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XBRL
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q 
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020 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 Number: 0-10235
GENTEX CORPORATION
(Exact name of registrant as specified in its charter)
Michigan
38-2030505
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
600 N. Centennial
Zeeland
Michigan49464
(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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.06 per shareGNTXNASDAQ Global Select Market
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:  þ No:  o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes:  þ No:  o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes:    No:   þ
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 Sections 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:  o No:  o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Shares Outstanding, April 24, 2020
Common Stock, $.06 Par Value
244,871,910

1


GENTEX CORPORATION AND SUBSIDIARIES
For the Three Months Ended March 31, 2020
FORM 10-Q
Index

Part I - Financial Information
Page
Item 1.
Item 2.
Item 3.
Item 4.
Part II - Other Information
Item 1A.
Item 2.
Item 6.


2


PART I —FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements.
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2020 and December 31, 2019
March 31, 2020 (Unaudited)
December 31, 2019
(Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$278,524,928  $296,321,622  
Short-term investments131,078,039  140,384,053  
Accounts receivable, net233,578,125  235,410,326  
Inventories251,006,414  248,941,855  
Prepaid expenses and other16,539,990  29,319,036  
Total current assets910,727,496  950,376,892  
PLANT AND EQUIPMENT—NET493,114,501  498,316,100  
OTHER ASSETS
Goodwill307,365,845  307,365,845  
Long-term investments177,794,760  139,909,323  
Intangible assets, net245,550,000  250,375,000  
Patents and other assets, net23,550,490  22,460,033  
Total other assets754,261,095  720,110,201  
Total assets$2,158,103,092  $2,168,803,193  
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Accounts payable$100,099,191  $97,553,917  
Current portion of long-term debt75,000,000    
Accrued liabilities88,858,713  74,292,883  
Total current liabilities263,957,904  171,846,800  
OTHER NON-CURRENT LIABILITIES9,091,509  7,414,424  
DEFERRED INCOME TAXES50,448,046  51,454,149  
Total liabilities323,497,459  230,715,373  
SHAREHOLDERS’ INVESTMENT
Common stock14,691,939  15,076,651  
Additional paid-in capital801,388,454  807,928,139  
Retained earnings1,018,310,446  1,116,372,133  
Accumulated other comprehensive income (loss)214,794  (1,289,103) 
Total shareholders’ investment1,834,605,633  1,938,087,820  
Total liabilities and shareholders’ investment$2,158,103,092  $2,168,803,193  

Note: The condensed consolidated balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
3


GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2020 and 2019
 
Three Months Ended March 31,
20202019
NET SALES
$453,761,726  $468,588,997  
COST OF GOODS SOLD
297,174,245  298,944,494  
Gross profit156,587,481  169,644,503  
OPERATING EXPENSES:
Engineering, research and development29,615,422  28,089,181  
Selling, general & administrative21,944,892  19,958,991  
Total operating expenses51,560,314  48,048,172  
Income from operations105,027,167  121,596,331  
OTHER INCOME (LOSS)
Investment income2,446,649  3,262,741  
Other income (loss), net(199,167) 49,469  
Total other income2,247,482  3,312,210  
INCOME BEFORE PROVISION FOR INCOME TAXES107,274,649  124,908,541  
PROVISION FOR INCOME TAXES17,768,848  20,628,130  
NET INCOME$89,505,801  $104,280,411  
EARNINGS PER SHARE: (1)
Basic$0.36  $0.40  
Diluted$0.36  $0.40  
Cash Dividends Declared per Share$0.120  $0.115  
(1) Earnings Per Share has been adjusted to exclude the portion of net income allocated to participating securities as a result of share-based payment awards.

4


GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2020 and 2019
Three Months Ended March 31,
20202019
Net Income$89,505,801$104,280,411
Other comprehensive income before tax:
Foreign currency translation adjustments(692,090) 298,999  
Unrealized gains on debt securities, net2,779,730  1,298,236  
Other comprehensive income, before tax2,087,640  1,597,235  
Income tax impact related to components of other comprehensive income583,743  272,631  
Other comprehensive income, net of tax1,503,897  1,324,604  
Comprehensive Income$91,009,698  $105,605,015  

5


GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Three Months Ended March 30, 2020 and 2019
Common 
Stock
Shares
Common 
Stock
Amount
Additional 
Paid-In
Capital
Retained 
Earnings
Accumulated 
Other
Comprehensive
Income (Loss)
Total 
Shareholders’
Investment
BALANCE AS OF JANUARY 1, 2020251,277,515  15,076,651  807,928,139  1,116,372,133  (1,289,103) 1,938,087,820  
Issuance of common stock from stock plan transactions607,175  36,431  7,319,057  —  —  7,355,488  
Repurchases of common stock(7,019,032) (421,143) (20,214,812) (158,183,629) —  (178,819,584) 
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock—  —  6,356,070  —  —  6,356,070  
Dividends declared ($0.12 per share)
—  —  —  (29,383,859) —  (29,383,859) 
Net income—  —  —  89,505,801  —  89,505,801  
Other comprehensive loss—  —  —  —  1,503,897  1,503,897  
BALANCE AS OF MARCH 31, 2020244,865,658  14,691,939  801,388,454  1,018,310,446  214,794  1,834,605,633  
BALANCE AS OF JANUARY 1, 2019259,328,613  15,559,717  745,324,144  1,102,468,137  (1,600,338) 1,861,751,660  
Issuance of common stock from stock plan transactions980,670  58,840  10,455,714  —  —  10,514,554  
Repurchases of common stock(4,724,938) (283,496) (12,001,344) (83,982,388) —  (96,267,228) 
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock—  —  4,862,947  —  —  4,862,947  
Dividends declared ($0.115 per share)
—  —  —  (29,392,200) —  (29,392,200) 
Net income—  —  —  104,280,411  —  104,280,411  
Other comprehensive loss—  —  —  —  1,324,604  1,324,604  
BALANCE AS OF MARCH 31, 2019255,584,345  15,335,061  748,641,461  1,093,373,960  (275,734) 1,857,074,748  


6


GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2020 and 2019
 
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$89,505,801  $104,280,411  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization26,295,146  28,098,804  
(Gain) on disposal of assets(151,910) (43,338) 
Loss on disposal of assets54,279  122,296  
(Gain) on sale of investments(42,461) (88,576) 
Loss on sale of investments5,487    
Change in deferred income taxes(1,589,855) (1,233,853) 
Stock-based compensation expense related to employee stock options, employee stock purchases and restricted stock6,356,070  4,862,947  
Change in operating assets and liabilities:
Accounts receivable, net1,832,201  (30,728,497) 
Inventories(2,064,558) (21,443) 
Prepaid expenses and other12,779,046  10,847,705  
Accounts payable2,545,274  (2,692,820) 
Accrued liabilities, excluding dividends declared and short-term debt15,755,950  20,436,582  
Net cash provided by operating activities151,280,470  133,840,218  
CASH FLOWS (USED FOR) INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales proceeds3,124,008  17,139,689  
Maturities and calls19,720,000  3,000,000  
Purchases(48,606,718) (18,475,158) 
Plant and equipment additions(15,574,443) (16,844,301) 
Proceeds from sale of plant and equipment165,533  117,455  
Decrease in other assets(2,544,554) 164,215  
Net cash (used for) investing activities(43,716,174) (14,898,100) 
CASH FLOWS (USED FOR) FINANCING ACTIVITIES:
Proceeds from borrowings on Credit Agreement75,000,000    
Issuance of common stock from stock plan transactions7,355,488  10,514,554  
Cash dividends paid(28,896,894) (28,526,146) 
Repurchases of common stock(178,819,584) (96,267,229) 
Net cash (used for) financing activities(125,360,990) (114,278,821) 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(17,796,694) 4,663,297  
CASH AND CASH EQUIVALENTS, beginning of period296,321,622  217,025,278  
CASH AND CASH EQUIVALENTS, end of period$278,524,928  $221,688,575  

7


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)




(1) Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by the Company, 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 Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 2019 annual report on Form 10-K. 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 Company as of March 31, 2020, and the results of operations and cash flows for the interim periods presented.

(2) Adoption of New Accounting Pronouncements

Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings in the period of adoption. Based on the insignificant impact of this ASU on the Company's financial statements, a cumulative-effect adjustment to retained earnings was not deemed necessary. The standard requires a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis. The standard requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. The adoption of this standard did not have a material impact on the Company's consolidated balance sheet, consolidated income statement, or consolidated statement of cash flows.


(3) Goodwill and Other Intangible Assets

Goodwill represents the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company recorded Goodwill of $307.4 million as part of the HomeLink® acquisition. The carrying value of Goodwill as of both March 31, 2020 and December 31, 2019 was $307.4 million.

In addition to annual impairment testing, which is performed as of the first day of the fourth quarter, the Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value thus resulting in the need for interim impairment testing, including long-term revenue growth projections, profitability, discount rates, recent market valuations from transactions by comparable companies, volatility in the Company's market capitalization, and general industry, market and macroeconomic conditions. The impact of COVID-19 was considered in the most recently completed quarter, but did not indicate the need for interim impairment testing.







8


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


The patents and intangible assets and related change in carrying values are set forth in the tables below:

As of March 31, 2020:
Other Intangible AssetsGrossAccumulated AmortizationNetAssumed Useful Life
Gentex Patents$37,496,822  $(23,003,239) $14,493,583  Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$52,000,000  $—  $52,000,000  Indefinite
HomeLink® Technology
180,000,000  (97,500,000) 82,500,000  12 years
Existing Customer Platforms43,000,000  (27,950,000) 15,050,000  10 years
Exclusive Licensing Agreement96,000,000  —  96,000,000  Indefinite
Total Other Intangible Assets$371,000,000  $(125,450,000) $245,550,000  
Total Patents & Other Intangible Assets$408,496,822  $(148,453,239) $260,043,583  


As of December 31, 2019:

Other Intangible Assets
Gross
Accumulated Amortization
Net
Assumed Useful Life
Gentex Patents
$37,328,963  $(22,491,010) $14,837,953  Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$52,000,000  $—  $52,000,000  Indefinite
HomeLink® Technology
180,000,000  (93,750,000) 86,250,000  12 years
Existing Customer Platforms43,000,000  (26,875,000) 16,125,000  10 years
Exclusive Licensing Agreement
96,000,000  —  96,000,000  Indefinite
Total Other Intangible Assets$371,000,000  $(120,625,000) $250,375,000  
Total Patents & Other Intangible Assets$408,328,963  $(143,116,010) $265,212,953  

Amortization expense on patents and intangible assets was approximately $5.6 million during the three months ended March 31, 2020, compared to approximately $5.6 million for the same quarter ended March 31, 2019.

Excluding the impact of any future acquisitions, the Company estimates amortization expense for each of the years ended December 31, 2020 and 2021 to be approximately $22 million annually, for the year ended December 31, 2022 to be approximately $21 million, for the year ended December 31, 2023 to be approximately $19 million, and for the year ended December 31, 2024 to be approximately $16 million.


(4) Investments
The Company follows the provisions of Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, and for its non-financial assets and liabilities subject to fair value measurements. ASC 820 provides a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases, require
9


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


estimates of fair-market value. This standard also expanded financial statement disclosure requirements with respect to a company’s use of fair-value measurements, including the effect of such measurements on earnings. The cost of securities sold is based on the specific identification method.
The Company determines the fair value of its government securities, asset-backed securities, municipal bonds, and corporate bonds by utilizing monthly valuation statements that are provided by its broker. The broker determines the investment valuation by utilizing the bid price in the market and also refers to third party sources to validate valuations, and as such are classified as Level 2 assets.
The Company's certificates of deposit are classified as available for sale and are considered as Level 1 assets. These investments are carried at cost, which approximates fair value.

The Company also periodically makes technology investments in certain non-consolidated third-parties. These equity investments are accounted for in accordance with ASC 321, Investments - Equity Securities. Equity investments that do not have readily determinable fair values, and where the Company has not identified any observable events that would cause adjustment of the valuation to date, such equity investments are held at cost. These technology investments totaled approximately $9.0 million as of March 31, 2020 and December 31, 2019. These investments are classified within Long-Term Investments in the consolidated balance sheet. 
Assets or liabilities that have recurring fair value measurements are shown below as of March 31, 2020 and December 31, 2019:

As of March 31, 2020:
Fair Value Measurements at Reporting Date Using
Total as of
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable
Inputs
Significant
Unobservable
Inputs
Description
March 31, 2020(Level 1)(Level 2)(Level 3)
Cash & Cash Equivalents
$278,524,928  $278,524,928  $  $  
Short-Term Investments:
Certificate of Deposit50,099,795  50,099,795      
Corporate Bonds29,122,402    29,122,402    
Government Securities46,903,815    46,903,815    
Municipal Bonds2,084,121    2,084,121    
Other2,867,906  2,867,906      
Long-Term Investments:
Asset Backed Securities43,628,702    43,628,702    
Certificate of Deposit5,086,858  5,086,858      
Corporate Bonds20,397,525    20,397,525    
Government Securities7,308,584    7,308,584  
Municipal Bonds92,358,822    92,358,822    
Total$578,383,458  $336,579,487  $241,803,971  $  







10


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)




As of December 31, 2019:
Fair Value Measurements at Reporting Date Using
Total as of
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable
Inputs
Significant
Unobservable
Inputs
Description
December 31, 2019(Level 1)(Level 2)(Level 3)
Cash & Cash Equivalents
$296,321,622  $296,321,622  $  $  
Short-Term Investments:
Certificate of Deposit50,099,795  50,099,795      
Corporate Bonds29,219,685    29,219,685    
Government Securities58,432,823    58,432,823    
Other2,631,750  2,631,750      
Long-Term Investments:
Asset-backed Securities25,791,029    25,791,029    
Certificate of Deposit3,557,798  3,557,798    
Corporate Bonds22,815,998    22,815,998    
Governmental Securities6,088,190    6,088,190    
Municipal Bonds72,638,690    72,638,690    
Total$567,597,380  $352,610,965  $214,986,415  $  

The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of March 31, 2020 and December 31, 2019:

As of March 31, 2020:
Unrealized
Cost
Gains
Losses
Market Value
Short-Term Investments:
Certificate of Deposit$50,099,795  $  $  $50,099,795  
Corporate Bonds29,047,745  84,838  (10,181) 29,122,402  
Government Securities46,564,204  339,611    46,903,815  
Municipal Bonds2,079,998  4,123    2,084,121  
Other2,867,906      2,867,906  
Long-Term Investments:
Asset Backed Securities43,046,638  988,808  (406,744) 43,628,702  
Certificate of Deposit5,007,454  87,617  (8,213) 5,086,858  
Corporate Bonds20,271,904  330,691  (205,070) 20,397,525  
Government Securities7,150,365  158,219    7,308,584  
Municipal Bonds89,556,097  2,905,405  (102,680) 92,358,822  
Total$295,692,106  $4,899,312  $(732,888) $299,858,530  





11


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



As of December 31, 2019: 
Unrealized
CostGainsLossesMarket Value
Short-Term Investments:
Certificate of Deposit$50,099,795  $  $  $50,099,795  
Corporate Bonds29,025,624  194,061    29,219,685  
Government Securities58,343,911  99,917  (11,005) 58,432,823  
Other2,631,750      2,631,750  
Long-Term Investments:
Asset-backed Securities25,971,156    (180,127) 25,791,029  
Certificate of Deposit3,500,000  58,808  (1,010) 3,557,798  
Corporate Bonds22,306,130  509,868    22,815,998  
Government Securities6,012,705  75,485    6,088,190  
Municipal Bonds71,997,996  1,036,116  (395,422) 72,638,690  
Total$269,889,067  $1,974,255  $(587,564) $271,275,758  

Unrealized losses on investments as of March 31, 2020, are as follows:
Aggregate Unrealized LossesAggregate Fair Value
Loss duration of less than one year$732,888  $36,159,819  
Loss duration of greater than one year    
       Total
$732,888  $36,159,819  

Unrealized losses on investments as of December 31, 2019, are as follows: 
Aggregate Unrealized Losses
Aggregate Fair Value
Loss duration of less than one year$587,564  $90,721,081  
Loss duration of greater than one year