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, 2018.
Fourth Quarter and Calendar Year 2018
Highlights
- Full display mirror unit shipments increased 116% to
390,000 units for the year
- Gross profit margin improved sequentially to 37.9% for
the fourth quarter of 2018, which included incremental tariff
headwinds of 20 basis points versus the third quarter of
2018
- Net income for calendar year 2018 was $437.9 million,
up 8% compared with net income of $406.8 million in calendar year
2017
- Earnings per diluted share increased 15% from $1.41 in
2017 to $1.62 in 2018
- 3.3 million shares repurchased during the fourth
quarter at an average price of $21 per share and 26.4 million
shares repurchased during calendar year 2018 at an average price of
$22.37 per share
For the fourth quarter of 2018, the Company
reported net sales of $453.4 million, a decrease of 1% compared to
net sales of $459.6 million for the fourth quarter of 2017.
During the fourth quarter of 2018, plant shutdowns and changes to
production schedules at OEM’s, as well as order adjustments at
certain Tier 1 customers, negatively impacted quarterly unit
shipments and revenue. At the beginning of the fourth quarter
of 2018, vehicle production estimates from IHS Markit showed a net
growth of approximately 2% in the combined regions of Europe, North
America, Japan and Korea and a slight decline for the China
market. The actual unit production for these markets in the
fourth quarter combined for a decline of nearly 6%. The total
negative impact on Company revenue as a result of the vehicle
production shortfall and the Tier 1 adjustments to orders was
approximately $30 million in the fourth quarter of
2018.
For calendar year 2018, the Company’s net sales
increased 2% to $1.83 billion compared to $1.79 billion for
calendar year 2017, primarily as a result of a 6% increase in
auto-dimming interior and exterior mirror unit shipments which were
partially offset by product mix headwinds, vehicle production
shortfalls and Tier 1 order adjustments that primarily affected the
fourth quarter of 2018. The Company’s initial forecast for
2018 was based on a vehicle production forecast that assumed an
approximate growth rate of 1% for Europe, North America, Japan,
Korea and China. However, the actual vehicle production rates
for calendar year 2018 in those markets were down approximately
2%.
"While 2018 was not the growth year we had hoped
for, we are encouraged that our top line grew despite the poor
performance in light vehicle production, particularly in our
highest penetration and dollar content markets of Europe and North
America,” said Steve Downing, President and CEO. “In
the end, 2018 finished with our sales levels outperforming our
underlying markets by over 4 percent and when you consider the
order adjustments of Tier 1 customers this growth rate was very
close to our stated goal of mid-single digit out-performance versus
our underlying market.”
The gross margin in the fourth quarter of 2018
was 37.9% compared with a gross margin of 39.2% in the fourth
quarter of 2017. The gross margin during the most recently
completed quarter was negatively impacted by approximately 80 basis
points from tariffs that became effective during the third quarter
of 2018.
For calendar year 2018, the gross margin was
37.6%, compared with a gross margin of 38.7% for calendar year
2017. The gross margin during the year was negatively
impacted by approximately 30 basis points from tariffs that became
effective during 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.
"When considering the poorer than expected
performance in light vehicle production and the lower than expected
revenue that this produced, we were pleased with the fourth quarter
gross margin of 37.9%. The gross margin expansion of 30 basis
points from the third to the fourth quarter of 2018 was impressive
given the overall lower sales level. Additionally, the fourth
quarter gross margin would have further improved if not for the
incremental 20 basis points of tariffs that began at the end of the
third quarter. Excluding the impact of tariffs, the gross
margin of the Company would have otherwise improved sequentially
during each quarter of 2018," said Downing.
Operating expenses during the fourth quarter of
2018 were up 0.5% to $46.5 million when compared to operating
expenses of $46.3 million in the fourth quarter of 2017. For
calendar year 2018, operating expenses were $182.3 million, up 6.5%
compared to $171.2 million in calendar year 2017.
Net income for the fourth quarter of 2018 was
$106.3 million, compared to net income of $130.5 million in the
fourth quarter of 2017. Net income in the fourth quarter of
2017 was positively impacted by $37.2 million as a result of the
Tax Cuts and Jobs Act that became effective during the fourth
quarter of 2017.
Net income for calendar year 2018 was $437.9
million, up 8% compared with net income of $406.8 million in
calendar year 2017, primarily driven by a lower effective tax rate
for 2018. Net income in 2017 was positively impacted by $37.2
million as a result of the Tax Cuts and Jobs Act.
Earnings per diluted share in the fourth quarter
of 2018 were $0.41, compared with earnings per diluted share of
$0.46 in the fourth quarter of 2017. Earnings per diluted
share during the fourth quarter of 2017, were positively impacted
by $0.13 as a result of the Tax Cuts and Jobs Act that became
effective during the fourth quarter of 2017. For calendar
year 2018, earnings per diluted share were $1.62, which was a 15%
increase year over year, compared with $1.41 for calendar year
2017. Earnings per diluted share during 2017 were positively
impacted by $0.13 as a result of the Tax Cut and Jobs Act.
Auto-dimming unit shipments increased 2% in the
fourth quarter of 2018 compared with the fourth quarter of 2017,
and increased 6% for calendar year 2018 when compared to calendar
year 2017. Automotive net sales in the fourth quarter
of 2018 were $442.8 million, down 2% compared with $450.4 million
in the fourth quarter of 2017, and for calendar year 2018 were
$1.79 billion, up 2% compared with $1.76 billion in calendar year
2017.
Other net sales were $10.6 million in the fourth
quarter of 2018, up 16% compared with $9.2 million in the fourth
quarter of 2017, and for calendar year 2018 were up 17% to $42.9
million, when compared with $36.7 million in calendar year
2017.
Share RepurchasesThe Company
repurchased 3.3 million shares of its common stock during the
fourth quarter of 2018 at an average price of $21 per share.
For the year ended December 31, 2018, the Company repurchased
26.4 million shares of its common stock at an average price of
$22.37 per share. Total share repurchases increased 120% when
compared to the 12 million shares repurchased for the year ended
December 31, 2017. As of December 31, 2018, the Company has
8.8 million shares remaining available for repurchase in the
previously announced plan.
Future EstimatesThe Company’s
forecasts for light vehicle production for calendar year 2019 and
2020 are based on the IHS Markit mid-January 2019 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 2019 and 2020, the Company is giving certain annual
guidance for 2019 and revenue guidance for 2020:
| Light Vehicle Production (per IHS Markit
January light vehicle production forecast) |
| (in Millions) |
|
Region |
CalendarYear 2020 |
CalendarYear 2019 |
CalendarYear 2018 |
2020 vs.2019 %Change |
2019 vs.2018 %Change |
| North America |
16.4 |
|
16.9 |
|
17.0 |
|
(3 |
)% |
(1 |
)% |
| Europe |
22.2 |
|
21.9 |
|
21.9 |
|
1 |
% |
— |
% |
| Japan and Korea |
12.7 |
|
13.3 |
|
13.2 |
|
(5 |
)% |
1 |
% |
| China |
28.6 |
|
27.4 |
|
27.0 |
|
4 |
% |
1 |
% |
| Total Light Vehicle
Production |
79.9 |
|
79.5 |
|
79.1 |
|
1 |
% |
1 |
% |
| 2019 Guidance |
| Revenue |
$1.83 - $1.93
billion |
| Gross Margin |
36% - 37% |
| Operating Expenses (E,
R&D and S, G&A) |
$195 - $200
million |
| Estimated Annual Tax
Rate |
16% - 18% |
| Capital
Expenditures |
$90 - $100 million |
| Depreciation &
Amortization |
$105 - $115
million |
Additionally, based on the Company’s forecasts
for light vehicle production for calendar year 2020, the Company
currently expects calendar year 2020 revenue growth of
approximately 3 - 8% above the 2019 revenue estimates.
"The current production environment in the
automotive space is proving to be difficult to forecast due to the
macro-economic climate and geo-political concerns that surround our
primary industry. However, we have continued to grow at a rate that
has outpaced the growth rate of our underlying markets in 2018 and
we believe that over the next two years we will be able to continue
that successful trend. This past year was challenging in that we
worked through both a difficult production environment and some
product specific headwinds that limited our growth rate. We
also know that there are additional challenges in the coming years
from those same previously mentioned product headwinds and a
flat-to-down vehicle production environment. Despite these issues,
the Company is well positioned to grow based on our unique,
future-focused products. At CES, we continued to push the
technology envelope in mirrors, digital vision systems, connected
car technologies and large area dimmable devices. We believe
this technology roadmap will help secure the future of the Company
and help us deliver profitable growth and shareholder value for
many years to come," concluded Downing.
Safe Harbor for Forward-Looking
StatementsThis 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”, “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; 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, 2018 and January 17, 2019)
(http://www.gentex.com/forecast-disclaimer).
Fourth Quarter Conference CallA
conference call related to this news release will be simulcast live
on the Internet beginning at 9:30 a.m. ET today, January 30, 2019.
The dial-in number to participate in the call is (844) 389-8658,
passcode 7285861. Participants may listen to the call via audio
streaming at www.gentex.com or by
visiting https://edge.media-server.com/m6/p/u2pojeog. 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 CompanyFounded 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, |
| |
2018 |
|
2017 |
|
% Change |
|
2018 |
|
2017 |
|
% Change |
| North American Interior
Mirrors |
2,201 |
|
|
2,206 |
|
|
— |
|
% |
|
8,838 |
|
|
8,899 |
|
|
(1 |
) |
% |
| North American Exterior
Mirrors |
1,157 |
|
|
824 |
|
|
40 |
|
% |
|
4,029 |
|
|
3,497 |
|
|
15 |
|
% |
| Total
North American Mirror Units |
3,359 |
|
|
3,030 |
|
|
11 |
|
% |
|
12,867 |
|
|
12,396 |
|
|
4 |
|
% |
| International Interior
Mirrors |
5,039 |
|
|
4,996 |
|
|
1 |
|
% |
|
20,813 |
|
|
19,433 |
|
|
7 |
|
% |
| International Exterior
Mirrors |
1,827 |
|
|
1,997 |
|
|
(9 |
) |
% |
|
7,925 |
|
|
7,513 |
|
|
5 |
|
% |
| Total
International Mirror Units |
6,866 |
|
|
6,992 |
|
|
(2 |
) |
% |
|
28,738 |
|
|
26,946 |
|
|
7 |
|
% |
| Total Interior
Mirrors |
7,240 |
|
|
7,202 |
|
|
1 |
|
% |
|
29,651 |
|
|
28,332 |
|
|
5 |
|
% |
| Total Exterior
Mirrors |
2,984 |
|
|
2,821 |
|
|
6 |
|
% |
|
11,954 |
|
|
11,010 |
|
|
9 |
|
% |
| Total
Auto-Dimming Mirror Units |
10,225 |
|
|
10,023 |
|
|
2 |
|
% |
|
41,605 |
|
|
39,343 |
|
|
6 |
|
% |
Note: Percent change and amounts may not total due to
rounding.
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME
| |
Three Months Ended December 31, |
|
Twelve Months ended December 31, |
| |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Net Sales |
$ |
453,408,719 |
|
|
$ |
459,570,469 |
|
|
$ |
1,834,063,697 |
|
|
$ |
1,794,872,578 |
|
| Cost of
Goods Sold |
281,365,186 |
|
|
279,280,443 |
|
|
1,143,597,005 |
|
|
1,100,344,312 |
|
| Gross
profit |
172,043,533 |
|
|
180,290,026 |
|
|
690,466,692 |
|
|
694,528,266 |
|
| |
|
|
|
|
|
|
|
|
Engineering, Research & Development |
26,996,140 |
|
|
24,560,492 |
|
|
107,134,862 |
|
|
99,726,438 |
|
| Selling,
General & Administrative |
19,548,094 |
|
|
21,735,468 |
|
|
75,206,283 |
|
|
71,443,476 |
|
| Income
from operations |
125,499,299 |
|
|
133,994,066 |
|
|
508,125,547 |
|
|
523,358,352 |
|
|
|
|
|
|
|
|
|
|
| Other
Income |
5,280,324 |
|
|
4,161,928 |
|
|
13,921,400 |
|
|
8,438,352 |
|
| Income before Income
Taxes |
130,779,623 |
|
|
138,155,994 |
|
|
522,046,947 |
|
|
531,796,704 |
|
| |
|
|
|
|
|
|
|
| Provision for Income
Taxes |
24,505,068 |
|
|
7,687,095 |
|
|
84,163,850 |
|
|
125,004,782 |
|
| Net Income |
$ |
106,274,555 |
|
|
$ |
130,468,899 |
|
|
$ |
437,883,097 |
|
|
$ |
406,791,922 |
|
| |
|
|
|
|
|
|
|
| Earnings Per Share |
|
|
|
|
|
|
|
|
Basic |
$ |
0.41 |
|
|
$ |
0.46 |
|
|
$ |
1.64 |
|
|
$ |
1.42 |
|
|
Diluted |
$ |
0.41 |
|
|
$ |
0.46 |
|
|
$ |
1.62 |
|
|
$ |
1.41 |
|
| Weighted Average
Shares |
|
|
|
|
|
|
|
|
Basic |
260,860,937 |
|
|
282,612,512 |
|
|
267,794,786 |
|
|
285,864,997 |
|
|
Diluted |
262,199,420 |
|
|
284,868,220 |
|
|
269,877,349 |
|
|
288,226,089 |
|
| |
|
|
|
|
|
|
|
| Cash Dividends Declared
per Share |
$ |
0.110 |
|
|
$ |
0.100 |
|
|
$ |
0.440 |
|
|
$ |
0.390 |
|
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
| |
December 31, 2018 |
|
December 31, 2017 |
| ASSETS |
|
|
|
| Cash and Cash
Equivalents |
$ |
217,025,278 |
|
|
$ |
569,734,496 |
|
| Short-Term
Investments |
169,412,999 |
|
|
152,538,054 |
|
| Accounts Receivable,
net |
213,537,799 |
|
|
231,121,788 |
|
| Inventories |
225,281,599 |
|
|
216,765,583 |
|
| Other Current
Assets |
25,672,579 |
|
|
14,403,902 |
|
| Total Current
Assets |
850,930,254 |
|
|
1,184,563,823 |
|
| |
|
|
|
| Plant and Equipment -
Net |
498,473,766 |
|
|
492,479,330 |
|
| |
|
|
|
| Goodwill |
307,365,845 |
|
|
307,365,845 |
|
| Long-Term
Investments |
137,979,082 |
|
|
57,782,418 |
|
| Intangible Assets |
269,675,000 |
|
|
288,975,000 |
|
| Patents and Other
Assets |
21,010,121 |
|
|
20,887,496 |
|
| Total Other Assets |
736,030,048 |
|
|
675,010,759 |
|
| |
|
|
|
| Total Assets |
$ |
2,085,434,068 |
|
|
$ |
2,352,053,912 |
|
| |
|
|
|
| LIABILITIES AND
SHAREHOLDERS' INVESTMENT |
|
|
|
| Current
Liabilities |
$ |
169,160,919 |
|
|
$ |
243,647,007 |
|
| Long-Term Debt |
— |
|
|
— |
|
| Deferred Income
Taxes |
54,521,489 |
|
|
58,888,644 |
|
| Shareholders'
Investment |
1,861,751,660 |
|
|
2,049,518,261 |
|
| Total Liabilities &
Shareholders' Investment |
$ |
2,085,434,068 |
|
|
$ |
2,352,053,912 |
|
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