Ladies and gentlemen, thank you for standing by. And welcome to the Gentex Reports the Fourth Quarter 2019 and Year-End Financial Results. At this time, all participants' lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] I would like to turn today's conference call to Josh O’Berski. You may begin. Josh O’Berski: Thank you. Good morning. And welcome to the Gentex Corporation fourth quarter 2019 earnings release conference call. I'm Josh O’Berski, Gentex's Director of Investor Relations. And I am joined by Steve Downing, President and CEO; Neil Boehm, Vice President of Engineering and CTO; and Kevin Nash, Vice President of Finance and CFO. This call is live on the Internet by way of an icon on the Gentex IR Web site at ir.gentex.com. All contents of this conference call are the property of Gentex Corporation, and may not be copied, published, reproduced, rebroadcast, retransmitted, transcribed or otherwise redistributed. Gentex Corporation will hold responsible and liable any party for any damages incurred by Gentex Corporation with respect to any unauthorized use of the contents of this conference call. This conference call contains forward-looking information within the meaning of the Gentex Safe Harbor statement included in the Gentex reports fourth quarter and year-end 2019 financial results press release from earlier this morning, and as always, shown on the Gentex Web site. Your participation in this conference call implies consent to these terms. Now, I’ll turn the call over to Steve Downing, who will give the third quarter 2019 financial summary. Steve?

Thank you, Josh. 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 in 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% 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 is always 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. Throughout the year, we continue to experience exceptional growth of our full display mirror product, especially with our launch customer, General Motors. By the end of the year, GM had become one of our larger customers in 2019, which means we were disproportionately impacted by the strike. For the quarter, revenue ended down 2%, but we lost approximately 5% in the revenue due to the strike. In essence, if the strike had not happened, revenue would have been up 3% for the quarter. In terms of light vehicle production, global volumes were down over 5% for the quarter. But even if you remove the impact of the strike from those numbers, then global production was still down over 4% in Q4 versus last year. This put our outperformance to…

Thank you, Steve. Auto-dimming mirror unit shipments increased 3% in the fourth quarter of 2019 compared with the fourth quarter of 2018, and also increased 3% for calendar year 2019 when compared to calendar '18. Automotive net sales in the fourth quarter of 2019 were $433.8 million, down 2% compared with $442.8 million in the fourth quarter of 2018. And for calendar year 2019 were $1.81 billion, up 1% compared with $1.79 billion in calendar '18. Other net sales were $10 million in the fourth quarter of 2019, down 6% compared with $10.6 million in the fourth quarter of '18. And for calendar year '19 were up 13% to $48.4 million when compared with $42.9 million in calendar '18. Now for a balance sheet update. The following balance sheet items represent a comparison versus December 31 of '18, which are also included in today's press release. Cash and cash equivalents were $296.3 million, up from $217 million, primarily due to cash flow from operations and proceeds from stock option activity, which was partially offset by share repurchases, dividend payments and capital expenditures. Short term investments were $140.4 million, down from $169.4 million due to investment maturities and long term investments were $139.9 million, up slightly from $138 million. Accounts receivable was $235.4 million, up from $213.5 million, primarily due to the timing of sales in the quarter. Inventories were $248.9 million, up from $225.3 million, primarily as a result of increased raw material inventory. Increases in raw materials are to support first quarter 2020 production and sales forecasts, as well as higher levels of component inventory with longer lead times. And accounts payable increased to $97.6 million from $92.8 million. Quickly for some cash flow highlights. The fourth quarter 2019 cash flow from operations was $122 million, down from $154.2…

Thank you, Kevin. Earlier this month, Gentex displayed at the 2020 Consumer Electronics Show. This show has become our preferred platform for Gentex to showcase our technologies and capabilities. More importantly, this venue and format allows us to gauge our customers' interests and the new ideas and proof of concepts that we display, enabling us to get access to the voice of the customer quickly and with direct feedback. This year at CES was a landmark year in debuting new iterations of existing technology, completely new technology concepts and products and even product design for new vertical. Our first area of new product concepts was designed to show the evolution of our full display mirror. A functional prototype of a touch screen version of our FDM was on display and included various features, including pinch to zoom, tilt, pan brightness control and the integration of soft button into the mirror display. In terms of the soft button interface, we showed several different examples of features that could be controlled by the mirror. But as you can imagine, many of the examples centered around HomeLink and HomeLink Connect interface options. We also introduced new scene enhancement features for our Full Display Mirror product. The first example is scene enhancement included active infrared illumination of the rearward scene to help improve visibility during nighttime driving. The second software enhancement was a lane and line projection for the FDM to assist with rearward revision by providing orientation and location of other vehicles. This feature also assists the driver or passenger in a semiautonomous vehicle with better lane awareness and lane keeping information. Additionally, we showed for the first time publicly, our digital video recorder system implemented in a mirror. The prototype shown was very similar to an OEM sourced program that we've been…

Thanks, Neil. Our forecasted guidance for calendar years 2020 and 2021 are based on the mid January 2020 IHS market production forecast for light vehicles produced in North America, Europe, Japan, Korea and China. The current IHS market light vehicle production forecast for these markets is expected to decrease approximately 1% for 2020 with 1% increase currently forecasted for 2021. Based on the current 2020 vehicle production forecast, the company estimates that net sales for the calendar year 2020 will be between $1.91 million and $2 billion. The company also estimates that the gross profit margin for calendar year 2020 will be between 36% and 37%. The gross margin estimate included approximately $20 million in annual costs as a result of tariffs that were put in place beginning in 2018 and have continued to increase throughout 2019. The company has worked hard to mitigate the escalation of tariffs by significantly reducing our exposure. However, this still remains a meaningful cost, both on imports of raw materials, as well as on products sold into the China market. The company estimates that operating expenses will be between $205 million and $215 million for 2020. We continue to invest heavily in technology as we fund the development of our current product portfolio and create iterations of those products that help keep these products new and attractive to our customers. We have also been investing heavily in the next wave of innovation, many of which were shown for the first time at CES this month, and included new products for automotive, aerospace and our newest developments in intelligent medical lighting. The company currently is estimating that the annual effective tax rate to be between 15% and 17% for calendar year 2020. Variation in the tax rate will occur from time-to-time and these are driven…

[Operator Instructions] Our first question comes from Chris Van Horn with B. Riley FBR.

So I just want to focus on CES, because you had a lot going on there, showed a lot of new products. And in years past, you've shown kind of revolutionary products, if you will, for the auto space and then you start to get awards and see those come to market in the following 12 to 18 months. So I'm just wondering, you had this CMS award this year and you showed a lot of new things around full display mirror. Can you give any more detail about what the pipeline looks like for some of those automotive related products and maybe some more detail on our timing?

So what was really unique about 2020 CES this year was like you mentioned, a lot times when we show something at CES even this year, we did it too. I mean there were two products in particular that we showed for the first time publicly, but we already had sourced programs for. And that was in the smoke vape sensor and also the DVR product. So those, even though they're brand new products and we haven't really shown them to a lot of customers, those were actually co-developed with OEM. So those already in line and launch phase. So those should be producing revenue in the next two to three years. If you look beyond that and CMS as well, is something that we obviously partnered with on Aston Martin but we continue to show full capability in that product line up that one we would expect to take a little longer. And the reason why as an OEM has to make a strategic decision about how do they want to execute, do they want to execute a CMS type product? And then if so, what does that design phase need to look like? So some of those products are further out, probably three to five years out before they'll generate revenue, some of them are here now and then obviously, some of them like the new product on the medical lighting side, we think that's a two to three year development to finish up that development and get it ready for launch.

And then kind of sticking with CES, on the aerospace side, obviously, big win with Airbus, but you also showed some other technologies. And I'm wondering was that OEM driven? Or there Boeing, or Airbus, or even a business jet driven decision to go down that product route or because you were developing other products for the aerospace market? You said look, we've got some things we can kind of transfer over there and now you're going to go to market with those.

Yes, there were multiple other technologies that we demonstrated between the Smart Lighting for beyond the medical but for aerospace, as well as some of the sensor systems. And those are more utilizing some of our core competencies and demonstrating what could be done into that aerospace market. So more driven actually through customer interest and then combining that with our capability. There was the, I'll call it the two way mirror that we also demonstrated, which was a reflective surface just like our full display mirror that had display behind it. That was actually an interest from an OEM, from an aerospace OEM that we worked with to develop the concept and then kind of work further to enhance that and get that ready from an award perspective.

I think the interesting thing there is what we found with our aerospace customer is once we get down the product path and we're developing our window capability with them, what they start to see is the other things that we do at Gentex. And so there the interest wasn't necessarily specific to hey, show us these products, but it's more about we love the fact that Gentex comes in with unique concepts and is somewhat disruptive in the space. So our goal on the aerospace show and then at CES was to show some of those disruptive concepts and then really start to put the technology foot forward beyond just dimmable glass, but in other areas that we feel we have capabilities then for aerospace.

And then lastly from me, obviously the mirror shipments for full display mirror in 2019 was well above expectations. Any sense on how that, any sort of visibility on how that number might evolve over 2021 and 2022, or even 2020 as well?

If you look at the last three years, kind of the growth rate and if you kind of average that growth rate out and then cast that forward, that's kind of what our expectations look like over the next couple of years from a growth rate perspective. We definitely -- this year was a big step up. So we're not saying it's going to be the same number of units. But if you look at that average over three years, we think that's a pretty good indication of where it should be in over the next two to three years.

Our next question comes from James Picariello with KeyBanc.

So for FTM, how many nameplates do you expect to be on by the end of 2020, and with how many OEMs? So I believe the numbers for 2019 were five OEs across 38 nameplates. Is that right?

That was what we're shipping, our estimated…

I think over 2020, I want to say that we're adding -- we should be shipping on an additional two or three OEMs we had this year, I think we had two or three OEMs this year. And I don't want to guess the number and nameplates quite frankly, just because I don't have it in front of me, but two to three OEM should launch this year. And then obviously we will see some propagation of additional nameplates not only on those OEMs but on our existing OEMs as well.

And if you do give us a unit volume estimate for 2020, we'll just add 200,000 units to that or whatever number [Multiple Speakers] the real forecast?

Well, we're joking ahead of the call that what we're going to say about that, and Kevin thought it'd be a good idea if I went with my at least half of million units.

If we just think about maybe -- you obviously have your 2020 guidance out. But like just thinking out to 2021, what's a most reasonable scenario that allows Gentex to really start to deliver margin improvement again? What pieces get the company back on track for that to happen?

I think first and foremost, one of the things we've been fighting through and we've been talking about quite a bit are the headwinds to our revenue. We had some legacy products that have been causing headwinds on the revenue side and obviously, that hurts on overall you know overhead exposure, stability and vehicle production, would be perfect. We don't need massive growth in the number of vehicles produced, but you know 6% headwind to vehicles produced is obviously problematic. As you look beyond that, you start talking about tariffs and things that actually directly impact gross margin, some stability in terms of trade relations, even a wind down or pull back, and those would be incredibly helpful. Beyond that, it's about execution, getting that growth rate above 5% is really where we start to see margin expansion.

And then just what are you baking in for 2020 in terms of incremental tariff impact?

Well, this year was about $17.5 million and what we had talked about on the prepared comments was right now we have about $20 million baked into the forecast.

The $17.5 million is a cumulative all-in number as opposed to incremental for '19 or…

That was the total for '19 and then remaining '20 for…

And the reason why we're estimating a little higher is because if you look at the second half of '19, there were increases in the tariffs mid '19, I think May and June. And the second half run rate was a hair higher than the first half run rate.

Our next question comes from David Kelley with Jefferies.

I guess you mentioned the legacy revenue headwinds. Could you update us on what the full year of 2019 impact of smart beam and driver assist was? And then any color on how you're thinking about. How you're thinking about 2020 and the update on the timing of the Mobileye roll off would be really helpful.

For 2019 it actually was about 275 basis points of headwind, two thirds of that was Mobileye, the other third probably smart beam. And then for 2020, we're looking at probably another 150 basis points to 200 basis points of headwind. And then one more year really of impact in 2021 probably closer to 75 to 100 basis points, and then we'll be done talking about it hopefully.

And most of that fall off in 2021, is the last bit of Mobileye.

And then I guess, maybe switching gears a bit [Multiple Speakers]. So the revenue guidance assumptions, I mean, I think most to-date at least or assuming global light vehicle production, maybe a bit worse than HIS somewhere around, number seems to be minus 2 to minus 4. Are you planning for anything as it relates to 2020 some downside to that minus 1 that could be embedded in that revenue guidance as well? Or is this market specific or something you're seeing on the horizon that maybe might provide some upside versus what some of the others are thinking out there?

I think given what's happened in the last two years, in particular, we tend to take, have a little bit of a negative slant on IHS assessments, generically, not just in 2020. So our model when we look at it, we're probably a little more pessimistic than what those numbers suggest, especially given what's going on in China right now, knowing that they're shut down, they're happened due to the virus, and there's probably a couple of weeks of exposure there if that continues. So not that we would be disproportionally impacted based on changes in China, but it definitely does affect where we've been growing over the last couple of years. So we do have some -- we do have to keep our eye on that. Beyond that, what we're hopeful for is that if the markets just stable, even if it's slightly down but stable, that gives us a great platform to operate in. And the tough part is when you talk about strikes and some of the other inefficiencies that have happened, it's really tough to plan and it's very difficult obviously, to get efficiencies when you're turning on and turning off lines. And so one of the things that we're focused on and hopeful for is that even if the numbers aren't perfect, at least it will be more stable environment to operate.

Our next question comes from David Leiker with Baird.

I was wondering, well, first of all, these year-end adjustments in inventory I presume most of that is with your, the businesses that you have as tier two supplier. Is that correct?

Yes, most of its with our tier one customers.

Can you quantify at all how big of a number that was?

It wasn't as big this year. I mean, it wasn't a huge problem. It was more about the -- there's more about -- the biggest impact was the strike in Q4.

And then I want to circle back a bit on the commentary though about the new launches and what 2021-22 might look like. Is there any sense -- is there any choppiness in any of that? Or does it look like your launches are going to be fairly even as they come online the next couple of years?

Are you talking specifically about FDM or generically?

FDM?

No, I don't think there'll be a lot of lumpiness. I mean, I think it'll be pretty well -- pretty spread out throughout the year.

And is GM, how close is GM to being fully launched with your product?

I would say I would -- I'm trying to put it in a percentage. I would guess they're probably about 80% of the way there in terms of number of vehicles and nameplates. Obviously, over the next couple of years, you'll have some of the nameplates that we launched on a few years ago and starts to roll off and become new vehicles. So you know you'll see, I mean what would look like a lot as they design a vehicle and replace it with something else. But right now, we feel really comfortable about where we're at with that GM launch. Now it's more about, less about the number of vehicles around, right now it's about take rates and penetration of that product into the GM lineup.

You stole my next question. I'm guessing you're seeing take rates at GM and those products that those vehicles that have launched that you're continuing to see take rates? What kind of take rates are you seeing on the vehicles that you have FDM on?

Depends on which level of vehicle. Obviously, in some of the vehicles, like the Cadillac lineup you're seeing upwards in the high 90s. And then if you're in the more of the volume vehicles, you're in the mid 20s to mid 30% range.

And is that consistent across the other customers, or is that higher at GM than others?

That was really high at GM. If you look at like Land Rover for instance, we do very well on Land Rover vehicles I would say probably in the 70% 80% range, is kind of where we're at on the Land Rover lineup. Beyond that, it depends on the OEM and it really in their strategy and which vehicle it is. So I would say on average when we get a customer, we kind of expect to be somewhere in the 30% to 40% range is kind of a good rule of thumb.

Our next question comes from John Murphy with Bank of America.

Just sort of thinking about the 2020 guide here, I mean, you're looking for revenue up about 5% at the midpoint. Should we think about doing it at the, growing it at the same rate or could they actually grow a little bit faster and some of these legacy products just create a little bit more pressure on revenue from here? I’m trying to understand how you're thinking about the revenue and the units for next year.

Actually, I think given the headwinds on the production side and our kind of take on that, we wouldn't expect units to be above revenue. We actually think that with the growth in FDM, you're going to continue to see kind of dollar content increase on that side. And so we think units will probably be a little lower growth rate than revenue.

And maybe just to follow-up on that, when we look at the fourth quarter, I mean the revenue from here, when you simply take automotive revenue divided by the total shipments, was I think down about 5%. I mean is that a lot to do with the GM strike and it's sort of an anomaly? Or is that something -- is there something else going on there on legacy products below this?

It was primarily due to GM, because if you think about them and the content, FDM is a big part of it. HomeLink, which is not included in that number, it's a modular base. But then secondarily, the driver assist, primarily Mobileye one of our higher ASP products. So the combination of both of those drove ASP decline.

The other thing I would add there is OEC growth rate in the quarter was very high. And so those are below average ASP. And so whenever you have OEC growth rates much higher than IEC growth rates, you're going to ASP deterioration. But like we always talk about that tends to be a good signal for long term for margin stability.

And then that actually leads to my next question on the gross margins. I mean basically we're looking for flat to down year-over-year tariffs, you're highlighting as a headwind. Is there anything else that would be sort of a weight -- I mean was that kind of revenue growth you'd expect would some pretty good gross margin uplift?

I think just in general you have normal annual customer price reductions and what we know to be like little tougher market from a supply standpoint to get cost reductions out of supply base. But the biggest factor you point out there are the tariffs and what we're seeing. As we grow in China for instance and those tariffs on our products that we export into China do drive those tariff costs higher, not only -- the thing we've been talking about with the incoming, we talked about a lot from the supply community but for us, about half of those tariffs are on our exports back into the China market. So as we hopefully will see a rebound in the China production levels, we would expect those tariffs to move proportionally with that what we hope to be a growth rate back into China.

And then as we think about sort of the adjacency of the Airbus windows, as well as what you're working on the Mayo Clinic with the operating room lighting. Do any of those roll on in the 2021 timeframe or are these really sort of two to five years out? And how should we think about the revenue and gross margin opportunity there?

From a time inside, the surface windows side will start rolling in beginning part of next year. And then we'll talk about the medical writing, that's two to three years of development. And then you're probably closer to four to five years out before that would actually contribute anything.

And the economics on both of those, as far as margins, I would imagine will be significantly higher than your corporate average. Is that a fair statement?

That's the hope.

And then just lastly on the CapEx. What has happened here? I mean, it seems like you guys are executing and putting in lines and everything that you need. I mean was there something going on in the past where there was sort of just -- a slight lack of discipline in CapEx spending? Or is there something else that you're kind of, secret sauce or uncovering here as you're being a lot more efficient?

I think there's a combination. I think one of the things we've worked really hard on as a management team the last few years is making sure we're planning out further that allows you to spend more efficiently and not rushing the buildings, facilities and lines in place. Some of it is us just trying to manage to the market we're in and being cognizant of what's happening from a growth rate perspective, knowing that if we want to protect margins we got to also protect for overhead issues. And those overhead issues are compounded when you have lower growth rate periods. And so fortunately the last few years, we've been focused on that. That allowed us to have a quite a bit of margin stability this year, whereas if we had overspent without the -- with a single digits, low single digit growth rate, it would have been a really difficult to absorb that extra overhead. So part of it is being disciplined, part of it is -- I don't want to say necessarily the lack of discipline before, but there was definitely some things that we looked at and said, we should be able to do better than that. And so we've been focused on that as a team for the last couple years, and now it's become part of our DNA.

Our next question comes from Ryan Brinkman with JP Morgan.

Maybe just to start with another one, on the new medical business that you're pursuing. How are you thinking about the various use cases for the product? And how are you thinking about the associated total addressable market, to the extent that you've done that work and can share?

So what was interesting about the product concept and the partnership with Mayo was, it was focused on a problem statement that they have been working on and trying to solve for a long time, which was a general lack of technology, intelligence, the ability for surgeons and operating room staff to really execute well in that environment. Obviously, our history with machine vision, and control and lighting and automotive was a good building block that we began with and started to make enhancements to that product. The real use case there or the available market there is obviously a number of operating rooms. The system itself is scalable. In other words, they're kind of pods that you can put, they're ceiling mounted flush with the ceiling, so you can scale based off of the need of that operating room. In terms of one of the things that we're excited about longer term is with the machine and the intelligence system, you can go to a fewer number of lighting pods and start to address, not only operating rooms but general care facilities, dentists' office to orthodontia, appoint doctors' offices. There's a lot of available market outside of just the traditional operating room. And so when we look at the scalability of this system, we think there's plenty of market available. We know there's a lot of work to do and get this through, not only the development phase to make sure it works as well as we think it should, but then also through the clinical trial process and then also FDA approvals. But when you start talking about all those steps, that's where we come up with that three to five year kind of window. But at this point in the development phase a couple of years into this, we don't see any reason why we can't go ahead and complete that development cycle. All the technical hurdles that we saw at the beginning, we've gotten through most of those. We know there'll be a lot more as we continue that evolution and development. But it's pretty exciting, because it is a very scalable system and you can literally go from one or two pods up to 10 or 10 per room depending on the need.

And then when it comes to the development costs to support the medical business or the sensor, or the new camera monitoring systems, et cetera. To what extent have these costs already been running through your R&D line? And then as a follow up, I'm not sure how much you can or want to disclose. But are there other kinds of, like left field things that you are working on that are also already reflected in current ER&D that we don't yet know about similar to the medical revelation? What percent of your ER&D would you say is associated with new automotive and non-automotive product categories that you're not already in today?

Sure. So I would say the vast majority of the cost increases that we've been talking about over the last two years and step up in R&D spending, those are already running through. On the medical -- supporting aerospace and medical, I'd say we're 80% of that already. In other words, there might be some small increases to that that would drive R&D higher as we move through these next couple of years. But this isn't like this is going to double R&D spend or even be a huge mover to that. It's already reflected in our current spend. And to answer your question on the other, yes, there's always some crazy ideas that we're working on that are pretty far out there that are already in the budget as well. We usually don't talk about them until we feel like we have a market, or a partner or a customer. And the reason why is the vast majority of these ideas end up kind of evolved failing or evolving and becoming something different. Just one on the medical side, we felt really good about where we were with our partnership with Mayo and that the relationship that we've developed with them, and we felt like it was the right time to kind of show that to help kind of get the market aware of what we're working on and what we think could be coming down the pike in the next couple of years.

And then just lastly from me, you mentioned that you're basing your outlook for global light vehicle production minus 1% upon IHS. I know that's consistent with your historical practice. A few suppliers earlier this week though assumed global production more like minus 3% in 2020, a bit below IHS. I'm just curious how you're thinking about the trend in global production this year as you think there's upside or downside to various regions? And then maybe just what the latest you're seeing on the ground in China is?

I'd say -- I mean, we would tend to agree with that, that there's probably more downside risk than upside potential. And so we kind of build our forecast around that. Looking at you go through some situational conditioning and look at it say, okay, what is it, what if it's down an extra percent or two, and what are their forecasts look like. We believe that our guidance range encapsulates couple of points, point or two more of downside. Obviously, we would love to see it just stable or flat or even a slight uptick. But we're not necessarily depending on that, depending on where those headwinds or uplifts come from, it may or may not help us. I mean, we are very geographically kind of nuance. So you got to be careful of just looking at vehicle production. What we look at is where we growing the most in those primary markets, especially the more mature markets where average vehicle sale prices are higher. And then also looking at what segmentation of vehicles those headwinds or challenges are coming from. If it's coming from eight segment vehicles, it's probably not going to impact us as much. If it's CD&E, obviously, we're going to have a disproportionate exposure to those level of vehicles.

Our next question comes from David Whiston was Morningstar.

Kevin, I think earlier you were talking about inventory sort of higher raw materials due to some longer lead time products coming and also some higher production coming, if I heard right. Are you able to say -- be a bit more specific as to what those products are and what customers at the higher production?

Not from a customer perspective, but it's really the general statement around FDM and the cost of the components related to FDM displays, electronics, all the things associated with that and building up for what was a shortfall in Q4 because of the strike and then the build back and what we're seeing kind of going into Q1.

And to put as an example like an LTD right now, you're talking about months of lead time to get those components. So when the strike happened and it happened that quickly, we've already got the components on site in order to support our customers but then it comes with zero sales for five weeks. So obviously, your inventory starts to change pretty quickly when that happens.

We had a little bit of falling in U.S. China trade relations recently. I know you talked about $1 tariff headwind, and I missed the first few minutes of call, so I apologize if you mentioned this. But anything you can say on basis points impact? I know you've talked about 110 bps before.

Yes, that's kind of where we're at and all in is around 100 basis points of total exposure in 2019. We're modeling in about $20 million worth of impact for 2020, which is around the same impact. Now, as Steve also mentioned, if things grow in China, which we hope, the tariffs actually do incrementally get a little bit worse versus worth the mix was in 2019, because of all of our imports into the China market, our tariff rates there are -- at this point, about half of what the total tariff closure is.

Our next question comes from Ryan Sigdahl with Craig-Hallum Capital.

So as it relates to the virus related disruptions going on in China here. Have you guys seen any impact to either component supply into the U.S. or shipments into China?

Yes, not so much on our shipments into China. But on the incoming supply side, you definitely see some things happening there. I mean nothing that's catastrophic like it was during the natural disasters from a few years ago but more problems just getting components, A, on time definitely and especially during the trade like during some of the trade disputes. There was some slow down in the processing at ports and how things were happening. So something we were keeping our eye on. More importantly, for us in order to offset a lot of those tariffs, we've had some change in supplier locations and ultimately some change in the suppliers to help find areas where we could get source outside of those areas would be impacted by tariff. So some of it was things that happened to us, some of it were things we were actively trying to pursue in order to get costs down. So those continue to happen. They're definitely not as bad right now as what they have been so we continue to watch it. And you're always a little careful to, I think you count your chickens, you're just nervous that somehow some changes and that there's a disruption. And given the complexity of our industry and the supply base, it's something we always keep our eye on.

And as you talk about moving suppliers and locations, is that primarily to other regions in China or is that outside of the country? And then secondly, you mentioned you talked to kind of higher lead time for building some inventory components. But is there anything related to kind of the situation in China on where you're also building some inventory of components there?

No, nothing that's going on in China that's causing that build in inventory. It was really, really there was a lot of components that come from China that we use and FDM products, for instance and some of our other products that as the strike happened, we needed to have those parts in order in the late fall in order to have them here, oftentimes 12 to 16 weeks ahead of when you're -- you owe those deliveries to your customer. And so we have those parts already in house and already coming. And then when you have five week stoppage of parts you're selling to your customer, you see the inventory level swell. And you're not stopping the incoming supply very much, because you know you have to ramp back up or be prepared to ramp back up late fourth quarter or early Q1 to help support your customers. So that’s what really driving that increase in inventory. And then you had a second part of that question and -- the other part was, the vast majority of those when we move, we're moving, changing either the existing suppliers who at different location they had outside of China in order to get away from the tariff situation and some cases actually changing the sourcing to a different supplier outside of China.

Last one for me and maybe I missed it earlier. But did you guys give the new nameplate launches you had in the quarter like you normally do? And then also within that kind of the breakout between advanced features, geographic regions, products, et cetera?

No, we didn't go through it. Just Neil's section was long enough and he was about ready to pass out after covering all that. So we decided to give him a break. But basically the launches for full display mirror in Q4 were right in line with what our estimates were. So there's a couple of them hen we didn't -- we weren't going to mention by name, because they haven't shown up on the customers' Web sites yet or they haven't made an announcement of them. But we've gone through our launch phase and have begun the shipping process. It just hasn't hit the marketplace yet.

And then everything else fair to say, it's reasonably in line with kind of similar quarters previously or was there…

Yes, exactly, the normal kind of product launches. Usually somewhere above 50% of the product launches we do are some type of an advanced feature, continued growth in, even despite the things that are going on, continued growth in China market for us with our base mirror applications. So all in all, pretty similar quarter to what we've had in the past.

And I'm not showing any further questions at this time. I'd like turn the call back over to our host. Josh O’Berski: Great. Thank you everyone for your time and questions. This concludes our call. Have a great weekend.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.