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, 2003, 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
---------------- ---------------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
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 July 17, 2003
----- ----------------
Common Stock, $0.06 Par Value 76,397,639
Exhibit Index located at page 13
Page 1 of 18
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30, 2003 December 31, 2002
------------- -----------------
(Unaudited) (Audited)
----------- ---------
CURRENT ASSETS
Cash and cash equivalents $150,889,742 $168,834,111
Short-term investments 124,122,654 46,816,690
Accounts receivable, net 43,740,723 35,890,380
Inventories 18,718,241 17,742,009
Prepaid expenses and other 9,703,633 7,515,219
----------------- --------------------
Total current assets 347,174,993 276,798,409
PLANT AND EQUIPMENT - NET 125,362,669 124,982,665
OTHER ASSETS
Long-term investments 205,145,321 203,358,933
Patents and other assets, net 4,450,816 4,032,660
----------------- --------------------
Total other assets 209,596,137 207,391,593
----------------- --------------------
Total assets $682,133,799 $609,172,667
================= ====================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
CURRENT LIABILITIES
Accounts payable $15,262,466 $11,793,726
Accrued liabilities 18,723,064 17,266,309
----------------- --------------------
Total current liabilities 33,985,530 29,060,035
DEFERRED INCOME TAXES 11,946,091 6,472,270
SHAREHOLDERS' INVESTMENT
Common stock 4,583,858 4,573,282
Additional paid-in capital 134,915,721 123,923,391
Other shareholders' investment 496,702,599 445,143,689
----------------- --------------------
Total shareholders' investment 636,202,178 573,640,362
----------------- --------------------
Total liabilities and
shareholders' investment $682,133,799 $609,172,667
================= ====================
See accompanying notes to condensed consolidated financial statements.
- 2 -
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------------
2003 2002 2003 2002
---- ---- ---- ----
NET SALES $116,917,332 $97,346,344 $232,225,896 $186,394,812
COST OF GOODS SOLD 68,635,744 58,280,926 135,828,313 112,138,732
----------------------------- -----------------------------------
Gross profit 48,281,588 39,065,418 96,397,583 74,256,080
OPERATING EXPENSES:
Engineering, research and development 6,310,886 5,623,863 12,518,622 11,209,603
Selling, general
& administrative 6,090,320 5,243,953 11,616,996 10,284,298
----------------------------- -----------------------------------
Total operating expenses 12,401,206 10,867,816 24,135,618 21,493,901
----------------------------- -----------------------------------
Income from operations 35,880,382 28,197,602 72,261,965 52,762,179
OTHER INCOME:
Interest and dividend income 2,758,764 2,915,457 5,423,975 5,676,305
Other, net 13,193 460,708 (651,063) 1,215,009
----------------------------- -----------------------------------
Total other income 2,771,957 3,376,165 4,772,912 6,891,314
----------------------------- -----------------------------------
Income before provision
for income taxes 38,652,339 31,573,767 77,034,877 59,653,493
PROVISION FOR INCOME TAXES 12,562,000 10,263,000 25,036,000 19,389,500
----------------------------- -----------------------------------
NET INCOME $26,090,339 $21,310,767 $51,998,877 $40,263,993
============================= ===================================
Earnings Per Share:
Basic $0.34 $0.28 $0.68 $0.53
Diluted $0.34 $0.28 $0.68 $0.53
Weighted Average Shares:
Basic 75,992,364 75,685,015 75,974,343 75,494,641
Diluted 76,878,488 76,619,056 76,813,994 76,482,761
See accompanying notes to condensed consolidated financial statements.
- 3 -
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
-------------------------
2003 2002
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $51,998,877 $40,263,993
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 10,586,146 9,239,381
Loss on disposal of asset 75,626 11,180
(Gain) loss on sale of investments 1,942,315 (609,326)
Deferred income taxes (105,539) 2,008,634
Amortization of deferred compensation 554,688 581,818
Change in operating assets and liabilities:
Accounts receivable, net (7,850,343) (7,921,761)
Inventories (976,232) (643,887)
Prepaid expenses and other (1,564,550) 1,879,434
Accounts payable 3,468,740 4,483,290
Accrued liabilities 1,456,755 3,142,782
Tax benefit of stock plan transactions 3,591,854 3,486,599
----------------- -----------------
Net cash provided by
operating activities 63,178,337 55,922,137
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant and equipment additions (11,044,112) (20,235,959)
Proceeds from sale of plant and equipment 72,000 189,926
(Increase) decrease in investments (66,876,106) (24,470,355)
Increase in other assets (64,199) (597,096)
----------------- -----------------
Net cash used for
investing activities (77,912,417) (45,113,484)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock from
stock plan transactions 7,036,521 6,924,487
Repurchases of common stock (10,246,810) 0
----------------- -----------------
Net cash provided by (used for)
financing activities (3,210,289) 6,924,487
----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (17,944,369) 17,733,140
CASH AND CASH EQUIVALENTS,
beginning of period 168,834,111 139,784,721
----------------- -----------------
CASH AND CASH EQUIVALENTS,
end of period $150,889,742 $157,517,861
================= =================
See accompanying notes to condensed consolidated financial statements.
- 4 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED 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 2002 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, 2003, 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:
June 30, 2003 December 31, 2002
------------- -----------------
Raw materials $ 9,872,188 $ 9,911,022
Work-in-process 1,970,231 1,744,372
Finished goods 6,875,823 6,086,615
----------- ------------
$18,718,241 $ 17,742,009
=========== ============
(4) The following table reconciles the numerators and denominators used in the
calculation of basic and diluted earnings per share (EPS):
Quarter Ended June 30, Six Months Ended June 30,
----------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
Numerators:
Numerator for both basic and
diluted EPS, net income $26,090,339 $21,310,767 $51,998,877 $40,263,993
Denominators:
Denominator for basic EPS,
weighted-average shares
outstanding 75,992,364 75,685,015 75,974,343 75,494,641
Potentially dilutive shares
resulting from stock plans 886,124 934,041 839,651 988,120
----------- ----------- ----------- -----------
Denominator for diluted EPS 76,878,488 76,619,056 76,813,994 76,482,761
=========== =========== =========== ===========
Shares related to stock plans
not included in diluted average
common shares outstanding
because their effect would be
antidilutive 705,855 424,703 1,055,485 416,882
(5) At June 30, 2003, the Company had two stock option plans and an employee
stock purchase plan. The Company accounts for these plans under the
recognition and measurement principles of APB Opinion No. 25 (Accounting
for Stock Issued to Employees) and related interpretations. No stock-based
employee compensation cost is reflected in net income, as all options
granted under these plans have an exercise price equal to the market value
of the underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation.
-5-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
Quarter Ended June 30, Six Months Ended June 30,
---------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net income, as reported $26,090,339 $21,310,767 $51,998,877 $40,263,993
Deduct: Total stock-based employee
compensation expense determined
under fair-value-based method of all
awards, net of tax effects (2,335,352) (1,968,351) (4,466,666) (3,703,771)
----------- ----------- ----------- -----------
Pro forma net income $23,754,987 $19,342,416 $47,532,211 $36,560,222
=========== =========== =========== ===========
Earnings per share:
Basic -- as reported $ .34 $ .28 $ .68 $ .53
Basic -- pro forma .31 .26 .63 .48
Diluted -- as reported .34 .28 .68 .53
Diluted -- pro forma .31 .25 .62 .48
(6) 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, 2003 June 30, 2002
------------- -------------
Quarter Ended $36,795,378 $14,494,227
Six Months Ended 61,625,563 32,830,578
(7) The increase in common stock during the quarter ended June 30, 2003, is
attributable to the issuance of 374,348 shares of the Company's common
stock under its stock-based compensation plans. The increase in common
stock during the six months ended June 30, 2003, is attributable to the
issuance of 591,269 shares of the Company's common stock under its
stock-based compensation plans, partially offset by the repurchase of
415,000 shares.
(8) 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,
---------------------------------- ---------------------------------
2003 2002 2003 2002
---- ---- ---- ----
Revenue:
Automotive Products $ 110,894,144 $ 91,566,416 $ 221,071,003 $ 175,459,835
Fire Protection Products 6,023,188 5,779,928 11,154,893 10,934,977
------------- ------------- -------------- --------------
Total $ 116,917,332 $ 97,346,344 $ 232,225,896 $ 186,394,812
============= ============= ============== ==============
Operating Income:
Automotive Products $ 34,646,655 $ 27,141,179 $ 70,133,741 $ 50,692,070
Fire Protection Products 1,233,727 1,056,423 2,128,224 2,070,109
------------- ------------- -------------- --------------
Total $ 35,880,382 $ 28,197,602 $ 72,261,965 $ 52,762,179
============= ============= ============== ==============
-6-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(9) In order to avoid the registration requirements of the Investment Company
Act of 1940, the Company has changed its intent to hold certain of its
held-to-maturity investments and has therefore reclassified investments in
debt securities with a net carrying value of $202 million from
held-to-maturity to available-for-sale during the second quarter of 2003.
The unrealized gain on these securities, net of income taxes, was
approximately $1 million at the time of the reclassification and was
recorded in accumulated other comprehensive income within shareholders'
investment at June 30, 2003.
(10) New Accounting Pronouncements - Financial Accounting Standards Board
(FASB) Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others," changes current practice in accounting for, and disclosure of,
guarantees. Interpretation No. 45 will require certain guarantees to be
recorded as liabilities at fair value on the Company's balance sheet.
Current practice requires liabilities related to guarantees to be recorded
only when a loss is probable and reasonably estimable, as those terms are
defined in SFAS No. 5, "Accounting for Contingencies." Interpretation No.
45 also requires a guarantor to make significant new disclosures, even when
the likelihood of making any payments under the guarantee is remote, which
is another change from current practice. The disclosure requirements of
Interpretation No. 45 were effective as of December 31, 2002; however the
Company currently does not have significant third-party guarantees or
warranty liabilities that would require disclosure under the
interpretation. The initial recognition and measurement provisions are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The recognition and measurement provisions were adopted,
prospectively, as of January 1, 2003, and did not have a significant effect
on the Company's consolidated financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FASB Statement
No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change to the fair-value-based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require disclosure in interim financial
statements regarding the method used on reported results. The Company does
not intend to adopt a fair-value-based method of accounting for stock-based
employee compensation until a final standard is issued by the FASB that
requires this accounting. Pro forma disclosures of quarterly earnings using
the fair-value method are included in Note 5 of this Form 10-Q.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." This standard clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statement,"
and addresses consolidation by business enterprises of variable interest
entities. Interpretation No. 46 requires existing unconsolidated variable
interest entities to be consolidated by their primary beneficiaries if the
entities do not effectively disperse risk among the parties involved.
Interpretation No. 46 also enhances the disclosure requirements related to
variable interest entities. This interpretation is effective immediately
for variable interest entities created or in which an enterprise obtains an
interest after January 31, 2003. Interpretation No. 46 will be effective
for the Company beginning July 1, 2003, for all interest in variable
interest entities acquired before February 1, 2003. The adoption of
Interpretation No. 46 is not expected to have a significant effect on the
Company's consolidated financial position or results of operations.
-7-
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
SECOND QUARTER 2003 VERSUS SECOND QUARTER 2002
Net Sales. Net sales for the second quarter of 2003 increased by
approximately $19,571,000, or 20%, when compared with the second
quarter last year. Net sales of the Company's automotive mirrors
increased by $19,328,000, or 21%, as electrochromic mirror unit
shipments increased by 11% from approximately 2,278,000 in the second
quarter of 2002 to 2,534,000 in the current quarter. These increases
reflected the increased penetration of interior and exterior
electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors on 2003 model
year vehicles plus additional electronic feature content. Unit
shipments to customers in North America for the second quarter of
2003 increased by 7% compared to the same period in the prior year,
primarily due to increased penetration, despite a 9% decline in North
American automotive industry production levels. Mirror unit shipments
to automotive customers outside North America increased by 17% for
the second quarter of 2003 compared with the second quarter in 2002,
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 increased 4% for the second
quarter of 2003, 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 goods sold
decreased from 60% in the second quarter of 2002 to 59% in the second
quarter of 2003. This decreased percentage primarily reflected the
higher sales level leveraged over the fixed overhead costs and
product mix, partially offset by annual customer price reductions.
Each factor is estimated to have impacted cost of goods sold as a
percentage of net sales by approximately 1-2%.
Operating Expenses. Engineering, research and development expenses
for the quarter increased approximately $687,000, but decreased from
6% to 5% of net sales as the additional expenses were leveraged over
increased 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 $846,000 for the quarter, but remained at 5% of net
sales, when compared with the second quarter of 2002. This increased
expense primarily reflected the continued expansion of the Company's
overseas sales and engineering offices.
Other Income - Net. Other income decreased by approximately $604,000
for the quarter when compared with the second quarter of 2002,
primarily due to realized losses on the sale of equity investments.
SIX MONTHS ENDED JUNE 30, 2003, VERSUS SIX MONTHS ENDED JUNE 30, 2002
Net Sales. Net sales for the six months ended June 30, 2003,
increased by approximately $45,831,000, or 25%, when compared with
the same period last year. Automatic-dimming mirror unit shipments
increased by 17% from approximately 4,334,000 in the first six months
of 2002 to 5,069,000 in the first six months of 2003. This increase
reflected the increased penetration on 2003 model year vehicles for
interior and exterior electrochromic NVS Mirrors. Unit shipments to
customers in North America increased by 11% for the first six months
of 2003, primarily due to increased penetration, despite lower North
American automotive industry production levels. Mirror unit shipments
to automotive customers outside North America increased by 26% for
the first six months of 2003 compared with the first six months in
2002, 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 increased 2% for the
first six months of 2003, 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 goods sold
decreased from 60% to 58% in the first six months of 2003. This
decreased percentage primarily reflected the higher sales level
leveraged over the fixed overhead costs and product mix, partially
offset by annual customer price reductions. Each factor is estimated
to have impacted cost of goods sold as a percentage of net sales by
approximately 1-2%.
-8-
Operating Expenses. For six months ended June 30, 2003, engineering,
research and development expenses increased approximately $1,309,000,
but decreased from 6% to 5% of net sales as the additional expenses
were leveraged over increased sales, when compared with the same
period last year, primarily reflecting additional staffing for new
product development, including mirrors with additional electronic
features. Selling, general and administrative expenses increased
approximately $1,333,000 for the first six months of 2003, but
decreased from 6% to 5% of net sales as the additional expenses were
leveraged over increased sales, when compared to the first six months
of 2002.This increased expense primarily reflected the continued
expansion of the Company's overseas sales and engineering offices.
Other Income -- Net. Other income for the six months ended June 30,
2003, decreased by approximately $2,118,000 when compared with the
first six months of 2002, primarily due to realized losses on the
sale of equity investments.
FINANCIAL CONDITION:
Cash flow from operating activities for the six months ended June 30,
2003, increased $7,256,000 to $63,178,000, compared to $55,922,000
for the same period last year, primarily due to increased net income.
Capital expenditures for the six months ended June 30, 2003, were
$11,044,000, compared to $20,236,000 for the same period last year,
primarily due to the purchase of a company airplane in 2002.
Management considers the Company's working capital and long-term
investments totaling approximately $518,335,000 at June 30, 2003,
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.
On October 8, 2002, the Company announced a share repurchase plan,
under which the Company may purchase up to 4,000,000 shares based on
a number of factors, including market conditions, the market price of
the Company's common stock, anti-dilutive effect on earnings,
available cash and other factors as the Company deems appropriate.
During the quarter ended March 31, 2003, the Company repurchased
415,000 shares at a cost of approximately $10,247,000. No shares were
repurchased during the quarter ended June 30, 2003.
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. During the quarter ended
June 30, 2003, there were no significant changes in the market risks
reported in the Company's 2002 Form 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. The Company
utilizes the forecasting services of J.D. Power and Associates, and
its current forecasts for light vehicle production are approximately
16.0 million in North America, 15.7 million in Western Europe and
20.3 million in the Asia-Pacific region for calendar 2003.
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, profit pressures at certain automakers are
resulting in increased cost reduction efforts by them, including
requests for additional price reductions, decontenting certain
features from vehicles, and warranty cost-sharing programs, which
could adversely impact the Company's sales growth and margins. The
Company also continues to experience from time to time some pressure
for select raw material cost increases.
Automakers have been experiencing increased volatility and
uncertainty in executing planned new programs which have, in some
cases, resulted in cancellations or delays of new vehicle platforms,
package reconfigurations and inaccurate volume forecasts. In
addition, there remains uncertainty associated with automotive light
vehicle production schedules for the balance of the year due to
weaker automotive sales, the economy and geopolitical factors,
including the occupation in Iraq. This increased volatility and
uncertainty has made it more difficult for
-9-
TRENDS AND DEVELOPMENTS (CONT.):
the Company to forecast future sales and effectively utilize capital,
engineering, research and development, and human resource
investments.
The Company does not have any significant off-balance sheet
arrangements or commitments that have not been recorded in its
consolidated financial statements.
On October 1, 2002, Magna International acquired Donnelly
Corporation. Magna Donnelly is the Company's major competitor for
sales of automatic-dimming rearview mirrors to domestic and foreign
vehicle manufacturers and their mirror suppliers. The Company also
sells certain automatic-dimming rearview mirror sub-assemblies to
Magna Donnelly. To date, the Company is not aware of any significant
impact of Magna's acquisition of Donnelly upon the Company; however,
any ultimate significant impact has not yet been determined.
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.
ITEM 4. CONTROLS AND PROCEDURES
As of June 30, 2003, an evaluation was performed under the
supervision and with the participation of the Company's management,
including the CEO and CFO, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures [(as
defined in Exchange Act Rules 13a -- 14(c) and 15d -- 14(c)]. Based
on that evaluation, the Company's management, including the CEO and
CFO, concluded that the Company's disclosure controls and procedures
were effective as of June 30, 2003, to ensure that material
information relating to the Company would be made known to them by
others within the Company, particularly during the period in which
this Form 10-Q was being prepared. There have been no significant
changes in the Company's internal controls over financial reporting
or in other factors that could significantly affect internal controls
over financial reporting subsequent to June 30, 2003, nor any
significant deficiencies or material weaknesses in such controls
requiring corrective actions. As a result, no corrective actions were
required or taken.
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.
-10-
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 14, 2003, at which:
(a) The following nominees were elected to serve
three-year terms (except for a one-year term for
John Mulder) on the Company's Board of Directors
by the following votes.
Fred Bauer Leo Weber Gary Goode John Mulder
---------- --------- ---------- -----------
For 50,582,435 69,285,160 69,369,544 54,326,298
Against - - - -
Withheld 20,502,679 1,799,954 1,715,570 16,758,816
Broker Non-Votes - - - -
The terms of office for incumbent Directors
Mickey Fouts, Kenneth La Grand, Arlyn Lanting,
Fred Sotok and Ted Thompson, continued after the
meeting.
(b) A proposal to approve the Gentex 2003 Employee
Stock Purchase Plan was approved by the following
vote:
For 70,319,972
Against 619,737
Abstain 145,405
Broker Non-Votes -
(c) A shareholder proposal on board diversity was not approved
by the following votes:
For 21,381,079
Against 33,166,192
Abstain 4,100,461
Broker Non-Votes -
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 13.
(b) During the three months ended June 30, 2003, one
report on Form 8-K was filed on April 16, 2003,
to disclose the Company's financial results for
the first quarter ended March 31, 2003.
-11-
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: August 6, 2003 /s/ Fred T. Bauer
---------------------- ----------------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: August 6, 2003 /s/ Enoch C. Jen
----------------------- ----------------------------------
Enoch C. Jen
Vice President -- Finance,
Principal Financial and
Accounting Officer
-12-
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 February 27, 2003, was filed as
Exhibit 3(b)(1) to Registrant's Report on Form 10-Q dated May 5, 2003, 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.
-13-
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
*10(b)(3) Gentex Corporation 2002 Non-Employee Director Stock Option Plan
(adopted March 6, 2002), was filed as Exhibit 10(b)(4) to
Registrant's Report on Form 10-Q dated April 30, 2002, and the
same is incorporated herein by reference.
10(e) The form of Indemnity Agreement between Registrant and each of
the Registrant's directors and certain officers was filed as
Exhibit 10 (e) to Registrant's Report on Form 10-Q dated October
31, 2002, and the same is incorporated herein by reference.
31.1 Certification of the Chief Executive Officer of Gentex Corporation
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). 15
31.2 Certification of the Chief Financial Officer of Gentex Corporation
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). 16
32.1 Certificate of the Chief Executive Officer of Gentex Corporation
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). 17
32.2 Certificate of the Chief Financial Officer of Gentex Corporation
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350). 18
*Indicates a compensatory plan or arrangement.
-14-
EXHIBIT 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE
OFFICER OF GENTEX CORPORATION
I, Fred T. Bauer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gentex
Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by others
within those entities, particularly during the
period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented
in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual
report) that has materially affected, or is
reasonably likely to materially affect, the
registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrant's ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2003
--------------
/s/ Fred T. Bauer
-----------------------------------
Fred T. Bauer
Chief Executive Officer
-15-
EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL
OFFICER OF GENTEX CORPORATION
I, Enoch C. Jen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gentex
Corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) designed such disclosure controls and procedures,
or caused such disclosure controls and procedures
to be designed under our supervision, to ensure
that material information relating to the
registrant, including its consolidated
subsidiaries, is made known to us by others
within those entities, particularly during the
period in which this report is being prepared;
(b) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented
in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) disclosed in this report any change in the
registrant's internal control over financial
reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual
report) that has materially affected, or is
reasonably likely to materially affect, the
registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) all significant deficiencies and material
weaknesses in the design or operation of internal
control over financial reporting which are
reasonably likely to adversely affect the
registrant's ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
control over financial reporting.
Date: August 6, 2003
--------------
/s/ Enoch C. Jen
----------------------------
Enoch C. Jen
Vice President, Finance
-16
EXHIBIT 32.1
CERTIFICATE OF THE CHIEF EXECUTIVE
OFFICER OF GENTEX CORPORATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S. C. 1350):
I, Fred T. Bauer, Chief Executive Officer of Gentex Corporation, certify, to the
best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. 1350), that:
(1) The quarterly report on Form 10-Q for the quarterly period ended
June 30, 2003, which this statement accompanies, fully complies
with requirements of Section 13(a) or 15(d) of the Securities and
Exchange Act of 1934 and;
(2) The information contained in this quarterly report on Form 10-Q
for the quarterly period ended June 30, 2003, fairly presents, in
all material respects, the financial condition and results of
operations of Gentex Corporation.
GENTEX CORPORATION
Dated: August 6, 2003 By: /s/ Fred T. Bauer
-------------- -----------------------------
Fred T. Bauer
Its: Chief Executive Officer
A signed original of this written statement required by Section 906, or other
documentation authenticating, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to Gentex Corporation and
will be retained by Gentex Corporation and furnished to the Securities Exchange
Commission or its staff upon request.
-17-
EXHIBIT 32.2
CERTIFICATE OF THE CHIEF FINANCIAL
OFFICER OF GENTEX CORPORATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S. C. 1350):
I, Enoch C. Jen, Chief Financial Officer of Gentex Corporation, certify, to the
best of my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. 1350), that:
(1) The quarterly report on Form 10-Q for the quarterly period ended
June 30, 2003, which this statement accompanies, fully complies
with requirements of Section 13(a) or 15(d) of the Securities and
Exchange Act of 1934 and;
(2) The information contained in this quarterly report on Form 10-Q
for the quarterly period ended June 30, 2003, fairly presents, in
all material respects, the financial condition and results of
operations of Gentex Corporation.
GENTEX CORPORATION
Dated: August 6, 2003 By: /s/ Enoch C. Jen
-------------- -----------------------------------
Enoch C. Jen
Its: Vice President - Finance
A signed original of this written statement required by Section 906, or other
documentation authenticating, acknowledging, or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to Gentex Corporation and
will be retained by Gentex Corporation and furnished to the Securities Exchange
Commission or its staff upon request.
-18-
