EPS .34 vs. .21, up 62%. Revs up 36%. Unit mirror shipments up 47%. Revs were dragged down by Fire Protection Products, which fell 5% to around 5m. The good news is that by y/e '99, this should only be 7% of revenues and hardly worth worrying about. The big surprise was the gross margin, which rose again to 39.7% from 35.2% last year and 38.3% in Q4. We are now back near the peak levels seen in '94-'95 (GM was actually 42% at its
high). While base interior EC mirrors are still seeing price competition, GNTX has benefitted from the same factors we always talk about - many high end mirrors and greater yields and scale benefits from production of thin glass and ashperic mirrors. Mgmt. did say that they don't expect the GM to move up much from here and I can't argue it should.
Profitability: the operating margin was.........29.8%! Look at any technology company. With the exception of Microsoft and Cisco, I can't think of any company with higher margins (I'm sure there are a few). The net margin was 21.9%. Again, hard to beat. The company now has over $125 million in cash. I wish they had done a stock buyback 3 years ago when we first encouraged them too. Then earnings would likely be 5% higher. But at this point,
that is just nitpicking.
Other comments: mgmt. said they have a model year '99 program (one car, either inside or outside mirror) that will open up a whole new class of cars to the outside EC mirrors. They also have a couple '00 programs that would definitely be considered mid-range cars, might get these mirrors into the mainstream, highest-volume autos. While there was nothing material to report on the EC windows front, it seems like they are continually making progress
toward commercial potential.
All in all, it was maybe the best looking quarter I've seen out of this company.
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