<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
------ -------
COMMISSION FILE NO. 0-10235
GENTEX CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2030505
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 N. CENTENNIAL, ZEELAND, MICHIGAN 49464
(Address of principal executive offices) (Zip Code)
(616) 772-1800
(Registrant's 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 x No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING 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 No
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APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Class at April 14, 1997
- ----------------------------- ------------------
Common Stock, $0.06 Par Value 34,924,311
Exhibit Index located at page 10
Page 1 of 11
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 31, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS
March 31, 1997 December 31, 1996
CURRENT ASSETS -------------- -----------------
<S> <C> <C>
Cash and cash equivalents $ 12,088,810 $ 16,730,356
Short term investments 22,199,048 31,803,621
Accounts receivable, net 20,246,635 17,015,174
Inventories 7,853,841 6,180,422
Prepaid expenses and other 1,235,524 966,287
------------ ------------
Total current assets 63,623,858 72,695,860
PLANT AND EQUIPMENT - NET 33,151,993 31,574,547
OTHER ASSETS
Long-term investments 55,831,594 33,945,446
Patents and other assets, net 2,184,888 2,162,567
------------ ------------
Total other assets 58,016,482 36,108,013
------------ ------------
Total assets $154,792,333 $140,378,420
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 8,968,494 $ 5,794,832
Accrued liabilities 7,004,995 5,566,085
------------ ------------
Total current liabilities 15,973,489 11,360,917
DEFERRED INCOME TAXES 1,287,463 1,213,862
SHAREHOLDERS' INVESTMENT
Common stock 2,095,459 2,084,957
Additional paid-in capital 47,311,156 44,963,895
Other shareholders' equity 88,124,766 80,754,789
------------ ------------
Total shareholders' investment 137,531,381 127,803,641
------------ ------------
Total liabilities and
shareholders' investment $154,792,333 $140,378,420
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 3
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
NET SALES $41,902,122 $35,908,083
COST OF GOODS SOLD 27,169,956 22,377,952
----------- -----------
Gross profit 14,732,166 13,530,131
OPERATING EXPENSES:
Research and development 2,077,268 1,727,234
Selling, general
& administrative 2,690,391 3,642,004
Patent settlement 0 4,000,000
----------- -----------
Total operating expenses 4,767,659 9,369,238
----------- -----------
Income from operations 9,964,507 4,160,893
OTHER INCOME
Interest and dividend income 951,649 815,275
Other, net 23,122 17,481
----------- -----------
Total other income 974,771 832,756
----------- -----------
Income before provision
for federal income taxes 10,939,278 4,993,649
PROVISION FOR FEDERAL INCOME TAXES 3,555,000 1,648,000
----------- -----------
NET INCOME $ 7,384,278 $ 3,345,649
=========== ===========
EARNINGS PER SHARE $ 0.21 $ 0.10
WEIGHTED DAILY AVERAGE OF
COMMON STOCK OUTSTANDING 35,745,958 34,761,962
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,384,278 $ 3,345,649
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 1,519,844 989,598
Loss (Gain) on disposal of equipment 5,319 0
Deferred income taxes 44,130 1,362,768
Amortization of deferred compensation 154,424 115,510
Change in assets and liabilities:
Accounts receivable, net (3,231,461) (1,726,603)
Inventories (1,673,419) (614,885)
Prepaid expenses and other (152,932) (66,553)
Accounts payable 3,173,662 1,793,527
Accrued liabilities 1,438,910 2,090,087
------------ -----------
Net cash provided by
operating activities 8,662,755 7,289,098
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in short-term investments 9,604,573 (2,732,274)
Plant and equipment additions (3,056,724) (4,363,901)
Proceeds from sale of plant and equipment 1,500 0
Increase in long-term investments (22,134,246) (2,954,245)
Increase in other assets (77,167) (99,591)
------------ -----------
Net cash used for
investing activities (15,662,064) (10,150,011)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 2,357,763 2,422,659
------------ -----------
Net cash provided by
financing activities 2,357,763 2,422,659
------------ -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (4,641,546) (438,254)
CASH AND CASH EQUIVALENTS,
beginning of period 16,730,356 14,115,041
------------ -----------
CASH AND CASH EQUIVALENTS,
end of period $12,088,810 $13,676,787
============ ===========
</TABLE>
See accompanying notes to condensed financial statements
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<PAGE> 5
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The 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 generally accepted accounting
principles 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 condensed consolidated financial statements be read
in conjunction with the financial statements and notes thereto included in
the Registrant's 1996 annual report on Form 10-K.
(2) 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 March 31, 1997, and December
31, 1996, and the results of operations and cash flows for the interim
periods presented.
(3) Inventories consisted of the following at the respective quarter ends:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Raw materials $5,348,393 $3,860,534
Work-in-process 348,336 348,336
Finished goods 2,157,112 1,971,552
---------- ----------
$7,853,841 $6,180,422
========== ==========
</TABLE>
(4) During the quarter ended March 31, 1997, the Company reclassified
$11,207,492 of U.S. Government fixed income securities from
held-to-maturity to available-for-sale. This resulted in recording an
unrealized net of tax gain of $24,621.
(5) All earnings per share amounts and weighted daily average of shares of
common stock outstanding have been restated, to reflect the two-for-one
stock split effected in the form of a 100 percent common stock dividend
issued to shareholders on June 24, 1996.
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<PAGE> 6
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
FIRST QUARTER 1997 VERSUS FIRST QUARTER 1996
Net Sales. Net sales for the first quarter of 1997 increased by
approximately $5,994,000, or 17%, when compared with the first quarter
last year. Net sales of the Company's automotive mirrors increased by
17% as automatic mirror unit shipments increased by 20% from
approximately 720,000 in the first quarter of 1996 to 864,000 in the
current quarter. This increase reflected increased penetration on
domestic and foreign 1997 model year vehicles for interior and exterior
electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors. Mirror unit
shipments to automotive customers outside North America increased by
46% compared with the first quarter in 1996. Shipments to customers in
North America increased by 11%, compared with approximate 5% growth in
North American light vehicle production. Net sales of the Company's
fire protection products increased 12%, primarily due to increased
sales of the Company's audible and visual signals, such as primary
evacuation horns and strobe warning lights.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased from 62% in the first quarter of 1996 to 65% for the
comparable period in 1997. This increased percentage primarily
reflected automotive customer price reductions not fully offset by
productivity improvements, relatively low yields on the Company's new
aspheric exterior mirrors as volume shipments began during the quarter,
and increased overhead and start-up expenses for the new 1998 model
year mirror programs.
Operating Expenses. Research and development expenses increased
approximately $350,000, but remained at 5% of net sales, when compared
with the same quarter last year, primarily reflecting additional
staffing for new product development, including aspheric exterior
mirrors, thin glass exterior mirrors, and mirrors with other electronic
features. Selling, general and administrative expenses decreased
approximately $952,000, and decreased from 10% to 6% of net sales, when
compared with the first quarter of 1996. This decreased expense
primarily reflected lower patent litigation legal expense accruals of
$30,000, compared to $1,200,000 last year. During the first quarter
in 1996, the Company recorded a one-time charge of $4,000,000 in
connection with the settlement of its patent litigation with Donnelly
Corporation.
Other Income - Net. Investment income increased by approximately
$142,000 when compared with the first quarter of 1996, primarily due to
the higher investable fund balances.
FINANCIAL CONDITION:
Management considers the Company's working capital and long-term
investments totaling approximately $103,482,000 at March 31, 1997,
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 foreseeable future.
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONT.)
TRENDS AND DEVELOPMENTS:
In addition to price reductions over the life of its long-term
contracts, the Company continues to experience 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 improvements, engineering
and purchasing cost reductions, and increases in unit sales volume. In
addition, the Company continues to experience some pressure for raw
material cost increases. The Company began volume shipments of its new
aspheric exterior mirrors during the first quarter and will begin
volume shipments of its new thin glass exterior mirrors toward the end
of the second quarter; margins will be adversely affected to the extent
that the Company is unable to improve glass yields to target levels and
ramp-up production on schedule.
The Company currently supplies NVS(R) Mirrors to BMW, Chrysler
Corporation, Ford Motor Company and General Motors Corporation under
long-term contracts. The General Motors contract is in effect through
the 1998 model year, and the contracts with BMW are in effect for the
four-year period ending March 31, 1999. The term of the Ford contract
is through December 1999, and the Chrysler contract runs through the
1999 Model Year.
During February 1997, the Financial Accounting Standards Board issued
statement of Financial Accounting Standard (FAS) No. 128 "Earnings Per
Share." This standard is effective for periods ending after December
15, 1997. The Company will adopt FAS No. 128 in its fourth quarter for
the year ending December 31, 1997. The Company does not expect the
impact of FAS No. 128 to materially affect the financial statements.
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<PAGE> 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 10.
(b) No reports on Form 8-K were filed during the three months
ended March 31, 1997.
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<PAGE> 9
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 4/30/97 /s/ Fred T. Bauer
--------------- -----------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date 4/30/97 /s/ Enoch C. Jen
--------------- -----------------------
Enoch C. Jen
Vice President-Finance,
Principal Financial and
Accounting Officer
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<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
3(a) Registrant's Articles of Incorporation were filed in 1981 as Exhibit
2(a) to a Registration Statement on Form S-18 (Registration No.
2-74226C), an Amendment to those Articles was filed as Exhibit 3 to
Registrant's Report on Form 10-Q in August of 1985, an additional
Amendment to those Articles was filed as Exhibit 3(a)(i) to
Registrant's Report on Form 10-Q in August of 1987, and an additional
Amendment to those Articles was filed as Exhibit 3(a)(2) to
Registrant's Report on Form 10-K dated March 10, 1992, all of which
are hereby incorporated herein by reference. Amendment to Articles
of Incorporation, adopted on May 9, 1996, was filed as Exhibit
3(a)(2) to Registrant's Report on Form 10-Q dated July 31, 1996, and
the same is incorporated herein by reference.
3(b) Registrant's Bylaws as amended and restated August 18, 1995 were
filed as Exhibit 3(b) to Registrant's Report on Form 10-Q dated
November 1, 1995, and the same is incorporated herein by reference.
4(a) A specimen form of certificate for the Registrant's common stock, par
value $.06 per share, was filed as part of a Registration Statement
on Form S-18 (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.
4(b) Shareholder Protection Rights Agreement, dated as of August 26, 1991,
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
Registrant's report on Form 8-K on August 20, 1991, and the same is
hereby incorporated herein by reference.
4(b)(1) First Amendment to Shareholder Protection Rights Agreement, effective
April 1, 1994, was filed as Exhibit 4(b)(1) to Registrant's report on
Form 10-Q on April 29, 1994, and the same is hereby incorporated
herein by reference.
4(b)(2) Second Amendment to Shareholder Protection Rights Agreement,
effective November 8, 1996, was filed as Exhibit 4(b)(2) to
Registrant's Report on Form 10-K, dated March 7, 1997, and the same
is hereby incorporated herein by reference.
10(a)(1) A Lease dated August 15, 1981, was filed as part of a Registration
Statement (Registration Number 2-74226C) as Exhibit 9(a)(1), and the
same is hereby incorporated herein by reference.
10(a)(2) A First Amendment to Lease dated June 28, 1985, was filed as Exhibit
10(m) to Registrant's 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 March 7, 1997), was filed as Exhibit 10(b)(1) to
Registrant's Report on Form 10-K dated March 7, 1997, and the same is
hereby incorporated herein by reference.
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
*10(b)(2) Gentex Corporation 1987 Incentive Stock Option Plan (as amended
through May 24, 1989), was filed as Exhibit 10(g)(3) to Registrant's
Report on Form 10-K dated March 1, 1990, and the same is hereby
incorporated herein by reference.
*10(b)(3) Gentex Corporation Restricted Stock Plan was filed as Exhibit
10(b)(3) to Registrant's Report on Form 10-K dated March 10, 1992,
and the same is hereby incorporated herein by reference.
*10(b)(4) Gentex Corporation Non-Employee Director Stock Option Plan (as
amended and restated, effective March 7, 1997) was filed as Exhibit
10(b)(4) to Registrant's Report on Form 10-K dated March 7, 1997, and
the same is incorporated herein in reference.
10(e) The form of Indemnity Agreement between Registrant and each of the
Registrant's directors was filed as a part of a Registration
Statement on Form S-2 (Registration No. 33-30353) as Exhibit 10(k)
and the same is hereby incorporated herein by reference.
27 Financial Data Schedule
</TABLE>
-------------------------------
* Indicates a compensatory plan or arrangement.
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,088,810
<SECURITIES> 22,199,048
<RECEIVABLES> 20,246,635
<ALLOWANCES> 0
<INVENTORY> 7,853,841
<CURRENT-ASSETS> 63,623,858
<PP&E> 50,244,294
<DEPRECIATION> (17,092,301)
<TOTAL-ASSETS> 154,792,333
<CURRENT-LIABILITIES> 15,973,489
<BONDS> 0
0
0
<COMMON> 2,095,459
<OTHER-SE> 135,435,922
<TOTAL-LIABILITY-AND-EQUITY> 154,792,333
<SALES> 41,902,122
<TOTAL-REVENUES> 41,902,122
<CGS> 27,169,956
<TOTAL-COSTS> 27,169,956
<OTHER-EXPENSES> (974,771)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,939,278
<INCOME-TAX> 3,555,000
<INCOME-CONTINUING> 7,384,278
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,384,278
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
