Jan 29, 2009
Executives
Connie Hamblin - Vice President of Investor Relations and Corporate Communications Enoch Jen - Senior Vice President
Analysts
Ryan Brinkman - JPMorgan David Leiker - Robert W. Baird Brett Hoselton - KeyBanc Capital Markets Greg Halter - LJR Great Lakes Review
Operator
Good day and welcome to the Gentex Corporation's Fourth Quarter Year End 2008 Earnings Conference Call. Today's call is being recorded.
I would now like to turn meeting over to Ms. Connie Hamblin, Vice President of Investor Relations and Corporate Communications.
Please go ahead Ms. Hamblin.
Connie Hamblin
Thank you. Good morning everyone.
I just will make a few brief comments. On the call with me is today is Enoch Jen, our Senior Vice President, and Steve Dykman, our Chief Financial Officer.
I want to make a quick announcement that we're pleased to announce that the company recently filed an 8-K reporting that Enoch has agreed to delay his full time retirement for an additional year, until January 2nd of 2011 and that he intends to work on a part-time consultant basis through March 31st of 2012. We are pleased with Enoch's decision and believe that his continued employment with the company will help as we work to develop a strong senior management team that will assist in the company's succession planning.
Going into my generic comments, I should tell you that this call is being broadcast live on the Internet, should be on Gentex Corporation's website at www.gentex.com. The auto playback of the conference call is also available on the website.
This call is being recorded by Gentex Corporation. All contents of Gentex Corporation's conference calls is a property of Gentex.
No such content may be copied, published, reproduced, rebroadcast, retransmitted or otherwise redistributed without the expressed written consent of Gentex Corporation. Gentex alone holds such rights.
While we understand that there may be companies that transcribe and redistribute our conference calls, not withstanding this warning, Gentex Corporation provides no authorization to do so and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcript as Gentex Corporation will not be held liable for the content of any such transcript.
Gentex Corporation will hold responsible or liable any party for any damages incurred by Gentex Corporation with respect to any such unauthorized use. Your participation implies consent to our taping and to the foregoing terms.
Please drop off the line if you do not agree of these terms. Our Safe Harbor statement.
This presentation may include forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates, projections about top-line growth in the global automotive industry, the economy, the impact of stock option expenses on earnings, the ability to leverage fixed manufacturing overhead costs, unit shipment growth rates, and the company itself. Words like anticipate, believes, confident, estimates, expect, forecast, likely, plans, project, hope 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, and actual results may differ materially from those in the forward-looking statements. The company undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
We urge you to review the full Safe Harbor statement that is contained in the news release that is posted on our website. At this time, I will turn the call over to Enoch Jen.
He'll make his remarks with respect to the quarter and after that the call will be open to Q&A. As usual we'd ask that you ask one single part question at a time, so that other individuals on the call may have the opportunity to participate.
Thank you.
Enoch Jen
Thank you Connie. Good morning everyone.
Thanks for joining our conference call. If we...
looking at the fourth quarter, our revenues for the fourth quarter were $122.3 million, a decline of 28%, compared to $170.7 million in the fourth quarter of 2007. For the calendar year 2008, our revenues were $623.8 million, down 5% compared to $653.9 million for calendar year 2007.
Our operating income for the fourth quarter was $9.8 million, a decline of 71% compared to the $33.7 million reported for the fourth quarter of 2007. For the calendar year 2008, our operating income was $108.8 million down 22% compared to a $138.8 million in calendar year 2007.
For the fourth quarter of 2008, we reported a net loss of $10.4 million. This compared with net income of $31.8 million in the fourth quarter of 2007.
For the calendar year 2008, we reported net income of $62.1 million, a 49% decline compared to net income of a $122.1 million in calendar year 2007. For the fourth quarter, we reported a loss of $0.08 per share.
This compared with earnings per share of $0.22 in the fourth quarter of 2007. For the calendar year of 2008, we reported earnings of $0.44 per share, compared with earnings of $0.85 per share in calendar year 2007.
Excluding some unusual items that we will discuss later in the conference call, our earnings per share for the fourth quarter of 2008 would have been approximately in line with the street consensus estimates. Looking next at automotive revenues and auto-dimming mirror unit shipments; for the fourth quarter, our total auto-dimming mirror unit shipments decreased by 30% in the fourth quarter of 2008, compared with the fourth quarter in 2007.
Automotive revenues decreased by 29% from a $165.3 million in the fourth quarter of 2007 to a $117.3 million in the fourth quarter of 2008. Auto-dimming mirror unit shipments in North America decreased by 37% in the fourth quarter of 2008 compared with the same period in 2007, primarily as a result of significantly lower light vehicle production.
North American light vehicle production declined by 26% in the fourth quarter of 2008 compared with the same prior-year period. GMT900 light vehicle production was down 40% in the fourth quarter of 2008 compared with the same period in 2007 and those vehicles utilize an interior and exterior mirror on each vehicle.
In addition other automakers announced extended pick up and SUV plant closings during the quarter resulting in total truck and SUV production in North America being down by 38% in the fourth quarter of 2008 compared with the fourth quarter of 2007. Auto-dimming mirror unit shipments offshore customers decreased by 25% in the fourth quarter of 2008 compared with the same period last year.
The decrease in unit shipments was primarily due to lower light vehicle production in Europe and Asia. Light vehicle production in Europe decreased by 27% in the fourth quarter and decreased by 16% in Japan and Korea in the fourth quarter of 2008, compared with the same period last year.
Looking at the calendar year, total out of auto-dimming mirror unit shipments decreased by 5% in calendar year 2008 compared with calendar year 2007. In calendar year 2008, automotive revenues decreased by 5% to $601.5 million compared with $630.1 million in calendar year 2007.
auto-dimming mirror unit shipments in North America decreased by 19% in calendar year 2008 compared with calendar year 2007 primarily as a result of significantly lower light vehicle production after the quarter three (ph). North American light vehicle production declined by 16% in calendar year 2008 compared with calendar year 2007.
GMT900 vehicle production was down 41% in calendar year 2008, compared with the same period in 2007. Total light vehicle or total light truck and SUV production was down 25% in calendar year 2008 compared with calendar 2007.
Auto-dimming mirror unit shipments' offshore customers increased by 5% in calendar year 2008 compared with calendar year 2007 primarily due to increased unit shipments to certain European and Asian customers. Light vehicle production in Europe decreased by 5% in calendar year 2008 compared with calendar year 2007.
Light vehicle production in Japan and Korea decreased by 2% in calendar year 2008 compared with calendar year 2007. Next we're going to provide an updated information on global automotive customer revenues as a percentage of total company revenues for 2008.
So for calendar year 2008, Daimler represented 14% of total company's revenues and these are listed in order, now those some of them sound like they were at high. Second, General Motors represented 14%.
Also third, Toyota represented 14%. Fourth, Volkswagen Audi represented 13%.
Fifth, BMW represented 11% and sixth, Ford represented just under 10%. So this is our global revenues by customer compared to total company revenues.
Next, our average selling price per auto-dimming mirror unit was $42.53 during the fourth quarter of 2008. The ASP increased from $41.23 in the third quarter of 2008 to $42.53 in the fourth quarter of 2008, primarily due to the mix of higher featured mirrors.
The ASP also increased on a year-over-year basis from the fourth quarter of 2007 when it was $41.94 to $42.53 in the fourth quarter of 2008, primarily due to the mix of higher featured mirrors partially offset by annual customer price reductions. We would currently expect ASP in the first quarter of 2009 to be slightly below the reported fourth quarter of 2008 ASP, as sales of vehicles on which we offer base mirrors are holding up better than sales on vehicles that tend to offer more highly featured mirrors.
We do expect ASPs to increase over the balance of 2009 as we begin shipping for additional rear camera display in SmartBeam programs. Just as a reminder, fourth quarter of 2008 and calendar year 2008 ASPs exclude non auto-dimming mirrors and microphone units.
This is how we will be reporting ASP is going forward. Fire protection revenues decreased by 9% to $5 million for the fourth quarter of 2008 compared with the same period last year.
Fire protection revenues decreased by 7% to $22.1 million in the calendar year 2008 compared with calendar year 2007. The decreased revenues during both periods reflected the weak commercial construction markets.
Next looking at gross profit margins; the gross profit margin of 28.4% in the fourth quarter of 2008 declined sequentially from 30.5% in the third quarter of 2008, primarily due to the company's inability to leverage it's fixed overhead costs because of the decline in revenues and production inefficiencies as a result of last minute customer order reductions and foreign exchange rates. Gross margin declined on a year-over-year basis from 34.2% in the fourth quarter of 2007 to 28.4% in the fourth quarter of 2008.
Two-thirds of that decline was a result of the company's inability to leverage it's fixed overhead costs due to production inefficiencies as a result of last minute customer order reductions. The balance of the decline was due to annual customer price reductions and foreign exchange rates which were partially offset by purchasing cost reductions.
Based on the company's expected revenues for the first quarter of 2009 which will be discussed later in these comments, we would expect continued downward pressure on the company's gross margins in the short term. The gross profit margin will continue to be impacted by annual customer price reductions, uncertain global automotive production levels, our ability to leverage our fixed overhead costs, purchasing cost reductions, VAVE initiatives and manufacturing yields.
Our engineering research and development expense decreased by 1% in the fourth quarter of 2008 compared with the same 2007 period. Expense related to the Muth litigation which was settled on February 15, 2008 was $358,000 in the fourth quarter of 2007.
Excluding the Muth litigation expense, the ER&D expense would have increased by approximately 2% in fourth quarter of 2008. Compared with the same prior year period, the increased expense was primarily due to severance cost associated with the layoffs in the first quarter.
ER&D expense increased by 2% in calendar year 2008 compared with calendar year 2007, excluding Muth patent litigation expense of approximately $104,000, and the litigation judgment expense accrual reversal of $335,000 in calendar year 2008. Compared with patent litigation expense of $4.8 million for calendar year 2007, ER&D expense would have increased by approximately 13% for calendar year 2008 compared with calendar year 2007.
ER&D expense is currently expected to be slightly down for the first quarter of 2009 compared with the first quarter of 2008. Selling, general and administrative expense increased by 35% in the fourth quarter of 2008 compared with the same prior-year period.
Excluding the increase in the allowance for doubtful accounts of $3.8 million during the fourth quarter of 2008, SG&A expenses decreased by 6% compared to the same prior year period, primarily due to non-income based tax accrual reductions and foreign exchange rates. The company increased the allowance for doubtful accounts related to certain financially distressed tier-one automotive customers.
The company continues to ship to these customers based on direct payment arrangement for certain European automakers. Excluding Magna mirrors, our total tier-one credit exposure as of December 31, 2008 was approximately $10 million.
The company's total credit exposure for the Detroit three automakers as of December 31, 2008 was approximately $14 million. SG&A expense increased by 20% in calendar year 2008, compared with calendar year 2007.
Excluding the increase in the allowance for doubtful accounts, SG&A expenses increased by 10% compared with calendar year 2007, primarily due to continued expansion of the company's overseas offices. SG&A expense is currently expected to be approximately flat for the first quarter of 2009 compared with the first quarter of 2008 as the continued expansion of overseas offices is expected to be offset by foreign exchange rates.
Next, we'll talk a little bit about cost reduction actions. In response to the weakness in the automotive markets, the company eliminated its entire contract workforce which was followed by the elimination of a third shift of production near the end of the third quarter of 2008.
In addition, the company offered voluntary layoff, had a partial shutdown in the week of the Thanksgiving Holiday, and had expended plant shutdowns over the Christmas and New Year holidays, in response to similar plant shutdowns by its automotive customers. Since the automotive production schedules have continued to decline, and are forecasted to continue on the downward slope through most of calendar year 2009, the company permanently laid off approximately 290 hourly and 70 salaried workers in December 2008, which will help to reduce overhead and operating expenses bringing them to a level that is more in line with current and planned sales and production levels in the automotive and fire protection industry.
The salaried workforce reductions will reduce overhead and operating expenses by approximately 5.5 to $6 million on an annualized basis. Approximately half of the expense reductions will impact the company's overhead expenses, and the other half will impact the company's operating expenses, primarily in the engineering, research and development area.
The company continues to work to reduce expenses in a number of different areas. The primary areas that we are working on includes continued purchase cost reductions and VAVE efforts, a continued slow down in any new hiring reducing incentive employee compensation, reduced travel, supply healthcare and freight expenses, end of significant reduction and capital expenditures which will result in slower growth of depreciation expense.
Looking to next at other income and expense. For the fourth quarter of 2008, investment income was $3,351,000 and impairment loss was a negative $17,910,000 and other on a net basis was a negative $11,199,000.
For the calendar year 2008, investment income was $13,600,000. The impairment loss was $17,910,000.
Other net was a negative $12,308,000 resulting in a total expense for the year of $15,618,000. Under current mark-to-market rules, the company reported a non-cash other than temporary impairment charge of $17.9 million for unrealized losses on the company's equity investments.
In addition, the company reported realized losses of approximately $12.4 million on the sale of equity investments. During the fourth quarter, approximately one half for the realized losses were driven by the mark-to-market accounting rule.
A few balance sheet items. At December 31, 2008, accounts receivable were $44.5 million.
Inventories were $55 million, patents and other assets were $9.7 million, accounts payable were $19.7 million and accrued liabilities were $29.8 million. Our tax rate; the refundable effective tax rate of 35.2% during the quarter was greater than the forecasted rate of 33.25% and the statutory rate of 35% primarily due to tax exempt interests and the domestic manufacturing deductions.
Excluding stock option expensing, we currently expect that the tax rate for 2009 will be approximately 33% based on current tax laws, primarily due to tax exempt interest income and the domestic manufacturing deduction. Our year-to-date cash flow from operations was $120.6 million.
Our capital expenditures for the fourth quarter of 2008 was $7.3 million and $45.5 million for the 2008 calendar year. Our depreciation and amortization expense for the fourth quarter of 2008 was $8.7 million and $35.9 million for calendar year 2008.
For calendar year 2009, our estimate for capital expenditures is currently approximately 30 to $35 million. Depreciation and amortization expense for 2009 is currently estimated at 36 to $38 million.
Next, we will provide an update on our share repurchase plans. The company repurchased 2.1 million shares at a cost of approximately $17.9 million during the fourth quarter of 2008.
The company has the share repurchase plan in place with authorization and repurchase up to 28 million shares of the company stock. Today, including the prior share repurchases, the company has repurchased approximately 26 million shares, leaving approximately 2 million shares authorized to be repurchased under the plan.
The company's current share repurchase plan was originally announced in 2002. The objective of the plan was you have to be opportunistic and be based on the a number of factors including market conditions, the market price of the company's common stock, the anti-dilutive effect on earnings, available cash and other factors that the company deems appropriate.
Given the current market conditions, such as the market volatility on certain automotive production and sales levels, of potential customer bankruptcies, liquidity needs, et cetera you should expect that that factor to play a more important role in the decisions that are being made as to the number of shares being repurchased and at what prices they are repurchased. Cash dividends; on January 20, 2009 the company paid a quarterly cash dividend of $0.11 per share.
The shareholders of record of the common stock have closed the business on January 7th. The ex-dividend date was January 5.
The company's cash dividend policy was established based on a number of criteria including the favorable income tax treatment under current u.s. income tax laws and that any dividend be meaningful, sustainable and that the dividend rate would increase generally in line with the company's earnings and operating cash flow over time.
The cash dividend rate is an agenda item at every board of directors meeting. Investors have to ask if the company will continue to pay a cash dividend at the current level, given the current economic environment or if the company does not continue to earn the dividend.
On a balance sheet basis, the company could continue to pay a dividend within the above criteria for a long period of time. The decision on any change of the dividend policy is the Board decision and the Board would take into consideration the existing economic climate and will base any changes on their expectations as to the duration and magnitude of this global recession.
Next, we will provide an update on the SmartBeam feature. We continued to make progress with automakers as they more broadly offers SmartBeam across their product lines.
SmartBeam is a high beam, headlamp assist product that we introduced in 2005 model year, and we currently are shipping for 20, 2009 vehicle programs to six OEM customers including General Motors, Chrysler, BMW, Audi, Opel/Vauxhall and Toyota. There continue to be a number of follow-on programs for existing and new customer schedules for the 2009 calendar year.
For the 2008 calendar year, we shipped approximately 295,000 SmartBeam units. Based on our existing forecast, volumes and incremental sales dollars for SmartBeam will become more meaningful in the 2009 calendar year.
However, due to the current significant uncertainties with vehicle production volumes, we do not plan to provide an estimate for SmartBeam mirror unit shipments in 2009 at this time. Next, an update on our Rear Camera Display or RCD feature.
We currently have announced 22 OEM RCD programs with four automakers including Ford, Hyundai, Kia General Motors and Toyota and four after-market accessory programs with Mazda, Gulf States Toyota and Suzuki. There continues to be significant interest in Gentex's RCD Mirrors and we are working with a number of additional customers on original equipment programs that will be announced in 2009.
The company shipped approximately 270,000 RCD Mirror units in calendar year 2008. It's like vehicle productions starts to stabilize and does not significantly decline from currently forecasted levels by CSM.
We still believe that there is sufficient customer demand that shipments of RCD Mirrors could more than double in calendar year 2009 compared to 2008. Legislation; the automaker is currently offering of Rear Camera Display Product are doing this absent any legislation and made their decision before any was pending.
The legislation that was signed into law on February 28, 2008, called the Kids Transportation Safety Act of 2007, orders the Secretary of Transportation at the National Highway Traffic Safety Administration to revise the federal standard, to expand the field-of-view so that the drivers can detect objects directly behind vehicles. The phase and period during which automakers will need to meet the requirement set by NHTSA, is expected to be between now and 2016.
Next an update on dimmable aircraft window program. Boeing currently expects the first 787 Dreamliner aircraft to go into service in late 2009 or early 2010.
Due to the Boeing production delays, we currently anticipate that we will begin to deliver our windows to the aircraft production line in 2009. Boeing has also expressed interest in utilizing dimmable windows for other aircrafts.
On October 5, 2008, Gentex and PPG Aerospace announced that we also will be shipping dimmable aircraft windows for use on the passenger cabin windows of the 2010, Beechcraft King Air 350i aircraft. This is the first aircraft in general business aviation with dimmable windows.
Each King Air 350i will have 16 windows and we expect to begin shipments some time during calendar year of 2009. We are not allowed to provide information related to aircraft production volumes.
Other aircraft manufacturers continue to have interest in this technology and we are working on those potential programs with PPG Aerospace. Next, we'll look at revenue estimates.
The following projection for revenues in the first quarter of 2009 is based on CSM's mid-January light vehicle production forecast. Due to significant uncertainties with global vehicle production volumes, we do not plan to provide an estimate for revenues for calendar year 2009 at this time.
For the first quarter of 2009, our estimate for revenues is currently a decline of approximately 40% compared with the same period in 2008, based on the current forecast for light vehicle production levels, including customer plans for extended holiday plant shutdowns that carried over into the first quarter as well as customer releases for the 12-week release schedule. However, due to the many uncertainties in the marketplace, we believe that there is potentially more downside than upside to the current CSM forecast for global light vehicle production levels.
For the first quarter of 2009, light vehicle production per CSM for North America is 2 million vehicle units, which is a decline of 42%when compared with the first quarter of 2008. The first quarter light vehicle production for Europe is currently 3.8 million vehicle units, a decline of 34% compared to the first quarter of 2008.
And the light vehicle production forecast for Japan and Korea is currently 2.8 million vehicle units, a 29% decline compared to the first quarter of 2008. And for those of you who track these changes, these declines have all been significantly down since our prior guidance in October of 2008.
For the calendar year 2009, light vehicle production for North America is currently 10 million vehicles, a 21% decline compared to calendar year 2008. Light vehicle production for Europe is currently forecasted to be 17.4 million vehicles for calendar year 2009, a decline of 16% compared to calendar year 2008.
And the light vehicle production forecast for Japan and Korea is currently 12 million vehicles for calendar year 2009, a 17% decline compared to 2008 calendar year. And again, these are all significantly further declines compared to the October 2008 CSM forecast.
At this time, I will turn the conference call back over to Connie.
Connie Hamblin
Just as a quick reminder, all listeners should note that this call is being recorded by Gentex. All contents of Gentex Corporation's conference calls is the property of Gentex.
No such content may be copied, published, reproduced, rebroadcast, retransmitted or otherwise redistributed without the expressed written consent of Gentex Corporation. Gentex Corporation alone holds such rights.
While we understand that there maybe companies that transcribe and redistribute our conference calls notwithstanding this warning, Gentex provides no authorization to do so and expressly disclaims any responsibility for any unauthorized use of the content. We advise that you should not rely on the content of any unauthorized transcript, as Gentex Corporation will not be held liable for the content of any such transcript.
Gentex Corporation will hold responsible or liable any party for any damages incurred by Gentex with respect to such unauthorized use. Your participation implies consent to our taping and to the foregoing terms.
Please drop off the line if you do not agree to these terms. At this point, we're going to open it up to the Q&A.
Again, if you could ask one single question at a time that would be helpful and allow others to get in. You can get back in the queue.
Thank you. Operator, if you could open it up to Q&A.
Operator
Thank you. Today's question-and-answer session will be conducted electronically.
(Operator Instructions). Our first question comes from Himanshu Patel with J.P Morgan.
Ryan Brinkman - JPMorgan
Hi this is Ryan Brinkman for Himanshu. I just had a couple of quick questions.
The first one relates to any thoughts that you might have to further cutting SG&A and R&D deeper, given your revenue outlook?
Enoch Jen
Well, Ryan like we mentioned, the outlook beyond the first quarter is currently very uncertain and in talking with the folks at CSM, at least in North America, they are currently expecting that around the end of the first quarter a large part of the excess inventories will be burned off and production levels will more closely, approximately sell at sales levels. We continue to monitor the revenue forecasts and depending on whether the CSM forecast of gradual improvement during 2009 holds up or not, we will continue to evaluate our overhead ER&D and SG&A expenses.
As you are aware, a significant portion of our ER&D expenses are tied to new business wins that will go into production over the next two to three years. And the prior growth in our SG&A expenses is primarily related to the expansion of our overseas sales and engineering offices, as our overseas shipments are accounting for a larger and larger percentage of our total company revenues.
Ryan Brinkman - JPMorgan
Okay. I appreciate that.
Maybe this is just a housekeeping item but did you give fourth quarter Rear Camera Display and SmartBeam shipments?
Connie Hamblin
No. We do not give those on a quarterly basis.
We give annualized numbers.
Ryan Brinkman - JPMorgan
Okay. What were the annualized backend (ph) based amount...
RCD I believe is 279,000.
Enoch Jen
270,000. SmartBeam was 295,000 units.
Ryan Brinkman - JPMorgan
Okay. Thanks very much.
Enoch Jen
Welcome.
Connie Hamblin
Thank you.
Operator
Our next question comes from David Leiker with Robert Baird.
David Leiker - Robert W. Baird
Hi, good morning. Can you hear me?
Enoch Jen
Good morning David, yes.
Connie Hamblin
Yes. Can you hear us?
David Leiker - Robert W. Baird
Pardon.
Connie Hamblin
Can you hear us?
David Leiker - Robert W. Baird
Yes. That occurs sometimes these days, sorry about that.
I wanted you to kind of walk me through a little bit, if you look at an opportunity for you to continues to get your product, new vehicles down the road and I think you increased penetration on existing programs that you are on. Have you seen any changes in that as the auto industry go through this distress in terms of they are putting more vehicles as they are pushing them off a couple of years, or the mix is different and content, any kind of general discussion on what you're seeing from your customers in that regard?
Enoch Jen
I don't think we've seen any significant changes in any of those areas David. I think in terms of offering our mirrors on more vehicles, I think we've previously talked about Ford's plans to bring over half a dozen European vehicles over into the United States, and all of those European vehicles currently offer auto-dimming mirrors.
And in terms of features like SmartBeam and RCD, all the automakers continue to be interested in adding the feature onto more vehicles. So, we're not seeing any noticeable trends in terms that would negatively impact our business, other than the overall production levels.
David Leiker - Robert W. Baird
Okay great. And then just one clarification here, your comment on gross profit under pressure.
Is that sequentially or is that year-over-year?
Enoch Jen
Sequentially.
David Leiker - Robert W. Baird
Or both?
Enoch Jen
Both, but primarily sequentially we're talking about.
David Leiker - Robert W. Baird
Okay. Thank you.
Operator: Your next question comes from Brett Hoselton with KeyBanc.
Brett Hoselton - KeyBanc Capital Markets
Good morning.
Enoch Jen
Good morning Brett.
Brett Hoselton - KeyBanc Capital Markets
Just help me go through some of the unusual items and personally I don't see this as one part question Connie, but --
Connie Hamblin
That's okay. We'll just cut you off.
Brett Hoselton - KeyBanc Capital Markets
Thank you. First the $3.8 million...
if I heard you correctly, that was SG&A, and I'm wondering can you give us an after-tax impact of that?
Enoch Jen
Yeah that was within SG&A, and if you take the tax effective roughly 35% in the quarter, that would then give you the net after-tax effect on that.
Brett Hoselton - KeyBanc Capital Markets
Okay good. And the now the 17.9, the same 35%?
Enoch Jen
Yes.
Brett Hoselton - KeyBanc Capital Markets
Okay. And then the other income, what were the other components of the other income again?
I was trying to take fast but went through a number of them?
Enoch Jen
We had... for the quarter or for calendar year?
Brett Hoselton - KeyBanc Capital Markets
For the quarter please.
Enoch Jen
Okay. Investment income, 3,351,000 million, and that down on a year-over-year basis due to lower year-end mutual fund distributions as well as lower interest rates.
And then the impairment loss of the 17.9 million in other net the expense of 11,199,000 million.
Brett Hoselton - KeyBanc Capital Markets
Okay. And the other net -- what comprises that?
Enoch Jen
That's primarily realized losses on the sale of equity investments.
Brett Hoselton - KeyBanc Capital Markets
And finally, in the last quarter you actually kind gave us a sense of where thought other income was going to go from the third quarter to the fourth quarter. Do you have any guess as to where it might go into the first quarter?
Is this going to be zero, or do you think it's going to be up, down; any thoughts?
Enoch Jen
We have a gap there. I m not sure it's worth a whole lot.
I mean at this point, I think we would expect investment income to be approximately the same excluding the year-end mutual fund distributions, and during the fourth quarter of 2008 the year-end mutual fund distribution accounted for about a third of investment income. So for the first quarter, we would expect absent any other unusual factors that investment income would be about two-thirds of the level of the fourth quarter.
And then obviously the other two items, any further other than temporary impairment losses and any realized gains or losses, those both are somewhat subject to the whims of the stock market, and year-to-date it looks like there's more downside than upside to that at this point.
Brett Hoselton - KeyBanc Capital Markets
Okay. Thank you very much.
Connie Hamblin
You're Welcome. Operator: Our next question comes from David Linn (ph) with Wachovia.
Unidentified Analyst
Good morning. I just had a quick question.
What was the FX impact to revenues in the quarter?
Enoch Jen
It was less than 1 percentage point.
Unidentified Analyst
Great. That's all I have.
Thank you very much.
Enoch Jen
Thank you. Operator: Our next question comes from Greg Halter with Great Lakes Review.
Greg Halter - LJR Great Lakes Review
Yes. I wondered if you could further comment on the investment portfolio.
What it is invested and currently as well if there has been any change in your policy?
Enoch Jen
Well, there has not been any change in our policy and within the equity investment portfolio which is primarily the long-term investments on our balance sheet. We have those funds invested with over a dozen different investment managers of varying styles.
A portion of the portfolio is in mutual funds and that's primarily focused on the international side of the portfolio. And so, the overall portfolio have been performing in line with what the market has done and obviously for the calendar year 2008 the market has significantly declined which has generated some of the evaluation that we needed to do on other than temporary impairment.
Greg Halter - LJR Great Lakes Review
Can you characterize that in percentage of what you have in those types of areas?
Enoch Jen
As far as the equity investment allocation?
Greg Halter - LJR Great Lakes Review
And as well as the cash in short-term.
Enoch Jen
Okay. So if you look as December 31, our cash and cash equivalent was about $294 million.
Short-term investments were just over $29 million and our short-term investments are comprised primarily of government securities that mature in less than a year and then our long-term investments are just over $81 million as of the end of December.
Greg Halter - LJR Great Lakes Review
Great. And one quick one if I could sneak it in, can you clarify what you said on the...
relative to the dividend and the maintenance there? Thanks.
Enoch Jen
At what clarification are you looking for, Greg?
Greg Halter - LJR Great Lakes Review
Whether that would be maintained at a going-forward basis?
Enoch Jen
Well, what we said in our comments is that's really a decision by our Board of Directors and they will be influenced and take into consideration the existing economic climate and their expectations for the duration and magnitude of this global recession.
Greg Halter - LJR Great Lakes Review
Thank you.
Enoch Jen
You're welcome.
Operator
We will take a follow up question from Brett Hoselton of KeyBanc.
Brett Hoselton - KeyBanc Capital Markets
If the other than temporary impairment losses recognized in equity investments that's just mark-to-market, is that correct?
Enoch Jen
Yes.
Brett Hoselton - KeyBanc Capital Markets
Okay. And than you said Enoch that SmartBeam, although you are not giving guidance you said and I think it was something along the lines, is it going to be meaningful?
Enoch Jen
It will be more meaningful in terms of units and revenues in 2009, which I guess is a backend way of saying we expect some increased unit shipments in sales dollars. But the exact magnitude is somewhat uncertain at this time.
Brett Hoselton - KeyBanc Capital Markets
Okay. I understand.
I think that's fair. Can you maybe give us a broad brush sense.
I mean is it double or is it up 10%? More the former, more of the latter.
Any thoughts?
Connie Hamblin
Brett, if you remember actually we never have given a guidance number on that, we don't put any kind of number to it just because of the way in which we have to... the way the programs work on SmartBeam.
They are long retail program and there is a lot of engineering development on both our side and the customer side. And because there are many major milestones that need to be met along the way, potentially causing programs to be pushed out if there this is any misstep either on our part or the customer's part.
Though we have not previously really provided guidance there, so this is not a change.
Brett Hoselton - KeyBanc Capital Markets
Fair enough. Just tried...
I just asked. Thank you very much.
Connie Hamblin
Good try.
Operator
There are no further questions.
Connie Hamblin
Okay. Thank you.
we will be here to answer any additional questions that you may have. Have a good day.
Operator
This concludes today's conference call. Thanks for joining us and have a wonderful day.