mirror® and exterior auto-dimming mirror unit
shipment growth was essentially offset by reductions in interior
auto-dimming mirror unit shipments when compared to the same
quarter in the prior year. The reduction in interior auto-dimming
mirror unit shipments was primarily related to the decline in
global light vehicle production.
Other net sales in the first quarter of 2019,
which includes dimmable aircraft windows and fire protection
products, were $12.8 million, an increase of 23% compared to other
net sales of $10.4 million in the first quarter of 2018.
Share RepurchasesDuring the
first quarter of 2019, the Company repurchased approximately 4.7
million shares of its common stock at an average price of $20.37
per share, for a total of $96.3 million of share repurchases. As of
March 31, 2019, the Company has approximately 29.1 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 second quarter and
full year of 2019 are based on IHS Markit's mid-April 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-April light vehicle production forecast) |
(in Millions) |
Region |
2Q 2019 |
2Q 2018 |
% Change |
|
Calendar Year 2019 |
Calendar Year 2018 |
% Change |
North America |
4.31 |
|
4.36 |
|
(1 |
)% |
|
16.68 |
|
17.06 |
|
(2 |
)% |
Europe |
5.59 |
|
6.01 |
|
(7 |
)% |
|
21.49 |
|
22.22 |
|
(3 |
)% |
Japan and Korea |
3.17 |
|
3.23 |
|
(2 |
)% |
|
13.11 |
|
13.26 |
|
(1 |
)% |
China |
6.52 |
|
6.74 |
|
(3 |
)% |
|
26.88 |
|
26.85 |
|
— |
% |
Total Light Vehicle
Production |
19.59 |
|
20.34 |
|
(4 |
)% |
|
78.16 |
|
79.39 |
|
(2 |
)% |
Based on the above IHS Markit light vehicle
production forecasts, 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, estimated tax rate, and
depreciation and amortization for calendar year 2019. The Company
also continues to maintain annual revenue guidance for calendar
year 2020.
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.
Includes content supplied by IHS Markit Light Vehicle Production
Forecast (April 16, 2019)
(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, 2019.
The dial-in number to participate in the call is
844-389-8658, passcode 7669065.
Participants may listen to the call via audio streaming at
www.gentex.com or by visiting
https://edge.media-server.com/m6/p/7hwgu3v3. 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, |
|
2019 |
|
2018 |
|
% Change |
North American Interior
Mirrors |
2,227 |
|
|
2,326 |
|
|
(4 |
)% |
North American Exterior
Mirrors |
1,229 |
|
|
818 |
|
|
50 |
% |
Total North American Mirror Units |
3,455 |
|
|
3,143 |
|
|
10 |
% |
International Interior
Mirrors |
5,256 |
|
|
5,319 |
|
|
(1 |
)% |
International Exterior
Mirrors |
1,971 |
|
|
2,114 |
|
|
(7 |
)% |
Total International Mirror Units |
7,227 |
|
|
7,433 |
|
|
(3 |
)% |
Total Interior
Mirrors |
7,483 |
|
|
7,644 |
|
|
(2 |
)% |
Total Exterior
Mirrors |
3,199 |
|
|
2,932 |
|
|
9 |
% |
Total Auto-Dimming Mirror Units |
10,682 |
|
|
10,576 |
|
|
1 |
% |
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, |
|
|
2019 |
|
2018 |
Net Sales |
|
$ |
468,588,997 |
|
|
$ |
465,420,105 |
|
|
|
|
|
|
Cost of
Goods Sold |
|
298,944,494 |
|
|
292,791,704 |
|
Gross
Profit |
|
169,644,503 |
|
|
172,628,401 |
|
|
|
|
|
|
Engineering, Research & Development |
|
28,089,181 |
|
|
26,049,258 |
|
Selling,
General & Administrative |
|
19,958,991 |
|
|
18,063,810 |
|
Operating
Expenses |
|
48,048,172 |
|
|
44,113,068 |
|
|
|
|
|
|
Income
from Operations |
|
121,596,331 |
|
|
128,515,333 |
|
|
|
|
|
|
Other
Income |
|
3,312,210 |
|
|
3,244,598 |
|
Income before Income
Taxes |
|
124,908,541 |
|
|
131,759,931 |
|
|
|
|
|
|
Provision for Income
Taxes |
|
20,628,130 |
|
|
20,511,188 |
|
|
|
|
|
|
Net Income |
|
$ |
104,280,411 |
|
|
$ |
111,248,743 |
|
|
|
|
|
|
Earnings Per Share |
|
|
|
|
Basic |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
Diluted |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
Weighted Average
Shares |
|
|
|
|
Basic |
|
257,822,836 |
|
|
274,759,516 |
|
Diluted |
|
259,105,232 |
|
|
277,509,428 |
|
|
|
|
|
|
Cash Dividends Declared
per Share |
|
$ |
0.115 |
|
|
$ |
0.110 |
|
|
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS |
|
|
(Unaudited) |
|
|
|
March 31, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
Cash and Cash
Equivalents |
$ |
221,688,575 |
|
|
$ |
217,025,278 |
|
Short-Term
Investments |
180,313,222 |
|
|
169,412,999 |
|
Accounts Receivable,
net |
244,266,296 |
|
|
213,537,799 |
|
Inventories |
225,303,042 |
|
|
225,281,599 |
|
Other Current
Assets |
14,824,876 |
|
|
25,672,579 |
|
Total Current
Assets |
886,396,011 |
|
|
850,930,254 |
|
|
|
|
|
Plant and Equipment -
Net |
492,613,112 |
|
|
498,473,766 |
|
|
|
|
|
Goodwill |
307,365,845 |
|
|
307,365,845 |
|
Long-Term
Investments |
126,528,508 |
|
|
137,979,082 |
|
Intangible Assets |
264,850,000 |
|
|
269,675,000 |
|
Patents and Other
Assets |
22,612,152 |
|
|
23,242,633 |
|
Total Other Assets |
721,356,505 |
|
|
738,262,560 |
|
|
|
|
|
Total Assets |
$ |
2,100,365,628 |
|
|
$ |
2,087,666,580 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' INVESTMENT |
|
|
|
Current
Liabilities |
$ |
184,493,872 |
|
|
$ |
170,608,565 |
|
Other Non-current
Liabilities |
5,509,373 |
|
|
784,866 |
|
Deferred Income
Taxes |
53,287,636 |
|
|
54,521,489 |
|
Shareholders'
Investment |
1,857,074,747 |
|
|
1,861,751,660 |
|
Total Liabilities &
Shareholders' Investment |
$ |
2,100,365,628 |
|
|
$ |
2,087,666,580 |
|
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