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 JUNE 30, 2001, 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)
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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 July 18, 2001
----- ----------------
Common Stock, $0.06 Par Value 74,821,010
Exhibit Index located at page 10
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30, 2001 and December 31, 2000
ASSETS
June 30, 2001 December 31, 2000
------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $133,403,011 $110,195,583
Short-term investments 35,140,447 28,246,967
Accounts receivable, net 30,642,811 35,614,669
Inventories 11,560,336 12,087,513
Prepaid expenses and other 6,771,441 4,411,118
-------------- --------------
Total current assets 217,518,046 190,555,850
PLANT AND EQUIPMENT - NET 102,038,780 81,919,668
OTHER ASSETS
Long-term investments 147,437,755 153,016,195
Patents and other assets, net 3,055,530 2,636,980
-------------- --------------
Total other assets 150,493,285 155,653,175
-------------- --------------
Total assets $470,050,111 $428,128,693
============== ==============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $9,551,555 $9,328,155
Accrued liabilities 11,497,809 10,363,097
-------------- --------------
Total current liabilities 21,049,364 19,691,252
DEFERRED INCOME TAXES 6,197,773 6,333,880
SHAREHOLDERS' INVESTMENT
Common stock 4,489,261 4,457,465
Additional paid-in capital 100,105,258 92,132,617
Other shareholders' investment 338,208,455 305,513,479
-------------- --------------
Total shareholders' investment 442,802,974 402,103,561
-------------- --------------
Total liabilities and
shareholders' investment $470,050,111 $428,128,693
============== ==============
See accompanying notes to condensed consolidated financial statements.
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GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES $77,074,568 $76,755,923 $156,471,374 $150,632,461
COST OF GOODS SOLD 46,710,921 44,635,685 94,382,078 86,005,307
---------------------------- ----------------------------------
Gross profit 30,363,647 32,120,238 62,089,296 64,627,154
OPERATING EXPENSES:
Research and development 5,325,034 4,256,066 10,225,844 8,129,999
Selling, general
& administrative 4,780,327 4,501,495 9,704,414 8,640,635
---------------------------- ----------------------------------
Total operating expenses 10,105,361 8,757,561 19,930,258 16,770,634
---------------------------- ----------------------------------
Income from operations 20,258,286 23,362,677 42,159,038 47,856,520
OTHER INCOME:
Interest and dividend income 3,253,200 3,008,014 6,907,776 5,684,296
Other, net 483,338 871,495 487,970 1,150,404
---------------------------- ----------------------------------
Total other income 3,736,538 3,879,509 7,395,746 6,834,700
---------------------------- ----------------------------------
Income before provision
for income taxes 23,994,824 27,242,186 49,554,784 54,691,220
PROVISION FOR INCOME TAXES 7,799,000 8,882,000 16,106,000 17,781,000
---------------------------- ----------------------------------
NET INCOME $16,195,824 $18,360,186 $33,448,784 $36,910,220
============================ ==================================
Earnings Per Share:
Basic $0.22 $0.25 $0.45 $0.50
Diluted $0.21 $0.24 $0.44 $0.49
Weighted Average Shares:
Basic 74,677,817 73,897,916 74,521,573 73,715,860
Diluted 75,865,525 75,688,794 75,701,341 75,653,305
See accompanying notes to condensed consolidated financial statements.
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GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2001 and 2000
2001 2000
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $33,448,784 $36,910,220
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 7,599,259 5,338,620
(Gain) loss on disposal of equipment 155,797 (8,481)
Deferred income taxes 239,088 46,260
Amortization of deferred compensation 454,873 382,643
Change in operating assets and liabilities:
Accounts receivable, net 4,971,858 (9,404,036)
Inventories 527,177 150,882
Prepaid expenses and other (2,525,072) 473,209
Accounts payable 223,400 939,903
Accrued liabilities 1,134,712 5,351,691
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Net cash provided by
operating activities 46,229,876 40,180,911
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments (6,893,480) (3,059,644)
Plant and equipment additions (29,069,936) (13,285,785)
Proceeds from sale of plant and equipment 1,241,285 166,103
(Increase) decrease in long-term investments 4,977,167 (14,590,901)
(Increase) decrease in other assets (521,539) (167,993)
------------- -------------
Net cash used for
investing activities (30,266,503) (30,938,220)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 7,244,055 7,927,465
------------- -------------
Net cash provided by
financing activities 7,244,055 7,927,465
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NET INCREASE IN CASH AND
CASH EQUIVALENTS 23,207,428 17,170,156
CASH AND CASH EQUIVALENTS,
beginning of period 110,195,583 69,227,972
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CASH AND CASH EQUIVALENTS,
end of period $133,403,011 $86,398,128
============= =============
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 June 30, 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:
June 30, 2001 December 31, 2000
------------- -----------------
Raw materials $ 5,853,877 $ 7,362,544
Work-in-process 1,822,464 1,488,326
Finished goods 3,883,995 3,236,643
------------ ------------
$ 11,560,336 $ 12,087,513
============ ============
(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:
June 30, 2001 June 30, 2000
------------- -------------
Quarter Ended $ 18,237,099 $ 18,077,064
Six Months Ended 33,000,485 37,676,885
(5) The increase in common stock and additional paid-in capital during the
quarter and six months ended June 30, 2001, is attributable to the issuance
of 263,512 and 529,933 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:
Quarter Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
2001 2000 2001 2000
Revenue: ----------- ----------- ------------ ------------
Automotive Products $71,413,728 $71,063,071 $145,532,925 $139,824,283
Fire Protection Products 5,660,840 5,692,852 10,938,449 10,808,178
----------- ----------- ------------ ------------
Total $77,074,568 $76,755,923 $156,471,374 $150,632,461
=========== =========== ============ ============
Operating Income:
Automotive Products $18,936,770 $22,228,526 $ 39,943,740 $ 45,861,559
Fire Protection Products 1,321,516 1,134,151 2,215,298 1,994,961
----------- ----------- ------------ ------------
Total $20,258,286 $23,362,677 $ 42,159,038 $ 47,856,520
=========== =========== ============ ============
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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:
SECOND QUARTER 2001 VERSUS SECOND QUARTER 2000
Net Sales. Net sales for the second quarter of 2001 increased by
approximately $319,000, or less than 1%, when compared with the second
quarter last year. Net sales of the Company's automotive mirrors
increased by $351,000, or less than 1%, as automatic mirror unit
shipments increased by 3% from approximately 1,698,000 in the second
quarter of 2000 to 1,753,000 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 6%, primarily due to reduced North American automotive production
schedules. Mirror unit shipments to automotive customers outside North
America increased by 17% compared with the second 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 decreased 1%, primarily due to lower
sales of certain of the Company's smoke detectors.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased from 58% in the second quarter of 2000 to 61% in the second
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 $1,069,000, and increased from 6% to 7% 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
$279,000, but remained unchanged at 6% of net sales, when compared with
the second quarter of 2000. This increased expense primarily reflected
the expansion of the Company's overseas sales and engineering offices.
Other Income - Net. Other income decreased by approximately $143,000
when compared with the second quarter of 2000, primarily due to
declining interest rates on investments and lower income from customer
reimbursable engineering and tooling projects.
SIX MONTHS ENDED JUNE 30, 2001 VERSUS SIX MONTHS ENDED JUNE 30, 2000
Net Sales. Net sales for the six months ended June 30, 2001 increased by
approximately $5,839,000, or 4%, when compared with the same period last
year. Automatic mirror unit shipments increased from approximately
3,431,000 in the first six months of 2000 to 3,603,000 in the first six
months of 2001. This increase primarily reflected increased penetration
on foreign 2001 model year vehicles for interior and exterior
electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors. Shipments to
customers in North America decreased by 8%, primarily due to reduced
industry production levels. Mirror unit shipments to automotive
customers outside North America increased by 29% compared with the first
six months 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 1%, primarily
due to higher sales of certain of the Company's signaling products.
Cost of Goods Sold. As a percentage of net sales, cost of good sold
increased from 57% in the first six months of 2000, to 60% for the
comparable period in 2001. This increased percentage primarily reflected
customer price reductions, some shifts in mirror product mix, and the
start-up of the Company's third automotive manufacturing facility during
the second quarter of 2000.
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SIX MONTHS ENDED JUNE 30, 2001 VERSUS SIX MONTHS ENDED JUNE 30, 2000
(CONT.)
Operating Expenses. For the six months ended June 30, 2001, research and
development expenses increased approximately $2,096,000, and increased
from 5% to 7% 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 $1,064,000, but remained at 6% of net sales,
when compared with the first six months of 2000. This increased expense
primarily reflected the expansion of the Company's overseas automotive
sales and engineering offices to support future growth opportunities.
Other Income - Net. Other income for the six months ended June 30, 2001,
increased by approximately $561,000 when compared with the first six
months of 2000, primarily due to higher investable fund balances,
partially offset by declining interest rates and lower income from
customer-reimbursable engineering and tooling projects.
FINANCIAL CONDITION:
Management considers the Company's working capital and long-term
investments totaling approximately $343,906,000 at June 30, 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.
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.
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 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company was
held on May 16, 2001, at which:
(a) The following nominees were elected to serve
three-year terms on the Company's Board of Directors
by the following votes:
Mickey Fouts John Mulder Fred Sotok
------------ ----------- ----------
For 67,696,603 60,042,125 67,787,174
Against - - -
Withheld 824,958 8,479,436 734,387
Broker Non-Votes - - -
The terms of office for incumbent Directors
Fred Bauer, Arlyn Lanting, Kenneth La Grand,
Ted Thompson, and Leo Weber, continued after
the meeting.
(b) A proposal to approve the Gentex Second Restricted
Stock Plan was approved by the following vote:
For 61,386,047
Against 6,858,081
Abstain 277,433
Broker Non-Votes -
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 June 30, 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: 7/27/01 /s/ Fred T. Bauer
----------- -------------------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 7/27/01 /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
- ----------- ------------ ----
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, was filed as Exhibit 4(b) to Registrant's Report
on Form 10-Q dated April 27, 2001, 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 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 was filed as
Exhibit 10(b)(2) to Registrant's Report on Form 10-Q dated
April 27, 2001, and the same is hereby incorporated herein by
reference.
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EXHIBIT NO. DESCRIPTION PAGE
- ----------- ------------ ----
*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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