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, 2002, 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 17, 2002 ----- ----------------- Common Stock, $0.06 Par Value 75,534,077 Exhibit Index located at page 10 -1-
PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS GENTEX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2002 AND DECEMBER 31, 2001 <TABLE> <CAPTION> ASSETS March 31, 2002 December 31, 2001 -------------- ----------------- <S> <C> <C> CURRENT ASSETS Cash and cash equivalents $140,071,475 $139,784,721 Short-term investments 72,368,560 65,859,016 Accounts receivable, net 35,640,571 31,994,939 Inventories 13,574,196 14,405,350 Prepaid expenses and other 7,325,763 7,814,468 ------------ ------------ Total current assets 268,980,565 259,858,494 PLANT AND EQUIPMENT - NET 121,392,609 110,862,310 OTHER ASSETS Long-term investments 150,374,602 132,771,234 Patents and other assets, net 3,554,635 3,330,760 ------------ ------------ Total other assets 153,929,237 136,101,994 ------------ ------------ Total assets $544,302,411 $506,822,798 ============ ============ <CAPTION> LIABILITIES AND SHAREHOLDERS' INVESTMENT <S> <C> <C> CURRENT LIABILITIES Accounts payable $ 11,453,570 $ 9,378,937 Accrued liabilities 22,561,380 11,606,467 ------------ ------------ Total current liabilities 34,014,950 20,985,404 DEFERRED INCOME TAXES 6,709,096 6,836,865 SHAREHOLDERS' INVESTMENT Common stock 4,532,045 4,510,317 Additional paid-in capital 111,553,111 105,327,971 Other shareholders' investment 387,493,209 369,162,241 ------------ ------------ Total shareholders' investment 503,578,365 479,000,529 ------------ ------------ Total liabilities and shareholders' investment $544,302,411 $506,822,798 ============ ============ </TABLE> See accompanying notes to condensed consolidated financial statements. -2-
GENTEX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 <TABLE> <CAPTION> 2002 2001 ----------- ----------- <S> <C> <C> NET SALES $89,048,468 $79,396,806 COST OF GOODS SOLD 53,857,806 47,671,157 ----------- ----------- Gross profit 35,190,662 31,725,649 OPERATING EXPENSES: Research and development 5,585,740 4,900,810 Selling, general & administrative 5,040,345 4,924,088 ----------- ----------- Total operating expenses 10,626,085 9,824,898 ----------- ----------- Operating income 24,564,577 21,900,751 OTHER INCOME: Interest and dividend income 2,760,848 3,654,576 Other, net 754,301 4,633 ----------- ----------- Total other income 3,515,149 3,659,209 ----------- ----------- Income before provision for income taxes 28,079,726 25,559,960 PROVISION FOR INCOME TAXES 9,126,500 8,307,000 ----------- ----------- NET INCOME $18,953,226 $17,252,960 =========== =========== Earnings Per Share: Basic $ 0.25 $ 0.23 Diluted $ 0.25 $ 0.23 Weighted Average Shares: Basic 75,313,856 74,375,407 Diluted 76,347,821 75,555,508 </TABLE> See accompanying notes to condensed consolidated financial statements. -3-
GENTEX CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 <TABLE> <CAPTION> 2002 2001 ------------- ------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 18,953,226 $ 17,252,960 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 4,576,614 3,764,949 (Gain) loss on disposal of equipment (27,250) 171,665 Deferred income taxes 73,459 (135,991) Amortization of deferred compensation 268,967 218,686 Change in operating assets and liabilities: Accounts receivable, net (3,645,632) (2,066,710) Inventories 831,154 258,823 Prepaid expenses and other 589,117 (1,537,453) Accounts payable 2,074,633 3,444,896 Accrued liabilities 10,954,913 9,867,150 ------------- ------------- Net cash provided by operating activities 34,649,201 31,238,975 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) decrease in short-term investments (6,509,544) (8,849,792) Plant and equipment additions (15,253,685) (17,248,034) Proceeds from sale of plant and equipment 189,926 1,214,285 (Increase) decrease in long-term investments (18,465,197) 6,594,225 (Increase) decrease in other assets (296,465) (134,793) ------------- ------------- Net cash used for investing activities (40,334,965) (18,424,109) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock and tax benefit of stock plan transactions 5,972,518 3,496,768 ------------- ------------- Net cash provided by financing activities 5,972,518 3,496,768 ------------- ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 286,754 16,311,634 CASH AND CASH EQUIVALENTS, beginning of period 139,784,721 110,195,583 ------------- ------------- CASH AND CASH EQUIVALENTS, end of period $ 140,071,475 $ 126,507,217 ============= ============= </TABLE> See accompanying notes to condensed consolidated financial statements. -4-
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 2001 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, 2002, and December 31, 2001, 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> March 31, 2002 December 31, 2001 -------------- ----------------- <S> <C> <C> Raw materials $ 7,359,879 $ 8,376,321 Work-in-process 1,584,723 1,649,389 Finished goods 4,629,594 4,379,640 ----------- ----------- $13,574,196 $14,405,350 =========== =========== </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> March 31, 2002 March 31, 2001 -------------- -------------- <S> <C> <C> Quarter Ended $18,336,351 $14,763,386 </TABLE> (5) The increase in common stock and additional paid-in capital during the quarter ended March 31, 2002, is attributable to the issuance of 362,126 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: <TABLE> <CAPTION> Quarter Ended March 31, ----------------------------- Revenue: 2002 2001 ---- ---- <S> <C> <C> Automotive Products $83,893,419 $74,119,197 Fire Protection Products 5,155,049 5,277,609 ----------- ----------- Total $89,048,468 $79,396,806 =========== =========== Operating Income: Automotive Products $23,550,891 $21,006,969 Fire Protection Products 1,013,686 893,782 ----------- ----------- Total $24,564,577 $21,900,751 =========== =========== </TABLE> -5-
GENTEX CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS: FIRST QUARTER 2002 VERSUS FIRST QUARTER 2001 Net Sales. Net sales for the first quarter of 2002 increased by approximately $9,652,000, or 12%, when compared with the first quarter last year. Net sales of the Company's automotive mirrors increased by $9,774,000, or 13%, as automatic mirror unit shipments increased by 11% from approximately 1,850,000 in the first quarter of 2001 to 2,056,000 in the current quarter. This increase primarily reflected the increased penetration of interior electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors on 2002 model year mid-sized vehicle models. Unit shipments to customers in North America increased by 15.5%, primarily due to increased penetration, as North American light vehicle production schedules increased by approximately 3%. Mirror unit shipments to automotive customers outside North America increased by 6% compared with the first quarter in 2001, primarily due to increased interior mirror shipments to European and Asian-Pacific automakers. Net sales of the Company's fire protection products decreased 2%, primarily due to lower hotel / motel construction after the September 11, 2001, terrorist attack. Cost of Goods Sold. As a percentage of net sales, cost of goods sold remained unchanged at 60% in the first quarter of 2002 compared to the first quarter of 2001. This unchanged percentage primarily reflected annual customer price reductions offset by the higher sales level leveraged over the fixed overhead costs. Operating Expenses. Research and development expenses increased approximately $685,000, but remained unchanged at 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 $116,000, but remained unchanged at 6% of net sales, when compared with the first quarter of 2001. Other Income - Net. Other income decreased by approximately $144,000 when compared with the first quarter of 2001, primarily due to declining interest rates on investments, partially offset by realized gains from sales of equity investments. FINANCIAL CONDITION: Management considers the Company's working capital and long-term investments totaling approximately $385,340,000 at March 31, 2002, 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 next year and 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 2001 10-K report during the quarter ended March 31, 2002. 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. 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. -6-
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. 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 March 31, 2002. -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: 4/30/02 /s/ Fred T. Bauer ------------------- --------------------------------- Fred T. Bauer Chairman and Chief Executive Officer Date: 4/30/02 /s/ Enoch C. Jen -------------------- --------------------------------- Enoch C. Jen Vice President - Finance, Principal Financial and Accounting Officer -9-
EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION - ----------- ----------- <S> <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)(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. </TABLE> -10-
<TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION - ----------- ----------- <S> <C> *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(b)(4) Gentex Corporation 2002 Nonemployee Director Stock Option Plan (adopted March 6, 2002). 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. </TABLE> --------------------------------------------------- *Indicates a compensatory plan or arrangement.