Gentex Corporation (NASDAQ: GNTX), a leading supplier of digital
vision, connected car, dimmable glass and fire protection products,
today reported financial results for the fourth quarter and
calendar year ended December 31, 2019.
Fourth Quarter and Calendar Year 2019
Highlights
- Full Display Mirror® unit
shipments increased 89% for calendar year 2019 to 739,000
units
- Revenue for the fourth
quarter of 2019 declined 2% versus the fourth quarter of 2018,
primarily impacted by the strike at General Motors which created a
5% revenue headwind in the quarter, and global light vehicle
production that declined approximately 5% versus the same quarter
last year
- Gross profit margin of
36.5% for the fourth quarter of 2019, which was significantly
higher than the strike-impacted Company forecast of 35 - 36% for
the quarter
- Gross profit margin of 37%
for calendar year 2019, which includes 70 basis points of
incremental tariff headwinds when compared to 2018, and total
tariff costs of approximately 100 basis points for the full
year
- Earnings per diluted share
for 2019 increased 2% to $1.66 in 2019 from $1.62 in
2018
- 2.4 million shares
repurchased during the fourth quarter at an average price of $28.55
per share and 13.8 million shares repurchased during calendar year
2019 at an average price of $24.06 per share
For the fourth quarter of 2019, the Company
reported net sales of $443.8 million, a decrease of 2% compared to
net sales of $453.4 million for the fourth quarter of 2018. The
decrease in revenue on a quarter over quarter basis was due in
large part to the strike at General Motors, which negatively
impacted sales in the quarter by approximately 5%. In addition to
the strike creating headwinds that impacted the North American
market, the rest of the world light vehicle production declined 5%
on a quarter over quarter basis when compared to the fourth quarter
of 2018. A 6% production decline in Europe and a 10% production
decline in the Japan/Korea market quarter over quarter, more than
offset the modest improvement in the China market versus the fourth
quarter of 2018. "The fourth quarter has always been difficult to
forecast because of inventory adjustments at our customers that
often occur at year end, but in 2019 we were also estimating the
impact that the strike would have on revenue and profitability for
the quarter. With the exceptional growth rate of our Full Display
Mirror product, General Motors has become one of our larger
customers in 2019, which means we were disproportionately impacted
by the strike," said President and CEO, Steve Downing. "In fact, if
not for the 5% revenue impact of the strike, our out-performance
versus the underlying vehicle production levels in the quarter was
consistent with our full year out-performance of 7%," concluded
Downing.
For calendar year 2019, the Company’s net sales
increased 1% to $1.86 billion compared to $1.83 billion for
calendar year 2018. The Company’s initial sales forecast for 2019
was based on a global light vehicle production forecast that
assumed an approximate growth rate of 1%, however, the actual
global vehicle production rates for calendar year 2019 were down
approximately 6%, therefore, the Company's out-performance to
market was 7% for calendar year 2019.
The gross margin in the fourth quarter of 2019
was 36.5% compared with a gross margin of 37.9% in the fourth
quarter of 2018. The impact of the strike at General Motors caused
margin headwinds of approximately 125 basis points due to the lower
revenue and the resulting lost profitability during the quarter, in
addition to the Company's inability to leverage fixed overhead
costs due to the lower sales. The gross margin during the fourth
quarter of 2019 was also negatively impacted by approximately 30
basis points of incremental tariffs when compared to the fourth
quarter of 2018.
For calendar year 2019, the gross margin was
37.0%, compared with a gross margin of 37.6% for calendar year
2018. The gross margin during 2019 was negatively impacted by
approximately 70 basis points from tariffs versus 2018. Other
factors that impacted the gross margin during the year included the
Company’s inability to leverage fixed overhead costs on the lower
than expected sales levels and annual customer price reductions
that were not fully offset by purchasing cost reductions.
"Considering the very challenging global light
vehicle production markets, the strike, and the fact that we were
still dealing with some of our own product related headwinds in
2019, our team has done an excellent job maintaining the gross
margin profile of the Company. All of our teams were focused on
offsetting annual customer price reductions, addressing incremental
tariff costs, and finding ways to minimize the impact of fixed
overhead, through better than expected purchasing cost reductions,
improved manufacturing efficiencies, design changes that led to
cost improvements, and the success of our Full Display Mirror. In
fact, if not for the incremental tariffs encountered in 2019, our
gross margin would have been slightly better than 2018," said
Downing.
Operating expenses during the fourth quarter of
2019 were up 9% to $50.9 million when compared to operating
expenses of $46.5 million in the fourth quarter of 2018. For
calendar year 2019, operating expenses were $199.8 million, up 10%
compared to $182.3 million in calendar year 2018, which was in-line
with the Company's original estimates for 2019.
Net income for the fourth quarter of 2019 was
$99.5 million, compared to net income of $106.3 million in the
fourth quarter of 2018, primarily driven by the reduction in
revenue as a result of the strike during the fourth quarter of
2019.
Net income for calendar year 2019 was $424.7
million, down 3% compared with net income of $437.9 million in
calendar year 2018, primarily driven by lower vehicle production
levels, increases in tariffs and the impact of the strike.
Earnings per diluted share in the fourth quarter
of 2019 were $0.39, compared with earnings per diluted share of
$0.41 in the fourth quarter of 2018. For calendar year 2019,
earnings per diluted share were $1.66, which was a 2% increase year
over year, compared with $1.62 for calendar year 2018.
Auto-dimming mirror unit shipments increased 3%
in the fourth quarter of 2019 compared with the fourth quarter of
2018, and increased 3% for calendar year 2019 when compared to
calendar year 2018. Automotive net sales in the fourth
quarter of 2019 were $433.8 million, down 2% compared with $442.8
million in the fourth quarter of 2018, and for calendar year 2019
were $1.81 billion, up 1% compared with $1.79 billion in calendar
year 2018.
Other net sales were $10.0 million in the fourth
quarter of 2019, down 6% compared with $10.6 million in the fourth
quarter of 2018, and for calendar year 2019 were up 13% to $48.4
million, when compared with $42.9 million in calendar year
2018.
Share Repurchases
The Company repurchased 2.4 million shares of
its common stock during the fourth quarter of 2019 at an average
price of $28.55 per share. For the year ended December 31,
2019, the Company repurchased 13.8 million shares of its common
stock at an average price of $24.06 per share. As of
December 31, 2019, the Company has 20.1 million shares
remaining available for repurchase in the previously announced
plan.
Future Estimates
The Company’s forecasts for light vehicle
production for calendar year 2020 and 2021 are based on the IHS
Markit mid-January 2020 forecast for light vehicle production in
North America, Europe, Japan/ Korea, and China and are detailed in
the table herein.
Based on the following light vehicle production
forecasts for 2020 and 2021, the Company is giving certain annual
guidance for 2020 and revenue guidance for 2021:
|
Light Vehicle Production (per IHS Markit January light
vehicle production forecast) |
(in Millions) |
Region |
Calendar Year2021 |
Calendar Year2020 |
Calendar Year2019 |
2021 vs. 2020% Change |
2020 vs. 2019% Change |
North America |
16.5 |
|
16.5 |
|
16.3 |
|
— |
% |
1 |
% |
Europe |
21.2 |
|
20.7 |
|
21.1 |
|
2 |
% |
(2 |
)% |
Japan and Korea |
12.6 |
|
12.9 |
|
13.1 |
|
(2 |
)% |
(2 |
)% |
China |
25.3 |
|
24.4 |
|
24.6 |
|
4 |
% |
(1 |
)% |
Total Light Vehicle
Production |
75.6 |
|
74.5 |
|
75.1 |
|
1 |
% |
(1 |
)% |
|
2020 Guidance |
Revenue |
$1.91 - $2.0 billion |
Gross Margin |
36% - 37% |
Operating Expenses (E, R&D
and S, G&A) |
$205 - $215 million |
Estimated Annual Tax Rate |
15% - 17% |
Capital Expenditures |
$85 - $95 million |
Depreciation &
Amortization |
$105 - $110 million |
|
|
Additionally, based on the Company’s forecasts
for light vehicle production for calendar year 2021, the Company
currently expects calendar year 2021 sales growth of approximately
3% - 8% above the 2020 sales estimates.
"While the current forecast for global light
vehicle production appears to be stabilizing, it certainly does not
provide any tailwind to our growth rate in 2020 or 2021.
Additionally, although there have been some improvements in global
trade relations, tariffs still remain on incoming materials and on
our exports into the China market which create headwinds to growth
in the domestic China market and to the profitability of many of
our products. So, while the underlying market conditions continue
to be difficult, we are optimistic about our ability to continue
the trend of outgrowth versus the market for 2020 and 2021 based on
our targeted growth rate of 3% - 8% per year. This growth rate will
be driven by increased penetration rates of our core mirror
products, continued growth of our Full Display Mirror product, and
launches of the new Integrated Toll Module product. The Company
remains committed to investing heavily in new technology in the
areas of vision systems, connected car and dimmable glass. As an
example, at CES in January, we showed advancements and several new
product concepts in our mirror technology, digital vision systems,
connected car technologies and large area dimmable devices. We also
debuted a new vertical for the Company, when we introduced our
intelligent medical lighting application that was developed in
partnership with Mayo Clinic. We believe our technology roadmap
will provide the opportunities we need to continue our revenue
growth story for many years to come," concluded Downing.
Safe Harbor for Forward-Looking
Statements
This news release contains forward-looking
statements within the meaning of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The statements
contained in this communication that are not purely historical are
forward-looking statements. Forward-looking statements give the
Company’s current expectations or forecasts of future events. These
forward-looking statements generally can be identified by the use
of words such as “anticipate”, “believe”, “could”, “estimate”,
“expect”, “forecast”, “goal”, “hope”, “may”, “plan”, "poised",
“project”, “will”, and variations of such words and similar
expressions. Such statements are subject to risks and uncertainties
that are often difficult to predict and beyond the Company’s
control, and could cause the Company’s results to differ materially
from those described. These risks and uncertainties include,
without limitation: changes in general industry or regional market
conditions; changes in consumer and customer preferences for our
products (such as cameras replacing mirrors and/or autonomous
driving); our ability to be awarded new business; continued
uncertainty in pricing negotiations with customers; loss of
business from increased competition; changes in strategic
relationships; customer bankruptcies or divestiture of customer
brands; fluctuation in vehicle production schedules (including the
impact of customer employee strikes); changes in product mix; raw
material shortages; higher raw material, fuel, energy and other
costs; unfavorable fluctuations in currencies or interest rates in
the regions in which we operate; costs or difficulties related to
the integration and/or ability to maximize the value of any new or
acquired technologies and businesses; changes in regulatory
conditions; warranty and recall claims and other litigation and
customer reactions thereto; possible adverse results of pending or
future litigation or infringement claims; changes in tax laws;
import and export duty and tariff rates in or with the countries
with which we conduct business; and negative impact of any
governmental investigations and associated litigations including
securities litigations relating to the conduct of our business.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date they
are made. The Company undertakes no obligation to publicly update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by law
or the rules of the NASDAQ Global Select Market. Accordingly, any
forward-looking statement should be read in conjunction with the
additional information about risks and uncertainties identified
under the heading “Risk Factors” in the Company’s latest Form 10-K
and Form 10-Q filed with the SEC. Includes content supplied by
IHS Markit Light Vehicle Production Forecast (October 16, 2019 and
January 16, 2020) (http://www.gentex.com/forecast-disclaimer).
Fourth Quarter and Year End Conference
Call
A conference call related to this news release
will be simulcast live on the Internet beginning at 9:30 a.m. ET
today, January 31, 2020. The dial-in number to participate in the
call is (844) 389-8658, passcode 7789178. Participants may listen
to the call via audio streaming at www.gentex.com or by
visiting https://edge.media-server.com/mmc/p/5ufmtyz3. A
webcast replay will be available approximately 24 hours after the
conclusion of the call
at http://ir.gentex.com/events-and-presentations/upcoming-past-events.
About the Company
Founded in 1974, Gentex
Corporation (The NASDAQ Global Select Market: GNTX) is a
leading supplier of digital vision, connected car, dimmable glass
and fire protection technologies. Visit the Company’s web site
at www.gentex.com.
Contact Information:Gentex Investor & Media ContactJosh
O'Berski(616)772-1590 x5814
GENTEX
CORPORATIONAUTO-DIMMING MIRROR
SHIPMENTS(Thousands)
|
Three Months
EndedDecember 31, |
|
Twelve Months endedDecember
31, |
|
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
North American Interior Mirrors |
1,985 |
|
|
2,201 |
|
|
(10 |
)% |
|
8,556 |
|
|
8,838 |
|
|
(3 |
)% |
North American Exterior
Mirrors |
1,318 |
|
|
1,157 |
|
|
14 |
% |
|
5,279 |
|
|
4,029 |
|
|
31 |
% |
Total North American Mirror Units |
3,304 |
|
|
3,359 |
|
|
(2 |
)% |
|
13,836 |
|
|
12,867 |
|
|
8 |
% |
International Interior
Mirrors |
5,253 |
|
|
5,039 |
|
|
4 |
% |
|
21,038 |
|
|
20,813 |
|
|
1 |
% |
International Exterior
Mirrors |
1,981 |
|
|
1,827 |
|
|
8 |
% |
|
8,007 |
|
|
7,925 |
|
|
1 |
% |
Total International Mirror Units |
7,234 |
|
|
6,866 |
|
|
5 |
% |
|
29,044 |
|
|
28,738 |
|
|
1 |
% |
Total Interior Mirrors |
7,238 |
|
|
7,240 |
|
|
— |
% |
|
29,594 |
|
|
29,651 |
|
|
— |
% |
Total Exterior Mirrors |
3,300 |
|
|
2,984 |
|
|
11 |
% |
|
13,286 |
|
|
11,954 |
|
|
11 |
% |
Total Auto-Dimming Mirror Units |
10,538 |
|
|
10,225 |
|
|
3 |
% |
|
42,880 |
|
|
41,605 |
|
|
3 |
% |
|
|
Note: Percent
change and amounts may not total due to rounding. |
|
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME(Unaudited)
|
Three Months Ended December 31, |
|
Twelve Months ended December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net Sales |
$ |
443,835,638 |
|
|
$ |
453,408,719 |
|
|
$ |
1,858,897,406 |
|
|
$ |
1,834,063,697 |
|
Cost of Goods Sold |
282,031,064 |
|
|
281,365,186 |
|
|
1,170,589,437 |
|
|
1,143,597,005 |
|
Gross profit |
161,804,574 |
|
|
172,043,533 |
|
|
688,307,969 |
|
|
690,466,692 |
|
|
|
|
|
|
|
|
|
Engineering, Research & Development |
28,840,060 |
|
|
26,996,140 |
|
|
114,687,309 |
|
|
107,134,862 |
|
Selling, General & Administrative |
22,063,889 |
|
|
19,548,094 |
|
|
85,083,056 |
|
|
75,206,283 |
|
Income from operations |
110,900,625 |
|
|
125,499,299 |
|
|
488,537,604 |
|
|
508,125,547 |
|
|
|
|
|
|
|
|
|
Other Income |
2,744,108 |
|
|
5,280,324 |
|
|
11,877,730 |
|
|
13,921,400 |
|
Income before Income
Taxes |
113,644,733 |
|
|
130,779,623 |
|
|
500,415,334 |
|
|
522,046,947 |
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes |
14,097,683 |
|
|
24,505,068 |
|
|
75,731,395 |
|
|
84,163,850 |
|
Net Income |
$ |
99,547,050 |
|
|
$ |
106,274,555 |
|
|
$ |
424,683,939 |
|
|
$ |
437,883,097 |
|
|
|
|
|
|
|
|
|
Earnings Per Share(1) |
|
|
|
|
|
|
|
Basic |
$ |
0.39 |
|
|
$ |
0.41 |
|
|
$ |
1.67 |
|
|
$ |
1.64 |
|
Diluted |
$ |
0.39 |
|
|
$ |
0.41 |
|
|
$ |
1.66 |
|
|
$ |
1.62 |
|
Weighted Average Shares |
|
|
|
|
|
|
|
Basic |
248,955,547 |
|
|
260,860,937 |
|
|
251,766,382 |
|
|
267,794,786 |
|
Diluted |
250,452,266 |
|
|
262,199,420 |
|
|
253,272,990 |
|
|
269,877,349 |
|
|
|
|
|
|
|
|
|
Cash Dividends Declared per
Share |
$ |
0.115 |
|
|
$ |
0.110 |
|
|
$ |
0.460 |
|
|
$ |
0.440 |
|
|
|
|
|
|
|
|
|
(1) Earnings Per Share has been adjusted to exclude the portion of
net income allocated to participating securities as a result of
share-based payment awards |
|
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)
|
December 31, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
Cash and Cash Equivalents |
$ |
296,321,622 |
|
|
$ |
217,025,278 |
|
Short-Term Investments |
140,384,053 |
|
|
169,412,999 |
|
Accounts Receivable, net |
235,410,326 |
|
|
213,537,799 |
|
Inventories |
248,941,855 |
|
|
225,281,599 |
|
Other Current Assets |
29,319,036 |
|
|
25,672,579 |
|
Total Current Assets |
950,376,892 |
|
|
850,930,254 |
|
|
|
|
|
Plant and Equipment - Net |
498,316,100 |
|
|
498,473,766 |
|
|
|
|
|
Goodwill |
307,365,845 |
|
|
307,365,845 |
|
Long-Term Investments |
139,909,323 |
|
|
137,979,082 |
|
Intangible Assets |
250,375,000 |
|
|
269,675,000 |
|
Patents and Other Assets |
22,460,033 |
|
|
21,010,121 |
|
Total Other Assets |
720,110,201 |
|
|
736,030,048 |
|
|
|
|
|
Total Assets |
$ |
2,168,803,193 |
|
|
$ |
2,085,434,068 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
INVESTMENT |
|
|
|
Current Liabilities |
$ |
171,846,800 |
|
|
$ |
169,160,919 |
|
Other Non-current
Liabilities |
7,414,424 |
|
|
— |
|
Deferred Income Taxes |
51,454,149 |
|
|
54,521,489 |
|
Shareholders' Investment |
1,938,087,820 |
|
|
1,861,751,660 |
|
Total Liabilities &
Shareholders' Investment |
$ |
2,168,803,193 |
|
|
$ |
2,085,434,068 |
|
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