Gentex Corp (GNTX) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to this Gentex first-quarter 2011 financial results conference call. Today's conference is being recorded. I would now like to turn the meeting over to Ms. Connie Hamblin, Vice President of Investor Relations and Corporate Communications. Please go ahead, Ms. Hamblin.

Thank you, good morning, everyone. I would like to take this opportunity to welcome you to Gentex Corporation's first-quarter conference call. On the call today is Senior Vice President, Enoch Jen, as well as our Chief Financial Officer, Steve Dykman. I am going to go through a few brief comments and then I will turn the call over to Enoch and he will review the quarter.

This call is being broadcast live on the Internet via Gentex Corporation's website at www.gentex.com. The playback of the conference call is also available on the website. This 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 transcribe and redistribute our conference calls, notwithstanding this morning, 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 party 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 to 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 in the Company itself.

Words like anticipates, believes, confident, estimates, expects, forecast, 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, 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 conference call over to Enoch Jen. He will make remarks with respect to the quarter and then we will open it up for Q&A. As usual, please ask one single part question at a time. Enoch?

Thank you, Connie. Good morning, everyone. Looking at the results for the first quarter, our record first-quarter net sales were $250.9 million, a 35% increase compared with net sales of $185.8 million in the first quarter of 2010. Record operating income in the first quarter of 2011 was $60.1 million, a 35% increase compared with operating income of $44.6 million in the first quarter of 2010.

Record net income of $42.3 million in the first quarter of 2011, a 30% increase compared with net income of $32.5 million in the first quarter of 2010. And record earnings per diluted share were $0.29 in the first quarter of 2011 compared with $0.23 per share in the first quarter of 2010.

Looking at automotive net sales and auto dimming mirror unit shipments, total auto dimming mirror unit shipments increased by 34% in the first quarter of 2011 compared with the first quarter last year. Automotive net sales increased by 36% from $181.5 million in the first quarter of 2010 to $246.3 million in the first quarter of 2011.

Auto dimming mirror unit shipments increased by 43% to North America in the first quarter of 2011 primarily as a result of increased mirror unit shipments of the domestic automakers. North American light vehicle production increased by 15% in the first quarter of 2011 compared with the same prior year period.

Auto dimming mirror unit shipments to offshore customers increased by 30% in the first quarter of 2011 compared with the same period last year. The increase in unit shipments was primarily due to increased mirror unit shipments of certain European automakers. Light vehicle production in Europe increased by 8% in the first quarter of 2011 and decreased by 19% in Japan and Korea in the first quarter of 2011 compared with the same period last year.

Other net sales increased by 10% to $4.7 million for the first quarter of 2011 compared with the same quarter last year due to increased dimmable aircraft window net sales and a 4% increase in fire protection net sales.

Next we will look at the impact of the Japan earthquake and tsunami on net sales and supply chain constraints. As a result of the March 11 earthquake and tsunami in Japan, the Company believes that the lost net sales during the first quarter of 2011 was not material.

For the second quarter of 2011, based on IHS' mid April forecast for automotive light vehicle production and our customers' releases, we currently expect that the Company's net sales will be negatively impacted by approximately $15 million to $20 million for the second quarter of 2011, which is included in our guidance for the second quarter, which will be discussed later in these comments.

As a result of the fast ramp up in automotive light vehicle production in the second half of 2010, and the continuation into the first quarter of 2011, the Company continued to experience increased costs associated with supply chain constraints on certain automotive grade electronic components during the first quarter of 2011 compared with the same period last year. Although availability of certain automotive grade components remains tight, we did experience continued sequential improvement in this area during the first quarter of 2011.

Given the circumstances in Japan, the Company has been in contact with all of its suppliers and we continue to work with them to secure adequate quantities of parts, including some purchases at a higher cost due to changes in purchasing channels. Based on the mid-April IHS forecast for light vehicle production levels and the Company's anticipated product mix, we currently believe that the Company has an adequate supply of parts for the second quarter of 2011.

As a result of the rapidly changing environment in Japan it is not currently known what the ultimate impact the earthquake and tsunami will have on the supply chain, global light vehicle production, the automotive industry or Gentex.

All projections made on this call are based on the following IHS assumptions regarding Japan.

First, the breadth of lost automotive industry volume expands outside Japan. Japanese automakers outside Japan would be the first to primarily be affected by any part shortages and non-Japanese automakers will be affected although to a lesser extent.

Second, almost all of the automotive industry volume loss outside of Japan can be recovered in the balance of 2011.

Third, approximately 60% of lost automotive industry volume in Japan can be recovered in 2011. The balance will either be recovered in calendar year 2012 or possibly lost due to reduced sales volumes in Japan and the possibility of a shift in market share to non-Japanese competitors.

The average selling price per auto dimming mirror unit was down sequentially to $44.83 in the first quarter of 2011 compared with $46.36 in the fourth quarter of 2010 primarily due to a higher mix of base auto dimming mirrors and annual customer price reductions.

The ASP increased on a year-over-year basis to $44.83 compared with $44.56 in the first quarter of 2010 primarily due to a higher product mix of mirrors with advanced electronic features that more than offset annual customer price reductions.

Based on IHS' mid-April light vehicle production forecast, we currently expect the second-quarter 2011 ASP to slightly increase sequentially based on the anticipated product mix of based and featured mirrors in that forecast offsetting the annual customer price reductions. As usual, there are uncertainties with the IHS production and sales forecast, customer orders and new product introductions.

Looking next at our gross profit margin, the gross profit margin increased on a sequential basis from 35.8% in the fourth quarter of 2010 to 36% in the first quarter of 2011. The gross profit margin decreased on a year-over-year basis from 36.9% in the first quarter of 2010 to 36% in the first quarter of 2011, primarily due to annual customer price reductions partially offset by the Company's ability to leverage its fixed overhead cost.

The Company currently expects that its gross margin in the second quarter of 2011 will decline approximately one-half to three-quarters of a percentage point compared with the gross margin reported in the first quarter of 2011, primarily due to the estimated impact of expected lost sales of approximately $15 million to $20 million and to additional supply chain constraints as a result of the Japan earthquake and tsunami.

As a result of the situation in Japan the estimated impact of the expected lost sales in the second quarter of 2011 on the gross margin is approximately two-thirds of the expected decline in the gross margin. 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 and VAVE cost reductions, supply chain constraints and manufacturing yields.

Our engineering, research and development expense increased by 32% in the first quarter of 2011 compared with the same 2010 period primarily due to additional hiring of employee and outside contract engineering and development services to support new product development projects and new program awards. ER&D expense is expected to increase by approximately 30% to 35% for the second quarter of 2011 compared with the second quarter of 2010, primarily due to additional hiring of employee and outside contract engineering and development services.

Selling, general and administrative expense increased by 18% in the first quarter of 2011 compared with the same prior year period, primarily due to continued overseas office hiring to support our overseas growth. SG&A expense is currently expected to increase by approximately 10% to 15% for the second quarter of 2011 compared with the second quarter of 2010 primarily due to overseas office expenses.

Looking next at total other income. In the breakdown of total other income for the first quarter of 2011 was investment income of $499,000 and other on a net basis of $2.865 million. The total other income increased in the first quarter of 2011 compared with the first quarter of 2010 primarily due to changes in the foreign currency rate related to the Company's euro denominated account.

Next we will look at a few balance sheet items. At March 31, 2011 accounts receivable was $116.3 million, inventories were $104 million, patents and other assets were $13.1 million, accounts payable were $61.2 million and accrued liabilities were $54.3 million.

The effective tax rate of 33% during the second quarter of 2011 varied from the statutory rate of 35% primarily due to the domestic manufacturing deduction. We currently expect that the tax rate for 2011 will be approximately 33% based on current tax laws primarily due to the domestic manufacturing deduction.

Our year-to-date cash flow from operations was $77.4 million, our capital expenditures for the first quarter of 2011 was $19.4 million and our depreciation expense for the first quarter of 2011 was $10.6 million.

In light of strong customer demand for our auto dimming mirrors and a more complex product mix we have been increasing our production line capacity. Production lines for auto dimming mirrors with advanced electronic features such as rear camera display and SmartBeam are much more complex and require additional equipment. For calendar year 2011 our estimate for capital expenditures is approximately $60 million to $70 million, [depreciation] expense for 2011 is currently estimated at $39 million to $42 million.

Today the Company paid a quarterly cash dividend of $0.12 per share to shareholders of record of the common stock at the close of business on April 7. This represents a 9% increase compared with the Company's previous cash dividend rate. The Company's cash dividend policy was established based on a number of criteria including current US income tax laws, that it be meaningful and sustainable, and that the dividend rate would increase generally in line with the Company's earnings and operating cash flow over time.

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 currently is offered on 56 vehicle models at 12 OEM customers.

For the 2010 calendar year we shipped approximately 630,000 SmartBeam units. Based on the IHS at mid-April forecast we currently expect that SmartBeam units will increase by approximately 50% to 60% in calendar year 2011.

Next an update on Rear Camera Display. To date our RCD mirrors are offered on 62 vehicle models with nine automakers as original equipment. RCD Mirrors are also currently offered as a dealer installed option or an aftermarket product on over 20 additional models. The Company shipped approximately 1.25 million RCD Mirrors in calendar year 2010.

Regarding legislation, there is an update on the legislation regarding the Kids Transportation Safety Act contained within the news release that was issued this morning. Please refer to that release, as well as the links on our website that will get you to the docket for this pending regulation, for more information and as a result we won't reread the update. But we will be happy to take any questions.

Because we are in the early stages of the implementation phase of this regulation, and many automakers are revisiting any decisions that may have been made prior to the December 7, 2010 NHTSA announcement and subsequent technical workshop on March 11, as well as the situation in Japan, we continue to believe that there are too many uncertainties to provide annual guidance for RCD Mirror units at this time. And as a result we still plan to only provide guidance for the first six months of the year.

Based on IHS' automotive mid-April forecast we currently expect that RCD Mirror unit shipments will increase by approximately 50% for the first six months of 2011 compared with the same period in 2010. Since it is likely that camera based systems will be required by September 2014, we now believe that the market for camera displays in vehicles will be divided into two primary market segments.

The top 15% to 20% of the vehicle market will primarily offer the display for a rear camera in the navigation system with the option of purchasing an RCD Mirror. The rest of the market, the most likely market area to offer a camera display in the mirror or in other multipurpose displays in the vehicle in a number of different locations, including the radio, instrument panel, console, etc. This is a segment of the market with the greatest volume potential but also the greatest in increasing competition.

Next an update on dimmable aircraft window programs. We currently are shipping dimmable windows for the 787 Dreamliner and each passenger aircraft has approximately 100 windows. Boeing has also expressed interest in utilizing dimmable windows for other aircraft.

In January 2011 there was an announcement that the anticipated first-quarter 2011 shipment of the Boeing 787 Dreamliner will be delayed until the third quarter of 2011 due to an in-flight issue experienced back in November on a test plane. Our best information indicates that they are still on track to meet that revised timing.

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

Next we will look at our net sales estimates. The following projection for net sales in the second quarter of 2011 is based on IHS' mid-April light vehicle production forecast. Please note that any forward-looking information discussed on this call is predicated on IHS Automotive's assumptions for Japan that were stated earlier in this call and also our reference in our news release.

Our estimates for net sales for the second quarter of 2011 is an increase of approximately 20% to 25% compared with the same period in 2010 based on IHS' mid-April forecast for light vehicle production levels.

For the second quarter of 2011, the light vehicle production per IHS for North America is 3 million vehicle units, a 3% decline compared to the second quarter of 2010. The forecast for Europe is 4.6 million vehicle units, a 7% decline from 5 million vehicle units in the same quarter of 2010. And the forecast for Japan and Korea is 2.2 million vehicle units, a 33% decline from the 3.2 million vehicle units in the second quarter of 2010.

The IHS forecast for light vehicle production for calendar year 2011 is 13.1 million vehicles for North America, a 10% increase compared to 11.9 million vehicle units in calendar year 2010; 19.4 million vehicle units for Europe, a 3% increase compared to 18.8 million vehicle units in calendar year 2010; and 11.5 million vehicles for Japan and Korea, a 13% decrease compared to 13.1 million vehicles for calendar year 2010.

At this point I will turn the conference call back over to Connie.

As a reminder all listeners should note that this call is being recorded by Gentex Corporation. All contents of Gentex Corporation's conference calls is 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 morning, 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 transcript as Gentex Corporation will not be held liable for the content of any such transcript. Gentex Corporation will hold responsible and liable any party for any damages incurred by Gentex Corporation 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 to these terms.

At this point we are going to open it up to Q&A and we do ask that you try to ask one single part question at a time. Operator, if we can open it up to Q&A now.

(Operator Instructions). David Lim, Wells Fargo Securities.

Just since it is one question, I just wanted to get to the electronic components piece of it. Have you guys been forced to look at other suppliers, maybe move your procurement to more North American or European suppliers? Can you give us a little bit more color on that situation?

I think in light of the supply constraints even before the situation in Japan, this has been ongoing for some time now. We have been looking at a number of different sources for our parts while continuing to maintain the quality of the automotive grade components that we purchase.

So we have been looking at second sources, we have been looking at purchasing through different purchasing channels. We have also been doing some product reengineering. So it has been a combination of many different types of efforts to maintain the supply of parts that we need for production.

So, to sort of follow up also on that, where are you guys at -- I mean if it was like a four quarter football game, I mean are we halfway there, three-fourths there in relation to your procurement strategy related to electronics?

Well, I think prior to the events in Japan we had indicated that it was approximately four quarters beginning in the third quarter of last year and lasting at least through the first half of this year. In light of the events in Japan, which have provided additional pressure on our supply chain, it is likely that the supply chain constraints on some parts will continue into the second half of this year.

Great. Thank you very much.

David Leiker, Robert W Baird.

Hi, good morning. It is Keith Schicker on the line for David. I want to follow up on the other David's question there quickly. So, if we look at the margin guidance for the second quarter and the expectations for some of the supply chain constraints to continue into the second half of the year now, is this something that continues to improve sequentially as it has the last couple quarters based on what you are hearing now? Or is it something that maybe gets a little worse or doesn't get better? How should we think about how that progresses through the course of the year?

When you look on a sequential basis from the fourth quarter to the first quarter our margin improvement was primarily due to improvements in the supply chain constraint area. And we expected that that improvement would continue. However, with the events in Japan, we think that we won't see the continued improvement in Q2.

And as we mentioned, we feel that the margin in Q2 will drop roughly a half to three-quarters of a point and about two-thirds of that drop would pertain to the lost sales and the remaining third would relate to supply chain.

So we feel with the events in Japan that the supply chain constraints could continue into the third quarter in the second half of the year, but we are hopeful that it may improve sequentially as we progress through the year.

Okay, thank you.

Brett Hoselton, KeyBanc.

Good morning, this is Matt Mishan in for Brett. As far as ASPs go, I believe you did $46.40 in last year's second quarter, I am not sure if that is correct or not. But given from your guidance it looks like you are expecting a slight increase from $44.83. So do you expect that year over year your ASPs are declining?

Well, I think like we've talked about before, Matt, from our standpoint ASP is somewhat of a mathematical computation in hindsight. And it is not so much that there is necessarily a negative reason for that, but in the first half of this year I think we are seeing a faster growth in our base mirror business than in our advanced feature business.

So both segments are growing, the base mirror segment is just growing a little faster, which then puts downward pressure on the ASP. But from our standpoint our gross margins are good on both products.

Have you reached a point where -- I believe you talked before about volume discounts with some RCDs and SmartBeam for some of your customers or have annual price reductions changed in any way over the past year?

Yes, I think we are now experiencing normal annual price reductions both on the SmartBeam and the Rear Camera Display Mirror.

And last question, Enoch. You guys mentioned that you remain confident that the legislation will say that automakers will be 100% compliant by 2014. Given the legislation is somewhat delayed here, what gives you confidence that it won't be pushed out by a year?

Well, I think we are -- obviously there will be some pressure from some automakers to push out the timeline. What we are saying is we did not hear anything in the hearings or the workshop that would indicate, and this is considering a delay. Now that is not to say that they couldn't. But if you recall, they actually moved up the deadline by six months previously.

And they also -- actually when they changed the truck -- the trucks initially were on a different schedule, phase-in schedule than what the cars were. And in their March 2 announcement they actually reiterated that the cars and trucks would be on the same schedule with full compliance by September 2014. So I mean, we are going by what they are saying and what we are seeing. I mean, we don't know any more than anybody else does, but we are just going by what we see.

Thank you very much.

Himanshu Patel, JPMorgan.

The two questions I had, one was on the CSM forecast that is now out there, it seems to imply a fairly steep ramp in global auto production in Q4, not just North America but everywhere. And I think in particular some of these months like November seem to imply something like an annualized run rate of 88 million units globally for that month.

I am just curious, what do you think are the implications of that on sort of the manufacturing stress that either Gentex or other suppliers are going to face? I am curious if we could have a situation where top-line is going to ramp up nicely sequentially towards year end but could there be an issue with margins towards the back end just because of friction cost?

Well, I think the current expectation is that the growth in the second half of the year will be further increased because of the events in Japan so that as the second quarter lost sales will be mostly made up in the second half of the year.

And we are thinking that it is going to place a lot of strain on the entire industry supply chain because our current impression is that many suppliers are running pretty close to flat out now. And unless they can add capacity it is going to be a challenge. And as we are all well aware, it only takes one or two key suppliers that could potentially shut down the entire supply chain.

So, I think there will be a little bit of pressure maybe on the cost side. But I think the bigger issue will be availability of parts.

Okay. And then, Connie, maybe you could update us on just the issue on RCD Mirrors with response time, just some of the comparisons and where your latest thinking is on kind of what the RCD product can provide on response time and what you have heard as sort of the best available response time from some of the infotainment products that are out there?

Well, I mean, as far as our own product, our own product responds within 2 seconds. I mean it is very, very fast. It doesn't matter if it is hot, if it is cold, it will respond within 2 seconds. And there was the pushback from OEMs through the alliance which represents I think 12 of the major automakers and they basically wanted to increase the response time.

Some of them talked about -- and what we talk about is response time from when you put the vehicle in reverse the amount of time that it takes for the display to either come up on your mirror or to come up in an infotainment system or nav screen, whatever, any screen. And the pushback has been because these systems -- other systems need time to boot up. Some of these systems -- in certain vehicles they have screens that actually pop up that take time for them to pop up. And then they have to boot up.

So you are taking a number of seconds before this image comes up on these displays and any of the safety proponents and any of the safety groups are going to say that if you have anything above 2 seconds that after that period of time you likely have already hit whatever is in the path of your vehicle and it basically makes the meaning of the loss kind of just goes away if you are not going to have a very quick response time.

So just --.

Go ahead.

Two related questions just so I understand it. So on infotainment systems is it mainly a software issue in your view that that sort of gives rise to a longer response time for that product versus RCD?

And then a related question, is there -- maybe you guys don't know the answer, but I'm sure you have heard more than most of us. Have you heard of any talk about some of the infotainment providers trying to reengineer the software to sort of shorten that response time and potentially be more competitive to your product?

I can't speak for what other people are doing. I mean I do -- I think it is a software issue. And I think that they probably are trying to reengineer their system so that they do respond faster. But some of them, I don't know that they could actually even get there if they do that, but (multiple speakers).

But you probably ought to ask them.

Yes, you should ask them.

Yes, okay. They won't tell us, so we are asking you(laughter).

Go get in some vehicles and put it in reverse and look at -- go do some research.

Very good. Thank you very much.

Steve Dyer, Craig-Hallum.

So just kind of I guess piggybacking on the last question. The alliance in this whole process has pushed back on a number of different things and specifications. And so, in addition to response time is your feeling or belief that kind of based on their latest proposal your -- your in mirror solution I mean it satisfies everything that they have kind of been pushing for?

Yes.

Okay.

Yes, we think that it did from the start. So, yes.

Right, right, I just -- it has gotten more -- it seems to have gotten more stringent since they have been making requests and so forth on it. And so, I was just wondering if you felt it still did, which you still think it does.

Yes.

Is kind of your working assumption then -- I know they say kind of by end of the year, but it seems like it is the government so it probably is going to be December 31. Do you have any reason to think it could be sooner than that or is that kind of your working assumption is we will hear something basically at the end of the year?

I think all we can go on is what they have publicly said. I think there will be some pressure on them to release the interpretation earlier than year-end if they wish to hold to the September 2014 deadline.

And I also do know that the threshold for changing the notice of proposed rulemaking from December 7 is higher now. And they are going -- if they want to make changes to this they are going to have to provide data that shows that there is a good reason why they should make changes to this. So the threshold is much higher this time around in terms of making changes.

Okay, that is good to know. So is then -- I mean do you have any insight other than what they have said? Do you expect it to still be a phased roll in or does the delay kind of increase the likelihood that it is just kind of a drop dead 2014 type date?

No, I think there will be a phase in.

You do, okay.

I think they will continue with a phase-in, yes.

Okay. And then I guess just one last housekeeping question. I missed the accounts receivable and the inventory. Could you repeat those?

So our accounts receivable at the end of March was $116.3 million, inventories were $104 million.

All right. Thank you much.

[Jeff Rosenbaum], York Capital Management.

I just wanted to know your discussions with the OEMs, if others are planning on being more aggressive a-la Ford in offering their camera as an option on most of their fleet prior to any scheduled requirement?

We are not aware of anything that anybody is planning to announce, but we wouldn't -- if we were we couldn't say anything anyhow, probably.

Okay. And in terms of the [AAM] comments and some of the other OEM comments I guess wanting the days and schedule pushed out to September 15, you still are confident that it's more of a 2014-ish event?

Well I think we are just saying that is NHTSA's current position. And certainly there are requests to relax some of the specifications and delay the implementation. But all we can go on right now with our customers is what NHTSA's current position is.

Thank you.

Jason Rogers, Great Lakes Review.

Just shifting the conversation to SmartBeam for a moment, I was wondering when you expect to introduce the next generation of SmartBeam.

Well we have actually -- well we expect that we will have programs within the next year or so for the second generation and then the third generation -- we are talking about the different levels of SmartBeam itself -- probably within a year after that. And then we are also working on the other driver assist features which will come within the next couple of years.

Okay. And on the RCD as far as the number of models that it's on, was that 6-2, 62 or 52 that you said?

62.

62, okay. And it looks like you added another OEM to SmartBeam and RCD in the quarter. Could you say who that was?

For RCD was it was Nissan and for SmartBeam it was SEAT.

Right.

It was, I'm sorry?

S-E-A-T.

That is the Spanish affiliate of VW.

Yes.

Okay, thank you very much.

Peter Nesvold, Jeffries.

Good morning. When we talk to private suppliers we get a little different perspective about Japan and there seems to be some perspective, at least within the privately held community, that the worst is yet to come. Is there a timeframe, do you think, in which the industry can sort of sound the all clear signal?

Do you look at maybe three weeks of inventory on the ground, six weeks of inventory on the water? So for nine weeks past the event the -- we have gotten past the worst of it? Any perspective on that would be helpful.

Well, I think, one, the perspective among different suppliers will depend on specific parts. And it will go from the Tier 1's down to the Tier 2's and Tier 3's. I think generally you are accurate that you have a certain amount in inventory and a certain amount in transit. But what the concern is is what happens after that.

So with what you are saying, if you take your three weeks and six weeks, the concern is actually at the nine week point because then you will have used up your inventory on hand and the inventory in transit. So that is when some suppliers are going to face difficulties in the availability of the parts they need. So I think it is going to take a while to figure this out. And it is going to be somewhat supplier specific.

Great. And on the rear camera displays you had indicated that your sense is maybe the top 15% or 20% end up in navigational systems, the rest of the market ends up in a variety of different areas. I don't think you quantified what percent you think the mirror piece will be. Is there a number that you could put around that?

No. Right now because we are in this kind of automaker wait and see period where they are trying to evaluate different alternatives, certainly some of them are leaning towards specific locations but it is not always necessarily standard and it is not necessarily across all their vehicle models. So right now it is very difficult to tell.

We certainly are targeting a major share of that segment. But until each automaker makes their final decisions by vehicle and by trim level it will be hard to determine that accurately.

Okay, great. Thank you for your time.

David Leiker, Robert W. Baird.

Hi, good morning. Keith again obviously. I just wanted to touch on the second-quarter guidance. With revenue up 20% to 25% and global production is going to be down 6%, the regions that you highlighted down 13%, that is a pretty significant spread between your revenue growth and production and that is the second consecutive quarter that it has been, in our view, considerably above what the long-term trend rate is. Could you just maybe elaborate on what you think the drivers are there and whether that is sustainable going forward?

I think our performance over the automotive production performance has been quite a gap for several quarters. To some degree it has been the mix of products that we have been on. And specifically in North America over the last several quarters we indicated part of that outperformance has been in the light truck area we have quite a bit of penetration on. So it is really a mix issue on a quarter-to-quarter basis.

And I think another area that we've talked about, Keith, is in Europe where the luxury car segment has been doing significantly better than the overall growth in Europe. And our understanding is a significant portion of that is due to the growth in China.

Okay. Do you have a comment or any perspective on how mix -- luxury mix in Europe and light truck mix in North America might be expected to trend going forward?

No, that is what we pay IHS for, right or wrong.

Okay. Thanks, guys.

John Murphy, Bank of America-Merrill Lynch.

Hi, guys, it is actually John Lovallo on for John Murphy. First question is how should we think about ASPs on a regional basis? Is there a significant difference between regions?

We have not broken down ASPs by region. And I think part of it has to do with we know where our mirrors are being shipped to final assembly plants worldwide. But we also recognize that a significant portion of those vehicles are then shipped to a different end market.

I think historically in Europe we primarily sold base mirrors. And so, the ASP tended to be lower than the average. And as some of the European automakers have adopted SmartBeam and rear camera display, they are now very close to the average.

Also historically in North America the light trucks tend to have more features. But now again with the advent of SmartBeam and rear camera display it is more evened out. So I think there is less difference in ASPs among regions than there used to be.

Great, that is very helpful. And then just thinking about gas prices here and the potential effect on mix. Can you dimension kind of your penetration level and content on say a midsize vehicle versus a small vehicle?

I think in general our take rates are higher on the higher end vehicles. And I think what we have seen so far is that it looks like Americans in general have not changed their buying behavior significantly yet in response to gas prices. And I know I've seen some articles speculating that the magic threshold is $4 and for those above $4 the American consumer is going to look at changing their behavior. But to date we haven't seen much of any impact.

And in terms of content on say a midsize vehicle as compared to a compact vehicle, they are starting to put a lot more content on the lower-priced vehicles similar to what they do in Europe. I mean, in Europe you might have a vehicle that we would consider to be small but it doesn't -- it is not stripped-down and has a lot of features in it. And Ford has kind of moved towards that. And I think that other automakers are doing the same thing.

That is very helpful. And finally, your cash balance is building up nicely. I mean how are you thinking about your priorities in terms of using cash?

I think if you look at the cash balance as of the end of March, part of the increase were we had some short-term investments that matured. But as far as utilizing the cash, it is always our first priority to reinvest back in the business and develop new products because that is going to give us our highest return on investment.

And we have a quarterly cash dividend program, which we recently increased. And we previously stated that given the growth prospects and our conservative nature that we'll tend to keep a buffer on the balance sheet.

Great, thanks very much, guys.

And that will conclude the question-and-answer session. Before turning the call back to Connie Hamblin for closing remarks, a very happy birthday to you, Connie, from Lisa and your co-presenters. Connie, go ahead.

Thank you very much. Thank you, everybody, for participating in this conference call. If you have additional questions please feel free to follow up with us. Thank you. And I am going to go fire Lisa (laughter).

And with that, that will conclude your conference for today. Thank you for your participation.