Gentex(GNTX) - 2023 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion Item 1. Unaudited Condensed Consolidated Financial Statements This section presents the company's unaudited condensed consolidated financial statements and related notes Unaudited Condensed Consolidated Balance Sheets Total assets and shareholders' investment increased, driven by higher cash and accounts receivable balances Condensed Consolidated Balance Sheet Highlights (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 | December 31, 2022 | Change | | :-------------------------- | :---------------- | :------------------ | :------- | | Total Assets | $2,487,107,092 | $2,327,229,924 | +$159,877,168 | | Cash and cash equivalents | $237,665,601 | $214,754,638 | +$22,910,963 | | Accounts receivable, net | $350,409,472 | $276,493,752 | +$73,915,720 | | Inventories | $390,026,268 | $404,360,270 | -$14,334,002 | | Long-term investments | $239,621,466 | $202,331,983 | +$37,289,483 | | Total Liabilities | $291,157,766 | $261,437,103 | +$29,720,663 | | Total Shareholders' Investment | $2,195,949,326 | $2,065,792,821 | +$130,156,505 | Unaudited Condensed Consolidated Statements of Income Net sales, gross profit, and net income grew significantly for both quarterly and six-month periods Condensed Consolidated Statements of Income Highlights (Q2 2023 vs. Q2 2022) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | | Net Sales | $583,472,846 | $463,423,002 | 26.0% | | Gross profit | $193,083,039 | $148,367,014 | 30.1% | | Income from operations | $127,289,388 | $85,790,969 | 48.4% | | Net Income | $109,155,403 | $72,404,403 | 50.8% | | Basic EPS | $0.47 | $0.31 | 51.6% | | Diluted EPS | $0.47 | $0.31 | 51.6% | Condensed Consolidated Statements of Income Highlights (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :------- | | Net Sales | $1,134,234,157 | $931,673,777 | 21.7% | | Gross profit | $367,820,270 | $308,778,973 | 19.1% | | Income from operations | $240,540,035 | $189,096,873 | 27.2% | | Net Income | $206,733,664 | $159,933,028 | 29.3% | | Basic EPS | $0.88 | $0.68 | 29.4% | | Diluted EPS | $0.88 | $0.68 | 29.4% | Unaudited Condensed Consolidated Statements of Comprehensive Income Comprehensive income grew substantially, reflecting increased net income and improved other comprehensive income Condensed Consolidated Statements of Comprehensive Income Highlights (Q2 2023 vs. Q2 2022) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | | Net income | $109,155,403 | $72,404,403 | 50.8% | | Other comprehensive (loss) income, net of tax | $(1,018,271) | $(5,828,471) | 82.5% | | Comprehensive income | $108,137,132 | $66,575,932 | 62.4% | Condensed Consolidated Statements of Comprehensive Income Highlights (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :------- | | Net income | $206,733,664 | $159,933,028 | 29.3% | | Other comprehensive (loss) income, net of tax | $900,166 | $(12,883,123) | 107.0% | | Comprehensive income | $207,633,830 | $147,049,905 | 41.2% | Unaudited Condensed Consolidated Statements of Shareholders' Investment Shareholders' investment increased due to net income, partially offset by share repurchases and dividends Shareholders' Investment Changes (Six Months Ended June 30, 2023) | Item | Amount | | :------------------------------------------------ | :------------- | | Balance as of January 1, 2023 | $2,065,792,821 | | Issuance of common stock from stock plan transactions | $13,882,810 | | Repurchases of common stock | $(53,566,122) | | Stock-based compensation expense | $18,264,205 | | Dividends declared ($0.24 per share) | $(56,058,218) | | Net income | $206,733,664 | | Other comprehensive income | $900,166 | | Balance as of June 30, 2023 | $2,195,949,326 | Unaudited Condensed Consolidated Statements of Cash Flows Operating cash flow increased, while investing activities saw a significant rise in cash usage for plant and equipment Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :------------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Net cash provided by operating activities | $241,766,133 | $189,261,043 | 27.7% | | Net cash used for investing activities | $(126,395,275) | $(63,217,406) | 100.0% | | Net cash used for financing activities | $(96,459,895) | $(118,982,836) | 18.9% | | Net increase in cash and cash equivalents | $18,910,963 | $7,060,801 | 167.8% | | Cash, cash equivalents, and restricted cash, end of period | $237,665,601 | $269,372,471 | -11.7% | - Investing activities saw a significant increase in cash usage, primarily due to $90.3 million in plant and equipment additions (up from $58.0 million) and increased purchases of available-for-sale securities[23] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the unaudited consolidated financial statements (1) Basis of Presentation Unaudited financial statements are prepared under SEC rules and GAAP, with management confirming all necessary adjustments - Financial statements are unaudited and prepared according to SEC rules, condensing certain GAAP disclosures[24] - Management confirms the statements include all necessary normal and recurring adjustments for fair presentation[24] (2) Goodwill and Other Intangible Assets Goodwill remained stable at $313.6 million with no impairment, and intangible asset amortization expenses are decreasing Goodwill Carrying Amount (June 30, 2023 vs. December 31, 2022) | Metric | Amount | | :-------------------------- | :------------- | | Balance as of December 31, 2022 | $313,807,494 | | Other | $(160,226) | | Balance as of June 30, 2023 | $313,647,268 | - No interim impairment testing was needed for goodwill or other intangible assets despite considering component shortages, supply chain constraints, inflation, and labor shortages[25] Estimated Amortization Expense for Patents and Intangible Assets | Year Ending December 31, | Estimated Amortization Expense | | :----------------------- | :----------------------------- | | 2023 | ~$20 million | | 2024 | ~$16 million | | 2025 | ~$13 million | | 2026 | ~$5 million | | 2027 | ~$5 million | (3) Investments Technology investments increased to $94.0 million, including a $21.5 million stake in Adasky, and unrealized losses decreased to $10.0 million - Technology investments in non-consolidated third parties increased to approximately $94.0 million as of June 30, 2023, from $69.5 million at December 31, 2022[35] - On March 9, 2023, the Company purchased a 15% equity investment in Adasky, LTD. for $21.5 million, a developer of intelligent thermal sensing technologies[35] Unrealized Losses on Investments (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :---------------- | :------------------ | | Aggregate Unrealized Losses | $10,000,656 | $13,034,062 | | Aggregate Fair Value of Investments | $151,587,132 | $154,344,732 | (4) Inventories Total inventories decreased to $390.0 million, primarily due to reduced raw materials, partially offset by increased finished goods Inventory Composition (June 30, 2023 vs. December 31, 2022) | Category | June 30, 2023 | December 31, 2022 | | :--------------- | :---------------- | :------------------ | | Raw materials | $280,764,776 | $304,184,004 | | Work-in-process | $44,861,244 | $45,512,275 | | Finished goods | $64,400,248 | $54,663,991 | | Total Inventory | $390,026,268 | $404,360,270 | (5) Earnings Per Share Basic and diluted earnings per share increased significantly for both periods, reflecting higher net income Basic and Diluted EPS (Q2 2023 vs. Q2 2022) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | | Basic EPS | $0.47 | $0.31 | | Diluted EPS | $0.47 | $0.31 | Basic and Diluted EPS (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.88 | $0.68 | | Diluted EPS | $0.88 | $0.68 | (6) Stock-Based Compensation Plans Stock-based compensation expense increased, with 9.4 million share awards and $75.9 million in unearned compensation costs Stock-Based Compensation Expense (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Period | 2023 | 2022 | | :-------------------------- | :------------- | :------------- | | Three Months Ended June 30, | $9,744,670 | $8,573,230 | | Six Months Ended June 30, | $18,264,205 | $15,361,567 | - As of June 30, 2023, 9,445,055 share awards have been made under the 2019 Omnibus Plan, utilizing 23,954,574 shares out of 45,000,000 available[49] - Unearned compensation costs include $8.8 million for stock options, $47.0 million for restricted shares, and $20.1 million for performance shares as of June 30, 2023[51][56][58] (7) Comprehensive Income (Loss) Accumulated other comprehensive loss decreased to $(13.2) million, driven by improved unrealized gains on debt securities Accumulated Other Comprehensive Loss (June 30, 2023 vs. December 31, 2022) | Component | June 30, 2023 | December 31, 2022 | | :------------------------------------------ | :---------------- | :------------------ | | Foreign currency translation adjustments | $(5,609,783) | $(4,032,239) | | Unrealized (losses) gains on available-for-sale debt securities | $(7,632,985) | $(10,110,695) | | Accumulated other comprehensive loss, end of period | $(13,242,768) | $(14,142,934) | (8) Debt and Financing Arrangements A new $250.0 million unsecured revolving credit facility was established, with no outstanding balance and all covenants met - New three-year unsecured revolving credit facility of up to $250.0 million established, maturing February 21, 2026[65] - No outstanding balance on the Revolver as of June 30, 2023, and the Company is in compliance with all covenants[65][66] (9) Equity Common shares outstanding decreased by 0.7 million due to repurchases and issuances, and a $0.120 per share cash dividend was declared - Net decrease of 0.7 million common shares outstanding due to 2.0 million repurchases offset by 1.2 million issuances from stock plans[67] - Cash dividend of $0.120 per share declared in Q2 2023, totaling $28.0 million[68] (10) Contingencies The company is involved in routine legal proceedings but anticipates no material adverse effects on its financial position or results - The Company is involved in routine legal proceedings but does not anticipate any material adverse effects on its financial position or future results[69] (11) Segment Reporting The automotive segment remains the primary revenue driver, showing significant increases in revenue and income from operations Revenue by Segment (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Segment | Q2 2023 Revenue | Q2 2022 Revenue | 6M 2023 Revenue | 6M 2022 Revenue | | :------------------ | :-------------- | :-------------- | :-------------- | :-------------- | | Automotive Products | $574,109,748 | $452,951,028 | $1,111,532,736 | $910,903,581 | | Other | $9,363,098 | $10,471,974 | $22,701,421 | $20,770,196 | | Total | $583,472,846 | $463,423,002 | $1,134,234,157 | $931,673,777 | Income (Loss) from Operations by Segment (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Segment | Q2 2023 Income (Loss) | Q2 2022 Income (Loss) | 6M 2023 Income (Loss) | 6M 2022 Income (Loss) | | :------------------ | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Automotive Products | $128,729,058 | $86,908,119 | $240,168,856 | $190,383,628 | | Other | $(1,439,670) | $(1,117,150) | $371,179 | $(1,286,755) | | Total | $127,289,388 | $85,790,969 | $240,540,035 | $189,096,873 | (12) Income Taxes The effective tax rate for the six months ended June 30, 2023, was 15.5%, influenced by state/local taxes and R&D credits - Effective tax rate for the six months ended June 30, 2023, was 15.5%, up from 15.0% in the prior year[72] - Tax rate differences from federal statutory rates are due to state/local taxes, permanent tax differences, foreign-derived intangible income deduction, and R&D tax credits[72] (13) Revenue Automotive revenue significantly increased across all major regions, while the 'Other Products' segment showed mixed results Automotive Revenue by Geography (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Region | Q2 2023 Revenue | Q2 2022 Revenue | 6M 2023 Revenue | 6M 2022 Revenue | | :------------------ | :-------------- | :-------------- | :-------------- | :-------------- | | U.S. | $177,940,475 | $145,818,259 | $348,722,079 | $288,012,229 | | Germany | $73,990,846 | $71,580,008 | $154,570,311 | $139,145,328 | | Japan | $84,178,567 | $46,655,756 | $156,334,551 | $101,418,244 | | Mexico | $36,803,254 | $29,792,178 | $71,090,798 | $61,927,257 | | Other | $201,196,606 | $159,104,827 | $380,814,997 | $320,400,523 | | Total Automotive Products | $574,109,748 | $452,951,028 | $1,111,532,736 | $910,903,581 | Other Segment Revenue by Major Source (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Source | Q2 2023 Revenue | Q2 2022 Revenue | 6M 2023 Revenue | 6M 2022 Revenue | | :---------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Fire Protection Products | $6,018,930 | $9,645,549 | $15,320,083 | $18,093,236 | | Aerospace Products | $3,344,168 | $826,425 | $7,381,338 | $2,676,960 | | Total Other | $9,363,098 | $10,471,974 | $22,701,421 | $20,770,196 | (14) Leases Operating leases for offices, vehicles, and equipment have remaining terms of 1 to 5 years, with total future payments of $3.9 million - Operating leases for sales/engineering offices, vehicles, and equipment have remaining terms of 1 to 5 years[75] Future Minimum Lease Payments for Operating Leases (as of June 30, 2023) | Year ending December 31, | Amount | | :------------------------------------------ | :------------- | | 2023 (excluding the six months ended June 30, 2023) | $1,051,018 | | 2024 | $1,285,724 | | 2025 | $882,673 | | 2026 | $452,055 | | 2027 | $215,760 | | Total future minimum lease payments | $3,887,230 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, condition, business updates, outlook, and critical accounting policies SECOND QUARTER 2023 VERSUS SECOND QUARTER 2022 Q2 2023 achieved record net sales and substantial growth in net income and EPS, driven by strong automotive demand Net Sales Q2 2023 net sales reached a record $583.5 million, a 26% increase, driven by a 27% rise in automotive sales - Net sales for Q2 2023 increased by $120.0 million (26%) to $583.5 million, a new quarterly sales record[77][105] - Automotive net sales increased 27% to $574.1 million, driven by a 21% increase in automotive mirror unit shipments to 12.9 million units[78] Auto-Dimming Mirror Unit Shipments (Q2 2023 vs. Q2 2022) | Metric | Q2 2023 (thousands) | Q2 2022 (thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :------- | | Total Interior Mirrors | 8,019 | 7,036 | 14% | | Total Exterior Mirrors | 4,902 | 3,656 | 34% | | Total Auto-Dimming Mirror Units | 12,921 | 10,692 | 21% | Cost of Goods Sold Gross profit margin improved to 33.1% in Q2 2023 due to reduced freight and improved fixed overhead leverage - Gross profit margin improved due to decreases in freight expense (150-200 bps impact), improved fixed overhead leverage (150-200 bps impact), and customer cost recoveries/product mix (50-100 bps impact each)[81] - Raw material increases and annual customer price reductions each had a negative impact of 100-150 bps on gross margin, while labor cost increases had a negative impact of 50-100 bps[81] Operating Expenses Total operating expenses increased 5% to $65.8 million in Q2 2023, with R&D rising and SG&A decreasing - Engineering, research and development expenses increased by $5.1 million in Q2 2023[82] - Selling, general & administrative (SG&A) expenses decreased by $1.9 million (6%) in Q2 2023, primarily due to a decrease in expense related to a prior SEC settlement[83] Total Other Income (Loss) Total other income for Q2 2023 increased by $2.3 million compared to the prior year - Total other income increased by $2.3 million in Q2 2023 compared to Q2 2022[84] Provision for Income Taxes The effective tax rate for Q2 2023 was 15.1%, resulting in an income tax expense of $19.4 million - Effective tax rate was 15.1% in Q2 2023, up from 14.6% in Q2 2022[85] - Income tax expense for Q2 2023 was $19.4 million[85] Net Income Net income for Q2 2023 increased 50.8% to $109.2 million, driven by higher net sales and operating profits - Net income for Q2 2023 was $109.2 million, a 50.8% increase from $72.4 million in Q2 2022[86] Earnings Per Share Diluted EPS for Q2 2023 was $0.47, a substantial increase from $0.31 in the prior year - Diluted EPS for Q2 2023 was $0.47, compared to $0.31 in Q2 2022[86] SIX MONTHS ENDED JUNE 30, 2023 VERSUS SIX MONTHS ENDED JUNE 30, 2022 The first six months of 2023 saw a 22% increase in net sales and a 29% rise in net income Net Sales Net sales for the first six months of 2023 increased 22% to $1.13 billion, driven by automotive sales and dimmable aircraft sales - Net sales for the first six months of 2023 increased by $202.6 million (22%) to $1.13 billion[87] - Automotive net sales increased 22% to $1.1 billion, driven by an 18% increase in automotive mirror unit shipments[88] - Dimmable aircraft sales increased 176% to $7.4 million, while fire protection sales decreased 15% to $15.3 million for the first six months of 2023[89] Cost of Goods Sold Gross profit margin slightly decreased to 32.4% for the first six months of 2023, due to raw material costs and price reductions - Gross profit margin decreased due to raw material increases and annual customer price reductions (each 100-150 bps negative impact)[90] - Freight expense (100-150 bps positive impact) and fixed overhead leverage (50-100 bps positive impact) partially offset the margin decrease[90] Operating Expenses E, R & D expenses increased 12% to $72.6 million for the first six months of 2023, while SG&A remained stable - E, R & D expenses increased 12% to $72.6 million, primarily due to additional staffing, professional fees, and new product development[91] - S, G & A expenses remained stable at $54.7 million, representing 5% of net sales[92] Total Other Income (Loss) Total other income for the first six months of 2023 was $4.1 million, a significant improvement from a prior year loss - Total other income for the first six months of 2023 was $4.1 million, compared to a $1.0 million loss in the prior year[92] Provision for Income Taxes The effective tax rate for the first six months of 2023 was 15.5%, slightly higher than the prior year - Effective tax rate for the first six months of 2023 was 15.5%, compared to 15.0% in the same period of 2022[93] Net Income Net income for the first six months of 2023 increased 29% to $206.7 million, driven by higher net sales - Net income increased by $46.8 million (29%) to $206.7 million for the first six months of 2023[94] Earnings Per Share Diluted EPS for the first six months of 2023 was $0.88, an increase from $0.68 in the prior year - Diluted EPS for the first six months of 2023 was $0.88, compared to $0.68 in the prior year[94] FINANCIAL CONDITION Financial condition improved with increased cash, investments, and working capital, with capital expenditures rising for facility construction - Cash and cash equivalents increased by $22.9 million to $237.7 million as of June 30, 2023, primarily from operations[95] - Long-term investments increased to $239.6 million, including a $21.5 million investment in Adasky, LTD[96] - Capital expenditures for the six months ended June 30, 2023, were $90.3 million, up from $58.0 million, driven by building and facility construction projects[100] - Construction of a new 350,000 sq-ft manufacturing facility ($80-90 million) and two expansions (distribution center and manufacturing facility) are underway, expected to be operational in Q4 2023[101] Working Capital and Long-Term Investments (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 | December 31, 2022 | | :------------------ | :---------------- | :------------------ | | Working Capital | $749,244,410 | $698,099,624 | | Long-Term Investments | $239,621,466 | $202,331,983 | | Total | $988,865,876 | $900,431,607 | BUSINESS UPDATE The company achieved record Q2 net sales of $583.5 million, a 26% increase, outpacing light vehicle production and launching 35 new features - Q2 2023 net sales reached a new quarterly record of $583.5 million, a 26% increase YoY[105] - Global light vehicle production in North America, Europe, Japan/Korea, and China increased approximately 18% in Q2 2023[105] - The company launched 35 new interior and exterior auto-dimming mirrors and electronic features in Q2 2023, with over 60% being advanced features like HomeLink® and Full Display Mirror®[106] PRODUCT UPDATE The company continues product innovation, with new frameless mirror approvals, expanded Full Display Mirror® adoption, and advancements in connected car and dimmable technologies Mirror Systems China's new GB15084 procedures now permit the use of the company's frameless inside mirrors in the domestic market - China's new GB15084 procedures allow for the use of the company's frameless inside mirrors in the China domestic market[106] Camera Systems The Full Display Mirror® (FDM) system is shipping to fifteen automakers, complemented by a three-camera rear vision system and advanced SmartBeam® control - Full Display Mirror® (FDM) is shipping to fifteen automaker customers, including General Motors, Subaru, Toyota, Nissan, and Ford[107][110] - The company's three-camera rear vision system (CMS) provides comprehensive side and rear views, integrating with FDM and offering fail-safe functionality with traditional mirrors[108][109] - SmartBeam® Generation 4 offers advanced features like high beam assist, dynamic forward lighting, and specific detection applications, leveraging a custom CMOS imager[110] Connected Car HomeLink® Connect offers cloud-based vehicle-to-home automation, ITM® is shipping on 11 Audi platforms, and biometric solutions are under development - HomeLink® Connect uses RF and cloud-based connectivity for comprehensive vehicle-to-home automation, with Volkswagen being the first automaker to offer a Bluetooth-enabled mirror for HomeLink Connect[112] - Integrated Toll Module (ITM®) is shipping on 11 Audi platforms and the Mercedes EQS model, enabling travel across nearly all U.S. toll roads without a traditional toll tag[113] - The company is developing an embedded biometric solution leveraging ActiveIRIS® iris scanning technology for secure in-vehicle authentication and personalization, with future plans to integrate with HomeLink®[113] Dimmable Devices The company provides variably dimmable windows for Boeing 787 Dreamliner and 777X aircraft, with Airbus production starting in 2021 - Variably dimmable windows are provided for Boeing 787 Dreamliner and 777X aircraft, and production for Airbus aircraft began in 2021[114] Medical The company is developing an intelligent medical lighting system with Mayo Clinic to optimize illumination in surgical and patient-care settings - The company is developing an intelligent medical lighting system, co-developed with Mayo Clinic, to optimize illumination in surgical and patient-care environments[115][116] OTHER Automotive products account for 97-99% of revenue, facing pricing pressure and rising costs, with patents providing a competitive advantage - Automotive revenues represent approximately 97-99% of the Company's total revenue[117] - The company faces ongoing pricing pressure, raw material/labor cost increases, and logistics costs, which negatively impact sales and profit margins[118] - Patents and trade secrets provide a competitive advantage in dimmable devices, electronics, and other features for automotive, aerospace, and medical industries[120] OUTLOOK The company forecasts $2.45-2.55 billion revenue for 2024 and $2.2-2.3 billion for 2023, with ongoing share repurchases Light Vehicle Production Forecast (S&P Global Mobility, mid-July 2023) | Region | Q3 2023 Forecast (Millions) | CY 2024 Forecast (Millions) | CY 2023 Forecast (Millions) | CY 2023 vs 2022 % Change | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | | North America | 3.92 | 15.84 | 15.47 | 8% | | Europe | 3.84 | 17.27 | 17.44 | 10% | | Japan and Korea | 2.99 | 11.60 | 12.37 | 11% | | China | 6.27 | 28.09 | 26.55 | 1% | | Total Light Vehicle Production | 17.02 | 72.80 | 71.83 | 6% | Calendar Year 2023 Guidance Update | Metric | Expected Range | | :-------------------------- | :----------------------------- | | Revenue | $2.2 to $2.3 billion | | Gross Margin | 32.5% to 33% | | Operating Expenses | ~$260 to $270 million | | Estimated Annual Tax Rate | 15% to 16% | | Capital Expenditures | $200 to $225 million | | Depreciation and Amortization | $100 to $110 million | - Calendar year 2024 revenue is expected to be approximately $2.45 to $2.55 billion[125] CRITICAL ACCOUNTING POLICIES Financial statements rely on management estimates and assumptions, continuously evaluated, with historical results generally aligning - Financial statements rely on management estimates and assumptions, which are evaluated on an ongoing basis[126] - Historically, actual results have not materially differed from estimates, but future results may vary under different assumptions or conditions[126] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign exchange and interest rates, with updated risk factors including work stoppages, inflation, and supply chain issues - The Company is exposed to foreign exchange rate risk and interest rate risk, which could impact financial performance and light vehicle demand[128] - Material changes in risk factors include potential work stoppages from automaker or union labor strikes, and the ongoing impacts of an inflationary environment and global supply chain/labor constraints[128][134] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures, with no material changes to internal control Evaluation of Disclosure Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[130] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[131] PART II — OTHER INFORMATION This section provides additional information not covered in Part I, including updated risk factors and equity sales Item 1A. Risk Factors No material changes to risk factors were reported, except for updates on inflation, work stoppages, and supply chain constraints - No material changes to risk factors from the 2022 Form 10-K, except for updates in Part I – Item 2 and Item 3[136] - Updated risk factors include impacts of an inflationary environment, potential work stoppages from automaker or union labor strikes, and supply chain and labor constraints[134][136] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities, with 1.97 million shares repurchased and 18.8 million remaining Issuer Purchase of Equity Securities The company repurchased 1.97 million common shares during the first six months of 2023, with 18.8 million remaining available - The company repurchased 1,967,300 shares of common stock during the first six months of 2023[139] - As of June 30, 2023, 18,815,865 shares remain available for repurchase under the plan[138][139] Issuer Purchase of Equity Securities (Six Months Ended June 30, 2023) | Period | Shares Purchased | Weighted Average Price Paid Per Share | Total Shares Purchased As Part of a Publicly Announced Plan | Maximum Shares That May Yet Be Purchased | | :------------- | :--------------- | :---------------------------------- | :---------------------------------------------------------- | :--------------------------------------- | | January 2023 | — | — | — | 20,783,165 | | February 2023 | 46,835 | $28.58 | 46,835 | 20,736,330 | | March 2023 | 1,000,091 | $27.12 | 1,000,091 | 19,736,239 | | April 2023 | — | — | — | 19,736,239 | | May 2023 | 400,062 | $26.78 | 400,062 | 19,336,177 | | June 2023 | 520,312 | $27.64 | 520,312 | 18,815,865 | | 2023 Total | 1,967,300 | $27.23 | 1,967,300 | 18,815,865 | Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906[146] - Inline XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase are filed[146]