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, 2001, OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR
THE TRANSITION PERIOD FROM TO
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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)
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(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
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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
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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 18, 2001
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Common Stock, $0.06 Par Value 74,563,503
Exhibit Index located at page 10
Page 1 of 51
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 31, 2001 and December 31, 2000
ASSETS
------ March 31, 2001 December 31, 2000
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CURRENT ASSETS
Cash and cash equivalents $126,507,217 $110,195,583
Short-term investments 37,096,759 28,246,967
Accounts receivable, net 37,681,379 35,614,669
Inventories 11,828,690 12,087,513
Prepaid expenses and other 5,930,579 4,411,118
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Total current assets 219,044,624 190,555,850
PLANT AND EQUIPMENT - NET 94,037,912 81,919,668
OTHER ASSETS
Long-term investments 142,559,190 153,016,195
Patents and other assets, net 2,771,897 2,636,980
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Total other assets 145,331,087 155,653,175
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Total assets $458,413,623 $428,128,693
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES
Accounts payable $ 12,773,051 $ 9,328,155
Accrued liabilities 20,230,247 10,363,097
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Total current liabilities 33,003,298 19,691,252
DEFERRED INCOME TAXES 4,827,924 6,333,880
SHAREHOLDERS' INVESTMENT
Common stock 4,473,810 4,457,465
Additional paid-in capital 96,075,539 92,132,617
Other shareholders' equity 320,033,052 305,513,479
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Total shareholders' investment 420,582,401 402,103,561
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Total liabilities and
shareholders' investment $458,413,623 $428,128,693
============ ============
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, 2001 and 2000
2001 2000
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NET SALES $79,396,806 $73,876,538
COST OF GOODS SOLD 47,671,157 41,369,621
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Gross profit 31,725,649 32,506,917
OPERATING EXPENSES:
Research and development 4,900,810 3,873,935
Selling, general
& administrative 4,924,088 4,139,139
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Total operating expenses 9,824,898 8,013,074
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Operating income 21,900,751 24,493,843
OTHER INCOME:
Interest and dividend income 3,654,576 2,676,282
Other, net 4,633 278,909
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Total other income 3,659,209 2,955,191
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Income before provision
for federal income taxes 25,559,960 27,449,034
PROVISION FOR FEDERAL INCOME TAXES 8,307,000 8,899,000
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NET INCOME $17,252,960 $18,550,034
=========== ===========
Earnings Per Share:
Basic $ 0.23 $ 0.25
Diluted $ 0.23 $ 0.25
Weighted Average Shares:
Basic 74,375,407 73,521,804
Diluted 75,555,508 75,617,308
See accompanying notes to condensed consolidated financial statements.
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GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2001 and 2000
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,252,960 $ 18,550,034
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 3,764,949 2,722,208
(Gain) loss on disposal of equipment 171,665 (3,142)
Deferred income taxes (135,991) (36,213)
Amortization of deferred compensation 218,686 183,090
Change in operating assets and liabilities:
Accounts receivable, net (2,066,710) (9,326,628)
Inventories 258,823 (415,710)
Prepaid expenses and other (1,537,453) 1,070,609
Accounts payable 3,444,896 1,635,873
Accrued liabilities 9,867,150 9,090,260
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Net cash provided by
operating activities 31,238,975 23,470,381
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments (8,849,792) 1,408,548
Plant and equipment additions (17,248,034) (8,069,857)
Proceeds from sale of plant and equipment 1,214,285 3,700
(Increase) decrease in long-term investments 6,594,225 (5,280,473)
(Increase) decrease in other assets (134,793) 55,733
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Net cash used for
investing activities (18,424,109) (11,882,349)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 3,496,768 5,958,373
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Net cash provided by
financing activities 3,496,768 5,958,373
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NET INCREASE IN CASH AND
CASH EQUIVALENTS 16,311,634 17,546,405
CASH AND CASH EQUIVALENTS,
beginning of period 110,195,583 69,227,972
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CASH AND CASH EQUIVALENTS,
end of period $ 126,507,217 $ 86,774,377
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See accompanying notes to condensed consolidated financial statements.
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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 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 condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Registrant's 2000 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, 2001, and December 31,
2000, and the results of operations and cash flows for the interim periods
presented.
In June 1998 and June 2000, the Financial Accounting Standards Board issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities-an amendment of SFAS No. 133, respectively, which
establish accounting and reporting standards for all derivative instruments
and hedging activities. These statements require an entity to recognize all
derivatives as either assets or liabilities in the balance sheet and
measure those investments at fair value. Adoption of these pronouncements
on January 1, 2001 had minimal effect on the Company's consolidated results
of operations, financial position and financial disclosures.
(3) Inventories consisted of the following at the respective balance sheet
dates:
March 31, 2001 December 31, 2000
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Raw materials $ 7,116,666 $ 7,362,544
Work-in-process 1,391,407 1,488,326
Finished goods 3,320,617 3,236,643
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$11,828,690 $12,087,513
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(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:
March 31, 2001 March 31, 2000
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Quarter Ended $14,763,386 $19,599,821
(5) The increase in common stock and additional paid-in capital during the
quarter ended March 31, 2001, is attributable to the issuance of 266,421
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,
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Revenue: 2001 2000
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Automotive Products $74,119,197 $68,761,212
Fire Protection Products 5,277,609 5,115,326
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Total $79,396,806 $73,876,538
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Operating Income:
Automotive Products $21,006,969 $23,633,033
Fire Protection Products 893,782 860,810
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Total $21,900,751 $24,493,843
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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 2001 VERSUS FIRST QUARTER 2000
Net Sales. Net sales for the first quarter of 2001 increased by
approximately $5,520,000, or 7%, when compared with the first quarter
last year. Net sales of the Company's automotive mirrors increased by
8% as automatic mirror unit shipments increased by 7% from
approximately 1,733,000 in the first quarter of 2000 to 1,850,000 in
the current quarter. This increase reflected increased penetration of
interior and exterior electrochromic Night Vision Safety(TM) (NVS(R))
Mirrors on 2001 model year vehicles manufactured overseas. Shipments
to customers in North America decreased by 9%, primarily due to
reduced North American automotive production schedules. Mirror unit
shipments to automotive customers outside North America increased by
37% compared with the first quarter in 2000, 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 56% in the first quarter of 2000 to 60% in the first
quarter of 2001. This increased percentage primarily reflected
customer price reductions, changes in product mix, and the continued
ramp-up of the Company's third automotive supply manufacturing
facility.
Operating Expenses. Research and development expenses increased
approximately $1,027,000, 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
$785,000, but remained unchanged at 6% of net sales, when compared
with the first quarter of 2000. This increased expense primarily
reflected the expansion of the Company's overseas sales and
engineering offices.
Other Income - Net. Other income increased by approximately $704,000
when compared with the first quarter of 2000, 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 $328,601,000 at March 31, 2001,
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. There were no significant
changes in the market risks reported in the Company's 2000 10-K
report.
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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - CONTINUED
TRENDS AND DEVELOPMENTS - CONTINUED:
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 is through the 2004 Model Year
for inside mirrors.
The Board of Directors of the Company approved an Amended and
Restated Shareholder Protection Rights Plan that became effective
March 29, 2001. This Plan amends and restates a plan adopted in 1991.
The Plan Agreement is filed as Exhibit 4(b) to this filing.
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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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, 2001.
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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: 4/27/01 /s/ Fred T. Bauer
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Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 4/27/01 /s/ Enoch C. Jen
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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)(1) 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, were filed on Exhibit 3(b)(1) to Registrant's Report
on Form 10-Q dated October 27, 2000, 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) 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. 12
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 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 Second Restricted Stock Plan. 46
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EXHIBIT NO. DESCRIPTION PAGE
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*10(b)(3) 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.
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*Indicates a compensatory plan or arrangement.
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