ZEELAND, Mich.- 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, 2021.
3rd Quarter 2021 Summary
Net sales of $399.6 million, representing a 700 basis point outperformance compared to the quarter-over-quarter reduction in light vehicle production in the Company's primary markets
Gross profit margin of 35.3%
Net income of $76.7 million
2.83 million shares repurchased during the quarter at an average price of $32 per share
For the third quarter of 2021, the Company reported net sales of $399.6 million, compared to net sales of $474.6 million in the third quarter of 2020. On a quarter-over-quarter basis, global light vehicle production in the Company's primary regions of Europe, North America, Japan/Korea and China decreased 23% when compared to the third quarter of 2020. Additionally, when compared to the mid-July 2021 IHS Markit light vehicle production forecast in the Company's primary regions, actual light vehicle production during the third quarter of 2021 declined in excess of 3.1 million units, or 19%, as a result of the ongoing industry-wide part shortages and global supply chain constraints. The largest shortfall in light vehicle production for the third quarter of 2021 came from the European and North American markets, which together, experienced actual light vehicle production levels that declined by approximately 27% compared to the third quarter of 2020. The reduction in light vehicle production compared to forecast was led by several OEM customers that deploy high levels of the Company's product content, including both interior and exterior auto-dimming mirrors and other electronic features such as Full Display Mirror and HomeLink. The total impact to the Company from the shortfall in vehicle production was a reduction in actual mirror unit shipments of approximately 2.5 to 3 million mirrors versus the Company's beginning of the quarter forecast. 'While we have been dealing with the impacts of supply chain constraints throughout the first half of 2021, the effects of the electronic component shortages worsened during the third quarter of this year. The majority of the forecasted mirror unit shipments that were lost during the quarter came from our primary markets, but the hardest hit regions were North America and Europe where we typically have content that is above the corporate average in terms of average sell price. Despite these challenges, our team has done a remarkable job of securing components as well as providing unique solutions for our customers that included complete re-designs of circuits in order to avoid constrained components which helped minimize the impact to OEM production schedules,' said President and CEO, Steve Downing.
For the third quarter of 2021, the gross margin was 35.3%, compared to a gross margin of 39.7% for the third quarter of 2020. Compared to the third quarter of 2020, the gross margin was primarily impacted by the lower sales levels stemming from the 23% quarter over quarter decline in light vehicle production in the Company's primary regions. However, the gross margin was also impacted by lower than expected price reductions on raw materials, increases in freight and other supply chain related costs, as well as certain component cost increases. 'While the gross margin for the third quarter of 2021 was below our original forecasts, we were pleased with the overall performance of the Company given the significant reduction in sales versus our forecast coming into the quarter. Since the beginning of the pandemic, we have worked hard as an organization to reduce overhead costs which helped stabilize our profitability in the third quarter despite this unpredictably large change in revenue. In fact, our estimates show that had the sales levels been as forecasted, then our gross margins would have been more in line with our previous second half of 2021 guidance range,' continued Downing.
Operating expenses during the third quarter of 2021 increased by 7% to $52.7 million, compared to operating expenses of $49.4 million in the third quarter of 2020.
Income from operations for the third quarter of 2021 was $88.2 million compared to income from operations of $138.9 million for the third quarter of 2020.
During the third quarter of 2021, the Company had an effective tax rate of 15%, which was primarily driven by the benefit of the foreign derived intangible income deduction and discrete benefits from stock based compensation.
Net income was $76.7 million for the third quarter of 2021, compared to a net income of $117.1 million in the third quarter of 2020. The change in net income was primarily the result of the quarter over quarter changes in sales, gross margins and operating profits.
Earnings per diluted share for the third quarter of 2021 were $0.32, compared to earnings per diluted share of $0.48 for the third quarter of 2020.
Automotive net sales in the third quarter of 2021 were $391.3 million, compared with $464.7 million in the third quarter of 2020. Auto-dimming mirror unit shipments decreased 7% during the quarter compared to the third quarter of 2020.
Other net sales in the third quarter of 2021, which includes dimmable aircraft windows and fire protection products, were $8.3 million, compared to other net sales of $10.0 million in the third quarter of 2020. Dimmable aircraft window sales decreased by 34% for the third quarter of 2021 when compared to the third quarter of 2020. The Company continues to expect that dimmable aircraft window sales will be negatively impacted until there is a more meaningful recovery of the aerospace industry and the Boeing 787 aircraft production levels improve.
Share Repurchases
During the third quarter of 2021, the Company repurchased 2.83 million shares of its common stock at an average price of $32 per share for a total of $90.6 million. As of September 30, 2021, the Company has approximately 25.4 million shares remaining available for repurchase pursuant to its previously announced share repurchase plan. The Company intends to continue to repurchase additional shares of its common stock in the future in support of the previously disclosed capital allocation strategy, but share repurchases may vary from time to time and will take into account macroeconomic issues (including the impact of the COVID-19 pandemic and supply constraints), market trends, and other factors that the Company deems appropriate.
Future Estimates
The Company's current forecasts for light vehicle production for the fourth quarter of 2021, and full years 2021 and 2022 are based on the mid-October 2021 IHS Markit forecast for light vehicle production in North America, Europe, Japan/Korea and China.
Light vehicle production in the Company's primary markets is forecasted by IHS Markit to decrease 20% for the fourth quarter 2021 compared to the fourth quarter of 2020. However, this vehicle production forecast for the fourth quarter of 2021 represents a sequential increase in light vehicle production of 2.5 million units in our primary markets when compared to the third quarter of 2021. Forecasted vehicle production volumes for the fourth quarter of 2021 and calendar years 2021 and 2022 are shown below:
Read full report at:
https://ir.gentex.com/news-releases/news-release-details/gentex-reports-third-quarter-2021-financial-results
GENTEX CORPORATION 
