Gentex Corp (GNTX) 2010 Q1 法說會逐字稿

Thank you for taking the time to listen to our first-quarter conference call. On the call with me is Enoch Jen, our Senior Vice President; and Steve Dykman, our CFO. This call is being broadcast live, hopefully, on the Internet, via Gentex's website at www.gentex.com. I understand that if anybody is trying to listen to that, they should refresh their webpage in order to get that going again.

I'm going to go through a few regular things and then have Enoch go through and review the quarter for everyone. After that we will go into Q&A.

At this point I wanted to tell you that the call is being recorded by Gentex Corporation. All contents of Gentex Corporation's conference calls are the property of Gentex. No such content may be copied, published, reproduced, rebroadcast, retransmitted, or otherwise redistributed without the express written consent of Gentex Corporation. Gentex Corporation alone holds such rights.

While we understand that there may be companies that do transcribe and redistribute our conference calls, notwithstanding this warning, Gentex Corporation provides no authorization to do so, and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcripts, as Gentex Corporation will not be held liable for the content of any such transcripts.

Gentex Corporation will hold responsible and liable any parties for any damages incurred by Gentex with respect to any such unauthorized use. Your participation implies consent to our taping and to the foregoing terms. Please drop off the line if you do not agree with these terms.

Our Safe Harbor statement: this presentation may include forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, and projections about net sales and growth in the global automotive industry, the economy, the ability to leverage fixed manufacturing overhead costs, unit shipment growth rates, and the Company itself.

Words like anticipate, believes, confident, estimates, expects, forecasts, likely, plans, projects, optimistic, and should, and variations of such words and similar expressions, identify forward-looking statements.

These statements do not guarantee future performance and involve certain risks and uncertainties: risks, uncertainties, and assumptions that are difficult to predict with regard to timing, expense, likelihood and degree of occurrence; and actual results may differ materially from those in the forward-looking statements.

The Company undertakes no obligation to update, amend, or clarify forward-looking statements whether as a result of new information, future events, or otherwise.

We urge you to review the full Safe Harbor statement that is contained in the news release that is posted on our website.

At this time, I will turn the call over to Enoch. After Enoch makes his remarks with respect to [quarters], the call will be opened up for Q&A. Enoch?

Good morning, everyone. Thanks for joining our first-quarter conference call. We're certainly pleased that the financial results and the business outlook for this quarter are significantly better than a year ago. One thing that hasn't changed from a year ago is today is Connie's birthday. So we will, I'm sure, all join in in congratulating her on another year.

Looking at the first quarter of 2010, it represented a record quarter for Gentex in terms of net sales, operating income, and net income. Our first-quarter net sales were $185.8 million, a 98% increase compared with net sales of $93.8 million in the first quarter of 2009.

Our operating income in the first quarter of 2010 was $44.6 million compared with operating income of $2.2 million in the first quarter of 2009. Our net income was $32.5 million in the first quarter of 2010 compared with a net loss of $1.6 million in the first quarter of 2009. And our earnings per diluted share were $0.23 in the first quarter of 2010 compared with a loss of $0.01 per share in the first quarter of 2009.

Looking next at our automotive net sales and auto-dimming mirror unit shipments for the first quarter, our total auto-dimming mirror unit shipments increased by 93% in the first quarter of 2010 compared with the first quarter last year.

Automotive net sales increased by 104% from $89 million in the first quarter of 2009 to $181.5 million in the first quarter of 2010. Auto-dimming mirror unit shipments increased by 91% in North America in the first quarter of 2010, primarily as a result of increased mirror unit shipments of certain domestic and Japanese transplant automakers.

North American light vehicle production increased by 70% in the first quarter of 2010 compared with the same prior-year period.

Auto-dimming mirror unit shipments to offshore customers increased by 93% in the first quarter of 2010 compared with the same period last year. The increase in unit shipments was primarily due to increased mirror unit shipments to certain European and Asian automakers.

Light vehicle production in Europe increased by 28% in the first quarter of 2010, and increased by 49% in Japan and Korea in the first quarter of 2010 compared with the same period last year.

Our average selling price per auto-dimming mirror unit was $44.56 in the first quarter of 2010. The ASP was down sequentially to $44.56 in the first quarter of 2010 compared with $46.62 in the fourth quarter of 2009, primarily due to a higher mix of base featured mirrors. The ASP was up, on a year-over-year basis, from $41.82 in the first quarter of 2009, primarily due to increased sales of SmartBeam and rear camera display mirrors, partially offset by annual customer price reductions.

Based on CSM's end-of-March light vehicle production forecast, we expect ASPs to be in the mid-40s in the second quarter of 2010, based on the anticipated product mix of base and featured mirrors in that forecast and annual customer price reductions. As usual, there are uncertainties with the CSM production and sales forecasts, customer orders, and new product introductions.

Our fire protection net sales decreased by 23% to $3.8 million for the first quarter of 2010 compared with the same period last year. The decline in net sales was primarily due to the continued weak commercial construction market. The gross profit margin increased on a year-over-year basis from 23.8% in the first quarter of 2009 to 36.9% in the first quarter of 2010, primarily due to the Company's ability to leverage its fixed overhead costs due to the 98% year-over-year increase in net sales.

Based on the Company's expected net sales for the second quarter of 2010, which will be discussed later in these comments, we would expect the Company's second-quarter gross profit margin to be approximately in the same range as the first quarter of 2010. The gross profit margin will continue to be impacted by annual customer price reductions, uncertain global automotive production levels, our ability to leverage our fixed overhead costs, purchasing cost reductions, [VAV] initiatives, and manufacturing deals.

Our engineering, research, and development expense increased by 26% in the first quarter of 2010 compared with the same 2009 period, primarily due to increased variable employee compensation expense and increased hiring of employee and contract engineers. ER&D expense is currently expected to increase by approximately 25% to 30% for the second quarter of 2010 compared with the second quarter of 2009, primarily due to increased variable employee compensation expense and hiring of employee and contract engineers.

Our selling, general, and administrative expense increased by 10% in the first quarter of 2010 compared with the same prior-year period, primarily due to increased variable employee compensation expense and foreign exchange rates. SG&A expense is currently expected to increase by approximately 10% to 15% for the second quarter of 2010 compared with the second quarter of 2009, primarily due to increased variable employee compensation expense and some hiring.

Total other income and expense: our investment income for the first quarter of 2010 was $513,000. There was no other than temporary impairment loss reported in the first quarter of 2010. Our other income for the first quarter of 2010 was $2.564 million, for a total other income of $3.077 million.

Our investment income decreased in the first quarter of 2010 compared with the first quarter last year primarily due to lower interest rates. Non-cash charges for other than temporary impairment losses on available-for-sale securities decreased from $1.3 million in the first quarter of 2009 to zero in the first quarter of 2010.

Other income was $2.6 million in the first quarter of 2010 compared with first-quarter expense of $4.5 million last year, primarily due to realized gains on the sale of equity investments compared with realized losses in the same prior-year period.

Next, we will provide a few balance sheet items. At March 31, 2010, accounts receivable were $83.8 million. Inventories were $67.7 million. Patents and other assets were $11.6 million. Accounts payable were $49.8 million, and accrued liabilities were $52.5 million. Our effective tax rate of 32% varied from the statutory rate of 35%, primarily due to the domestic manufacturing deduction. Excluding stock option expensing, we currently expect that the tax rate for 2010 will be approximately 33% based on current tax laws, primarily due to the domestic manufacturing deduction.

The year-to-date cash flow from operations was $61.3 million. Our capital expenditures in the first quarter of 2010 was $10.8 million. Our depreciation expense in the first quarter of 2010 was $9.7 million. For calendar year 2010, our estimate for capital expenditures is approximately $40 million to $45 million. Our estimate for depreciation expense for 2010 is estimated at $38 million to $40 million.

Cash dividends. On April 16, 2010, the Company paid a quarterly cash dividend of $0.11 per share to shareholders of record of the common stock at the close of business on April 8. The ex-dividend date was April 5. The Company's cash dividend policy was established based on a number of criteria, including current US income tax laws, that the dividend rate be meaningful, sustainable, and that the rate would increase generally in line with the Company's earnings and operating cash flow over time. The cash dividend rate is an agenda item at every Board of Directors meeting.

Next, an update on SmartBeam. We continue to make progress with automakers as they more broadly offer SmartBeam across their product lines. SmartBeam is the intelligent high-beam headlamp assist product that we introduced in the 2005 model year. And it is currently offered on 33 vehicle models at eight OEM customers, including Audi, BMW, Chrysler, General Motors, Opel/Vauxhall, Tata Motors, Land Rover, Toyota/Lexus, and Rolls-Royce. We expect to announce a number of additional vehicle models for existing and new customers during the 2010 calendar year.

For the 2009 calendar year, we shipped approximately 437,000 SmartBeam units compared with approximately 295,000 SmartBeam units in 2008. Based on the CSM end-of-March forecast, we continue to expect that the SmartBeam unit shipments will increase by 30% to 40% in calendar year 2010.

Next, an update on rear camera display. To date, our RCD mirrors are offered on 42 vehicle models with eight automakers as original equipment, including Daihatsu, Ford, General Motors, Honda/Acura, Hyundai/Kia, Mitsubishi, Subaru, and Toyota/Lexus. RCD mirrors are also currently offered as a dealer-installed option or an aftermarket product on nearly 20 additional models.

In 2008, the Kids Transportation Safety Act of 2007 was signed into law, and ordered of the Secretary of Transportation at the National Highway Traffic Safety Administration to revise the federal standard to expand the field of view so that drivers can detect objects directly behind vehicles. The phase-in period during which automakers will need to meet the requirements set by NHTSA is expected to be between now and 2015. The automakers currently offering our rear camera display product are doing so absent any legislation, and made the decision before any legislation was pending.

Our RCD mirror is an optimum, ergonomic, easily adaptable method to display the output of a rear camera for increased safety. Ultrasonic sensors cost less, but may be less effective. Any color display in a vehicle is relatively costly. When a color display is required for other features such as navigation, radio, or other vehicle functions, then it may be less costly on a per-feature basis to display the output of the backup camera in that in-dash display.

The Company shipped approximately 573,000 RCD mirror units in calendar year 2009 compared with approximately 270,000 units in calendar year 2008. Based on our current forecast, we now expect that RCD mirror units will nearly double in calendar year 2010 compared with calendar year 2009. The increase in the forecast is primarily due to increased take rates on certain domestic vehicle models.

We currently believe that the market for camera displays in vehicles will be divided into three primary market segments. The top 15% to the 20% of the vehicle market will primarily offer the display for rear camera in the navigation system, with the option of purchasing our RCD Mirror.

The middle 60% to 70% of the market is the most likely market area to offer the camera display in the mirror, or in other multipurpose displays in the vehicle and a number of different potential locations, including the radio, instrument panel, console, et cetera. This is the segment of the market with the greatest volume potential, but also has the greatest and increasing competition.

The bottom 15% to 20% will primarily offer a radar/sonar display, provided that NHTSA allows sensor-based technologies to be used, possibly with a camera display as an upgrade option.

Next, we will provide an update on the dimmable aircraft window programs. Boeing now expects the first 787 Dreamliner aircraft to go into service in late 2010. Due to the Boeing production delays, we currently anticipate that we will begin to deliver our windows to the aircraft production line in the first half of 2010. Boeing has also expressed interest in utilizing dimmable windows for other aircraft.

Gentex is currently shipping dimmable aircraft windows for use on the passenger cabin windows of the 2010 Beechcraft King Air 350i aircraft. This is the first aircraft in general and business aviation with dimmable windows. Each King Air 350i will have 15 windows. Other aircraft manufacturers continue to have interest in this technology, and we are working on these potential programs with PPG Aerospace.

Next, we will provide some revenue estimates. The following projections for net sales in the second quarter of 2010 is based on CSM's end-of-March light vehicle production forecast. Our estimate for net sales for the second quarter of 2010 is an increase of approximately 55% to 65% compared with the same period in 2009. CSM's end-of-March light vehicle production forecast is currently 2.9 million vehicle units for North America, a 64% increase over the second quarter of 2009; 4.3 million vehicle units for Europe, a 1% increase over the prior-year period; and 2.9 million vehicle units for Japan and Korea, an 18% increase over the prior-year period.

CSM is currently forecasting relatively flat sequential vehicle production for all four quarters of 2010 in North America, Europe, and Japan and Korea combined. Due to continued automotive market uncertainties, we do not plan to provide full-year revenue guidance at this time.

The CSM light vehicle production forecast, as of the end of March, for calendar year 2010 was 11.5 million vehicle units for North America, a 35% increase over the prior year; 15.4 million vehicles for Europe, a 1% increase over the prior year; and 12.2 million vehicle units for Japan and Korea, a 12% increase over the prior year.

At this time, we will turn the conference call back over to Connie.

Just a quick reminder: all listeners should note that this call is being recorded by Gentex Corporation. All contents in Gentex Corporation's conference calls are the property of Gentex. No such content may be copied, published, reproduced, rebroadcast, retransmitted, or otherwise redistributed without the express written consent of Gentex Corporation. Gentex Corporation alone holds such rights.

While we understand that there may be companies that transcribe and redistribute our conference calls, notwithstanding this warning, Gentex Corporation provides no authorization to do so, and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcripts, as Gentex Corporation will not be held liable for the contents of any such transcripts.

Gentex Corporation will hold responsible and liable any party for any damages incurred by Gentex with respect to such unauthorized use. Your participation implies consent to our taping and to the foregoing terms. Please drop off the line if you do not agree to these terms.

At this point, we are going to open the call up to questions and answers. As usual, we do request that you don't ask multiple-part questions, and that you try to ask one at a time, so everybody gets an opportunity. Operator?

(Operator Instructions). John Murphy, Bank of America Merrill Lynch.

This is actually John Lovallo on for John Murphy. Thanks for taking the call. Yes, a couple of quick questions. Your offshore penetration seems to be very strong. Can you just get a little deeper into the drivers there? And do you think that this is sustainable?

Well, I think that, if you look at our new programs, we continue to win new programs overseas, both in Europe and Asia. I don't think that the rate in the first quarter is sustainable, but I think we feel we can continue to grow our business offshore at a faster rate than industry production levels.

Okay, that's fair. Then, next question, the return on assets in the investment portfolio was a little bit lower than we had anticipated. I know you mentioned lower interest rates, but was there anything, any change in the asset mix that we should be aware of?

No, not anything of any significance. Obviously, interest rates continue to decline, and the equity portfolio is performing in line with the overall markets.

Okay, fair enough. And last question, the raw materials, how are you guys thinking about that? Has there been any change in the OEM relationship, and their willingness to shoulder a little bit more of that burden?

I think that, in general, the OEMs continue to expect price reductions. I think in very specific commodities, like steel, they are open to some discussions. As you are aware, the majority of our product material content is electronics. While there certainly have been some supply chain issues in terms of delivery and lead times, that still has tended to be in a deflationary trend.

Okay. Thanks very much, guys.

Himanshu Patel, JPMorgan.

Happy birthday, Connie.

Thank you.

I know you guys didn't want to provide revenue or unit volume guidance for the balance of the year. But would it be unreasonable to take your comment about CSM -- I think you said that in NAFTA, Europe, Korea, Japan, CSM's combined production is sequentially flattish for the balance of the year. Putting aside foreign exchange and any potential shifts in platform mix, would it be unreasonable to say that Gentex's revenues should be sequentially flattish as well, from Q2 onward, if CSM proves true?

Well, I think, certainly, the industry production has a significant impact on our unit shipments. Now, having said that, there are a couple of factors that could make that correlation a little different. The first is obviously the exact mix of vehicles that are produced and sold. And the second would be the number of new programs that we will begin shipping on during the remainder of this year. So, with those two factors, we would agree with you.

Okay. And then the -- I think you mentioned, Enoch, $45 ASP, if I heard that right. Or mid-40s, I'm sorry, for Q2. Any sort of help you can provide us on that number for the back half of the year?

Well, I think what we've said, from quarter to quarter, the ASP can vary up or down. We're a little less concerned about that exact figure because we recognize that it's a mix of base featured inside mirrors, featured inside mirrors, as well as outside mirrors.

We have said, and we continue to believe, that over the next several years that there will be an upward trend as we continue to offer and ship more RCD and SmartBeam mirrors. But it's hard to predict it on a quarter-to-quarter basis.

And what is specifically driving the anticipated increase in ASPs Q1 to Q2?

No, I think it's approximately -- we intended to say that it was approximately -- would be in the same range.

I'm sorry. So, $41.82 was Q1, and you're thinking it's roughly the same (multiple speakers).

No, Q1 was $44.56. The $41.82 was last year's first quarter.

Got it. Sorry. I misheard that. Thank you. That's all I had.

David Leiker, Robert W. Baird.

Happy birthday, Connie.

Thank you so much.

You don't sound too happy (laughter).

She's expecting some magnificent gifts from analysts.

That's it (laughter).

If we look at the shipment number, and then SmartBeam and rear camera display, and realize quarterly that's going to be a little bit choppy, but you are seeing an acceleration in those numbers that are well beyond what's happening in the end market.

Can you characterize, or put into buckets at all, how much of that would be penetration on existing vehicles versus new programs, versus just mix relative to what last year's was? Is there any way to characterize that?

It's very difficult for us to do that, even internally, because our new programs are a combination of new vehicles on which we offer mirrors, as well as additional features. And so to try to break it down, it's a little more difficult.

One comment we would make for anyone that is inclined to try to extrapolate the first quarter, is if we all recall back to the first quarter of 2009, we had -- and other suppliers, too, had discussed that the Asian automakers were very quick to stop purchasing parts. And so the depleted their inventories very sharply of parts in the first quarter of 2009. And that then tended to increase the percentage year-over-year in 2010. So that was also a part of the increase that was greater than the industry percentage growth.

Okay. What if we look at the pace of your new program launches here this year relative to last year? Do you think that's comparable? Do you think it's higher, lower? How would you characterize that?

Well, I don't know that we've done any analysis on an overall basis. What we have said, specifically about RCD mirrors, is that we are looking at our RCD mirror growth in three phases. That the first phase, which was from when we first began shipping RCD mirrors till about now, were market decisions made by the automakers to add the future to their vehicles based on consumer interest and demand.

We are currently in the second phase, where automakers generally are taking a little bit of a breather as they are waiting for the final rule interpretations from NHTSA as to what will be allowed, and what will not be allowed, in order to meet the Kids Transportation Safety Act's requirements.

And then, once that -- those interpretations have been finalized, then there will be a third phase where the automakers then will go into implementing the feature across their entire vehicle line for North America.

Okay. And then just sneak one more in here on the ER&D number here. You've been running $14 million, $14.5 million Q1, and then where your Q2 guidance is. Is that a dollar level of spending that we should expect going forward from here? I know you didn't give guidance for the balance of the year, but is that a steady-state number for you?

I think what you're seeing is, when you look at the expense growth on a year-over-year basis, the single-largest contributor to the increase is the increase in variable employee compensation.

So, you look at Q1 versus the first quarter of 2009, about half of the overall increase was due to the variable compensation. So, as we proceed throughout the year, and those year-over-year comps are more normalized, the percentage growth rate should come down. But for the next couple-few quarters, it will be in this 25-plus range.

Okay, thank you.

Brett Hoselton, KeyBanc.

Good morning, Enoch, Steve. Happy birthday, Connie.

Thank you.

Yes, I wanted to send you an e-card here, but unfortunately the corporate website blocked it all (laughter). Anyway. Whatever.

I wanted to talk about RCD and SmartBeam. As we think about RCD and SmartBeam, you have talked about flat production through the year, and obviously there's potential for some mix going up and down in that sort of things. But if you think about R&D and SmartBeam shipments, first half of this year versus second half of this year, what kind of an increase might you expect with the new shipments or the new programs that you are expecting to kick in, in the back half of the year?

I don't think there's going to be a lot of ER&D expense tied to programs that are going to ship in the second half of the year.

Enoch, excuse me. I was actually thinking -- not ER&D expense. I was just thinking unit shipments of RCD and SmartBeams.

But that is for the year, or --?

Do you want to rephrase your question, then?

Yes, let's see. Production is going to be flat through the four quarters of the year. We're shipping a certain number in the first quarter, a certain number in the second quarter. And then you're going to have a number of programs that are going to kick in in the back half of the year, as you typically do. So it seemed that you would have some sort of an increase, given a flat production environment through the year, as you move into the back half of the year.

And so my question is, if you are going to ship, let's say, 1 million SmartBeams this year, is it going to be 0.5 million in the first half of the year, and 0.5 million in the second half of the year -- which wouldn't make sense, because you've got new programs coming online in the back half of the year? Or should we expect a 50% increase in RCD and SmartBeam shipments as you move from the first half of the year to the second half of the year?

Well, we haven't quantified the balance between the first and the second half of the year. I think it's safe to say, because we will be announcing some additional new RCD and SmartBeam programs throughout the rest of this year, that the second half of each year unit shipments are higher than the first half. And that's been true for the last several years also.

I guess what I'm driving at is I'm just trying to decide or figure out whether or not we should expect a material increase. Are these programs big programs? I guess would be a different way of asking it. Are they material programs?

And I guess we're not prepared to disclose that at this point.

Okay. Let me ask a second one here.

Nearly double year-over-year.

Yes. Let me ask a different question about the ASPs here. As you go from the fourth quarter to the first quarter, you said that a higher mix of base mirrors was the cause of the $2 decline in ASPs from the fourth quarter to the first quarter. Can you elaborate a little bit? Was there particular programs that caused that to happen?

Well, there's always particular programs. I think one of the reasons is that our European mirror unit shipments remained relatively strong, even though the overall European production was relatively flat. And the majority of the mirrors that we shipped into Europe are currently base featured mirrors.

Okay. Very helpful. Thank you very much.

Rich Kwas, Wells Fargo Securities.

Steve, on contribution margins on the gross profit line, any change in the expectation that it should be 40% to 45%, sequentially speaking?

I think we said, we felt over time it will go back more to this normalized level of 40% to 45%. We've been running above that on a year-over-year basis, as of late. And then based on the revenue and margin guidance that we've given for Q2, you could expect it would be -- that incremental gross margin percentage would be maybe in the mid-40s, so a little bit on the high end of the historical trend, yes.

Okay. And are you talking year-over-year, or sequentially?

Year-over-year, yes.

All right. And then just going back to this discussion around pricing, as we look at second half -- and last year, third quarter, you had a big increase in pricing due potentially a little bit to mix, but you've got a lot of RCD and SmartBeam stuff launching.

I think in the past you've discussed how, historically or going forward, second half of the year there should be some increase, because the number of programs that launch are just a little more weighted to the middle of the year and second half of the year. Is there any change in that view?

No. We still think that as we have additional new programs for RCD and SmartBeam, that will tend to push up the ASPs. Our only caution is obviously on a quarter-to-quarter basis, it always comes down to a question of mix.

Right, right. Just hypothetically, if European production were to pull back a little bit in the second half of the year versus the first half, North American stayed the same -- your mix, I would think, would get better, right?

That would be a reasonable supposition.

Okay. Okay, great. Thanks. Happy birthday, Connie.

Thank you. You guys can just send me money (laughter).

Adam Brooks, Sidoti & Company.

Real quick, I guess in the pricing with SmartBeam and RCD, can you talk about what the concessions are like now, versus your more base model mirrors?

Well, I think that the price reductions on some of our newer featured mirrors will be a little higher than average, from the position that as we can increase the volume of our shipments, that we have a little more flexibility to grant productivity price reductions.

Okay, and then real quick, looking at Asia versus Europe, is it possible to maybe break down the performance there? Because international was a little stronger that I was looking for in the quarter. Is there a big difference between Japan, Korea, and Europe?

I don't think there was a significant difference between the two areas, Adam. That's a good question, but they were not that dissimilar.

All right. Thank you.

Sean Brenckman, Craig-Hallum.

Can you talk a little bit about the RCD take rates? You said that they were a little bit higher on certain models. Can you give a little color on maybe what those models are, or what groups they're in?

We haven't really specifically -- we don't disclose take rates on a model-by-model basis. What we have said on RCD take rates is that they -- we have some data on them. And in calendar year 2009, the average take rate on RCD mirrors was approximately 15%. But we really don't break it out on a model-by-model basis.

Okay. You talked a little bit about the three phases you're in with the RCD rollout. We saw a content decrease this quarter. I'm sure some of that's due to the price reductions we talked about a lot here. Can you quantify how much of it might come from this phase 2, where automakers are taking a breather as they wait for interpretations of the law?

Well, I think our analysis says that the reason for the lower ASPs sequentially is primarily due to the mix of base featured inside mirrors and outside mirrors, rather than a flattening of the increased RCD mirror unit shipments.

Okay, great. And then lastly, are we going to see any sequential increases in variable comp throughout this year, or are we kind of there at this level?

Well, I think for the -- the Company-wide profit sharing bonus is dependent on the financial performance of the Company. So as we proceed through the balance of the year, there is that potential. But based on our second-quarter guidance, on a sequential basis from the first quarter, we wouldn't expect a lot of difference.

Great, thanks. That's all I had.

Jason Rogers, Great Lakes Review.

Looking at Daimler, the agreement that expired December of 2009, I was wondering if you could provide an update there.

I think the formal, long-term agreement expired. We are continuing on a year-to-year basis, as well as some informal discussions. And so we don't expect that to have any significant impact on our business with Daimler.

Okay. And I noticed that -- looking at your list of existing products, you now list of the side blind zone indicators as an existing product. And I was wondering if you could describe how that works, if you are shipping that to customers currently, and what the price point may be on that.

I could describe to you how it works. The side blind zone is basically an indicator in the mirror that takes a signal from an automaker's specified -- I believe there is a radar sensor. And it basically tells you if there is someone in your blind spot on that side of the vehicle.

So is it something that blinks, or --?

No, it's an icon (multiple speakers) .

It's an icon that lights up when it detects a vehicle in your blind spot. And we're currently shipping it to a number of automakers in North America and Europe -- both OEC mirrors, as well as some prismatic outside mirrors.

Okay. And then finally for clarification, the cash flow from operations for the quarter, was that $51.3 million or $61.3 million?

It was $61.3 million.

Okay, thank you.

Brett Hoselton, KeyBanc.

Just a follow-up question. The ASPs, again, fourth quarter to first quarter, you said primarily mix. Pricing typically has a negative impact. Is this virtually all mix, or is it just the majority of it is mix? In other words, how much did pricing impact it -- half of it, 25% of it, none of it?

Well, there it's primarily mix, because we do have some of our customers that have January 1 price (technical difficulty).

But on a sequential basis, pricing doesn't have as much of an impact on ASPs and margins as it does year-over-year.

Okay. That's good enough. Thank you very much.

David Leiker, Robert W. Baird.

Yes, just one follow-up. If I'm correct in my memory, the only luxury-branded vehicle you have RCD on right now is Lexus. Is that correct? I guess it depends on how you think about Lincoln.

Well, I guess it depends on what you consider luxury. It's on Acura models.

Okay. No Europeans, really -- is that something that we're going to start seeing here later this year, or is that further down the road?

The European customers look at the feature differently. They look at it more as a rear backup aid. But I think that you're going to see more of it, but I don't know that you're going to see a lot of it in the near future, just because it's taking some time for that feature to take hold over there.

But I do think that it is going to, particularly as -- we have it on Toyota models already. They can offer it in Europe. So I think that you are going to see more of it, but not necessarily in the second half of this year.

And what about the European brands, in terms of the vehicles they are going to sell here in the US? Do you have a sense of where they are going to go for conformance for the new law?

No, we do not.

And in response to your first question, David, in Europe there is more interest in multi-function displays. And so they are probably the leaders in some of the systems that not only offer navigation, but driver assist. And so they want multi-information displays, and they want a combination rather than a single function, like there's more interest in the United States.

Okay. Great, thank you.

And there are no further questions in queue with this time.

I will turn the call back over to you, Ms. Hamblin.

At this point, I'd like to thank everyone for participating. We apologize for the delay and problems at the beginning. Hopefully, it didn't cause anybody any issues. We will be here if you have additional questions. Thank you. Have a good day.

And that does conclude our conference for today. Thank you for your participation.