SOURCE: Gentex Corporation

Gentex Corporation

January 27, 2011 08:02 ET

Gentex Reports All-Time Record Net Sales and Net Income

ZEELAND, MI--(Marketwire - January 27, 2011) - Gentex Corporation (NASDAQ: GNTX), the Zeeland, Michigan-based manufacturer of automatic-dimming rearview mirrors and camera-based active-safety systems for the automotive industry, commercial fire protection products and dimmable aircraft windows, today reported all-time record results for the fourth quarter and calendar year ended December 31, 2010.

For the fourth quarter of 2010, the Company's all-time record net sales increased by 25 percent to $222.1 million compared with $177.6 million in the fourth quarter of 2009. The gross profit margin decreased on a quarter-over-quarter basis from 36.7 percent in the fourth quarter of 2009 to 35.8 percent in the fourth quarter of 2010, primarily due to annual customer price reductions and costs associated with supply chain constraints on certain automotive-grade electronic components, partially offset by purchasing/VAVE cost reductions and the Company's ability to leverage its fixed overhead costs.

For calendar year 2010, the Company's all-time record net sales increased by 50 percent to $816.3 million compared with $544.5 million in calendar year 2009. The gross profit margin increased from 32.6 percent for calendar year 2009 to 36.2 percent for calendar year 2010, primarily due to the Company's ability to leverage fixed overhead costs due to the 50 percent increase in net sales when comparing calendar year 2010 to calendar year 2009, partially offset by annual customer price reductions.

Income from operations increased by 17 percent to $50.6 million in the fourth quarter of 2010, compared with income from operations of $43.2 million in the fourth quarter last year, primarily due to the increased net sales. For calendar year 2010, all-time record operating income increased by 102 percent to $191.0 million, compared with operating income of $94.6 million for calendar year 2009, primarily due to the year-over-year increase in gross profit when comparing calendar year 2010 to calendar year 2009.

Total other income increased in the fourth quarter of 2010 compared with the fourth quarter of 2009, primarily due to realized gains on the sale of equity investments. Total other income increased to $12.5 million in calendar year 2010 from $1.7 million in calendar year 2009, primarily due to realized gains on the sale of equity investments in calendar year 2010 compared with realized losses on the sale of equity investments in calendar year 2009.

All-time record net income increased by 23 percent to $36.9 million for the fourth quarter of 2010, compared with net income of $30.0 million in the fourth quarter of 2009, primarily due to increased net sales. For calendar year 2010, all-time record net income of $137.7 million increased 113 percent compared with net income of $64.6 million for calendar year 2009. The increase in net income for calendar year 2010 compared with calendar year 2009 was primarily due to increased net sales and gross profit.

Earnings per diluted share were 26 cents in the fourth quarter of 2010 compared with 22 cents per share in the fourth quarter of 2009. Earnings per diluted share were 98 cents for calendar year 2010, compared with 47 cents per share in calendar year 2009.

"The fourth quarter was another record in a series of banner quarters for Gentex," said Gentex Chairman of the Board and Chief Executive Officer Fred Bauer. "Sales in the quarter were fueled by continued increases in unit shipments of our Rear Camera Display (RCD) and SmartBeam® mirrors. Increased light vehicle production and customer demand for those advanced electronic products were the primary reasons for the strong fourth quarter results."

Gentex Senior Vice President Enoch Jen said that the December announcement by the National Highway Traffic Safety Administration (NHTSA) related to rear backup cameras could potentially increase the Company's shipments of RCD Mirrors.

On December 3, 2010, NHTSA announced its preliminary interpretation of the "Kids Transportation Safety Act of 2007," a law intended to increase a driver's visibility while backing up. NHTSA indicated that all new vehicles under 10,000 lbs. in the United States are required to have backup camera-based systems by September 2014. The phase-in schedule currently proposed is that 10 percent of the vehicles in the United States must comply by September 2012, 40 percent by September 2013 and 100 percent by September 2014. The interpretation is subject to public comment and is intended to be finalized by February 28, 2011.

The Company believes that its cost-competitive RCD Mirror is an optimum, ergonomic, easily adaptable method to display the output of a rear camera for increased safety, and automakers could install rear cameras with the display in a RCD Mirror to satisfy NHTSA's preliminary interpretation. Any color display in a vehicle is relatively costly, and when a color display is required for other features such as navigation, radio or other vehicle functions, then it may be less costly on a per-feature basis to display the output of the backup camera in that in-dash display.

Jen said that since it appears likely that camera-based systems will be required by September 2014, the Company believes that the market for camera displays in vehicles will now be divided into two primary market segments:

    1) The top 15-20 percent 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; and
    2) The rest of the market is the most likely segment to offer the
       camera display in the mirror or in other multi-purpose displays in
       the vehicle in a number of different locations, including the radio,
       instrument panel, console, etc. This is the segment of the market
       that the Company believes offers the greatest volume potential, but
       also has significant and increasing competition.

Jen also said that, as the Company has previously indicated, RCD Mirrors will likely be implemented in three overlapping phases by automakers:

1. Market-Driven Phase: time period prior to any legislation through
   NHTSA's preliminary interpretation of the legislation on
   December 3, 2010;
2. "Wait and See" Phase: period of time from when the legislation was
   signed into law on February 28, 2008, until the final interpretation,
   which currently is expected by February 28, 2011; and
3. Implementation Phase: from the December 3, 2010, preliminary
   interpretation date until September of 2014, when 100 percent of all
   vehicles in the U.S. less than 10,000 lbs. will be required to be
   equipped with rear cameras and displays.

Jen indicated that another factor affecting these three phases is that there are certain automakers that have made it clear that they want to be leaders in this safety area, and so those automakers have either already come forward and announced their strategies for how they will offer displays in their vehicles or are expected by the Company to do so in the near future.

He said that it is important to understand the level of complexity involved in the customer decision-making process for determining how each different vehicle model will comply with these new, relatively technical regulations. At most automakers, the individuals who are responsible for displays, center consoles, mirrors and the rear back-up cameras each come from different departments at the automaker. While it's relatively straightforward to implement a Gentex auto-dimming RCD Mirror in a vehicle, pulling together the rest of the camera-based system at the automaker may be more complicated for the reasons discussed above.

Jen said that based on NHTSA's December 3, 2010, preliminary interpretation, "We understand that our customers are all busily working to determine how they will meet NHTSA's phase-in schedule, and there are many decisions yet to be made.

"We believe that this 'wait and see' phase may cause a brief slowdown in the ramp-up of RCD Mirror unit shipments until customers determine how they're going to meet the requirements of this new regulation across all of their vehicle lines -- and then implement those plans," said Jen.

"Because we are in both the 'wait and see' phase and the early stages of the implementation phase, and many automakers are revisiting any decisions that may have been made prior to the December 3 NHTSA announcement, we believe that there are too many uncertainties to provide annual guidance for RCD Mirror unit shipments at this time and, as a result, we currently plan to only provide guidance for the first six months of the year," said Jen.

The Rear Camera Display Mirrors display high-resolution, color images of the area directly behind the vehicle via an automaker-specified camera. SmartBeam is the Company's proprietary high beam headlamp assist system. Driver-assist features include several levels of the SmartBeam variable forward lighting product, as well as items like lane-departure warning and traffic sign recognition.

Gentex currently is working to fill a significant number of technical positions, primarily in the electrical and software development and engineering areas. Additional information is available at http://www.gentex.com/corp_jobs.html.

Unit Shipments and Net Sales

Total auto-dimming mirror unit shipments increased by 26 percent in the fourth quarter of 2010 compared with the fourth quarter last year. Automotive net sales increased by 26 percent from $173.3 million in the fourth quarter of 2009 to $217.7 million in the fourth quarter of 2010.

Total auto-dimming mirror unit shipments increased by 46 percent in calendar year 2010 compared with calendar year 2009. Automotive net sales increased by 52 percent from $525.6 million in calendar year 2009 to $797.1 million in calendar year 2010.

Automatic-dimming mirror unit shipments increased by 27 percent in North America in the fourth quarter of 2010 compared with the fourth quarter of 2009, primarily as a result of increased mirror unit shipments to the domestic automakers as well as the Asian transplant automakers. North American light vehicle production increased by 8 percent in the fourth quarter of 2010 compared with the same prior-year period.

Automatic-dimming mirror unit shipments increased by 56 percent in North America in calendar year 2010 compared with calendar year 2009, primarily as a result of increased mirror unit shipments to the domestic automakers as well as the Asian transplant automakers. North American light vehicle production increased by 39 percent in calendar year 2010 compared with calendar year 2009.

Automatic-dimming mirror unit shipments to offshore customers increased by 26 percent in the fourth quarter of 2010 compared with the same period last year. The increase in unit shipments was primarily due to increased mirror unit shipments to certain European automakers. Light vehicle production in Europe was flat in the fourth quarter of 2010, and decreased by 5 percent in Japan and Korea in the fourth quarter of 2010, compared with the same period last year.

Automatic-dimming mirror unit shipments to offshore customers increased by 41 percent in calendar year 2010 compared with calendar year 2009. The increase in unit shipments was primarily due to increased mirror unit shipments to certain European and Asian automakers. Light vehicle production in Europe increased by 13 percent in calendar year 2010, and increased by 20 percent in Japan and Korea in calendar year 2010, compared with calendar year 2009.

Other net sales increased by 5 percent to $4.4 million for the fourth quarter of 2010 compared with the same quarter last year, as increased dimmable aircraft window net sales more than offset the 5 percent decrease in fire protection net sales.

Other net sales increased by 2 percent to $19.2 million for calendar year 2010 compared with calendar year 2009, as increased dimmable aircraft window net sales more than offset the 16 percent decrease in fire protection net sales. The decrease in fire protection net sales for both the fourth quarter and calendar year was primarily due to the continued weak commercial construction market.

Future Estimates

Gentex Senior Vice President Enoch Jen provided certain guidance for 2011.

"Based on IHS Automotive's (formerly CSM Worldwide) end-of-December forecast for light vehicle production levels for the first quarter of 2011, we currently expect our net sales in the first quarter of 2011 to increase by approximately 30-35 percent compared with the first quarter of 2010," said Jen.

"Additionally, we currently estimate that shipments of our SmartBeam high beam headlamp assist product will increase by approximately 50-60 percent in calendar year 2011 compared with shipments of approximately 630,000 SmartBeam units in calendar year 2010," said Jen. The SmartBeam unit shipment estimate is based on IHS Automotive's light vehicle production forecast for calendar year 2011 compared with calendar year 2010.

As previously noted, the Company currently believes that there are too many uncertainties to provide annual guidance for RCD Mirror unit shipments at this time due to the December 3, 2010, NHTSA announcement and the uncertainties that has created. "As a result, based on the current IHS Automotive forecast for light vehicle production levels for the first six months of 2011, we currently estimate that RCD Mirror unit shipments will increase approximately 50 percent for the first six months of 2011 compared with the same period in 2010," said Jen. "Gentex shipped approximately 1.25 million RCD Mirror units in calendar year 2010 compared with shipments of approximately 573,000 units in calendar year 2009." The RCD Mirror unit shipment estimate is based on IHS Automotive's light vehicle production forecast for the first six months of 2011 compared with the first six months of 2010.

The Company's current forecasts for light vehicle production for each of the following periods in 2011 compared with the same periods in 2010 are based on IHS Automotive's end-of-December forecast for light vehicle production in North America, Europe and Japan and Korea.

             IHS Automotive Light Vehicle Production Forecast
      (formerly CSM Worldwide - based on end-of-December information)

                                  First  First
                                   Six    Six
             First  First         Months Months      Calendar Calendar
            Quarter Quarter  %      of     of     %     Year   Year    %
              2011*  2010* Change  2011*  2010* Change  2011*  2010* Change
             ------ ------ -----  ------ ------ -----  ------ ------ -----
*light vehicle units - millions
             ------ ------ -----  ------ ------ -----  ------ ------ -----
North America   3.3    2.9    15%    6.7    6.0    12%   12.9   11.9     9%
             ------ ------ -----  ------ ------ -----  ------ ------ -----
Europe          4.8    4.7     2%    9.7    9.7  Flat    18.6   18.5     1%
             ------ ------ -----  ------ ------ -----  ------ ------ -----
Japan and
 Korea          3.3    3.3  Flat     6.5    6.6    -2%   12.8   13.0    -2%
             ------ ------ -----  ------ ------ -----  ------ ------ -----

Based on the Company's expected net sales for the first quarter of 2011, Jen said that the Company currently expects its gross profit margin for the first quarter of 2011 to be approximately in the same range as the fourth quarter of 2010.

Safe Harbor Statement

This news release contains forward-looking 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 ability to control and leverage fixed manufacturing overhead costs, unit shipment and revenue growth rates, the ability to control E,R&D and S,G&A expenses, gross margins and the Company itself. Words like "anticipates," "believes," "confident," "estimates," "expects," "forecast," "hopes," "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. These risks include, without limitation, employment and general economic conditions, worldwide automotive production, the maintenance of the Company's market share, the ability to achieve purchasing and engineering cost reductions, customer inventory management, supplier part shortages, competitive pricing pressures, currency fluctuations, interest rates, equity prices, the financial strength/stability of the Company's customers (including their Tier 1 suppliers), supply chain disruptions, potential sale of OEM business segments or suppliers, potential customer (including their Tier 1 suppliers) bankruptcies, the mix of products purchased by customers, the ability to continue to make product innovations, the market for Rear Camera Display Mirrors and the success of those products, the success of certain other products (e.g. SmartBeam®), and other risks identified in the Company's other 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. EST today. To access that call, go to www.gentex.com and select the "Audio Webcast" icon on the right side 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 the leading supplier of automatic-dimming rearview mirrors and camera-based active safety systems to the global automotive industry. The Company also provides commercial smoke alarms and signaling devices to the North American fire protection market, as well as dimmable aircraft windows for the commercial, business and general aviation markets. Based in Zeeland, Michigan, the international 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. More than half of the Company's interior mirrors are sold with advanced electronic features, and more than 97 percent of the Company's net sales are derived from the sale 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,
                      2010           2009           2010          2009
                  ------------  --------------  ------------  ------------

Net Sales         $222,100,572  $  177,607,892  $816,263,414  $544,522,993
  Cost of Goods
   Sold            142,632,209     112,513,832   520,573,101   366,968,216
                  ------------  --------------  ------------  ------------
 Gross Profit       79,468,363      65,094,060   295,690,313   177,554,777

  Engineering,
   Research &
   Development      18,075,511      12,570,247    64,100,411    47,128,086
  Selling, General
   & Administrative 10,787,736       9,285,547    40,617,833    35,807,622
                  ------------  --------------  ------------  ------------
  Income from
   Operations       50,605,116      43,238,266   190,972,069    94,619,069

  Other Income      (4,637,271)     (1,615,618)  (12,467,945)   (1,733,234)
                  ------------  --------------  ------------  ------------

Income Before
 Income Taxes       55,242,387      44,853,884   203,440,014    96,352,303

Provision for
 Income Taxes       18,319,122      14,806,029    65,706,045    31,715,218
                  ------------  --------------  ------------  ------------

Net Income        $ 36,923,265  $   30,047,855  $137,733,969  $ 64,637,085
                  ============  ==============  ============  ============

Earnings Per Share
  Basic           $       0.26  $         0.22  $       0.99  $       0.47
  Diluted         $       0.26  $         0.22  $       0.98  $       0.47
Weighted Average
 Shares:
  Basic            140,483,242     137,418,113   139,356,831   137,227,677
  Diluted          142,227,174     138,372,258   140,735,767   137,645,350

Cash Dividends
 Declared per
 Share            $       0.11  $         0.11  $       0.44  $       0.44



                   CONDENSED CONSOLIDATED BALANCE SHEETS

                                 Dec 31, 2010                 Dec 31, 2009
                                --------------                ------------
ASSETS
Cash and Short-Term
 Investments                    $  434,797,369                $353,232,093
Other Current
 Assets                            220,471,905                 152,181,402
                                --------------                ------------

Total Current Assets               655,269,274                 505,413,495

Plant and
 Equipment - Net                   205,107,756                 197,530,249
Long-Term
 Investments and
 Other Assets                      142,313,609                 119,659,745
                                --------------                ------------

Total Assets                    $1,002,690,639                $822,603,489
                                ==============                ============


LIABILITIES AND
 SHAREHOLDERS'
 INVESTMENT
Current Liabilities             $   72,088,629                $ 58,637,778
Long-Term Debt                               0                           0
Deferred Income
 Taxes                              37,071,184                  28,036,968
Shareholders'
 Investment                        893,530,826                 735,928,743
                                --------------                ------------

Total Liabilities
 & Shareholders'
 Investment                     $1,002,690,639                $822,603,489
                                ==============                ============




                    AUTO-DIMMING MIRROR UNIT SHIPMENTS
                                (Thousands)

                                 Fourth
                              Quarter Ended           Year Ended
                               December 31,           December 31,
                              -------------          -------------
                               2010   2009  % Change  2010   2009  % Change
                              ------ ------ -------  ------ ------ -------
Domestic Interior              1,331  1,046      27%  4,956  3,086      61%
                              ------ ------ -------  ------ ------ -------
Domestic Exterior                329    262      26%  1,206    862      40%
                              ------ ------ -------  ------ ------ -------
Total Domestic Units           1,660  1,307      27%  6,162  3,949      56%
                              ------ ------ -------  ------ ------ -------

                              ------ ------ -------  ------ ------ -------
Foreign Interior               2,148  1,676      28%  7,872  5,537      42%
                              ------ ------ -------  ------ ------ -------
Foreign Exterior                 840    695      21%  3,058  2,193      39%
                              ------ ------ -------  ------ ------ -------
Total Foreign Units            2,988  2,371      26% 10,930  7,730      41%
                              ------ ------ -------  ------ ------ -------

                              ------ ------ -------  ------ ------ -------
Total Interior Mirrors         3,479  2,721      28% 12,828  8,623      49%
                              ------ ------ -------  ------ ------ -------
Total Exterior Mirrors         1,170    957      22%  4,264  3,055      40%
                              ------ ------ -------  ------ ------ -------
Total Mirror Units             4,648  3,678      26% 17,092 11,678      46%
                              ------ ------ -------  ------ ------ -------

Note: Certain prior year amounts have been reclassified to conform with the current year presentation. Percent change and amounts may not total due to rounding.

Contact Information

  • CONTACT:
    Connie Hamblin
    (616) 772-1800