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, 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 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 18, 2000
----- -----------------
Common Stock, $0.06 Par Value 73,831,898
Exhibit Index located at page 10
Page 1 of 11
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2000 AND DECEMBER 31, 1999
ASSETS
------
March 31, 2000 December 31, 1999
-------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $86,774,377 $69,227,972
Short term investments 24,097,109 25,505,657
Accounts receivable, net 39,960,129 30,633,501
Inventories 10,390,888 9,975,178
Prepaid expenses and other 1,943,559 2,873,276
----------------- --------------------
Total current assets 163,166,062 138,215,584
PLANT AND EQUIPMENT - NET 76,709,555 71,338,053
OTHER ASSETS
Long-term investments 132,750,634 125,816,629
Patents and other assets, net 2,197,351 2,302,504
----------------- --------------------
Total other assets 134,947,985 128,119,133
----------------- --------------------
Total assets $374,823,602 $337,672,770
================= ====================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES
Accounts payable $9,924,200 $8,288,327
Accrued liabilities 17,272,144 8,181,884
----------------- --------------------
Total current liabilities 27,196,344 16,470,211
DEFERRED INCOME TAXES 4,834,558 4,151,143
SHAREHOLDERS' INVESTMENT
Common stock 4,428,887 4,404,739
Additional paid-in capital 86,056,026 79,670,301
Other shareholders' equity 252,307,787 232,976,376
----------------- --------------------
Total shareholders' investment 342,792,700 317,051,416
----------------- --------------------
Total liabilities and
shareholders' investment $374,823,602 $337,672,770
================= ====================
See accompanying notes to condensed consolidated financial statements.
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GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
-------------- ----------------
NET SALES $73,876,538 $65,618,190
COST OF GOODS SOLD 41,369,621 36,624,710
-------------- ----------------
Gross profit 32,506,917 28,993,480
OPERATING EXPENSES:
Research and development 3,873,935 3,291,327
Selling, general
& administrative 4,139,139 3,414,208
-------------- ----------------
Total operating expenses 8,013,074 6,705,535
-------------- ----------------
Income from operations 24,493,843 22,287,945
OTHER INCOME
Interest and dividend income 2,676,282 1,644,479
Other, net 278,909 824,260
-------------- ----------------
Total other income 2,955,191 2,468,739
-------------- ----------------
Income before provision
for federal income taxes 27,449,034 24,756,684
PROVISION FOR FEDERAL INCOME TAXES 8,899,000 8,047,000
-------------- ----------------
NET INCOME $18,550,034 $16,709,684
============== ================
Earnings Per Share
Basic $0.25 $0.23
Diluted $0.25 $0.22
Weighted Average Shares:
Basic 73,521,804 72,412,314
Diluted 75,617,308 74,688,492
See accompanying notes to condensed consolidated financial statements.
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GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 3 MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $18,550,034 $16,709,684
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 2,722,208 2,291,241
(Gain) Loss on disposal of equipment (3,142) 0
Deferred income taxes (36,213) (3,613)
Amortization of deferred compensation 183,090 165,581
Change in assets and liabilities:
Accounts receivable, net (9,326,628) (1,605,603)
Inventories (415,710) (592,445)
Prepaid expenses and other 1,070,609 (61,712)
Accounts payable 1,635,873 3,024,173
Accrued liabilities 9,090,260 7,484,924
------------------ -----------------
Net cash provided by
operating activities 23,470,381 27,412,230
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in short-term investments 1,408,548 (1,088,125)
Plant and equipment additions (8,069,857) (2,674,055)
Proceeds from sale of plant and equipment 3,700 0
(Increase) Decrease in long-term investments (5,280,473) 1,101,599
(Increase) Decrease in other assets 55,733 (180,312)
------------------ -----------------
Net cash used for
investing activities (11,882,349) (2,840,893)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 5,958,373 4,303,196
------------------ -----------------
Net cash provided by
financing activities 5,958,373 4,303,196
------------------ -----------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 17,546,405 28,874,533
CASH AND CASH EQUIVALENTS,
beginning of period 69,227,972 50,027,747
------------------ -----------------
CASH AND CASH EQUIVALENTS,
end of period $86,774,377 $78,902,280
================== =================
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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 March 31, 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 quarter ends:
March 31, 2000 December 31, 1999
-------------- -----------------
Raw materials $ 4,998,735 $4,910,081
Work-in-process 1,299,680 1,194,632
Finished goods 4,092,473 3,870,465
------------ ----------
$ 10,390,888 $9,975,178
============ ==========
(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 as follows:
March 31, 2000 March 31, 1999
-------------- --------------
Quarter Ended $ 19,599,821 $ 15,668,361
(5) The increase in common stock and additional paid-in capital during the
quarter ended March 31, 2000, is attributable to the issuance of 419,582
shares 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:
Quarter Ended March 31,
--------------------------------
Revenue: 2000 1999
---- ----
Automotive Products $68,761,212 $60,629,567
Fire Protection Products 5,115,326 4,988,623
----------- -----------
Total $73,876,538 $65,618,190
=========== ===========
Operating Income:
Automotive Products $23,633,033 $21,490,887
Fire Protection Products 860,810 797,058
----------- -----------
Total $24,493,843 $22,287,945
=========== ===========
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GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
FIRST QUARTER 2000 VERSUS FIRST QUARTER 1999
Net Sales. Net sales for the first quarter of 2000 increased by
approximately $8,258,000, or 13%, when compared with the first
quarter last year. Net sales of the Company's automotive mirrors
increased by 13% as automatic mirror unit shipments increased by 16%
from approximately 1,490,000 in the first quarter of 1999 to
1,733,000 in the current quarter. This increase reflected increased
penetration on 2000 model year vehicles for interior and exterior
electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors. Shipments to
customers in North America increased by 6%, primarily due to
increased interior mirror shipments, 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 45% compared with the first quarter in 1999,
primarily due to increased interior and exterior mirror sub-assembly
shipments to European automakers. Net sales of the Company's fire
protection products increased 3% for the quarter compared to the same
period in the prior year.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
remained at 56% in the first quarter of 1999 and 2000. This unchanged
percentage primarily reflected automotive customer price reductions
offset by improved glass yields, increased employee productivity, and
increased sales volume spread over fixed overhead expenses.
Operating Expenses. Research and development expenses increased
approximately $583,000, 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 $725,000, and
increased from 5% to 6% of net sales, when compared with the first
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 $486,000
when compared with the first 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.
FINANCIAL CONDITION:
Management considers the Company's working capital and long-term
investments totaling approximately $268,720,000 at March 31, 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - CONTINUED
RESULTS OF OPERATIONS - CONTINUED:
TRENDS AND DEVELOPMENTS - CONTINUED:
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 runs through the 2002 Model
Year for inside mirrors.
YEAR 2000 READINESS DISCLOSURE:
The Company has not experienced any significant problems with its
computer systems' compliance with the year 2000, nor have any
customer shipments been adversely impacted. In addition, the Company
does not consider there to be any significant continuing exposure to
year 2000 issues.
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," "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.
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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, 2000.
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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: 05/03/00 /s/ Fred T. Bauer
--------------------------- ---------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 05/03/00 /s/ Enoch C. Jen
--------------------------- ---------------------------
Enoch C. Jen
Vice President - Finance,
Principal Financial and
Accounting Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
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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, 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.
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EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
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
*Indicates a compensatory plan or arrangement.
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