Gentex Reports Third Quarter 2017 Financial Results

Oct 20, 2017

ZEELAND, Mich., Oct. 20, 2017 (GLOBE NEWSWIRE) -- 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 and nine months ended September 30, 2017.

3rd Quarter 2017 Summary

  • Net sales growth of 2% quarter over quarter while North American light vehicle production declined 8% on a quarter over quarter basis.
  • Gross Margin improvement of 130 basis points versus 2Q 2017
  • Earnings per Diluted Share of $0.31
  • 3.2 million shares repurchased during the quarter
  • $10.0 million of debt repaid during the quarter

For the third quarter of 2017, the Company reported net sales of $438.6 million, which was an increase of 2% compared to net sales of $429.6 million in the third quarter of 2016.  The 2% quarter over quarter growth in net sales was driven by an increase of 12% in international auto-dimming mirror unit shipments.  The underlying light vehicle production in Europe, Japan, and Korea was up 7% overall in these markets which comprise the majority of the Company's international shipments.  The growth in international auto-dimming mirror unit shipments was partially offset by a quarter over quarter decrease of 7% in North American auto-dimming mirror unit shipments which in large part resulted from an 8% quarter over quarter decline in North American light vehicle production.  During the third quarter of 2017, North American light vehicle production schedules decreased by approximately 3% as compared to the Company's original estimates for production, primarily due to intermittent plant shutdowns, which negatively impacted the Company's net sales growth on a quarter over quarter basis by approximately the same percentage. 

When compared with the third quarter of 2016, the gross margin declined from 40.5% to 39.0% in the third quarter of 2017, primarily as a result of annual customer price reductions that were not fully offset by purchasing cost reductions, as well as the Company's inability to leverage fixed overhead costs due to the lower growth in sales on a quarter over quarter basis.  However, the gross profit margin improved sequentially from 37.7% in second quarter of 2017 to 39.0% in the third quarter of 2017, primarily as a result of improvements in product mix and manufacturing efficiencies.

Income from operations for the third quarter of 2017 decreased 4% to $129.1 million when compared to income from operations of $134.2 million for the third quarter of 2016, due to the lower quarter over quarter gross profit margin percentage, which more than offset the quarter over quarter increase in net sales.

Other income increased to $1.8 million in the third quarter of 2017 compared to $0.1 million in the third quarter of 2016, due to an increase in investment income during the most recently completed quarter as compared to the same quarter last year.

Net income for the third quarter of 2017 decreased 2% to $90.2 million compared with net income of $92.1 million in the third quarter of 2016.

Earnings per diluted share in the third quarter of 2017 decreased 3% to $0.31, compared with earnings per diluted share of $0.32 in the third quarter of 2016, as a result of the decrease in net income.

Automotive net sales in the third quarter of 2017 were $428.2 million, an increase of 2% compared with automotive net sales of $419.8 million in the third quarter of 2016, driven by a 5% increase in auto-dimming mirror unit shipments on a quarter over quarter basis.

Other net sales in the third quarter of 2017, which includes dimmable aircraft windows and fire protection products, were $10.5 million, an increase of 6%, compared to other net sales of $9.8 million in the third quarter of 2016.

Share Repurchases
During the third quarter of 2017, the Company repurchased 3.2 million shares of its common stock at an average price of $17.51 per share.  As of September 30, 2017, the Company has approximately 14.9 million shares remaining available for repurchase pursuant to its previously announced share repurchase plan. The Company intends to continue to repurchase additional shares of its common stock in the future depending on macroeconomic issues, market trends and other factors that the Company deems appropriate.

Debt Repayment
During the third quarter of 2017, the Company paid down $8.1 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 $10.0 million during the quarter.  The Company expects to continue, at its discretion based on previously disclosed factors, to pay additional principal toward its debt in the future, in anticipation of such debt maturing on September 27, 2018.

Future Estimates
The Company’s forecasts for light vehicle production for the fourth quarter and full year 2017 are based on the IHS Automotive October 2017 forecast for light vehicle production in North America, Europe, Japan and Korea.

Light Vehicle Production (per IHS Automotive October light vehicle production forecast)
(in Millions)
Region    4Q 2017   4Q 2016   % Change    Calendar
 Year 2017 
 Year 2016 
 % Change 
North America   4.23   4.36         (3 )%   17.28   17.83         (3 )%
Europe   5.69   5.37   6 %   22.27   21.54   3 %
Japan and Korea   3.50   3.48   1 %   13.51   12.91   5 %
Total Light Vehicle Production   13.42   13.21   2 %   53.06   52.28   1 %

Based on the October 2017 IHS light vehicle production forecast, current forecasted product mix and expense growth estimates, the Company has updated certain of its 2017 guidance.  For the fourth quarter of 2017, the Company estimates that revenue will increase between 5% and 10% versus the same quarter last year.  Other guidance has been updated below to reflect actual results through the first nine months of calendar year 2017.

2017 Calendar Year Guidance
  Annual Guidance
Item Updated as of 7/21/17     Updated as of 10/20/17
Net Sales $1.79 - $1.83 billion     $1.78 - $1.80 billion
Gross Margin 38.5% - 39.0%     no change
Operating Expenses (E,R&D and S,G&A)  $165 - $170 million     no change
Tax Rate (excluding discrete items) 31.5% - 32.5%     31.0% - 32.0%
Capital Expenditures $115 - $130 million     $110 - $120 million
Depreciation & Amortization $95 - $105 million     $95 - $100 million

Finally, based on 2018 light vehicle production forecasts and current forecasted product mix, the Company is making no changes to its previously announced revenue estimates for calendar year 2018, which continues to be estimated to be over and above the foregoing 2017 revenue estimates in the range of 6% - 10%.

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”, “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.

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 20, 2017. The dial-in number to participate in the call is 844-389-8658, passcode 91223697.  Participants may listen to the call via audio streaming at or by visiting A webcast replay will be available approximately 24 hours after the conclusion of the call at

About The Company

Founded 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

Contact Information:
Gentex Investor & Media Contact
Josh O'Berski
(616)772-1590 x5814

  Three Months Ended September 30,     Nine Months Ended September 30,
  2017   2016   %
  2017   2016   %
North American Interior Mirrors 2,102     2,259          (7 )%   6,693     6,835          (2 )%
North American Exterior Mirrors 842     921     (9 )%   2,673     2,714     (2 )%
Total North American Mirror Units  2,944     3,179     (7 )%   9,366     9,549     (2 )%
International Interior Mirrors 4,794     4,258     13 %   14,438     12,771     13 %
International Exterior Mirrors 1,875     1,675     12 %   5,517     4,887     13 %
Total International Mirror Units 6,668     5,933     12 %   19,954     17,658     13 %
Total Interior Mirrors 6,896     6,517     6 %   21,130     19,606     8 %
Total Exterior Mirrors 2,717     2,596     5 %   8,189     7,601     8 %
Total Auto-Dimming Mirror Units 9,613     9,113     5 %   29,320     27,207     8 %
Note: Percent change and amounts may not total due to rounding.

  (Unaudited)   (Unaudited)
  Three Months Ended September 30,   Nine Months ended September 30,
  2017   2016   2017   2016
Net Sales $ 438,627,786     $ 429,643,276     $ 1,335,302,109     $ 1,259,011,840  
Cost of Goods Sold 267,398,126     255,821,376     821,063,869     759,726,593  
Gross profit 171,229,660     173,821,900     514,238,240     499,285,247  
Engineering, Research & Development 24,770,279     23,585,115     75,165,946     69,748,112  
Selling, General & Administrative 17,386,729     16,024,504     49,708,008     45,730,143  
Operating Expenses 42,157,008     39,609,619     124,873,954     115,478,255  
Income from operations 129,072,652     134,212,281     389,364,286     383,806,992  
Other Income (Expense) 1,759,391     115,701     4,276,424     (2,300,688 )
Income before Income Taxes 130,832,043     134,327,982     393,640,710     381,506,304  
Provision for Income Taxes 40,601,708     42,263,336     117,317,687     122,676,422  
Net Income $ 90,230,335     $ 92,064,646     $ 276,323,023     $ 258,829,882  
Earnings Per Share              
Basic $ 0.32     $ 0.32     $ 0.97     $ 0.90  
Diluted $ 0.31     $ 0.32     $ 0.96     $ 0.89  
Weighted Average Shares              
Basic 284,661,920     287,736,638     285,915,565     288,466,905  
Diluted 287,020,950     290,453,825     289,061,501     291,024,663  
Cash Dividends Declared per Share $ 0.100     $ 0.090     $ 0.290     $ 0.265  

  September 30, 2017   December 31, 2016
Cash and Cash Equivalents $ 561,999,767     $ 546,477,075  
Short-Term Investments 178,650,929     177,021,197  
Accounts Receivable, net 240,505,816     211,591,745  
Inventories 206,657,817     189,311,437  
Other Current Assets 16,047,166     30,587,575  
Total Current Assets 1,203,861,495     1,154,989,029  
Plant and Equipment - Net 493,663,599     465,822,467  
Goodwill 307,365,845     307,365,845  
Long-Term Investments 51,663,435     49,894,363  
Intangible Assets 293,800,000     308,275,000  
Patents and Other Assets 21,276,820     23,273,129  
Total Other Assets 674,106,100     688,808,337  
Total Assets $ 2,371,631,194     $ 2,309,619,833  
Current Liabilities $ 264,922,840     $ 149,857,979  
Long-Term Debt     178,125,000  
Deferred Income Taxes 80,443,155     71,212,620  
Shareholders' Investment 2,026,265,199     1,910,424,234  
Total Liabilities & Shareholders' Investment $ 2,371,631,194     $ 2,309,619,833  

Primary Logo

Source: Gentex Corporation