<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 SEPTEMBER 30, 2000, 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
--------------------------------------------------------------------------------
(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 October 18, 2000
----- -------------------
Common Stock, $0.06 Par Value 74,180,584
Exhibit Index located at page 10
Page 1 of 21
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
ASSETS
------
September 30, 2000 December 31, 1999
------------------ -----------------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $100,860,953 $69,227,972
Short term investments 29,812,360 25,505,657
Accounts receivable, net 39,851,075 30,633,501
Inventories 11,444,679 9,975,178
Prepaid expenses and other 3,031,072 2,873,276
----------------- --------------------
Total current assets 185,000,139 138,215,584
PLANT AND EQUIPMENT - NET 81,443,748 71,338,053
OTHER ASSETS
Long-term investments 141,581,565 125,816,629
Patents and other assets, net 2,535,858 2,302,504
----------------- --------------------
Total other assets 144,117,423 128,119,133
----------------- --------------------
Total assets $410,561,310 $337,672,770
================= ====================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES
Accounts payable $10,637,705 $8,288,327
Accrued liabilities 10,570,773 8,181,884
----------------- --------------------
Total current liabilities 21,208,478 16,470,211
DEFERRED INCOME TAXES 6,200,442 4,151,143
SHAREHOLDERS' INVESTMENT
Common stock 4,450,835 4,404,739
Additional paid-in capital 90,612,138 79,670,301
Other shareholders' equity 288,089,417 232,976,376
----------------- --------------------
Total shareholders' investment 383,152,390 317,051,416
----------------- --------------------
Total liabilities and
shareholders' investment $410,561,310 $337,672,770
================= ====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 3
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- ------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $71,934,236 $64,146,371 $222,566,697 $196,653,710
COST OF GOODS SOLD 43,384,580 38,351,928 129,389,887 112,529,258
----------------------------- ------------------------------
Gross profit 28,549,656 25,794,443 93,176,810 84,124,452
OPERATING EXPENSES:
Research and development 4,261,318 3,444,350 12,391,317 10,278,835
Selling, general
& administrative 4,303,737 3,606,106 12,944,372 10,654,637
----------------------------- ------------------------------
Total operating expenses 8,565,055 7,050,456 25,335,689 20,933,472
----------------------------- ------------------------------
Income from operations 19,984,601 18,743,987 67,841,121 63,190,980
OTHER INCOME (EXPENSE)
Interest, net 3,451,845 2,150,815 9,136,141 5,620,356
Other 53,517 568,786 1,203,921 2,059,668
----------------------------- ------------------------------
Total other income 3,505,362 2,719,601 10,340,062 7,680,024
----------------------------- ------------------------------
Income before provision
for federal income taxes 23,489,963 21,463,588 78,181,183 70,871,004
PROVISION FOR FEDERAL INCOME TAXES 7,636,000 7,020,000 25,417,000 23,181,000
----------------------------- ------------------------------
NET INCOME $15,853,963 $14,443,588 $52,764,183 $47,690,004
============================= ==============================
Earnings Per Share
Basic $0.21 $0.20 $0.71 $0.65
Diluted $0.21 $0.19 $0.70 $0.64
Weighted Average Shares:
Basic 74,059,344 73,232,990 73,837,033 72,880,739
Diluted 75,442,982 75,036,282 75,602,926 75,032,658
</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 9 Months Ended September 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $52,764,183 $47,690,004
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 8,397,042 7,121,458
(Gain) Loss on disposal of equipment 5,028 113,209
Deferred income taxes 290,881 493,834
Amortization of deferred compensation 598,116 552,555
Change in assets and liabilities:
Accounts receivable, net (9,217,574) (7,053,819)
Inventories (1,469,501) 74,311
Prepaid expenses and other 84,717 (1,140,442)
Accounts payable 2,349,378 5,883,908
Accrued liabilities 2,388,889 3,489,235
----------------- -----------------
Net cash provided by
operating activities 56,191,159 57,224,253
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in short-term investments (4,306,703) 1,934,862
Plant and equipment additions (18,601,679) (18,059,821)
Proceeds from sale of plant and equipment 169,138 232,380
(Increase) Decrease in long-term investments (11,433,779) (45,164,997)
(Increase) Decrease in other assets (390,005) (700,688)
----------------- -----------------
Net cash used for
investing activities (34,563,028) (61,758,264)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 10,004,850 12,257,001
----------------- -----------------
Net cash provided by
financing activities 10,004,850 12,257,001
----------------- -----------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 31,632,981 7,722,990
CASH AND CASH EQUIVALENTS,
beginning of period 69,227,972 50,027,747
----------------- -----------------
CASH AND CASH EQUIVALENTS,
end of period $100,860,953 $57,750,737
================= =================
</TABLE>
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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 1999 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 September 30, 2000, and December
31, 1999, and the results of operations and cash flows for the interim
periods presented.
(3) Inventories consisted of the following at the respective balance sheet
dates:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Raw materials $ 6,566,891 $ 4,910,081
Work-in-process 1,377,105 1,194,632
Finished goods 3,500,683 3,870,465
------------- -----------
$ 11,444,679 $ 9,975,178
============= ===========
</TABLE>
(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 the Company, 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 as follows:
<TABLE>
<CAPTION>
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Quarter Ended $17,821,122 $12,141,729
Nine Months Ended 55,498,007 46,259,567
</TABLE>
(5) The increase in common stock and additional paid-in capital during the
quarter and nine months ended September 30, 2000, is attributable to the
issuance of 171,631 and 768,268 shares, respectively, of the Company's
common stock under its stock-based compensation plans.
(6) 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:
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
---------------------------------- ---------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Automotive Products $66,211,955 $58,456,906 $206,036,240 $180,662,109
Fire Protection Products 5,722,281 5,689,465 16,530,457 15,991,601
----------- ----------- ------------ ------------
Total $71,934,236 $64,146,371 $222,566,697 $196,653,710
=========== =========== ============ ============
Operating Income:
Automotive Products $18,833,792 $17,715,158 $64,695,351 $60,486,874
Fire Protection Products 1,150,809 1,028,829 3,145,770 2,704,106
----------- ----------- ------------ -----------
Total $19,984,601 $18,743,987 $67,841,121 $63,190,980
=========== =========== =========== ===========
</TABLE>
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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:
THIRD QUARTER 2000 VERSUS THIRD QUARTER 1999
Net Sales. Net sales for the third quarter of 2000 increased by
approximately $7,788,000, or 12%, when compared with the third quarter
last year. Net sales of the Company's automotive mirrors increased by
13% as automatic mirror unit shipments increased by 14% from
approximately 1,430,000 in the third quarter of 1999 to 1,632,000 in
the current quarter. This increase reflected increased penetration on
2000 and 2001 model year vehicles for interior and exterior
electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors. Shipments to
customers in North America increased by 7%, primarily due to new
exterior mirror and transplant interior mirror business. Mirror unit
shipments to automotive customers outside North America increased by
29% compared with the third quarter in 1999, primarily due to
increased interior and exterior mirror sub-assembly shipments to
European and Japanese automakers. Net sales of the Company's fire
protection products increased 1%, primarily due to higher sales of
certain of the Company's smoke detectors and signaling products.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
remained unchanged at 60% in the third quarter of 2000, and for the
comparable period in 1999. This unchanged percentage primarily
reflected customer price reductions and the ramp-up of the Company's
third automotive manufacturing facility, offset by increased sales
spread over fixed overhead expenses and improved glass yields.
Operating Expenses. Research and development expenses increased
approximately $817,000, and increased from 5% to 6% of net sales, when
compared with the same quarter last year, primarily reflecting
additional staffing, engineering and testing for new product
development, including mirrors with additional electronic features.
Selling, general and administrative expenses increased approximately
$698,000, but remained unchanged at 6% of net sales, when compared
with the third quarter of 1999. This increased expense primarily
reflected the start-up and expansion of the Company's overseas sales
and engineering offices.
Other Income - Net. Other income increased by approximately $786,000
when compared with the third quarter of 1999, primarily due to higher
interest rates and investable fund balances, partially offset by lower
realized gains on the sale of equity investments.
NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS NINE MONTHS ENDED
SEPTEMBER 30, 1999
Net Sales. Net sales for the nine months ended September 30, 2000,
increased by approximately $25,913,000, or 13%, when compared with the
same period last year. Automatic mirror unit shipments increased from
approximately 4,413,000 in the first nine months of 1999 to 5,063,000
in the first nine months of 2000. This increase primarily reflected
increased penetration on 2000 and 2001 model year vehicles for
interior and exterior electrochromic Night Vision Safety(TM) (NVS(R))
Mirrors. Shipments to customers in North America increased by 4%,
primarily due to higher industry production levels, partially offset
by exterior mirror package changes on certain General Motors
sport/utility vehicles. Mirror unit shipments to automotive customers
outside North America increased by 43% compared with the first nine
months in 1999, primarily due to increased interior and exterior
mirror sub-assembly shipments to European and Japanese automakers. Net
sales of the Company's fire protection products increased 3%,
primarily due to higher sales of certain of the Company's smoke
detectors and signaling products.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased from 57% in the first nine months of 1999, to 58% for the
comparable period in 2000. This increased percentage primarily
reflected customer price reductions and the start-up of the Company's
third automotive manufacturing facility, partially offset by increased
sales spread over fixed overhead expenses and improved glass yields.
-6-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - CONTINUED
RESULTS OF OPERATIONS - CONTINUED:
NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS NINE MONTHS ENDED
SEPTEMBER 30, 1999 (CONT.)
Operating Expenses. For the nine months ended September 30, 2000,
research and development expenses increased approximately $2,112,000,
and increased from 5% to 6% of net sales, when compared with the same
period last year, primarily reflecting additional staffing,
engineering and testing for new product development, including mirrors
with additional electronic features. Selling, general and
administrative expenses increased approximately $2,290,000, and
increased from 5% to 6% of net sales, when compared with the first
nine months of 1999. This increased expense primarily reflected the
start-up and expansion of the Company's overseas sales and engineering
offices.
Other Income - Net. Other income for the nine months ended September
30, 2000, increased by approximately $2,660,000 when compared with the
first nine months of 1999, primarily due to higher interest rates and
investable fund balances, partially offset by lower realized gains on
the sale of equity investments.
FINANCIAL CONDITION:
Management considers the Company's working capital and long-term
investments totaling approximately $305,373,000 at September 30, 2000,
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:
The Company is subject to market risk exposures of varying
correlations and volatilities, including foreign exchange rate risk,
interest rate risk and equity price risk.
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, it could be
significantly affected by weak economic conditions in foreign markets
that could reduce demand for its products.
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.
The Company currently supplies NVS(R) Mirrors to DaimlerChrysler AG
and General Motors Corporation under long-term agreements. The
long-term supply agreement with DaimlerChrysler AG runs through the
2003 Model Year, while the GM contract was extended through the 2004
Model Year for inside mirrors.
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 - Management's Discussion and
Analysis of Results of Operations and Financial Condition.
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" and "Trends and Developments" 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.
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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 September 30, 2000.
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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: 10/27/00 /s/ Fred T. Bauer
------------------------------ --------------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 10/27/00 /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, 2000. 12
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, 1999, was filed as Exhibit 4(b)(3) to
Registrant's Report on Form 10-Q on April 30, 1999, 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.
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<S> <C> <C>
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 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.
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