Gentex Corp., a leading supplier of digital vision, connected car, dimmable glass and fire protection technologies, has reported financial results for the three and nine months ended Sept. 30, 2018.
For the third quarter of 2018, the company reported net sales of $460.3 million, which was an increase of 5 percent 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 percent below forecast in Gentex’s 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 percent in the company’s primary markets. Vehicle production levels during the quarter were impacted negatively by the Worldwide Harmonized Light Vehicle Test Procedure 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 percent 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.
Income from operations for the third quarter of 2018 decreased 1 percent 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 income.
During the third quarter of 2018, the company’s effective tax rate was 14.7 percent, down from 31 percent 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 percent 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 percent to 42 cents, compared with earnings per diluted share of 31 cents 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 percent 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 percent 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 percent, compared to other net sales of $10.5 million in the third quarter of 2017.
Share Repurchases
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 Sept. 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 deems appropriate.
