Gentex Reports Third Quarter 2018 Financial Results
ZEELAND, Mich., Oct. 19, 2018 (GLOBE NEWSWIRE) -- 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, 2018.
3rd Quarter 2018 Summary
- Net Sales growth of 5% quarter over quarter
- Gross Margin of 37.6% including negative tariff impact of 60 basis points
- Net Income increased 23% quarter over quarter
- Earnings per Diluted Share increased 35% quarter over quarter to $0.42 per share
- 7.5 million shares repurchased during the quarter
- $23.1 million of debt repaid during the quarter
For the third quarter of 2018, the Company reported net sales of $460.3 million, which was an increase of 5% compared to net sales of $438.6 million in the third quarter of 2017. When compared with IHS Markit's mid-July forecast for the third quarter of 2018, actual light vehicle production was approximately 5% below forecast in our primary markets of Europe, North America, Japan and Korea. In addition, when compared to the third quarter of 2017, actual light vehicle production declined by approximately 3% in our primary markets. Vehicle production levels during the quarter were impacted negatively by the Worldwide Harmonized Light Vehicle Test Procedure ("WLTP") regulations in Europe and resulted in unit shipments and revenue that were below forecast for the quarter.
"The third quarter of 2018 began with vehicle production estimates pointing toward near double-digit revenue growth for the quarter, but actual vehicle production levels came in considerably lower than anyone expected. We believe much of the headwind in the European market was driven by the WLTP regulation changes that took effect during the third quarter. Despite the difficult production environment, we are pleased that our level of growth outpaced our primary markets by 8% on a quarter over quarter basis, which was driven by launches and continuing ramp-up in production of our Full Display Mirror," said President and CEO Steve Downing.
For the third quarter of 2018, the gross margin was 37.6%, which was down when compared to a gross margin of 39.0% in the third quarter of 2017. The gross margin during the quarter was negatively impacted by approximately 60 basis points due to the tariffs that became effective during the quarter. "If we take a few minutes to reflect on the gross margin performance for the third quarter, a couple of points become very obvious. First, the gross margin performed well during the quarter when considering the poor performance in vehicle production and the lower than expected revenue growth that this produced. Second, when you consider the 60 basis point headwind the Company experienced in the quarter from the addition of tariffs, the gross margin would have otherwise improved sequentially during each quarter of 2018,” said Downing.
Operating expenses during the third quarter of 2018 were up 8% to $45.6 million when compared to operating expenses of $42.2 million in the third quarter of 2017, primarily due to increased staffing levels.
Income from operations for the third quarter of 2018 decreased 1% to $127.4 million when compared to income from operations of $129.1 million for the third quarter of 2017. The decrease in
income from operations was primarily due to increased operating expenses and lower gross margin percentage, which was partially offset by quarter over quarter sales growth.
Other income increased to $3.1 million in the third quarter of 2018 compared to $1.8 million in the third quarter of 2017, primarily due to decreased interest expense and higher investment
During the third quarter of 2018, the Company's effective tax rate was 14.7%, down from 31.0% during the third quarter of 2017, primarily driven by the impacts of the Tax Cuts and Jobs Act of 2017
and the tax planning initiatives undertaken by the Company.
Net income for the third quarter of 2018 increased 23% to $111.3 million compared with net income of $90.2 million in the third quarter of 2017.
Earnings per diluted share in the third quarter of 2018 increased 35% to $0.42, compared with earnings per diluted share of $0.31 in the third 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 third quarter of 2018 were $449.2 million, an increase of 5% compared with automotive net sales of $428.2 million in the third quarter of 2017. This increase in
automotive net sales was driven by a 6% increase in auto-dimming mirror unit shipments and Full Display Mirror launches and volume increases on a quarter over quarter basis.
Other net sales in the third quarter of 2018, which includes dimmable aircraft windows and fire protection products, were $11.1 million, an increase of 6%, compared to other net sales of $10.5
million in the third quarter of 2017.
During the third quarter of 2018, the Company repurchased approximately 7.5 million shares of its common stock at an average price of $22.98 per share, for a total of $172.5 million of share
repurchases. As of September 30, 2018, the Company has approximately 12.2 million shares remaining available for repurchase pursuant to the previously announced share repurchase plan, which
remains a part of the Company's broader capital allocation strategy that was previously disclosed. 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
During the third quarter of 2018, the Company paid down the remaining principal on its credit facility of $23.1 million. The Company recently entered into a new credit agreement for a $150,000,000
senior revolving credit facility that will mature on October 15, 2023.
The Company’s forecasts for light vehicle production for the fourth quarter and full year of 2018 are based on IHS Markit's October 2018 forecasts for light vehicle production in North America, Europe, Japan and Korea.
|Light Vehicle Production (per IHS Markit October light vehicle production forecast)|
|Region||4Q 2018||4Q 2017||% Change||
|Japan and Korea||3.47||3.29||5||%||13.15||13.26||(1||)%|
|Total Light Vehicle Production||13.37||13.09||2||%||52.39||52.54||—||%|