Gentex Corp., supplier of digital vision, connected car, dimmable glass and fire protection products, has reported financial results for the fourth quarter and calendar year ended Dec. 31, 2019.
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.
“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.
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 39 cents, compared with earnings per diluted share of 41 cents 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.
Other net sales were $10 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 Dec. 31, 2019, the company repurchased 13.8 million shares of its common stock at an average price of $24.06 per share. As of Dec. 31, 2019, the company has 20.1 million shares remaining available for repurchase in the previously announced plan.
