Gentex Reports Fourth Quarter and Year End 2018 Financial Results
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
For calendar year 2018, the Company’s net sales increased 2% to
"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
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
Net income for the fourth quarter of 2018 was
Net income for calendar year 2018 was
Earnings per diluted share in the fourth quarter of 2018 were
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
Other net sales were
Share Repurchases
The Company repurchased 3.3 million shares of its common stock during the fourth quarter of 2018 at an average price of
Future Estimates
The Company’s forecasts for light vehicle production for calendar year 2019 and 2020 are based on the
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 | Calendar Year 2020 |
Calendar Year 2019 |
Calendar Year 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 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”, “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 (
Fourth Quarter Conference Call
A conference call related to this news release will be simulcast live on the Internet beginning at
About the Company
Founded in 1974,
Contact Information:
Gentex Investor & Media Contact
(616)772-1590 x5814
AUTO-DIMMING MIRROR SHIPMENTS
(Thousands)
Three Months Ended December 31, |
Twelve Months ended December 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 SUBSIDIARIES
CONDENSED 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 SUBSIDIARIES
CONDENSED 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 |
Source: Gentex Corporation