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Gentex Corporation (GNTX) Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 22, 2016, 10:30 AM ET


Josh O'Berski - Investor Relations Manager

Steve Downing - Senior Vice President and Chief Financial Officer

Kevin Nash - Vice President and Chief Accounting Officer

Neil Boehm - Vice President of Engineering


Christopher Van Horn - FBR Capital Markets & Co.

Richard Klass - Wells Fargo Securities LLC

Steven Dyer - Craig-Hallum Capital Group LLC.

Jason Rodgers - Great Lakes Review

Brett Hoselton - KeyBanc Capital Markets Inc.

Ryan Brinkman - J.P. Morgan & Co.

Aileen Smith - Bank of America Merrill Lynch

David Whiston - Morningstar Inc.


Good morning, ladies and gentlemen and welcome to the Gentex Reports First Quarter 2016 Financial Results Conference call. Today's conference is being recorded.

I would now like to turn the meeting over to Mr. Josh O'Berski with Gentex Investor Relations Manager. Please go ahead, sir.

Josh O'Berski

Thank you. Good morning and welcome to the Gentex Corporation first quarter 2016 earnings release conference call. I'm Josh O'Berski, Gentex Investor Relations Manager, I'm joined by Steve Downing, Senior Vice President and Chief Financial Officer; Kevin Nash, Vice President and Chief Accounting Officer; and Neil Boehm, Vice President of Engineering. This call is live on the Internet by way of an icon on the Gentex website at

All contents of this conference call are the property of Gentex Corporation and may not be copied, published, reproduced, rebroadcast, retransmitted, transcribed, or otherwise redistributed. Gentex Corporation will hold responsible and liable any party for any damages incurred by Gentex Corporation and with respect to any unauthorized use of the contents of this conference call.

This conference call contains forward-looking information within the meaning of the Gentex's Safe Harbor statement included in the Gentex reports first quarter of 2016 financial results press release from earlier this morning, and as always, shown on the Gentex website. Your participation in this conference call implies consent to these terms.

Now, I will turn the call over to Steve Downing who will give the first quarter 2016 financial summary.

Steve Downing

Thank you Josh. For the first quarter of 2016 the company is pleased to report net sales of $405.6 million, which was an increase of 10% compared to net sales of $368.9 million in the first quarter of 2015 on a 1% overall increase in automotive light vehicle production on a quarter-over-quarter basis in the company’s primary market.

The gross profit margin in the first quarter of 2016 was 39.1% compared with a gross profit margin of 38.8% in the first quarter of 2015. The primary drivers affecting gross profit margin on a quarter-over-quarter basis resulted in a net increase in the gross profit margin. Annual customer price reductions were more than offset by purchasing cost reductions and the company’s ability to leverage fixed overhead cost.

Operating income for the first quarter of 2016, increased 12% to $120.8 million when compared to operating income of $107.7 million for the first quarter of 2016. Other income decreased to a loss of $1.3 million in the first quarter of 2016 compared with other income of $0.7 million in the first quarter of 2015. Primarily due to realized losses on the sale of equity investment during the quarter.

Net income for the first quarter of 2016 increased 4% to $80.3 million compared with net income of $77.2 million in the first quarter of 2015. Net income was impacted by a reduction in other income of approximately $2 million on a quarter-over-quarter basis, the reduction in other income was a direct result of the underlying performance in equity markets.

In addition, the percentage increase in net income on a quarter-over-quarter basis was impacted by the fact that in the first quarter of 2015 the company realized incremental research and development tax credits of $3.9 million related to the completion of an audit of calendar years 2010 to 2012.