ZEELAND, MI--(Marketwire - January 29, 2008) - Gentex Corporation ("the Company") (
NASDAQ:
GNTX), the Zeeland, Michigan-based manufacturer of automatic-dimming
rearview mirrors and commercial fire protection products, today reported
financial results for the fourth quarter and year ended December 31, 2007.
The Company's net sales increased by 14 percent from $149.6 million in the
fourth quarter of 2006 to a record $170.7 million in the fourth quarter of
2007. Record net income for the fourth quarter ended December 31, 2007,
increased by three percent to $31.8 million compared with $30.8 million in
the fourth quarter last year. The Company's net income for the fourth
quarter and calendar year 2007 was negatively impacted by the $2.9 million
(pre-tax) litigation judgment related to the Muth litigation in Wisconsin,
as discussed below. Earnings per diluted share were flat at 22 cents in
the fourth quarter of 2007 compared with same prior-year period in 2006.
The Muth litigation judgment negatively impacted the Company's net income
for the fourth quarter and year ended December 31, 2007, by approximately
$1.9 million (after tax) and earnings per share by approximately one cent.
For the year ended December 31, 2007, net sales increased by 14 percent to
$653.9 million compared with $572.3 million in the year ended December 31,
2006. Net income for the calendar year 2007 increased by 12 percent to
$122.1 million compared with $108.8 million in calendar year 2006.
Earnings per diluted share increased by 16 percent to 85 cents for the year
ended December 31, 2007, compared with 73 cents for the same period in
calendar 2006.
During the fourth quarter of 2007, the Company's quarterly financial
results were negatively impacted by approximately $358,000 (pre-tax,
reported in Engineering, Research and Development Expense) in legal
expenses related to litigation between the Company and K.W. Muth and Muth
Mirror Systems LLC (collectively "Muth"). The litigation, as previously
announced, relates to exterior mirrors with turn signal indicators. A
trial took place in Wisconsin in July 2007, and in December 2007, the Court
found that Muth's patents were invalid and unenforceable, and that Gentex's
Razor Mirror product does not infringe the patents in suit. However, the
Court did find that Gentex had breached the agreement between the two
companies and, on January 24, 2008, entered a judgment against Gentex of
$2.9 million. In accordance with generally accepted accounting principles,
the Company recorded a pre-tax charge of $2.9 million in the fourth quarter
of 2007. It is uncertain at this time whether either party will appeal.
(The $2.9 million judgment was recorded above the operating income line on
the Company's income statement as "Litigation Judgment").
"We are pleased to report that the Company's sales continue to grow at a
significant pace, despite the issues related to reduced vehicle production
levels at the traditional 'Big Three' automakers in North America," said
Gentex Chairman and Chief Executive Officer Fred Bauer. "Our business
strategy many years ago was to work to diversify our business so that
eventually our percentage of business with each automaker would reflect
that automaker's percentage of global market share, and we believe that we
are on our way to doing that.
"We also have an excellent portfolio of very popular, high value-added
products to offer our customers, and a number of those products are just
starting to get some traction, such as SmartBeam® and the new Rear Camera
Display (RCD) Mirror. Each of those products have incremental average
selling prices that are at least three times higher than the price of one
base feature auto-dimming rearview mirror, and there appears to be
significant market demand for each," concluded Bauer.
Gentex Senior Vice President Enoch Jen said that the Company's gross margin
declined sequentially from 35.1% in the third quarter to 34.2% in the
fourth quarter, primarily because of the Company's inability to fully
leverage fixed overhead costs due to approximately 100,000 units that
customers canceled at the last minute during the last two weeks of December
2007, which units primarily consisted of exterior auto-dimming mirror units
for tier one mirror suppliers. The Company believes that the reduction in
orders was primarily due to year-end inventory adjustments by those tier
one exterior mirror suppliers.
In addition, in order to meet a large customer's cost reduction efforts,
the Company granted a price reduction that impacted the fourth quarter of
2007. In separate negotiations with that same customer, the Company
reached an agreement in the ordinary course of business to be that
customer's sole supplier of RCD Mirrors for model years 2011 to 2015. The
Company has not yet announced any rear camera display business awards with
that customer at this time.
Automatic-dimming mirror unit shipments for the fourth quarter of 2007
increased by 13 percent, but automotive revenues increased by 15 percent
due to a richer mix of mirror products shipped during the quarter. For the
fourth quarter of 2007, unit shipments in North America increased by 16
percent compared with the fourth quarter of 2006, primarily due to
increased interior automatic-dimming mirror unit shipments for certain
domestic and Asian transplant automakers. Increased penetration of
interior auto-dimming mirrors at certain of our European and Asian
automotive customers was the primary factor in achieving an 11 percent
increase in the Company's offshore unit shipments in the fourth quarter of
2007 compared with the fourth quarter of 2006.
SmartBeam
SmartBeam is the high beam headlamp assist system that the Company
developed and introduced in the 2005 model year. For the 2007 calendar
year, the Company shipped approximately 304,000 SmartBeam units, which was
at the lower end of guidance, primarily due to production cuts on light
vehicles in North America. Option rates have remained strong at 25-30% on
average. For the 2008 calendar year, we currently expect to ship
approximately 350,000 to 400,000 SmartBeam units. There are a number of
follow-on SmartBeam programs for existing and new customers scheduled for
the 2009 calendar year.
Rear Camera Display (RCD) Mirror
The Company's RCD Mirror consists of a proprietary liquid crystal display
(LCD) device that shows a panoramic video view of objects behind the
vehicle in real time. When the vehicle is put in "reverse," the display
illuminates and automatically appears through the rearview mirror's
reflective surface to give a high resolution, bright-colored image. The
image is generated by a camera or cameras placed in a protected area at the
rear of the vehicle. When the vehicle is put in "drive," the display in
the mirror automatically disappears. The ability to automatically have the
display appear through the automatic-dimming mirror's surface is made
possible by utilizing proprietary "transflective" coatings developed by
Gentex Corporation.
The RCD Mirror is currently offered as original equipment as a stand-alone
option on four Ford and Lincoln programs, as well as on the Kia Mohave for
Korea. The RCD Mirror is also offered on a number of port- or
dealer-installed programs. The Company shipped approximately 65,000 rear
camera display units in calendar year 2007, and currently estimates that it
will ship between 250,000 and 300,000 in calendar year 2008. Based on the
Company's current forecast, Gentex estimates that RCD Mirror shipments
could more than double in calendar year 2009 compared with calendar year
2008.
The automakers currently offering Gentex's RCD mirror are doing so absent
any legislation with respect to expanding the field of view on light
vehicles so that drivers can detect objects directly behind their vehicles,
and made the decision to offer the product before any legislation was
pending. There currently is pending legislation, called the "Kids
Transportation Safety Act of 2007," which passed in the U.S. House of
Representatives and was introduced into the Senate on December 19, 2007.
This Bill orders the Secretary of Transportation at the National Highway
Traffic Safety Administration (NHTSA) to initiate rulemaking to revise the
federal standard to expand the field of view on light vehicles in the
United States so that drivers can detect objects directly behind vehicles.
The requirements may be met by the use of additional mirrors, sensors,
cameras or other technology. NHTSA has conducted some independent studies
already and appears to be leaning toward the use of camera-based systems.
The Company believes that the Bill will pass the U.S. Senate and will be
signed into law sometime during 2008. Once it is signed into law, the
timeline is approximately seven years from the date of the initiation of
rulemaking by NHTSA until automotive manufacturers will be required to
comply with the rules.
"Based on the interest level of current customers and those with whom we
have development programs, absent any legislation, we currently expect
early adoption by many automakers," said Jen.
Future Estimates
Gentex Senior Vice President Enoch Jen provided certain guidance for the
first quarter and calendar year 2008.
"For the first quarter and calendar year 2008, we anticipate that our top
line growth will increase by approximately 10 percent over the same
prior-year periods, based on the current forecast for product mix, light
vehicle production levels and take rates," said Jen.
He also said that based on the current forecast, the gross margin in the
first quarter is expected to be in the range of 35 percent. When comparing
calendar year 2007 to calendar year 2006, the Company's gross margin was
flat at 34.8 percent, which is primarily attributable to purchasing cost
reductions, leveraging the Company's fixed overhead costs, and improved
manufacturing yields, which improvements were offset by annual and other
automotive customer price reductions. The Company's gross margin for all
of calendar year 2008 could improve by 25 to 50 basis points compared with
the gross margin reported for calendar year 2007, primarily depending upon
top line growth and purchasing cost reductions.
Jen said that the Company's current 2008 forecast is based on CSM's
preliminary mid-January forecast for light vehicle production in the first
quarter of 3.6 million units for North America, 5.6 million units for
Europe and 4.0 million units for Japan and Korea. Based on that same
forecast, CSM is expecting light vehicle production of 14.4 million units
for North America, 21.9 million units for Europe and 14.9 million units for
Japan and Korea for calendar year 2008.
Unit Shipments and Revenues
Total auto-dimming mirror unit shipments in the fourth quarter of 2007 were
approximately 3.9 million, a 13 percent increase over the same period last
year. Auto-dimming mirror unit shipments increased by 13 percent to 15.2
million for the year ended December 31, 2007, compared with the same
prior-year period.
Auto-dimming mirror unit shipments to customers in North America increased
by 16 percent to approximately 1.7 million in the fourth quarter of 2007
compared with the same quarter last year. North American light vehicle
production was up one percent in the fourth quarter of 2007 compared with
the same period in 2006. For the year ended December 31, 2007,
auto-dimming mirror unit shipments to customers in North America increased
by 10 percent to approximately 6.7 million compared with the same period
last year. North American light vehicle production declined by two percent
for the year ended December 31, 2007, compared with the same period in
2006.
Unit shipments to offshore customers increased by 11 percent to
approximately 2.2 million in the fourth quarter of 2007 compared with the
same period in 2006. Light vehicle production in Europe increased by six
percent, and production increased by five percent in Japan and Korea, in
the fourth quarter of 2007, compared with the same prior-year periods. For
the year ended December 31, 2007, auto-dimming mirror unit shipments to
offshore customers increased by 16 percent to approximately 8.5 million
compared with the same period last year. Light vehicle production in
Europe increased by six percent, and production increased by three percent
in Japan and Korea for the year ended December 31, 2007, compared with the
same periods in 2006.
Automotive revenues increased by 15 percent to $165.3 million in the fourth
quarter of 2007 compared with the same period last year, and increased by
15 percent to $630.1 million for the year ended December 31, 2007, compared
with the same period in 2006. Fire Protection revenues decreased by two
percent to $5.5 million for the fourth quarter of 2007 compared with the
fourth quarter of 2006, and were approximately flat at $23.8 million for
the year ended December 31, 2007, compared with the same period in 2006.
Non-GAAP Financial Measure
The financial information provided, including earnings, is in accordance
with GAAP. Still, the Company believes it is useful to provide non-GAAP
earnings to exclude the effect of Statement of Financial Accounting
Standards No. 123(R), "Share-Based Payment" [FAS 123(R)]. This non-GAAP
financial measure allows investors to evaluate current performance in
relation to historic performance without considering this non-cash charge.
The Company's management uses this non-GAAP information internally to help
assess performance in the current period versus historical performance
(especially prior periods where this non-cash charge was not included).
Disclosure of non-GAAP earnings to exclude the effect of FAS 123(R) has
economic substance because the excluded expenses do not represent current
or future cash expenditures.
A reconciliation of non-GAAP earnings, to exclude the effect of FAS 123(R),
to GAAP earnings can be found in the attached financial table. The use of
non-GAAP earnings is intended to supplement, not to replace, presentation
of GAAP earnings. Like all non-GAAP financial measures, non-GAAP earnings
are subject to inherent limitations because all of the expenses required by
GAAP are not included. The limitations are compensated by the fact that
non-GAAP earnings are not relied on exclusively, but are used to simply
supplement GAAP earnings.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act, as amended, that are based on management's
belief, assumptions, current expectations, estimates and projections about
the global automotive industry, the economy, the impact of stock option
expenses on earnings, the ability to leverage fixed manufacturing overhead
costs, unit shipment and revenue growth rates, top line growth rates, gross
margins, and the Company itself. Words like "anticipates," "believes,"
"confident," "estimates," "expects," "forecast," "likely," "plans,"
"projects," 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. These risks include, without
limitation, employment and general economic conditions, the pace of
automotive production worldwide, the maintenance of the Company's relative
market share, competitive pricing pressures, currency fluctuations, the
financial strength of the Company's customers, supply chain disruptions,
potential sale of OEM business segments or suppliers, the mix of products
purchased by customers, the ability to continue to make product
innovations, the success of certain newer products (e.g. SmartBeam®,
Z-Nav® and Rear Camera Display Mirror), and other risks identified in the
Company's filings with the Securities and Exchange Commission. Therefore,
actual results and outcomes may materially differ from what is expressed or
forecasted. Furthermore, the Company undertakes no obligation to update,
amend, or clarify forward-looking statements, whether as a result of new
information, future events, or otherwise.
Fourth Quarter Conference Call
A conference call related to this news release will be simulcast live on
the Internet beginning at 10:30 a.m. Eastern Time today. To access that
call, go to
www.gentex.com and select the "Audio Webcast" icon in the lower
right-hand corner of the page. Other conference calls hosted by the Company
will also be available at that site in the future.
About the Company
Founded in 1974, Gentex Corporation (
NASDAQ:
GNTX) is an international
company that provides high-quality products to the worldwide automotive
industry and North American fire protection market. Based in Zeeland,
Michigan, the Company develops, manufactures and markets interior and
exterior automatic-dimming automotive rearview mirrors that utilize
proprietary electrochromic technology to dim in proportion to the amount of
headlight glare from trailing vehicle headlamps. Many of the mirrors are
sold with advanced electronic features, and approximately 96 percent of the
Company's revenues are derived from the sales of auto-dimming mirrors to
nearly every major automaker in the world.
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
------------- ------------- ------------- -------------
Net Sales $ 170,722,639 $ 149,589,602 $ 653,933,236 $ 572,267,073
Costs and
Expenses
Cost of Goods
Sold 112,303,124 97,493,721 426,236,241 373,163,484
Engineering,
Research &
Development 12,740,981 11,115,661 50,715,057 41,773,792
Selling,
General &
Administrative 9,068,837 7,841,410 35,280,846 30,882,821
Litigation
Judgment 2,885,329 0 2,885,329 0
Other Expense
(Income) (13,725,745) (11,756,683) (40,923,005) (32,526,622)
------------- ------------- ------------- -------------
Total Costs and
Expenses 123,272,526 104,694,109 474,194,468 413,293,475
------------- ------------- ------------- -------------
Income Before
Income Taxes 47,450,113 44,895,493 179,738,768 158,973,598
Provision for
Income Taxes 15,600,391 14,079,519 57,608,747 50,212,596
------------- ------------- ------------- -------------
Net Income $ 31,849,722 $ 30,815,974 $ 122,130,021 $ 108,761,002
============= ============= ============= =============
Earnings Per
Share
Basic $ 0.22 $ 0.22 $ 0.85 $ 0.74
Diluted $ 0.22 $ 0.22 $ 0.85 $ 0.73
Weighted
Average
Shares:
Basic 143,995,387 142,219,264 143,056,704 147,950,666
Diluted 145,188,679 142,695,329 144,070,297 148,494,363
Cash Dividends
Declared per
Share $ 0.105 $ 0.095 $ 0.40 $ 0.37
CONDENSED CONSOLIDATED BALANCE SHEETS
Dec 31, 2007 Dec 31, 2006
------------- -------------
ASSETS
Cash and
Short-Term
Investments $ 397,988,781 $ 328,227,710
Other Current
Assets 130,505,167 118,650,384
------------- -------------
Total Current
Assets 528,493,948 446,878,094
Plant and
Equipment -
Net 205,609,671 184,134,373
Long-Term
Investments
and Other
Assets 163,919,061 154,015,933
------------- -------------
Total Assets $ 898,022,680 $ 785,028,400
============= =============
LIABILITIES AND
SHAREHOLDERS'
INVESTMENT
Current
Liabilities $ 68,362,705 $ 57,362,978
Long-Term Debt 0 0
Deferred Income
Taxes 22,847,779 24,971,133
Shareholders'
Investment 806,812,196 702,694,289
------------- -------------
Total
Liabilities &
Shareholders'
Investment $ 898,022,680 $ 785,028,400
============= =============
AUTO-DIMMING MIRROR UNIT SHIPMENTS
(Thousands)
Fourth Quarters
Ended Years Ended
December 31, December 31,
----------------- -------- ----------------- --------
2007 2006 % Change 2007 2006 % Change
-------- -------- -------- -------- -------- --------
Domestic Interior 1,247 1,050 19% 4,907 4,258 15%
-------- -------- -------- -------- -------- --------
Domestic Exterior 452 414 9% 1,768 1,784 -1%
-------- -------- -------- -------- -------- --------
Total Domestic
Units 1,699 1,465 16% 6,676 6,043 10%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Foreign Interior 1,589 1,359 17% 6,093 5,168 18%
-------- -------- -------- -------- -------- --------
Foreign Exterior 574 592 -3% 2,452 2,217 11%
-------- -------- -------- -------- -------- --------
Total Foreign Units 2,163 1,952 11% 8,545 7,385 16%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Total Interior
Mirrors 2,836 2,411 18% 11,000 9,426 17%
-------- -------- -------- -------- -------- --------
Total Exterior
Mirrors 1,026 1,006 2% 4,220 4,001 6%
-------- -------- -------- -------- -------- --------
Total Mirror Units 3,863 3,417 13% 15,221 13,427 13%
-------- -------- -------- -------- -------- --------
Note: Certain prior year amounts have been reclassified to conform with the
current year presentation. Amounts may not total due to rounding.
GENTEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME RECONCILIATION
NON-GAAP MEASUREMENT TO GAAP
Three Months Ended December 31, 2007
-------------------------------------------
(Non-GAAP
Excluding
Stock Option Stock Option
GAAP Expense Expense)
------------- ------------- -------------
Net Sales $ 170,722,639 $ 0 $ 170,722,639
Costs and Expenses
Cost of Goods Sold 112,303,124 (646,046) 111,657,078
Engineering, Research &
Development 12,740,981 (705,700) 12,035,281
Selling, General &
Administrative 9,068,837 (667,146) 8,401,691
Litigation Judgment 2,885,329 0 2,885,329
Other Expense (Income) (13,725,745) 0 (13,725,745)
------------- ------------- -------------
Total Costs and Expenses 123,272,526 (2,018,892) 121,253,634
------------- ------------- -------------
Income Before Provision for
Income Taxes 47,450,113 2,018,892 49,469,005
Provision for Income Taxes 15,600,391 725,609 16,326,000
------------- ------------- -------------
Net Income 31,849,722 1,293,283 33,143,005
============= ============= =============
Year Ended December 31, 2007
-------------------------------------------
(Non-GAAP
Excluding
Stock Option Stock Option
GAAP Expense Expense)
------------- ------------- -------------
Net Sales $ 653,933,236 $ 0 $ 653,933,236
Costs and Expenses
Cost of Goods Sold 426,236,241 (2,422,610) 423,813,631
Engineering, Research &
Development 50,715,057 (2,616,038) 48,099,019
Selling, General &
Administrative 35,280,846 (2,462,844) 32,818,002
Litigation Judgment 2,885,329 0 2,885,329
Other Expense (Income) (40,923,005) 0 (40,923,005)
------------- ------------- -------------
Total Costs and Expenses 474,194,468 (7,501,492) 466,692,976
------------- ------------- -------------
Income Before Provision for
Income Taxes 179,738,768 7,501,492 187,240,260
Provision for Income Taxes 57,608,747 4,195,253 61,804,000
------------- ------------- -------------
Net Income 122,130,021 3,306,239 125,436,260
============= ============= =============
Three Months Ended December 31, 2006
-------------------------------------------
(Non-GAAP
Excluding
Stock Option Stock Option
GAAP Expense Expense)
------------- ------------- -------------
Net Sales $ 149,589,602 $ 0 $ 149,589,602
Costs and Expenses
Cost of Goods Sold 97,493,721 (582,524) 96,911,197
Engineering, Research &
Development 11,115,661 (621,129) 10,494,532
Selling, General &
Administrative 7,841,410 (577,582) 7,263,828
Litigation Judgment 0 0 0
Other Expense (Income) (11,756,683) 0 (11,756,683)
------------- ------------- -------------
Total Costs and Expenses 104,694,109 (1,781,235) 102,912,874
------------- ------------- -------------
Income Before Provision
for Income Taxes 44,895,493 1,781,235 46,676,728
Provision for Income Taxes 14,079,519 740,481 14,820,000
------------- ------------- -------------
Net Income $ 30,815,974 $ 1,040,754 $ 31,856,728
============= ============= =============
Year Ended December 31, 2006
-------------------------------------------
(Non-GAAP
Excluding
Stock Option Stock Option
GAAP Expense Expense)
------------- ------------- -------------
Net Sales $ 572,267,073 $ 0 $ 572,267,073
Costs and Expenses
Cost of Goods Sold 373,163,484 (2,265,581) 370,897,903
Engineering, Research &
Development 41,773,792 (2,502,577) 39,271,215
Selling, General &
Administrative 30,882,821 (2,289,977) 28,592,844
Litigation Judgment 0 0 0
Other Expense (Income) (32,526,622) 0 (32,526,622)
------------- ------------- -------------
Total Costs and Expenses 413,293,475 (7,058,135) 406,235,340
------------- ------------- -------------
Income Before Provision
for Income Taxes 158,973,598 7,058,135 166,031,733
Provision for Income Taxes 50,212,596 2,503,404 52,716,000
------------- ------------- -------------
Net Income $ 108,761,002 $ 4,554,731 $ 113,315,733
============= ============= =============
Non-GAAP 2007
GAAP 2007 vs. vs. 2006 %
2006 % Change Change
------------- -------------
Net Sales 14.1% 14.1%
Costs and Expenses
Cost of Goods Sold 15.2% 15.2%
Engineering, Research &
Development 14.6% 14.7%
Selling, General &
Administrative 15.7% 15.7%
Litigation Judgment
Other Expense (Income) 16.7% 16.7%
Total Costs and Expenses 17.7% 17.8%
Income Before Provision for
Income Taxes 5.7% 6.0%
Provision for Income Taxes 10.8% 10.2%
Net Income 3.4% 4.0%
Non-GAAP 2007
GAAP 2007 vs. vs. 2006 %
2006 % Change Change
------------- -------------
Net Sales 14.3% 14.3%
Costs and Expenses
Cost of Goods Sold 14.2% 14.3%
Engineering, Research &
Development 21.4% 22.5%
Selling, General &
Administrative 14.2% 14.8%
Litigation Judgment
Other Expense (Income) 25.8% 25.8%
Total Costs and Expenses 14.7% 14.9%
Income Before Provision
for Income Taxes 13.1% 12.8%
Provision for Income Taxes 14.7% 17.2%
Net Income 12.3% 10.7%
Contact Information: CONTACT:
Connie Hamblin
(616) 772-1800