<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, 1999, 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 Section 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
---------- ----------
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 15, 1999
----- ------------------
Common Stock, $0.06 Par Value 72,713,814
Exhibit Index located at page 10
Page 1 of 12
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
ASSETS
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 78,902,280 $ 50,027,747
Short term investments 25,123,001 24,034,876
Accounts receivable, net 31,862,398 30,256,795
Inventories 9,318,865 8,726,420
Prepaid expenses and other 2,495,870 2,311,581
------------ ------------
Total current assets 147,702,414 115,357,419
PLANT AND EQUIPMENT - NET 59,756,404 59,359,885
OTHER ASSETS
Long-term investments 76,070,098 78,744,138
Patents and other assets, net 1,575,485 1,428,116
------------ ------------
Total other assets 77,645,583 80,172,254
------------ ------------
Total assets $285,104,401 $254,889,558
============ ============
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 10,627,106 $ 7,602,933
Accrued liabilities 14,728,881 7,243,957
------------ ------------
Total current liabilities 25,355,987 14,846,890
DEFERRED INCOME TAXES 2,603,060 3,034,450
SHAREHOLDERS' INVESTMENT
Common stock 4,361,704 4,335,535
Additional paid-in capital 69,582,762 64,876,098
Other shareholders' equity 183,200,888 167,796,585
------------ ------------
Total shareholders' investment 257,145,354 237,008,218
------------ ------------
Total liabilities and
shareholders' investment $285,104,401 $254,889,558
============ ============
</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, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
NET SALES $65,618,190 $56,979,402
COST OF GOODS SOLD 36,624,710 34,340,509
----------- -----------
Gross profit 28,993,480 22,638,893
OPERATING EXPENSES:
Research and development 3,291,327 2,579,229
Selling, general
& administrative 3,414,208 3,036,013
----------- -----------
Total operating expenses 6,705,535 5,615,242
----------- -----------
Income from operations 22,287,945 17,023,651
OTHER INCOME
Interest and dividend income 1,644,479 1,246,187
Other, net 824,260 305,445
----------- -----------
Total other income 2,468,739 1,551,632
----------- -----------
Income before provision
for federal income taxes 24,756,684 18,575,283
PROVISION FOR FEDERAL INCOME TAXES 8,047,000 6,074,000
----------- ---------
NET INCOME $16,709,684 $12,501,283
=========== ===========
Earnings Per Share
Basic $ 0.23 $ 0.18
Diluted $ 0.22 $ 0.17
Weighted Average Shares:
Basic 72,412,314 71,125,196
Diluted 74,688,492 73,356,376
</TABLE>
See accompanying notes to condensed consolidated financial statements.
- 3 -
<PAGE> 4
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,709,684 $ 12,501,283
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 2,291,241 2,145,732
(Gain) Loss on disposal of equipment 0 30,395
Deferred income taxes (3,613) (120,968)
Amortization of deferred compensation 165,581 123,638
Change in assets and liabilities:
Accounts receivable, net (1,605,603) (2,992,088)
Inventories (592,445) 316,727
Prepaid expenses and other (61,712) 237,269
Accounts payable 3,024,173 2,740,316
Accrued liabilities 7,484,924 5,278,569
------------ ------------
Net cash provided by
operating activities 27,412,230 20,260,873
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in short-term investments (1,088,125) (3,009,569)
Plant and equipment additions (2,674,055) (11,949,293)
Proceeds from sale of plant and equipment 0 0
(Increase) Decrease in long-term investments 1,101,599 105,417
(Increase) Decrease in other assets (180,312) (220,064)
------------ ------------
Net cash used for
investing activities (2,840,893) (15,073,509)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 4,303,196 5,135,542
------------ ------------
Net cash provided by
financing activities 4,303,196 5,135,542
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 28,874,533 10,322,906
CASH AND CASH EQUIVALENTS,
beginning of period 50,027,747 26,768,647
------------ ------------
CASH AND CASH EQUIVALENTS,
end of period $ 78,902,280 $ 37,091,553
============ ============
</TABLE>
See accompanying notes to condensed consolidated 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 1998 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, 1999, and December 31,
1998, and the results of operations and cash flows for the interim periods
presented.
(3) Inventories consisted of the following at the respective quarter ends:
March 31, 1999 December 31, 1998
-------------- -----------------
Raw materials $5,032,725 $4,301,060
Work-in-process 926,466 926,466
Finished goods 3,359,674 3,498,894
---------- ----------
$9,318,865 $8,726,420
========== ==========
(4) 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 Gentex, comprehensive income represents net income
adjusted for items such as unrealized gains and losses on certain
investments and foreign currency translation adjustments. Comprehensive
income was approximately as follows:
March 31, 1999 March 31, 1998
-------------- --------------
Quarter Ended $ 15,668,361 $13,970,764
(5) The Company currently manufactures electro-optic products, including
automatic-dimming rearview mirrors for the automotive industry and fire
protection products for the commercial building industry:
Quarter Ended March 31,
------------------------------
Revenue: 1999 1998
---- ----
Automotive Products $60,629,567 $52,077,502
Fire Protection Products 4,988,623 4,901,900
----------- -----------
Total $65,618,190 $56,979,402
=========== ===========
Operating Income:
Automotive Products $21,490,887 $16,214,062
Fire Protection Products 797,058 809,589
----------- -----------
Total $22,287,945 $17,023,651
=========== ===========
(6) 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 19, 1998.
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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 1999 VERSUS FIRST QUARTER 1998
Net Sales. Net sales for the first quarter of 1999 increased by
approximately $8,639,000, or 15%, when compared with the first
quarter last year. Net sales of the Company's automotive mirrors
increased by 16% as automatic mirror unit shipments increased by
18% from approximately 1,268,000 in the first quarter of 1998 to
1,490,000 in the current quarter. This increase reflected
increased penetration on 1999 model year vehicles for interior and
exterior electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors.
Shipments to customers in North America increased by 20%,
primarily due to increased exterior mirror shipments for light
trucks and sport/utility vehicles. Mirror unit shipments to
automotive customers outside North America increased by 11%
compared with the first quarter in 1998, primarily due to
increased exterior mirror sub-assembly shipments to European
automakers. Net sales of the Company's fire protection products
increased 2%, primarily due to higher sales of certain of the
Company's audible and visual signals.
Cost of Goods Sold. As a percentage of net sales, cost of goods
sold decreased from 60% in the first quarter of 1998 to 56% for
the comparable period in 1999. This decreased percentage primarily
reflected improved glass yields due to the Company's new in-house
coater and processes, and increased sales volume spread over fixed
overhead expenses.
Operating Expenses. Research and development expenses increased
approximately $712,000, but remained at 5% of net sales, when
compared with the same quarter last year, primarily reflecting
additional staffing for new product development, including mirrors
with additional electronic features. Selling, general and
administrative expenses increased approximately $378,000, but
remained at 5% of net sales, when compared with the first quarter
of 1998. This increased expense primarily reflected the
establishment in mid-1998 of a sales and engineering office in
Japan and a warehouse distribution operation in Germany.
Other Income - Net. Other income increased by approximately
$917,000 when compared with the first quarter of 1998, primarily
due to higher investable fund balances and realized gains on the
sale of equity investments.
FINANCIAL CONDITION:
Management considers the Company's working capital and long-term
investments totaling approximately $198,417,000 at March 31, 1999,
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.
TRENDS AND DEVELOPMENTS:
In addition to price reductions over the life of its long-term
agreements, 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 select raw material cost
increases.
-6-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
TRENDS AND DEVELOPMENTS:
The Company currently supplies NVS(R) Mirrors to DaimlerChrysler
AG (North America), Ford Motor Company and General Motors
Corporation under long-term agreements. The long-term supply
agreement with DaimlerChrysler AG runs through the 2003 Model
Year. The term of the Ford contract is through December 1999,
while the GM contract runs through the 2002 Model Year for inside
mirrors.
YEAR 2000 READINESS DISCLOSURE:
The Company has developed a plan to address its computer systems'
compliance with the Year 2000. All internal remediation activities
have been completed, and the Company expects that all internal
acceptance testing will be completed by mid-1999. The Company is
in the process of ascertaining the status of its suppliers' Year
2000 compliance efforts, and plans to develop contingency plans by
mid-1999 for any key suppliers that will not be compliant on a
timely basis. The Company currently believes that the cost of
addressing the Year 2000 issue will not be material to the
Company's business, operations or financial condition.
While the Company believes all necessary work will be completed,
there can be no guarantee that all systems will be in compliance
by the year 2000 or that the systems of other companies on which
the Company relies will be converted in a timely manner. Such
failure to complete the necessary work by the year 2000 could
cause delays in the Company's ability to produce or ship its
products, process transactions, or otherwise conduct business in
its markets, resulting in material financial risk.
Statements in this Quarterly Report on Form 10-Q which express
"belief", "anticipation" or "expectation" as well as other
statements which are not historical fact, are forward-looking
statements and involve risks and uncertainties described under the
headings "Management's Discussion and Analysis of Results of
Operations and Financial Condition," "Trends and Developments" and
"Year 2000 Readiness Disclosure" that could cause actual results
to differ materially from those projected. All forward-looking
statements in this Report are based on information available to
the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements.
-7-
<PAGE> 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 10.
(b) One report on Form 8-K was filed during the
three months ended March 31, 1999.
-8-
<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: 4/30/99 /s/ Fred T. Bauer
------------------- --------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 4/30/99 /s/ Enoch C. Jen
------------------- --------------------------
Enoch C. Jen
Vice President - Finance,
Principal Financial and
Accounting Officer
-9-
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
3(a)(1) 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, 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, an
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 an
Amendment to Articles of Incorporation, adopted on May 21, 1998, was filed as
Exhibit 3(a)(2) to Registrant's Report on Form 10-Q dated July 30, 1998, all of
which are hereby incorporated herein be reference.
3(b)(1) 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.
3(b)(2) First Amendment to Bylaws, adopted on August 25, 1997, was filed
as Exhibit 3(c) to Registrant's Report on Form 10-Q dated
October 31, 1997, and the same is hereby 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.
4(b)(3) Third Amendment to Shareholder Protection Rights Agreement, effective March 12, 12
1999
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.
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C> <C>
*10(b)(1) Gentex Corporation Qualified Stock Option Plan (as amended and
restated, effective August 25, 1997) was filed as Exhibit
10(b)(1) to Registrant's Report on Form 10-Q, and the same is
hereby incorporated herein by reference.
*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 by 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-
<PAGE> 1
EXHIBIT 21(b)(3)
THIRD AMENDMENT TO
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
This Third Amendment to Shareholder Protection Rights Agreement is made and
entered into effective March 12, 1999, by and between GENTEX CORPORATION (the
"Company"), and AMERICAN STOCK TRANSFER AND TRUST COMPANY (the "Rights Agent").
WITNESSETH:
WHEREAS, the Company currently has outstanding 72,494,242 shares of its
common stock; and ----------
WHEREAS, the aforementioned shares of common stock are subject to a certain
Shareholder Protection Rights Agreement effective August 26, 1991, between the
Company and the Rights Agent; and
WHEREAS, by virtue of a previous amendment to the aforementioned Rights
Agreement and a subsequent stock dividend, the Exercise Price pursuant to the
Rights Agreement is currently at $27.
NOW, THEREFORE, pursuant to Section 5.4 of the aforementioned Rights
Agreement, the Company and the Rights Agent hereby amend and restate Section 1.7
of the Rights Agreement to read as follows:
1.7 "Exercise Price" shall mean, as of any date,
the price at which a holder may purchase the securities
issuable upon exercise of one whole Right. Until adjustment
thereof in accordance with the terms hereof, the Exercise
Price shall equal $40."
Except for the amendment to Section 1.7 set forth above, the aforementioned
Shareholder Protection Rights Agreement shall continue in full force and effect
in accordance with its terms.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed effective as of the date specified above.
GENTEX CORPORATION
By /s/ Connie Hamblin
--------------------------
Its Corporate Secretary
----------------------
AMERICAN STOCK TRANSFER
AND TRUST COMPANY
By /s/ HERBERT J. LEMMER
---------------------------
Its HERBERT J. LEMMER
----------------------
VICE PRESIDENT
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 78,902,280
<SECURITIES> 25,123,001
<RECEIVABLES> 31,862,398
<ALLOWANCES> 0
<INVENTORY> 9,318,865
<CURRENT-ASSETS> 147,702,414
<PP&E> 89,918,808
<DEPRECIATION> (30,162,404)
<TOTAL-ASSETS> 285,104,401
<CURRENT-LIABILITIES> 25,355,987
<BONDS> 0
0
0
<COMMON> 4,361,704
<OTHER-SE> 252,783,650
<TOTAL-LIABILITY-AND-EQUITY> 285,104,401
<SALES> 65,618,190
<TOTAL-REVENUES> 65,618,190
<CGS> 36,624,710
<TOTAL-COSTS> 36,624,710
<OTHER-EXPENSES> (2,468,684)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,756,684
<INCOME-TAX> 8,047,000
<INCOME-CONTINUING> 16,709,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,709,684
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.22
</TABLE>
