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, 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)
--------------------------------------------------------------------------------
(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 17, 2001
----- -------------------
Common Stock, $0.06 Par Value 75,059,607
Exhibit Index located at page 10
Page 1 of 11
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
ASSETS
September 30, 2001 December 31, 2000
------------------ -----------------
CURRENT ASSETS
Cash and cash equivalents $132,027,851 $110,195,583
Short-term investments 59,792,055 28,246,967
Accounts receivable, net 34,734,753 35,614,669
Inventories 15,658,406 12,087,513
Prepaid expenses and other 5,245,976 4,411,118
----------------- ----------------
Total current assets 247,459,041 190,555,850
PLANT AND EQUIPMENT - NET 107,871,061 81,919,668
OTHER ASSETS
Long-term investments 125,552,013 153,016,195
Patents and other assets, net 3,260,928 2,636,980
----------------- ----------------
Total other assets 128,812,941 155,653,175
----------------- ----------------
Total assets $484,143,043 $428,128,693
================= ================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $12,199,260 $9,328,155
Accrued liabilities 12,616,170 10,363,097
----------------- ----------------
Total current liabilities 24,815,430 19,691,252
DEFERRED INCOME TAXES 3,730,064 6,333,880
SHAREHOLDERS' INVESTMENT
Common stock 4,503,576 4,457,465
Additional paid-in capital 103,251,014 92,132,617
Other shareholders' investment 347,842,959 305,513,479
----------------- ----------------
Total shareholders' investment 455,597,549 402,103,561
----------------- ----------------
Total liabilities and
shareholders' investment $484,143,043 $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 Nine Months Ended
September 30 September 30
--------------------------------- --------------------------------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES $74,116,183 $71,934,236 $230,587,557 $222,566,697
COST OF GOODS SOLD 45,685,789 43,384,580 140,067,867 129,389,887
--------------------------------- --------------------------------
Gross profit 28,430,394 28,549,656 90,519,690 93,176,810
OPERATING EXPENSES:
Research and development 5,081,973 4,261,318 15,307,817 12,391,317
Selling, general
& administrative 4,694,263 4,303,737 14,398,677 12,944,372
--------------------------------- --------------------------------
Total operating expenses 9,776,236 8,565,055 29,706,494 25,335,689
--------------------------------- --------------------------------
Income from operations 18,654,158 19,984,601 60,813,196 67,841,121
OTHER INCOME (EXPENSE)
Interest, net 3,090,374 3,451,845 9,998,150 9,136,141
Other 371,728 53,517 859,698 1,203,921
--------------------------------- --------------------------------
Total other income 3,462,102 3,505,362 10,857,848 10,340,062
--------------------------------- --------------------------------
Income before provision
for income taxes 22,116,260 23,489,963 71,671,044 78,181,183
PROVISION FOR INCOME TAXES 7,188,000 7,636,000 23,294,000 25,417,000
--------------------------------- --------------------------------
NET INCOME $14,928,260 $15,853,963 $48,377,044 $52,764,183
================================= ================================
Earnings Per Share:
Basic $0.20 $0.21 $0.65 $0.71
Diluted $0.20 $0.21 $0.64 $0.70
Weighted Average Shares:
Basic 74,966,071 74,059,344 74,665,184 73,837,033
Diluted 76,140,308 75,442,982 75,842,779 75,602,926
See accompanying notes to condensed consolidated financial statements.
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GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
2001 2000
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $48,377,044 $52,764,183
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 11,723,699 8,397,042
(Gain) loss on disposal of equipment 154,093 5,028
Deferred income taxes 363,198 290,881
Amortization of deferred compensation 698,909 598,116
Change in operating assets and liabilities:
Accounts receivable, net 879,916 (9,217,574)
Inventories (3,570,893) (1,469,501)
Prepaid expenses and other (657,426) 84,717
Accounts payable 2,871,105 2,349,378
Accrued liabilities 2,253,073 2,388,889
------------------ -----------------
Net cash provided by
operating activities 63,092,718 56,191,159
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments (31,545,088) (4,306,703)
Plant and equipment additions (39,001,311) (18,601,679)
Proceeds from sale of plant and equipment 1,244,285 169,138
(Increase) decrease in long-term investments 18,480,051 (11,433,779)
(Increase) decrease in other assets (700,974) (390,005)
------------------ -----------------
Net cash used for
investing activities (51,523,037) (34,563,028)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 10,262,587 10,004,850
------------------ -----------------
Net cash provided by
financing activities 10,262,587 10,004,850
------------------ -----------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 21,832,268 31,632,981
CASH AND CASH EQUIVALENTS,
beginning of period 110,195,583 69,227,972
------------------ -----------------
CASH AND CASH EQUIVALENTS,
end of period $132,027,851 $100,860,953
================== =================
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 September 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:
September 30, 2001 December 31, 2000
------------------ -----------------
Raw materials $ 8,823,117 $ 7,362,544
Work-in-process 1,835,166 1,488,326
Finished goods 5,000,123 3,236,643
------------- -------------
$15,658,406 $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:
September 30, 2001 September 30, 2000
------------------ ------------------
Quarter Ended $9,532,007 $17,821,122
Six Months Ended 42,532,492 55,498,007
(5) The increase in common stock and additional paid-in capital during the
quarter and nine months ended September 30, 2001, is attributable to the
issuance of 238,584 and 768,517 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 September 30, Nine Months Ended September 30,
Revenue: 2001 2000 2001 2000
---- ---- ---- ----
Automotive Products $68,644,031 $66,211,955 $214,176,956 $206,036,240
Fire Protection Products 5,472,152 5,722,281 16,410,601 16,530,457
------------- ------------- -------------- --------------
Total $74,116,183 $71,934,236 $230,587,557 $222,566,697
============= ============= ============== ==============
Operating Income:
Automotive Products $17,530,876 $18,833,792 $ 57,474,616 $ 64,695,351
Fire Protection Products 1,123,282 1,150,809 3,338,580 3,145,770
------------- ------------- -------------- --------------
Total $18,654,158 $19,984,601 $ 60,813,196 $ 67,841,121
============= ============= ============== ==============
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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:
THIRD QUARTER 2001 VERSUS THIRD QUARTER 2000
Net Sales. Net sales for the third quarter of 2001 increased by
approximately $2,182,000, or 3%, when compared with the third quarter
last year. Net sales of the Company's automotive mirrors increased by
$2,432,000, or 4%, as automatic mirror unit shipments increased by 5%
from approximately 1,621,000 in the third quarter of 2000 to 1,704,000
in the current quarter. This increase reflected the commencement of
mirror shipments for several mid-size vehicle models and increased
penetration of interior electrochromic Night Vision Safety(TM) (NVS(R))
Mirrors on 2002 model year vehicles manufactured overseas. Unit
shipments to customers in North America decreased by 2%, primarily due
to reduced North American automotive production schedules after the
September 11 terrorist attacks, partially offset by the commencement of
mirror shipments for several new mid-size vehicles/models. Mirror unit
shipments to automotive customers outside North America increased by 17%
compared with the third quarter in 2000, primarily due to increased
interior mirror shipments to European and Asian-Pacific automakers. Net
sales of the Company's fire protection products decreased 4%, 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 60% in the third quarter of 2000 to 62% in the third
quarter of 2001. This increased percentage primarily reflected annual
customer price reductions to two major automotive customers and the
continued excess plant capacity primarily associated with the Company's
third automotive mirror manufacturing facility expansion last year.
Operating Expenses. Research and development expenses increased
approximately $821,000, 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
$391,000, but remained unchanged at 6% of net sales, when compared with
the third 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 $43,000 when
compared with the third quarter of 2000, primarily due to declining
interest rates on investments, partially offset by higher income from
customer reimbursable engineering and tooling projects.
NINE MONTHS ENDED SEPTEMBER 30, 2001 VERSUS NINE MONTHS ENDED
SEPTEMBER 30, 2000
Net Sales. Net sales for the nine months ended September 30, 2001,
increased by approximately $8,021,000, or 4%, when compared with the
same period last year. Net sales of the Company's automotive mirrors
also increased by 4%, as automatic mirror unit shipments increased by 5%
from approximately 5,052,000 in the first nine months of 2000 to
5,307,000 in the first nine months of 2001. This increase primarily
reflected increased penetration on foreign 2001 and 2002 model year
vehicles for interior and exterior electrochromic Night Vision
Safety(TM) (NVS(R)) Mirrors. Shipments to customers in North America
decreased by 6%, primarily due to reduced industry production levels.
Mirror unit shipments to automotive customers outside North America
increased by 25% compared with the first nine months in 2000, primarily
due to increased interior and exterior mirror sub-assembly shipments to
European and Asian-Pacific 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 good sold
increased from 58% in the first nine months of 2000, to 61% for the
comparable period in 2001. This increased percentage primarily reflected
automotive customer price reductions, some shifts in mirror product mix,
and the continued excess plant capacity primarily associated with the
Company's third automotive manufacturing facility expansion last year.
-6-
NINE MONTHS ENDED SEPTEMBER 30, 2001 VERSUS NINE MONTHS ENDED
SEPTEMBER 30, 2000
(CONT.)
Operating Expenses. For the nine months ended September 30, 2001,
research and development expenses increased approximately $2,917,000,
and increased from 6% 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 $1,454,000, but remained at 6% of net
sales, when compared with the first nine 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 nine months ended September 30,
2001, increased by approximately $518,000 when compared with the first
nine months of 2000, primarily due to higher investable fund balances,
partially offset by declining interest rates.
FINANCIAL CONDITION:
Management considers the Company's working capital and long-term
investments totaling approximately $348,196,000 at September 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 worldwide markets
that could reduce demand for its products. Industry forecasts of future
market conditions have become more uncertain as a result of the
terrorist attacks on September 11, 2001. The Company utilizes the
forecasting services of J.D. Power and Associates, and its current
forecasts for light vehicle production for calendar 2002 are
approximately 15.9 million for North America, and 16.0 million for
Western Europe.
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 from time to time 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.
-7-
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, 2001.
-8-
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: 10/31/01 /s/ Fred T. Bauer
------------------------------ ------------------------------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 10/31/01 /s/ Enoch C. Jen
------------------------------- ------------------------------------------------
Enoch C. Jen
Vice President - Finance,
Principal Financial and
Accounting Officer
-9-
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.
-10-
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.
________________________________
*Indicates a compensatory plan or arrangement.
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