Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-10235
GENTEX CORPORATION
(Exact name of registrant as specified in its charter)
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Michigan
(State or other jurisdiction of
incorporation or organization)
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38-2030505
(I.R.S. Employer Identification No.) |
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600 N. Centennial, Zeeland, Michigan
(Address of principal executive offices)
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49464
(Zip Code) |
(616) 772-1800
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
*
Yes o No o
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* |
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The registrant has not yet been phased into the interactive
data requirements. |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if smaller reporting company) |
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Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Yes o No þ
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PROCEEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
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Shares Outstanding |
Class |
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at October 22, 2009 |
Common Stock, $0.06 Par Value
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137,835,871 |
Exhibit Index located at page 20
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
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Item 1. |
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Consolidated Financial Statements. |
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, 2009 |
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December 31, 2008 |
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(Unaudited) |
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(Audited) |
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ASSETS
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
335,829,868 |
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$ |
294,306,512 |
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Short-term investments |
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14,170,466 |
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29,177,273 |
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Accounts receivable, net |
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74,336,716 |
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44,528,810 |
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Inventories |
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46,678,434 |
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54,993,855 |
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Prepaid expenses and other |
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23,983,882 |
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34,145,509 |
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Total current assets |
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494,999,366 |
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457,151,959 |
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PLANT AND EQUIPMENT NET |
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202,454,289 |
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214,951,719 |
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OTHER ASSETS |
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Long-term investments |
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92,844,598 |
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81,348,942 |
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Patents and other assets, net |
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10,387,322 |
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9,650,760 |
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Total other assets |
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103,231,920 |
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90,999,702 |
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Total assets |
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$ |
800,685,575 |
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$ |
763,103,380 |
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LIABILITIES AND SHAREHOLDERS INVESTMENT
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
32,221,450 |
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$ |
19,706,159 |
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Accrued liabilities |
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41,186,708 |
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29,766,279 |
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Total current liabilities |
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73,408,158 |
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49,472,438 |
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DEFERRED INCOME TAXES |
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18,514,914 |
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15,034,620 |
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SHAREHOLDERS INVESTMENT |
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Common stock |
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8,270,152 |
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8,258,010 |
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Additional paid-in capital |
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261,173,973 |
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253,821,363 |
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Retained earnings |
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424,106,719 |
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434,975,514 |
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Other shareholders investment |
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15,211,659 |
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1,541,435 |
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Total shareholders investment |
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708,762,503 |
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698,596,322 |
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Total liabilities and
shareholders investment |
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$ |
800,685,575 |
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$ |
763,103,380 |
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See accompanying notes to condensed consolidated financial statements.
- 2 -
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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NET SALES |
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$ |
155,741,847 |
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$ |
153,056,570 |
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$ |
366,915,101 |
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$ |
501,518,401 |
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COST OF GOODS SOLD |
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101,386,005 |
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106,359,938 |
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254,454,384 |
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333,094,524 |
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Gross profit |
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54,355,842 |
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46,696,632 |
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112,460,717 |
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168,423,877 |
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OPERATING EXPENSES: |
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Engineering, research and development |
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11,955,915 |
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13,101,431 |
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34,557,839 |
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39,236,174 |
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Selling, general
& administrative |
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9,296,514 |
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10,324,190 |
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26,522,075 |
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30,139,806 |
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Total operating expenses |
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21,252,429 |
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23,425,621 |
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61,079,914 |
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69,375,980 |
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Income from operations |
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33,103,413 |
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23,271,011 |
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51,380,803 |
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99,047,897 |
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OTHER INCOME (EXPENSE) |
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Investment income |
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567,664 |
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2,949,412 |
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2,627,968 |
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10,249,623 |
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Impairment loss on available-for-sale securities |
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0 |
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0 |
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(1,290,590 |
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0 |
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Other, net |
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1,911,329 |
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(3,515,596 |
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(1,219,762 |
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(1,110,016 |
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Total other income (expense) |
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2,478,993 |
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(566,184 |
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117,616 |
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9,139,607 |
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Income before provision
for income taxes |
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35,582,406 |
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22,704,827 |
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51,498,419 |
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108,187,504 |
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PROVISION FOR INCOME TAXES |
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11,645,552 |
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7,558,271 |
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16,909,189 |
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35,734,452 |
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NET INCOME |
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$ |
23,936,854 |
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$ |
15,146,556 |
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$ |
34,589,230 |
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$ |
72,453,052 |
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EARNINGS PER SHARE: |
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Basic |
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$ |
0.17 |
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$ |
0.11 |
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$ |
0.25 |
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$ |
0.51 |
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Diluted |
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$ |
0.17 |
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$ |
0.11 |
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$ |
0.25 |
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$ |
0.51 |
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Cash Dividends Declared per Share |
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$ |
0.11 |
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$ |
0.11 |
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$ |
0.33 |
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$ |
0.32 |
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See accompanying notes to condensed consolidated financial statements.
- 3 -
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2009 and 2008
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2009 |
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2008 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
34,589,230 |
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$ |
72,453,052 |
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Adjustments to reconcile net income to net
cash provided by operating activities: |
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Depreciation and amortization |
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28,895,520 |
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27,192,983 |
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(Gain) loss on disposal of assets |
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409,489 |
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674,471 |
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(Gain) loss on sale of investments |
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2,086,250 |
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899,317 |
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Impairment loss on available-for-sale securities |
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1,290,590 |
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0 |
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Deferred income taxes |
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(5,208,670 |
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2,771,058 |
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Stock-based compensation expense related to employee
stock options, employee stock purchases and restricted stock |
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6,876,619 |
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7,653,209 |
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Excess tax benefits from stock-based compensation |
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0 |
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(62,647 |
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Change in operating assets and liabilities: |
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Accounts receivable, net |
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(29,807,906 |
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(6,762,945 |
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Inventories |
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8,315,421 |
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(7,848,893 |
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Prepaid expenses and other |
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12,264,207 |
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503,283 |
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Accounts payable |
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12,515,291 |
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(13,795 |
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Accrued liabilities, excluding dividends declared |
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11,398,168 |
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(6,452,290 |
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Net cash provided by (used for) operating activities |
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83,624,209 |
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91,006,803 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Plant and equipment additions |
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(16,452,961 |
) |
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(38,206,068 |
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Proceeds from sale of plant and equipment |
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10,754 |
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11,002 |
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(Increase) decrease in investments |
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18,952,520 |
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40,273,213 |
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(Increase) decrease in other assets |
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336,465 |
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(774,474 |
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Net cash provided by (used for) investing activities |
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2,846,778 |
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1,303,673 |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Issuance of common stock from
stock plan transactions |
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488,133 |
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11,693,703 |
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Cash dividends paid |
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(45,435,764 |
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(45,097,502 |
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Repurchases of common stock |
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0 |
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(93,352,675 |
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Excess tax benefits from stock-based compensation |
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0 |
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62,647 |
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Net cash provided by (used for) financing activities |
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(44,947,631 |
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(126,693,827 |
) |
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS |
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41,523,356 |
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(34,383,351 |
) |
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CASH AND CASH EQUIVALENTS,
beginning of period |
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294,306,512 |
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317,717,093 |
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CASH AND CASH EQUIVALENTS,
end of period |
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$ |
335,829,868 |
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$ |
283,333,742 |
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See accompanying notes to condensed consolidated financial statements.
- 4 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) |
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The unaudited condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to such rules and
regulations, although the Registrant believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the financial statements and
notes thereto included in the Registrants 2008 annual report on Form 10-K. |
(2) |
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In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting of only a normal and recurring
nature, necessary to present fairly the financial position of the Registrant as of September
30, 2009, and the results of operations and cash flows for the interim periods presented. |
(3) |
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Adoption of New Accounting Standards |
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In June 2009, the Financial Accounting Standards Board (FASB) issued authoritative guidance at
Accounting Standards Codification (ASC) 105, FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles (ASC 105). The standard establishes
FASB Accounting Standards Codification (Codification) as the single source of authoritative
U.S. GAAP. Rules and interpretive releases of the U.S. Securities and Exchange Commission
(SEC), under authority of federal securities laws, are also sources of authoritative U.S. GAAP
for U.S. SEC registrants. ASC 105 is effective for interim or annual financial periods ending
after September 15, 2009. All existing accounting standards are superseded as described in this
statement. All other accounting literature not included in the Codification is
non-authoritative. The adoption of the codification standards, during the current quarter, did
not have a material impact on the Companys consolidated financial statements. |
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In June 2008, FASB issued authoritative guidance located at ASC 260, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities (ASC
260). The standard states that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of earnings per share pursuant to the two
class method. The standard is effective for fiscal years beginning after December 15, 2008.
The Company concluded that the adoption of ASC 260 did not have a material impact on its
reported basic and diluted earnings per share amounts. |
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In May 2009, FASB issued authoritative guidance at ASC 855, Subsequent Events. The standard
establishes principles and requirements for subsequent events. The standard also sets forth the
period after the balance sheet date during which management shall evaluate events/transactions
that may occur for potential recognition or disclosure in its financial statements. The
standard is effective for interim or annual financial periods ending after June 15, 2009. The
Company has evaluated subsequent events from its interim balance sheet date of September 30,
2009, to November 3, 2009, and concluded that no events/transactions require disclosure or
recognition in its consolidated financial statements. |
|
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In April 2009, FASB issued authoritative guidance at ASC 820, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions that are Not Orderly, and Recognition and Presentation of
Other-Than-Temporary Impairments. This standard provides additional application guidance and
enhanced disclosures about fair value measurements and impairments of securities, which
clarifies the objective and method of fair value measurement even when there has been a
significant decrease in market activity for the asset being measured. The standard established
a new model for measuring other-than-temporary impairments for debt securities, including
establishing criteria for when to recognize a write-down through earnings. There was no impact
to the Companys consolidated financial statements as a result of the adoption of this standard. |
- 5 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Unaudited)
(3) |
|
Adoption of New Accounting Standards (Continued) |
|
|
In September 2009, FASB issued Accounting Standards Update No. 2009-12, Investments in Certain
Entities that Calculate Net Asset Value Per Share (or its Equivalent) (ASU 2009-12). ASU
2009-12 amends ASC 820 by providing additional guidance on measuring the fair value of certain
alternative investments. The amended guidance is
effective for interim or annual financial periods ending after December 15, 2009. The amended
guidance is not expected to have an impact on the Companys consolidated financial statements. |
|
|
In April 2009, FASB issued authoritative guidance at ASC 825, Interim Disclosures about Fair
Value of Financial Instruments. This ASC expands the fair value disclosures required for all
financial instruments to interim periods. There was no impact to the consolidated financial
statements as a result of the adoption of this ASC. The required disclosures regarding fair
value financial instruments are included in Note 4 to the consolidated financial statements. |
|
|
FASB issued authoritative guidance at ASC 820, Fair Value Measurements. This standard
establishes a framework for measuring the fair value of assets and liabilities. This framework
is intended to provide increased consistency in how fair value determinations are made under
various existing accounting standards that permit or, in some cases, require estimates of
fair-market value. This standard also expands financial statement disclosure requirements about
a companys use of fair-value measurements, including the effect of such measure on earnings. |
|
|
The Company adopted the provisions of ASC 820 related to its financial assets and liabilities in
the first quarter of 2008, and to its non-financial assets and liabilities in the first quarter
of 2009, neither of which had a material impact on the Companys consolidated financial
position, results of operations or cash flows. The Companys investment securities are
classified as available for sale and are stated at fair value based on quoted market prices.
Assets or liabilities that have recurring measurements are shown below as of September 30, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets |
|
|
Significant |
|
|
Significant |
|
|
|
|
|
|
|
for Identical |
|
|
Other Observable |
|
|
Unobservable |
|
|
|
Total as of |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
Description |
|
September 30, 2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & Cash Equivalents |
|
$ |
335,829,868 |
|
|
$ |
335,829,868 |
|
|
$ |
|
|
|
$ |
|
|
Short-Term Investments |
|
|
14,170,466 |
|
|
|
14,170,466 |
|
|
|
|
|
|
|
|
|
Long-Term Investments |
|
|
92,844,598 |
|
|
|
92,844,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
$ |
442,844,932 |
|
|
$ |
442,844,932 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys short-term investments primarily consist of Government Securities. Long-term
investments primarily consist of marketable equity securities. |
- 6 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Unaudited)
(4) |
|
Investments (continued) |
|
|
The amortized cost, unrealized gains and losses, and market value of investment securities are
shown as of September 30, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Market value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Agency |
|
$ |
14,079,694 |
|
|
$ |
10,080 |
|
|
$ |
(3,803 |
) |
|
$ |
14,085,971 |
|
Certificates of Deposit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Fixed income |
|
|
84,495 |
|
|
|
|
|
|
|
|
|
|
|
84,495 |
|
Equity |
|
|
73,442,779 |
|
|
|
19,731,330 |
|
|
|
(329,511 |
) |
|
|
92,844,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
87,606,968 |
|
|
$ |
19,741,410 |
|
|
$ |
(333,314 |
) |
|
$ |
107,015,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investments as of September 30, 2009 (excluding other-than-temporary
impairments), are as follows: |
|
|
|
|
|
|
|
|
|
|
|
Aggregate Unrealized Losses |
|
|
Aggregate Fair Value |
|
|
|
|
|
|
|
|
|
|
Less than one year |
|
$ |
(333,314 |
) |
|
$ |
13,451,782 |
|
Greater than one year |
|
|
|
|
|
|
|
|
|
|
ASC 320, Accounting for Certain Investments in Debt and Equity Securities, as amended and
interpreted, provides guidance on determining when an investment is other than temporarily
impaired. The Company reviews its fixed income and equity investment portfolio for any
unrealized losses that would be deemed other-than-temporary and require the recognition of an
impairment loss in income. If the cost of an investment exceeds its fair value, the Company
evaluates, among other factors, general market conditions, the duration and extent to which the
fair value is less than cost, and the Companys intent and ability to hold the investments.
Management also considers the type of security, related-industry and sector performance, as well
as published investment ratings and analyst reports, to evaluate its portfolio. Once a decline
in fair value is determined to be other than temporary, an impairment charge is recorded and a
new cost basis in the investment is established. If market, industry, and/or investee
conditions deteriorate, the Company may incur future impairments. Management considered equity
investment losses of $17,909,901 to be other than temporary at December 31, 2008. The Company
considered additional equity investment losses of $1,290,590 to be other than temporary at March
31, 2009. Accordingly, the losses were recognized in the consolidated statement of income in
their respective reporting periods. No additional equity investment losses were considered to
be other than temporary at June 30, 2009 and September 30, 2009. |
|
|
Fixed income securities as of September 30, 2009, have contractual maturities as follows: |
|
|
|
|
|
Due within one year |
|
$ |
14,085,971 |
|
Due Between one and five years |
|
|
|
|
Due over five years |
|
|
|
|
- 7 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Unaudited)
(5) |
|
Inventories consisted of the following at the respective balance sheet dates: |
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
Raw materials |
|
$ |
29,289,627 |
|
|
$ |
36,164,930 |
|
Work-in-process |
|
|
6,458,181 |
|
|
|
6,787,891 |
|
Finished goods |
|
|
10,930,626 |
|
|
|
12,041,034 |
|
|
|
|
|
|
|
|
|
|
$ |
46,678,434 |
|
|
$ |
54,993,855 |
|
|
|
|
|
|
|
|
(6) |
|
The following table reconciles the numerators and denominators used in the
calculation of basic and diluted earnings per share (EPS): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Numerators: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for both basic and
diluted EPS, net income |
|
$ |
23,936,854 |
|
|
$ |
15,146,556 |
|
|
$ |
34,589,230 |
|
|
$ |
72,453,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominators: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic EPS,
weighted-average shares
outstanding |
|
|
137,216,748 |
|
|
|
140,233,348 |
|
|
|
137,163,501 |
|
|
|
141,913,581 |
|
Potentially dilutive shares
resulting from stock plans |
|
|
494,110 |
|
|
|
210,304 |
|
|
|
383,209 |
|
|
|
301,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted EPS |
|
|
137,710,858 |
|
|
|
140,443,652 |
|
|
|
137,546,710 |
|
|
|
142,214,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares related to stock plans not
included in diluted average common
shares outstanding because their
effect would be antidilutive |
|
|
7,567,738 |
|
|
|
7,708,950 |
|
|
|
8,601,081 |
|
|
|
6,030,965 |
|
(7) |
|
Stock-Based Compensation Plans |
|
|
At September 30, 2009, the Company had two stock option plans, a restricted stock plan and an
employee stock purchase plan. Readers should refer to Note 6 of our consolidated financial
statements in our Annual Report on Form 10-K for the calendar year ended December 31, 2008, for
additional information related to these stock-based compensation plans. |
|
|
The Company recognized compensation expense for share-based payments of $1,911,198 and
$5,587,206 for the third quarter and nine months ended September 30, 2009, respectively.
Compensation cost capitalized as part of inventory as of September 30, 2009, was $112,970. |
- 8 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Unaudited)
(7) |
|
Stock-Based Compensation Plans (Continued) |
|
|
Employee Stock Option Plan |
|
|
The fair value of each option grant in the Employee Stock Option Plan was estimated on the date
of grant using the Black-Scholes option pricing model with the following weighted-average
assumptions for the indicated periods: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Dividend yield |
|
|
2.67 |
% |
|
|
2.15 |
% |
|
|
2.59 |
% |
|
|
2.09 |
% |
Expected volatility |
|
|
39.79 |
% |
|
|
31.57 |
% |
|
|
38.72 |
% |
|
|
30.89 |
% |
Risk-free interest rate |
|
|
2.33 |
% |
|
|
2.98 |
% |
|
|
2.18 |
% |
|
|
2.94 |
% |
Expected term of options (in years) |
|
|
4.26 |
|
|
|
4.31 |
|
|
|
4.25 |
|
|
|
4.31 |
|
Weighted-average grant-date fair
value |
|
$ |
4.18 |
|
|
$ |
3.77 |
|
|
$ |
3.39 |
|
|
$ |
3.77 |
|
|
|
The Company determined that all employee groups exhibit similar exercise and post-vesting
termination behavior to determine the expected term. Under the plans, the option exercise price
equals the stocks market price on date of grant. The options vest after one to five years, and
expire after five to seven years. |
|
|
As of September 30, 2009, there was $10,204,667 of unrecognized compensation cost related to
share-based payments which is expected to be recognized over the vesting period with a
weighted-average period of 4.0 years. |
|
|
Non-employee Director Stock Option Plan |
|
|
As of September 30, 2009, there was $44,899 of unrecognized compensation cost under this plan
related to share-based payments which is expected to be recognized over the balance of the 2009
calendar year. Under the plan, the option exercise price equals the stocks market price on
date of grant. The options vest after six months, and expire after ten years. |
|
|
Employee Stock Purchase Plan |
|
|
In 2003, a new Employee Stock Purchase Plan covering 1,200,000 shares was approved by the
shareholders, replacing a prior plan. Under the plan, the Company sells shares at 85% of the
stocks market price at date of purchase. Under ASC 718, the 15% discounted value is recognized
as compensation expense. |
|
|
The Company has a Restricted Stock Plan covering 2,000,000 shares of common stock that was
approved by shareholders. The purpose of the Plan is to permit grants of shares, subject to
restrictions, to key employees of the Company as a means of retaining and rewarding them for
long-term performance and to increase their ownership in the Company. Shares awarded under the
plan entitle the shareholder to all rights of common stock ownership except that the shares may
not be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction
period. The restriction period is determined by the Compensation Committee, appointed by the
Board of Directors, but may not exceed ten years. As of September 30, 2009, the .Company had
unearned stock-based compensation of $4,446,727 associated with these restricted stock grants.
The unearned stock-based compensation related to these grants is being amortized to compensation
expense over the applicable restriction periods. Amortization expense from restricted stock
grants in the third quarter and nine months ended September 30, 2009, were $516,320 and
$1,289,413, respectively. |
(8) |
|
Comprehensive income reflects the change in equity of a business enterprise during a period
from transactions and other events and circumstances from non-owner sources. For the Company,
comprehensive income represents net income adjusted for items such as unrealized gains and
losses on investments and foreign currency translation adjustments. Comprehensive income
(loss) was as follows: |
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
September 30, 2008 |
|
Quarter Ended |
|
$ |
31,538,084 |
|
|
$ |
5,550,210 |
|
Nine Months Ended |
|
$ |
48,259,454 |
|
|
$ |
51,081,405 |
|
- 9 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Unaudited)
(9) |
|
The increase in common stock during the nine months ended September 30, 2009, was
primarily due to the issuance of 202,369 shares of the Companys common stock under its
stock-based compensation plans. The Company has also recorded a $0.11 per share cash dividend
in the first, second and third quarters. The third quarter dividend of approximately
$15,162,000, was declared on August 18, 2009, and was paid on October 16, 2009. |
(10) |
|
The Company currently manufactures electro-optic products, including automatic-dimming
rearview mirrors for the automotive industry, and fire protection products for the commercial
construction industry. The Company also develops and manufactures variably dimmable windows
for the aerospace industry and non-auto dimming rearview automotive mirrors with electronic
features: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Products |
|
$ |
151,088,880 |
|
|
$ |
147,290,164 |
|
|
$ |
352,245,253 |
|
|
$ |
484,157,368 |
|
Other |
|
|
4,652,967 |
|
|
|
5,766,406 |
|
|
|
14,669,848 |
|
|
|
17,361,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
155,741,847 |
|
|
$ |
153,056,570 |
|
|
$ |
366,915,101 |
|
|
$ |
501,518,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Products |
|
$ |
33,864,759 |
|
|
$ |
23,292,326 |
|
|
$ |
52,855,970 |
|
|
$ |
99,229,035 |
|
Other |
|
|
(761,346 |
) |
|
|
(21,315 |
) |
|
|
(1,475,167 |
) |
|
|
(181,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
33,103,413 |
|
|
$ |
23,271,011 |
|
|
$ |
51,380,803 |
|
|
$ |
99,047,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Other segment includes Fire Protection Products and Dimmable Aircraft Windows.
Dimmable Aircraft Windows sales were negligible during the third quarter and nine months
ended September 30, 2009, which resulted in a larger loss from operations for the Other
category. |
- 10 -
GENTEX CORPORATION AND SUBSIDIARIES
Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations.
RESULTS OF OPERATIONS:
THIRD QUARTER 2009 VERSUS THIRD QUARTER 2008
Net Sales. Net sales for the third quarter of 2009 increased by approximately
$2,685,000, or 2%, when compared with the third quarter last year. Net sales of the
Companys automotive mirrors increased by approximately $3,799,000, or 3%, in the third
quarter of 2009, when compared with the third quarter last year, primarily due to increased
penetration of advanced featured mirrors. Auto-dimming mirror unit shipments decreased 7%
from approximately 3,528,000 in the third quarter 2008 to approximately 3,297,000 in the
current quarter. Unit shipments to customers in North America for the current quarter
decreased by 4% compared with the third quarter of the prior year, primarily due to lower
light vehicle production levels. Mirror unit shipments for the current quarter to
automotive customers outside North America decreased by 8% compared with the third quarter
in 2008, primarily due to lower light vehicle production levels in Asia and Europe. Net
sales of the Companys fire protection products decreased 19% for the current quarter
versus the same quarter of last year, primarily due to the weaker commercial construction
market.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold decreased
from 69.5% in the third quarter of 2008 to 65.1% in the third quarter of 2009. This
period-over-period percentage decrease primarily reflected purchasing cost reductions,
reduced fixed overhead costs and improved product mix, partially offset by annual customer
price reductions. Each factor is estimated to have impacted cost of goods sold as a
percentage of net sales by 1-2 percentage points.
Operating Expenses. Engineering, research and development (E, R & D) expenses for
the current quarter decreased 9% and approximately $1,146,000 when compared with the same
quarter last year, primarily due to reduced employee compensation expense. Selling,
general and administrative expenses decreased 10% and approximately $1,028,000, for the
current quarter, when compared with the same quarter last year, primarily due to reduced
overseas office expenses, reduced travel related expenses and foreign exchange rates. Each
factor is estimated to have impacted selling, general and administrative expenses equally.
Total Other Income (Expense). Investment income for the current quarter decreased
by approximately $2,382,000, when compared with the third quarter of 2008, primarily due to
lower investment income due to lower interest rates.
Other-net for the current quarter increased approximately $5,427,000 when compared with the
third quarter of 2008, primarily due to realized gains on the sale of equity investments.
Taxes. The provision for income taxes varied from the statutory rate during the
current quarter, primarily due to the domestic manufacturing deduction.
Net Income. Net income for the third quarter of 2009 increased by approximately
$8,790,000, or 58%, when compared with the same quarter last year primarily due to the
increased operating margin and the increase in total other income.
NINE MONTHS ENDED SEPTEMBER 30, 2009, VERSUS NINE MONTHS ENDED SEPTEMBER 30, 2008
Net Sales. Net sales for the nine months ended September 30, 2009 decreased by
approximately $134,603,000, or 27%, when compared with the same period last year. Net
sales of the Companys automotive mirrors decreased by approximately $131,912,000, or 27%,
period over period, as auto-dimming mirror unit shipments decreased by 31% from
approximately 11,593,000 in the first nine months of 2008 to approximately 8,000,000 in the
first nine months of 2009. The decrease was primarily due to lower light vehicle
production levels globally. Unit shipments to customers in North America decreased by 39%
during the first nine months of 2009 versus the same period in 2008, primarily due to lower
light vehicle production levels. Mirror unit shipments to automotive customers outside
North America decreased by 26% period over period, primarily due to lower light vehicle
production levels in Asia and Europe. Net sales of the Companys fire protection products
decreased 16% period over period, primarily due to the weak commercial construction market.
- 11 -
Cost of Goods Sold. As a percentage of net sales, cost of goods sold increased
from 66.4% in the nine months ended September 30, 2008, to 69.3% in the nine months ended
September 30, 2009. This period-over-period percentage increase primarily reflected the
Companys inability to leverage fixed overhead costs due to decreased sales resulting from
lower light vehicle production levels globally. The impact of annual customer price
reductions was offset by purchasing cost reductions.
Operating Expenses. For the nine months ended September 30, 2009, engineering,
research and development expenses decreased 12% and approximately $4,678,000, when compared
with the same period last year, primarily due to reduced employee compensation expense.
Selling, general and administrative expenses decreased 12% and approximately $3,618,000 for
the nine months ended September 30, 2009, when compared with the same period last year,
primarily due to reduced employee compensation expense and foreign exchange rates. Foreign
exchange rates accounted for approximately one third of the decrease in selling, general
and administrative expenses.
Total Other Income (expense). Investment income for the nine months ended
September 30, 2009, decreased by approximately $7,622,000, when compared with the same
period last year, primarily due to lower investment income due to lower interest rates.
A non-cash charge for other-than-temporary impairment losses on available-for-sale
securities of approximately $1,291,000 was recognized in the first quarter of 2009 due to
unrealized losses on equity investments (refer to investment footnote for additional
details).
Other-net for the nine months ended September 30, 2009, decreased approximately $110,000
when compared with the same period last year, primarily due to realized losses on the sale
of equity investments.
Taxes. The provision for income taxes varied from the statutory rate during the
nine months ended September 30, 2009, primarily due to the domestic manufacturing
deduction.
Net Income. Net income decreased by approximately $37,864,000, or 52% for the nine
months ended September 30, 2009, when compared with the same period last year, primarily
due to reduced operating margin.
FINANCIAL CONDITION:
Cash flow from operating activities for the nine months ended September 30, 2009, decreased
approximately $7,383,000 to approximately $83,624,000, compared with approximately
$91,007,000, for the same period last year, primarily due to the decrease in net income,
partially offset by a decrease in inventory and an increase in accrued liabilities. Capital
expenditures for the nine months ended September 30, 2009, were $16,453,000, compared with
$38,206,000 for the same period last year, primarily due to reduced production equipment
purchases.
Cash and cash equivalents as of September 30, 2009, increased approximately $41,523,000
compared with December 31, 2008. The increase was primarily due to cash flow from
operations, partially offset by dividends paid.
Accounts receivable as of September 30, 2009, increased approximately $29,808,000 compared
with December 31, 2008, primarily due to the higher sales level as well as monthly sales
within each quarter.
Inventories as of September 30, 2009, decreased approximately $8,315,000 compared with
December 31, 2008. The decrease was primarily the result of a reduction in long lead time
electronic component raw materials inventory.
Prepaid expenses and other current assets as of September 30, 2009, decreased approximately
$10,162,000 compared to December 31, 2008. The decrease was primarily due to a reduction in
the Companys refundable income taxes.
Long-term investments as of September 30, 2009, increased approximately $11,496,000 compared
to December 31, 2008. The increase was primarily due to an increase in unrealized gains in
equity investments, partially offset by the sale of equity securities not re-invested as of
September 30, 2009.
- 12 -
Accounts payable as of September 30, 2009, increased $12,515,000 compared to December 31,
2008, primarily due to increased production levels.
Management considers the Companys working capital and long-term investments totaling
approximately $514,436,000 as of September 30, 2009, together with internally generated cash
flow and an unsecured $5,000,000 line of credit from a bank, to be sufficient to cover
anticipated cash needs for the next year and for the foreseeable future.
On October 8, 2002, the Company announced a share repurchase plan, under which it may
purchase up to 8,000,000 shares (post-split) based on a number of factors, including market
conditions, the market price of the Companys common stock, anti-dilutive effect on
earnings, available cash and other factors that the Company deems appropriate. On July 20,
2005, the Company announced that it had raised the price at which the Company may
repurchase shares under the existing plan. On May 16, 2006, the Company announced that the
Companys Board of Directors had authorized the repurchase of an additional 8,000,000
shares under the plan. On August 14, 2006, the Company announced that the Companys Board
of Directors had authorized the repurchase of an additional 8,000,000 shares under the
plan. And, on February 26, 2008, the Company announced that the Companys Board of
Directors had authorized the repurchase of an additional 4,000,000 shares under the plan.
The following is a summary of quarterly share repurchase activity under the plan to date:
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
Shares Purchased |
|
|
Cost of |
|
Quarter Ended |
|
(Post-Split) |
|
|
Shares Purchased |
|
March 31, 2003 |
|
|
830,000 |
|
|
$ |
10,246,810 |
|
September 30, 2005 |
|
|
1,496,059 |
|
|
|
25,214,573 |
|
March 31, 2006 |
|
|
2,803,548 |
|
|
|
47,145,310 |
|
June 30, 2006 |
|
|
7,201,081 |
|
|
|
104,604,414 |
|
September 30, 2006 |
|
|
3,968,171 |
|
|
|
55,614,102 |
|
December 31, 2006 |
|
|
1,232,884 |
|
|
|
19,487,427 |
|
March 31, 2007 |
|
|
447,710 |
|
|
|
7,328,015 |
|
March 31, 2008 |
|
|
2,200,752 |
|
|
|
34,619,490 |
|
June 30,
2008 |
|
|
1,203,560 |
|
|
|
19,043,775 |
|
September 30, 2008 |
|
|
2,519,153 |
|
|
|
39,689,410 |
|
December 31, 2008 |
|
|
2,125,253 |
|
|
|
17,907,128 |
|
|
|
|
|
|
|
|
Total |
|
|
26,028,171 |
|
|
$ |
380,900,454 |
|
|
|
|
|
|
|
|
1,971,829 shares remain authorized to be repurchased under the plan as of September 30,
2009.
CRITICAL ACCOUNTING POLICIES:
The preparation of the Companys consolidated condensed financial statements contained in
this report, which have been prepared in accordance with accounting principles generally
accepted in the Unites States, requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. On an
ongoing basis, management evaluates these estimates. Estimates are based on historical
experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that may not be readily apparent from other sources.
Historically, actual results have not been materially different from the Companys
estimates. However, actual results may differ from these estimates under different
assumptions or conditions.
The Company has identified the critical accounting policies used in determining estimates
and assumptions in the amounts reported in its Managements Discussion and Analysis of
Financial Condition and Results of Operations in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2008. Management believes there have been no significant
changes in those critical accounting policies.
- 13 -
TRENDS AND DEVELOPMENTS:
The Company previously announced a number of OEM and dealer or port-installed programs for
its Rear Camera Display (RCD) Mirror that consists of a liquid crystal display (LCD) that
shows a panoramic video of objects behind the vehicle in real time. The Company recently
announced that its RCD Mirror is offered on the 2010 Kia Sorento, Opirus, Forte and Morning
in the Korean market. The Company also announced that its RCD Mirror is offered on the new
Daithatsu Mira Cocoa mini-passenger vehicle in Japan. The Company started shipping RCD
Mirrors to Acura/Honda, who does not allow suppliers to announce vehicle programs in a news
release. The Company is currently shipping auto-dimming mirrors with RCD for 55 vehicle
models.
On February 28, 2008, the President signed into law the Kids Transportation Safety Act of
2007. The National Highway Traffic Safety Administration (NHTSA) had one year to initiate
rulemaking to revise the federal standard to expand the field of view so that drivers can
detect objects directly behind vehicles. NHTSA then has two years to determine how
automakers must meet the rules, which may include the use of additional mirrors, sensors,
rear back-up cameras (which could be in a mirror, navigation systems or other LCD display).
Once NHTSA publishes the new rules, automakers will have 48 months to comply with those
rules for vehicles in the United States. The Companys RCD Mirror is a cost competitive
product that is relatively easy to implement and may be among the technologies that NHTSA
will include as a means to meet the requirements of the legislation.
The Company previously announced it is shipping auto-dimming mirrors with SmartBeam®, its
proprietary intelligent high-beam headlamp assist feature, to General Motors, Chrysler,
BMW, Audi, Opel/Vauxhall, Toyota, Tata/Land Rover and Rolls Royce. During the current
quarter, the Company announced that SmartBeam is offered on the 2010 BMW X1 Series and the
Opel/Vauxhall Astra. The Company is currently shipping auto-dimming mirrors with SmartBeam
for 32 vehicle models.
During 2005, the Company reached an agreement with PPG Aerospace to work together to
provide the variably dimmable windows for the passenger compartment on the new Boeing 787
Dreamliner series of aircraft. The Company will ship about 100 windows for the passenger
compartment of each 787. The Company believes that the commercially viable market for
variably dimmable windows is currently limited to the aerospace industry. The Company
began shipping parts for test planes in mid-2007. Boeing, based on the latest information
available, now expects the first delivery of the 787 Dreamliner series of aircraft to occur
in late 2010. Delays were due to the impact of the machinists strike, fastener
replacement work and production issues due to complexity, which did not relate to the
Companys product. The Company anticipates that it will begin to deliver our windows to
the production line in the first half of 2010. During 2008, the Company and PPG Aerospace
announced that they will work together to supply dimmable windows to Hawker Beechcraft
Corporation for the passenger-cabin windows of the 2010 Beechcraft King Air 350i airplane.
The Company began shipping parts for the King Air 350i airplane in mid-2009 in low volume.
On May 14, 2009, the Company announced the development of its first carbon monoxide (CO)
alarm designed primarily for applications such as hotels, motels, hospitals, college
dormitories and nursing homes. The new product introduction comes at a time when over
twenty states are currently mandating carbon monoxide detection. The new carbon monoxide
alarm utilizes established sensing technology to deliver reliable performance whenever CO
detection is required. The product is in compliance with Underwriters Laboratories 2034
and National Fire Protection Association 720, and is being shipped to leading electrical
wholesalers, security product distributors and engineered systems distributors.
The Company currently estimates that top line revenue will increase approximately 30-35% in
the fourth quarter of 2009 compared with the same period in 2008, based on the current
forecast for light vehicle production levels and the Companys anticipated product mix.
These estimates are based on current light vehicle production forecasts for the fourth
quarter of 2009 in the regions to which the Company ships product, as well as the estimated
option rates for its mirrors on prospective vehicle models and anticipated product mix.
Uncertainties, including light vehicle production levels, extended automotive plant
shutdowns, sales rates in North America, Europe and Asia, customer inventory management,
and the impact of potential automotive customer (including their Tier 1 suppliers)
bankruptcies, work stoppages, strikes, etc., which could disrupt our shipments to these
customers, making forecasting difficult. The Company also estimates that engineering,
research and development expenses are
currently expected to be flat in the fourth quarter of 2009 compared with the same period
in 2008, primarily due to increased variable employee compensation expense, offset by
reduced headcount. Selling, general and administrative expenses are currently expected to
increase approximately 10% the fourth quarter of 2009 compared with the same period in
2008, primarily due to increased variable employee compensation expense and foreign
exchange rates.
- 14 -
The Company utilizes the light vehicle production forecasting services of CSM Worldwide,
and CSMs end-of-September forecast for light vehicle production for the fourth quarter of
2009 are approximately 2.7 million units for North America, 4.3 million for Europe and 2.9
million for Japan and Korea. CSMs end-of-September forecast for light vehicle production
for calendar year 2009 are approximately 8.6 million for North America, 16.1 million for
Europe and 10.4 million for Japan and Korea.
The global governmental vehicle stimulus programs, such as the Cash for Clunkers program
in the United States, did not have a significant direct effect on the Companys production
levels in the third quarter of 2009, since the smaller vehicles that people were mostly
purchasing were those that typically did not contain significant Gentex content. However,
there may have been some indirect effect due to the increased showroom traffic that those
programs created. While the governmental stimulus programs were in effect, automotive
vehicle sales were temporarily higher than automotive production levels. Now that sales
have decreased and the scenario has reversed, automakers, at some point, will need to
adjust their production plans for the lower sales levels.
The Company is subject to increased market risk exposures of varying correlations and
volatilities due to the turmoil in the financial markets, including foreign exchange rate
risk, interest rate risk and equity price risk. Uncertain equity markets could negatively
impact the Companys financial performance due to an increase in realized losses on the
sale of equity investments and/or recognized losses due to an other-than-temporary
impairment adjustment on available-for-sale securities (mark-to-market adjustments).
During the quarter ended September 30, 2009, there were no material changes in the risk
factors previously disclosed in the Companys report on Form 10-K for the fiscal year ended
December 31, 2008, although certain risks have increased as noted above.
The Company has some assets, liabilities and operations outside the United States, which
currently are not significant. Because the Company sells its automotive mirrors throughout
the world, the Company is significantly affected by weak economic conditions in worldwide
markets that are reducing demand for its products.
Automakers, now more than ever before, have been experiencing increased volatility and
uncertainty in executing planned new programs which have, in some cases, resulted in
cancellations or delays of new vehicle platforms, package reconfigurations and inaccurate
volume forecasts. This increased volatility and uncertainty has made it more difficult for
the Company to forecast future sales, effectively manage costs and utilize capital,
engineering, research and development, and human resource investments.
The Company continues to experience significant pricing pressures from its automotive
customers, which have affected, and which will continue to affect, its margins to the
extent that the Company is unable to offset the price reductions with productivity and
manufacturing yield improvements, engineering and purchasing cost reductions, and increases
in unit sales volume, all of which pose increasing challenges in the current automotive
production environment. In addition, financial pressures at certain automakers are
resulting in increased cost reduction efforts by them, including requests for additional
price reductions, decontenting certain features from vehicles, customer market testing of
future business, dual sourcing initiatives and warranty cost-sharing programs, which could
adversely impact the Companys sales growth, margins, profitability and, as a result, its
share price. The Company also continues to experience pressure for select raw material
cost increases.
While the automotive industry has always been cyclical and highly impacted by levels of
economic activity, the current environment (global recession, credit crisis, decline in
consumer confidence, government loans to certain OEMs that require certain conditions to
be met) is unprecedented and is causing increased financial and production stresses
evidenced by volatile production levels, supplier part shortages, customer and supplier
bankruptcies, automotive plant shutdowns, consumer preference shift to smaller vehicles
where the Company has a lower penetration rate and lower content per vehicle due to fuel
costs, overcapacity and commodity material cost increases. If additional automotive
customers (including their Tier 1 suppliers) experience bankruptcies, work
stoppages, strikes, part shortages, etc., it could disrupt the Companys shipments to these
customers, which could adversely affect the Companys sales, margins, profitability and, as
a result, its share price.
- 15 -
In light of the well-publicized financial stresses within the worldwide automotive
industry, certain automakers have filed for bankruptcy and other automakers and tier one
mirror customers are considering bankruptcy and/or the sale of certain business segments.
Should one or more of the Companys larger customers (including sales through their Tier 1
suppliers) declare bankruptcy or sell their business, it could adversely affect the
collection of receivables, sales, margins, profitability and, as a result, its share price.
The current uncertain economic environment continues to cause increased financial
pressures and production stresses on the Companys customers, which could impact timely
customer payments and ultimately the collectibility of receivables.
The Company increased its allowance for doubtful accounts by $3.8 million in the fourth
quarter of 2008 related to financially distressed Tier 1 automotive customers. While the
Company has made progress in collecting a portion of the significantly past due account
balances from certain customers, the overall allowance for doubtful accounts related to all
financially distressed Tier 1 automotive customers remains unchanged as of the end of the
current quarter.
As of June 30, 2009, the Company has been paid for all pre-petition bankruptcy receivables
relating to Chrysler who filed for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code on April 30, 2009. As of September 30, 2009, the Company received
payment for all pre-petition bankruptcy receivables relating to General Motors who filed
for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on June 1,
2009.
The Company implemented the first phase of a new Enterprise Resource Planning (ERP) System
effective July 1, 2009, which covered key core business areas at its Zeeland, Michigan
locations. To date, the Company has not experienced any significant issues during the
implementation process. However, there is no guarantee that all system components will
function as intended in the future. In addition, the Company is planning to implement the
second phase of its new ERP System by the end of calendar year 2009, which will include one
overseas office and additional lean manufacturing production line scheduling and business
reporting capabilities. While we believe that all necessary system development processes,
testing procedures and user training that is planned for phase two will be adequate and
completed prior to final implementation, there is no guarantee that all system components
will function as intended at the time of the phase two implementation. Unanticipated
failure(s) could cause delays in the Companys ability to produce or ship its products,
process transactions, or otherwise conduct business in its markets, resulting in material
financial risk.
The Company does not have any significant off-balance sheet arrangements or commitments
that have not been recorded in its consolidated financial statements.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
The information called for by this item is provided under the caption Trends and
Developments under Item 2 Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Item 4. Controls And Procedures.
The Companys management, with the participation of its principal executive officer and
principal financial officer, has evaluated the effectiveness, as of September 30, 2009, of
the Companys disclosure controls and procedures, as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act). Based upon that evaluation, the Companys management, including the
principal executive officer and principal financial officer, concluded that the Companys
disclosure controls and procedures, as of September 30, 2009, were adequate and effective
such that the information required to be disclosed by the Company in the reports filed or
submitted by it under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commissions rules and
forms, and information required to be disclosed by the Company in such reports is
accumulated and communicated to the Companys management, including its principal executive
officer and principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.
- 16 -
In the ordinary course of business, the Company may routinely modify, upgrade, and enhance
its internal controls and procedures over financial reporting. However, there was no
change in the Companys internal control over financial reporting [as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act] that occurred during the
quarter ended September 30, 2009, that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.
SAFE HARBOR STATEMENT:
Statements in this Quarterly Report on Form 10-Q contain 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 managements 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
Companys market share, the ability to achieve purchasing cost reductions, competitive
pricing pressures, currency fluctuations, interest rates, equity prices, the financial
strength/stability of the Companys customers (including their Tier 1 suppliers), supply
chain disruptions, potential sale of OEM business segments or suppliers, potential
additional customer (including their Tier 1 suppliers) bankruptcies, the mix of products
purchased by customers, the ability to continue to make product innovations, the success of
certain products (e.g. SmartBeam and Rear Camera Display Mirror), and other risks identified
in the Companys 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.
- 17 -
PART II OTHER INFORMATION
Item 1A. Risk Factors.
Information regarding risk factors appears in Managements Discussion and Analysis of Financial
Condition and Results of Operations in Part I Item 2 of this Form 10-Q and in Part I Item
1A Risk Factors of the Companys report on Form 10-K for the fiscal year ended December 31,
2008. There have been no material changes from the risk factors previously disclosed in the
Companys report on Form 10-K for the year ended December 31, 2008, except to the extent
described in Part I Item 2 of this Form 10-Q.
Item 6. Exhibits
See Exhibit Index on Page 20.
- 18 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
GENTEX CORPORATION |
|
|
|
Date: November 3, 2009
|
|
/s/ Fred T. Bauer |
|
|
|
|
|
Fred T. Bauer |
|
|
Chairman and Chief
Executive Officer |
|
|
|
Date: November 3, 2009
|
|
/s/ Steven A. Dykman |
|
|
|
|
|
Steven A. Dykman |
|
|
Vice President Finance,
Principal Financial and
Accounting Officer |
- 19 -
EXHIBIT INDEX
|
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Exhibit No. |
|
Description |
|
Page |
|
|
|
|
|
|
|
|
|
|
3 |
(a) |
|
Registrants Restated Articles of Incorporation, adopted on August 20, 2004, were
filed as Exhibit 3(a) to Registrants Report on Form 10-Q dated November 2, 2004,
and the same is hereby incorporated herein by reference. |
|
|
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|
|
|
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|
|
|
|
|
|
|
3 |
(b) |
|
Registrants Bylaws as amended and restated February 27, 2003, were filed as
Exhibit 3(b)(1) to
Registrants Report on Form 10-Q dated May 5, 2003, and the same are hereby
incorporated herein by reference. |
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|
|
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|
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4 |
(a) |
|
A specimen form of certificate for the Registrants common stock, par value $.06
per share, were filed as part of a Registration Statement on Form S-8
(Registration No. 2-74226C) as Exhibit 3(a), as amended by Amendment No. 3 to such
Registration Statement, and the same is hereby incorporated herein by reference. |
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4 |
(b) |
|
Amended and Restated Shareholder Protection Rights Agreement, dated as of March
29, 2001, including as Exhibit A the form of Certificate of Adoption of Resolution
Establishing Series of Shares of Junior Participating Preferred Stock of the
Company, and as Exhibit B the form of Rights Certificate and of Election to
Exercise, was filed as Exhibit 4(b) to Registrants Report on Form 10-Q dated
April 27, 2001, and the same is hereby incorporated herein by reference. |
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|
10 |
(a)(1) |
|
A Lease dated August 15, 1981, was filed as part of a Registration Statement
on Form S-1 (Registration Number 2-74226C) as Exhibit 9(a)(1), and the same is
hereby incorporated herein by reference. |
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|
|
|
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|
10 |
(a)(2) |
|
First Amendment to Lease dated June 28, 1985, was filed as Exhibit 10(m) to
Registrants Report on Form 10-K dated March 18, 1986, and the same is hereby
incorporated herein by reference. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*10 |
(b)(1) |
|
Gentex Corporation Qualified Stock Option Plan (as amended and restated, effective
February 26, 2004) was included in Registrants Proxy Statement dated April 6, 2004, filed with
the Commission on April 6, 2004, which is hereby incorporated herein by reference. |
|
|
|
|
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|
|
|
|
|
|
|
|
*10 |
(b)(2) |
|
First Amendment to Gentex Corporation Stock Option Plan (as amended and restated
February 26, 2004) was filed as Exhibit 10(b)(2) to Registrants Report on Form 10-Q dated
August 2, 2005, and the same is hereby incorporated herein by reference. |
|
|
|
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|
|
|
|
|
|
|
*10 |
(b)(3) |
|
Specimen form of Grant Agreement for the Gentex Corporation Qualified Stock Option Plan (as amended and restated, effective February
26, 2004) was filed as Exhibit 10(b)(3) to Registrants Report on Form 10-Q dated November 1, 2005, and the same is hereby
incorporated herein by reference. |
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|
|
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|
|
*10 |
(b)(4) |
|
Gentex Corporation Second Restricted Stock Plan was filed as Exhibit 10(b)(2) to Registrants Report on Form 10-Q dated April 27,
2001, and the same is hereby incorporated herein by reference. |
|
|
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|
|
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|
|
|
|
|
|
|
|
*10 |
(b)(5) |
|
First Amendment to the Gentex Corporation Second Restricted Stock Plan was filed as Exhibit
10(b)(5) to Registrants Report on Form 10-Q dated August 4, 2008, and the same is hereby
incorporated herein by reference. |
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|
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|
|
|
|
|
|
|
|
|
|
|
*10 |
(b)(6) |
|
Specimen form of Grant Agreement for the Gentex Corporation Restricted Stock Plan, was filed
as Exhibit 10(b)(4) to Registrants Report on Form 10-Q dated November 2, 2004, and the same
is hereby incorporated herein by reference. |
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|
- 20 -
|
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|
|
Exhibit No. |
|
Description |
|
Page |
|
|
*10 |
(b)(7) |
|
Gentex Corporation 2002 Non-Employee Director Stock Option Plan (adopted March 6, 2002), was filed as Exhibit 10(b)(4) to Registrants
Report on Form 10-Q dated April 30, 2002, and the same is incorporated herein by reference. |
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|
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|
|
|
|
|
|
|
|
|
|
|
*10 |
(b)(8) |
|
Specimen form of Grant Agreement for the Gentex Corporation 2002 Non-Employee Director
Stock Option Plan, was filed as Exhibit 10(b)(6) to Registrants Report on Form 10-Q dated November 2, 2004, and the same is hereby
incorporated herein by reference. |
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10 |
(c) |
|
The form of Indemnity Agreement between Registrant and each of the Registrants directors
and certain officers was filed as Exhibit 10 (e) to Registrants Report on Form 10-Q dated October 31, 2002, and the same is
incorporated herein by reference. |
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31.1 |
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Certificate of
the Chief Executive Officer of Gentex Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
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22 |
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31.2 |
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Certificate of
the Chief Financial Officer of Gentex Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
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23 |
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32 |
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Certificate of the Chief Executive Officer and Chief Financial Officer of Gentex Corporation
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). |
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24 |
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* |
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Indicates a compensatory plan or arrangement. |
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