Gentex Reports First Quarter 2020 Financial Results
1st Quarter 2020 Summary
Net Sales decline of 3% quarter over quarter versus a 24% quarter over quarter reduction in global light vehicle production volumes- Novel coronavirus pandemic (COVID-19) negatively impacted first quarter net sales by approximately 9%
- Gross margin of 34.5% for the first quarter
- 7.0 million shares repurchased during the quarter
For the first quarter of 2020, the Company reported net sales of
"For the first two months of the first quarter, top-line revenue growth was progressing in line with our forecasts, with modest negative impacts coming from reductions in
For the first quarter of 2020, the gross margin was 34.5%, compared to a gross margin of 36.2% for the first quarter of 2019. On a quarter-over-quarter basis, the gross margin was impacted primarily by lost sales due to the pandemic and annual customer price reductions. When compared to the first quarter of 2019, product mix improved which partially offset some of the sales losses and price reductions. The improvement in product mix was primarily driven by Full Display Mirror® and exterior mirror growth.
"The gross margin for the quarter held up well when considering the significance of the lost sales and how quickly and unexpectedly the demand from our customers changed," said Downing. “In fact, through the first two months of the quarter our gross margin performance was on pace to position the Company to be in the range of our original annual guidance for gross margin."
Operating expenses during the first quarter of 2020 were up 7% to
Income from operations for the first quarter of 2020 decreased 14% to
During the first quarter of 2020, the Company's effective tax rate was 16.6%, up slightly from 16.5% during the first quarter of 2019.
Net income for the first quarter of 2020 decreased by 14% to
Earnings per diluted share for the first quarter of 2020 decreased 10% to
Automotive net sales in the first quarter of 2020 were
Other net sales in the first quarter of 2020, which includes dimmable aircraft windows and fire protection products, were
Capital Allocation
The Company remains committed to its previously announced capital allocation strategy. As of
In the first quarter of 2020, the Company announced a 4% increase in its dividend rate, marking ten straight years of year over year dividend increases. Also during the first quarter of 2020, the Company repurchased approximately 7.0 million shares of its common stock at an average price of
Future Estimates
The Company’s current forecast for light vehicle production for 2020 is based on the
Light Vehicle Production (per IHS Markit mid-April light vehicle production forecast) | |||||||||||||||
(in Millions) | |||||||||||||||
Region | 2Q 2020 | 2Q 2019 | % Change | Calendar Year 2020 |
Calendar Year 2019 |
% Change | |||||||||
1.37 | 4.24 | (68)% | 12.22 | 16.31 | (25)% | ||||||||||
2.50 | 5.61 | (55)% | 15.98 | 21.08 | (24)% | ||||||||||
2.16 | 3.36 | (36)% | 10.77 | 13.11 | (18)% | ||||||||||
4.86 | 5.50 | (12)% | 20.81 | 24.67 | (16)% | ||||||||||
Total Light Vehicle Production | 10.89 | 18.71 | (42)% | 59.78 | 75.17 | (20)% |
Based on this light vehicle production forecast, the Company's current estimate is that net sales for 2020 will be down between 10 and 15 percent, when compared with 2019. The Company is also providing additional updated guidance for calendar year 2020 as shown in the table below:
2020 Annual Guidance | ||
Item | As of |
Updated as of |
Gross Margin | 36% -37% | 34% -35% |
Operating Expenses | ||
Tax Rate | 15% - 17% | 16% - 17% |
Capital Expenditures | ||
Depreciation & Amortization |
Based on the difficulty and uncertainty of global light vehicle production data for 2021, the Company is withdrawing its revenue guidance for 2021 until better data becomes available. Despite the fact that the Company is withdrawing guidance for 2021, the Company remains confident in its ability to continue to outperform the underlying market.
"Over the last several weeks, COVID-19 has created unprecedented circumstances for our industries, which include massive changes to production levels at our customers. Our industries have also been significantly influenced by federal, state and local governments in each of the countries where our customers operate. Unfortunately, many of these changes have come with little or no advanced warning, which makes it very difficult to forecast sales or build a sustainable operating model. Our focus over the last few weeks was directed at protecting our employees, while still supporting our global customer base from our centralized manufacturing footprint. Over the coming months we will continue to work to ensure that our cost structure accurately reflects industry production changes and new business realities. Our overall commitment to new product research and development will remain one of our top priorities for investment even as we look to optimize our cost structure. We remain optimistic that we can continue to provide above market returns for our shareholders by leveraging our current product strategy and through the execution of our lean organizational structure, which provides the speed and agility necessary to respond quickly to and manage through this new business environment,” concluded Downing.
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; negative impact of any governmental investigations and associated litigation including securities litigation relating to the conduct of our business; the length and severity of the COVID-19 (coronavirus) pandemic, including its impact across our business on demand, operations, and the global supply chain. 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
First Quarter Conference Call
A conference call related to this news release will be simulcast live on the internet beginning at
About the Company
Founded in 1974,
Contact Information:
Gentex Investor & Media Contact
(616)772-1590 x5814
AUTO-DIMMING MIRROR SHIPMENTS
(Thousands)
Three months ended |
||||||||||
2020 | 2019 | % Change |
||||||||
North American Interior Mirrors | 2,019 | 2,227 | (9)% | |||||||
North American Exterior Mirrors | 1,234 | 1,229 | —% | |||||||
Total North American Mirror Units | 3,253 | 3,455 | (6)% | |||||||
International Interior Mirrors | 5,032 | 5,256 | (4)% | |||||||
International Exterior Mirrors | 2,108 | 1,971 | 7% | |||||||
Total International Mirror Units | 7,141 | 7,227 | (1)% | |||||||
Total Interior Mirrors | 7,051 | 7,483 | (6)% | |||||||
Total Exterior Mirrors | 3,343 | 3,199 | 5% | |||||||
Total Auto-Dimming Mirror Units | 10,394 | 10,682 | (3)% |
Note: Percent change and amounts may not total due to rounding.
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) | |||||||
Three months ended |
|||||||
2020 | 2019 | ||||||
$ | 453,761,726 | $ | 468,588,997 | ||||
Cost of Goods Sold | 297,174,245 | 298,944,494 | |||||
Gross Profit | 156,587,481 | 169,644,503 | |||||
Engineering, Research & Development | 29,615,422 | 28,089,181 | |||||
Selling, General & Administrative | 21,944,892 | 19,958,991 | |||||
Operating Expenses | 51,560,314 | 48,048,172 | |||||
Income from Operations | 105,027,167 | 121,596,331 | |||||
Other Income | 2,247,482 | 3,312,210 | |||||
Income before Income Taxes | 107,274,649 | 124,908,541 | |||||
Provision for Income Taxes | 17,768,848 | 20,628,130 | |||||
Net Income | $ | 89,505,801 | $ | 104,280,411 | |||
Earnings Per Share(1) | |||||||
Basic | $ | 0.36 | $ | 0.40 | |||
Diluted | $ | 0.36 | $ | 0.40 | |||
Weighted Average Shares | |||||||
Basic | 246,309,869 | 257,822,836 | |||||
Diluted | 247,616,443 | 259,105,232 | |||||
Cash Dividends Declared per Share | $ | 0.120 | $ | 0.115 | |||
(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 SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) | |||||||
ASSETS | |||||||
Cash and Cash Equivalents | $ | 278,524,928 | $ | 296,321,622 | |||
Short-Term Investments | 131,078,039 | 140,384,053 | |||||
Accounts Receivable, net | 233,578,125 | 235,410,326 | |||||
Inventories | 251,006,414 | 248,941,855 | |||||
Other Current Assets | 16,539,990 | 29,319,036 | |||||
Total Current Assets | 910,727,496 | 950,376,892 | |||||
Plant and Equipment - Net | 493,114,501 | 498,316,100 | |||||
307,365,845 | 307,365,845 | ||||||
Long-Term Investments | 177,794,760 | 139,909,323 | |||||
Intangible Assets | 245,550,000 | 250,375,000 | |||||
Patents and Other Assets | 23,550,490 | 22,460,033 | |||||
Total Other Assets | 754,261,095 | 720,110,201 | |||||
Total Assets | $ | 2,158,103,092 | $ | 2,168,803,193 | |||
LIABILITIES AND SHAREHOLDERS' INVESTMENT | |||||||
Current Liabilities | $ | 263,957,904 | $ | 171,846,800 | |||
Other Non-current Liabilities | 9,091,509 | 7,414,424 | |||||
Deferred Income Taxes | 50,448,046 | 51,454,149 | |||||
1,834,605,633 | 1,938,087,820 | ||||||
Total Liabilities & |
$ | 2,158,103,092 | $ | 2,168,803,193 |
Source: Gentex Corporation