Better Vehicle Sales Drive Gentex To Best Quarter

April 22, 2002
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ZEELAND — Gentex Corp. started the year in record fashion, riding higher-than-expected vehicles sales to its best sales quarter ever.

The Zeeland-based Gentex recorded first quarter revenues of $89 million, up 12 percent from the $79.3 million in the same period a year ago.

Net income totaled $18.9 million, or 25 cents per share, a 10 percent increase from the $17.3 million, or 23 cents per share, earned during the first quarter of 2001. Per-share earnings beat Wall Street analysts’ expectations of 22 cents.

Gentex attributed the strong financial showing to higher mirror shipments that were driven by increased vehicle production in North America and Europe and new business for mid-sized vehicle models. The quarter saw Gentex ship more than 2 million mirror units for the first time ever, Executive Vice President Ken LaGrand said.

Gentex remains “cautiously optimistic” it can achieve its goal of increasing mirror shipments in 2002 by 15 percent to 20 percent over last year’s 7.18 million units, especially given the recent upgrade in production expectations for the auto industry, LaGrand said. Mirror shipments during the first quarter grew 15.5 percent over the same period last year, to 2.05 million units, and Gentex conservatively expects unit growth to reach 20 percent to 25 percent for the second quarter.

The forecast is based on J.D. Powers and Associates’ outlook that foresees North American vehicle production reaching 15.9 million this year, down from last year but ahead of earlier predictions.

While the company posted strong numbers in the first quarter because of an unexpected solid demand for new vehicles, LaGrand cautioned brokerage analysts in an April 16 conference call that Gentex expects to see continued pressure on its gross margins brought on by price cuts demanded by automakers that are not offset by productivity gains.

LaGrand also told analysts that Gentex expects to come out relatively unscathed as General Motors examines removing features from vehicles as standard equipment and making them available only with option packages, although “quite a bit of uncertainty” remains over the “de-contenting” discussions that potentially may affect how the company’s mirrors are packaged on GM vehicles.

GM wants to have consumers pay for certain features they value and enjoy as part of option packages, rather than including them as standard equipment in the base price of a vehicle. Gentex expects decisions from GM this summer, in time for the 2003 model year, LaGrand said.

Gentex, which primarily makes automatic-dimming mirrors, believes it can make a good case to prevent GM from de-contenting any of its auto-dimming mirrors from vehicles and their electronic features such as a compass, temperature gauge, map lights and telematics systems that have proven popular with consumers.

“We have a pretty visible feature that has a good consumer visibility and response,” LaGrand said. “We’ll come through that pretty much unscathed.”           

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