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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, 2022 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 22, 2022
Common Stock, $.06 Par Value
234,459,296

1


GENTEX CORPORATION AND SUBSIDIARIES
For the Three Months Ended March 31, 2022
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 Condensed Consolidated Financial Statements.
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2022 and December 31, 2021
March 31, 2022 (Unaudited)
December 31, 2021
(Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$279,708,413 $262,311,670 
Short-term investments6,891,621 5,423,612 
Accounts receivable, net281,461,678 249,794,906 
Inventories362,736,521 316,267,442 
Prepaid expenses and other24,733,040 39,178,119 
Total current assets955,531,273 872,975,749 
PLANT AND EQUIPMENT—NET468,409,064 464,121,676 
OTHER ASSETS
Goodwill313,928,914 313,960,209 
Long-term investments175,824,026 207,693,147 
Intangible assets, net234,229,803 239,189,627 
Patents and other assets, net32,459,405 33,450,758 
Total other assets756,442,148 794,293,741 
Total assets$2,180,382,485 $2,131,391,166 
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Accounts payable$140,887,194 $98,342,928 
Accrued liabilities98,335,978 83,313,172 
Total current liabilities239,223,172 181,656,100 
OTHER NON-CURRENT LIABILITIES12,190,413 11,746,599 
Total liabilities251,413,585 193,402,699 
SHAREHOLDERS’ INVESTMENT
Common stock14,068,640 14,186,450 
Additional paid-in capital881,371,438 879,413,385 
Retained earnings1,038,656,230 1,042,461,388 
Accumulated other comprehensive (loss) income(5,127,408)1,927,244 
Total shareholders’ investment1,928,968,900 1,937,988,467 
Total liabilities and shareholders’ investment$2,180,382,485 $2,131,391,166 

Note: The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated 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, 2022 and 2021
 
Three Months Ended March 31,
20222021
NET SALES
$468,250,776 $483,724,839 
COST OF GOODS SOLD
307,838,816 300,424,671 
Gross profit160,411,960 183,300,168 
OPERATING EXPENSES:
Engineering, research and development31,974,987 27,652,081 
Selling, general & administrative25,131,068 21,914,386 
Total operating expenses57,106,055 49,566,467 
Income from operations103,305,905 133,733,701 
OTHER (LOSS) INCOME
Investment income788,316 1,023,410 
Other (loss) income, net(798,810)509,625 
Total other (loss) income(10,494)1,533,035 
INCOME BEFORE PROVISION FOR INCOME TAXES103,295,411 135,266,736 
PROVISION FOR INCOME TAXES15,766,785 21,815,866 
NET INCOME$87,528,626 $113,450,870 
EARNINGS PER SHARE: (1)
Basic$0.37 $0.47 
Diluted$0.37 $0.46 
Cash Dividends Declared per Share$0.120 $0.120 
(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, 2022 and 2021
Three Months Ended March 31,
20222021
Net income$87,528,626 $113,450,870 
Other comprehensive income (loss) before tax:
Foreign currency translation adjustments(896,420)(852,412)
Unrealized (losses) gains on debt securities, net(7,795,230)(5,118,953)
Other comprehensive income (loss), before tax(8,691,650)(5,971,365)
Income tax impact related to components of other comprehensive income (loss)(1,636,998)(1,074,980)
Other comprehensive income (loss), net of tax(7,054,652)(4,896,385)
Comprehensive income$80,473,974 $108,554,485 

5



GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Three Months Ended March 31, 2022 and 2021
Common 
Stock
Shares
Common 
Stock
Amount
Additional 
Paid-In
Capital
Retained 
Earnings
Accumulated 
Other
Comprehensive
(Loss) Income
Total 
Shareholders’
Investment
BALANCE AS OF JANUARY 1, 2022236,440,840 $14,186,450 $879,413,385 $1,042,461,388 $1,927,244 $1,937,988,467 
Issuance of common stock from stock plan transactions476,688 28,601 3,295,546 — — 3,324,147 
Repurchases of common stock(2,440,190)(146,411)(8,125,830)(62,979,781)— (71,252,022)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock— — 6,788,337 — — 6,788,337 
Dividends declared ($0.12 per share)
— — — (28,354,003)— (28,354,003)
Net income— — — 87,528,626 — 87,528,626 
Other comprehensive loss— — — — (7,054,652)(7,054,652)
BALANCE AS OF MARCH 31, 2022234,477,338 $14,068,640 $881,371,438 $1,038,656,230 $(5,127,408)$1,928,968,900 
BALANCE AS OF JANUARY 1, 2021243,692,869 $14,621,572 $852,771,508 $1,089,698,996 $6,851,052 $1,963,943,128 
Issuance of common stock from stock plan transactions601,020 36,061 9,229,779 — — 9,265,840 
Repurchases of common stock(2,755,065)(165,304)(8,540,700)(88,986,759)— (97,692,763)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock— — 5,894,645 — — 5,894,645 
Dividends declared ($0.12 per share)
— — — (28,984,621)— (28,984,621)
Net income— — — 113,450,870 — 113,450,870 
Other comprehensive loss— — — — (4,896,385)(4,896,385)
BALANCE AS OF MARCH 31, 2021241,538,824 $14,492,329 $859,355,232 $1,085,178,486 $1,954,667 $1,960,980,714 

6


GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2022 and 2021
20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$87,528,626 $113,450,870 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization24,711,500 25,599,131 
(Gain) on disposal of assets(33,982)(2,391)
Loss on disposal of assets11,067 131,490 
(Gain) on sale of investments(367,879)(486,433)
Loss on sale of investments704,214 41,681 
Change in deferred income taxes (1,544,501)
Stock-based compensation expense related to employee stock options, employee stock purchases and restricted stock6,788,337 5,894,645 
Change in operating assets and liabilities:
Accounts receivable, net(31,666,772)7,253,692 
Inventories(46,469,079)(6,768,464)
Prepaid expenses and other16,082,077 768,229 
Accounts payable42,968,193 22,277,513 
Accrued liabilities, excluding dividends declared and short-term debt15,702,241 24,233,539 
Net cash provided by operating activities115,958,543 190,849,001 
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales proceeds37,158,611 15,019,323 
Maturities and calls1,000,000 2,000,000 
Purchases(15,889,063)(31,379,609)
Plant and equipment additions(23,892,169)(12,599,388)
Proceeds from sale of plant and equipment33,740 17,744 
Acquisition of businesses, net of cash acquired (12,023,440)
Increase in other assets(455,419)(1,643,884)
Net cash used for investing activities(2,044,300)(40,609,254)
CASH FLOWS (USED FOR) FINANCING ACTIVITIES:
Issuance of common stock from stock plan transactions3,324,147 9,265,840 
Cash dividends paid(28,589,625)(29,243,108)
Repurchases of common stock(71,252,022)(97,692,763)
Net cash (used for) financing activities(96,517,500)(117,670,032)
NET INCREASE IN CASH AND CASH EQUIVALENTS17,396,743 32,569,715 
CASH AND CASH EQUIVALENTS, beginning of period262,311,670 423,371,036 
CASH AND CASH EQUIVALENTS, end of period$279,708,413 $455,940,751 

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 2021 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, 2022, and the results of operations and cash flows for the interim periods presented.

(2)    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 in 2013; $3.7 million as part of the acquisition of Vaporsens, Inc. ("Vaporsens") in the second quarter of 2020; $0.2 million as part of the acquisition of Air-Craftglass Production BV ("Air-Craftglass") in the third quarter of 2020; $1.0 million as a part of the acquisition of Argil, Inc. ("Argil") in the fourth quarter of 2020; and $2.0 million as part of the acquisition of Guardian Optical Technologies ("Guardian") in the first quarter of 2021. The carrying value of Goodwill as of both March 31, 2022 and December 31, 2021 was $313.9 million and $314.0 million, respectively, as set forth in the table below:

Carrying Amount
Balance as of December 31, 2021$313,960,209 
Acquisitions 
Divestitures 
Impairments 
Other(31,295)
Balance as of March 31, 2022$313,928,914 

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 of goodwill or other intangible assets 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, the recent microchip shortage, supply chain constraints, and labor shortages were again considered in the most recently completed quarter, but did not indicate the need for interim impairment testing.

The Company also acquired In-Process Research & Development ("I P R & D") as part of the acquisitions of: Vaporsens; Air-Craftglass; Argil; and Guardian, each of which has been previously disclosed.

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






8


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


As of March 31, 2022:
Other Intangible AssetsGrossAccumulated AmortizationNetAssumed Useful Life
Gentex Patents$39,290,691 $(26,730,389)$12,560,302 Various
Vaporsens Technology Licenses351,290 (67,367)283,923 Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$52,000,000 $— $52,000,000 Indefinite
HomeLink® Technology
180,000,000 (127,500,000)52,500,000 12 years
Existing Customer Platforms43,000,000 (36,550,000)6,450,000 10 years
Exclusive Licensing Agreement96,000,000 — 96,000,000 Indefinite
Vaporsens In-Process R&D11,000,000 — 11,000,000 Indefinite
Argil In-Process R&D6,278,132 — 6,278,132 Indefinite
Air-Craftglass In-Process R&D1,507,778 — 1,507,778 Indefinite
Guardian Trade Names1,302,844 — 1,302,844 Indefinite
Guardian In-Process R&D7,191,049 — 7,191,049 Indefinite
Total Other Intangible Assets$398,279,803 $(164,050,000)$234,229,803 
Total Patents & Other Intangible Assets$437,921,784 $(190,847,756)$247,074,028 

As of December 31, 2021:
Other Intangible Assets
Gross
Accumulated Amortization
Net
Assumed Useful Life
Gentex Patents
$39,362,187 $(26,506,155)$12,856,032 Various
Vaporsens Technology Licenses351,290 (50,107)301,183 Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$52,000,000 $— $52,000,000 Indefinite
HomeLink® Technology
180,000,000 (123,750,000)56,250,000 12 years
Existing Customer Platforms43,000,000 (35,475,000)7,525,000 10 years
Exclusive Licensing Agreement
96,000,000 — 96,000,000 Indefinite
    Vaporsens In-Process R&D11,000,000 — 11,000,000 Indefinite
    Argil In-Process R&D6,278,132 — 6,278,132 Indefinite
    Air-Craftglass In-Process R&D1,507,778 — 1,507,778 Indefinite
    Guardian Trade Names1,384,857 — 1,384,857 Indefinite
    Guardian In-Process R&D7,243,860 — 7,243,860 Indefinite
Total Other Intangible Assets$398,414,627 $(159,225,000)$239,189,627 
Total Patents & Other Intangible Assets$438,128,104 $(185,781,262)$252,346,842 

Amortization expense on patents and intangible assets was approximately $5.5 million during the three months ended March 31, 2022, and approximately $5.6 million for the same period ended March 31, 2021.

Excluding the impact of any future acquisitions, the Company estimates amortization expense for the year ending December 31, 2022 to be approximately $22 million annually, for the year ending December 31, 2023 to be approximately $20 million, for the year ending December 31, 2024 to be approximately $16
9


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


million, and for the years ending December 31, 2025 and December 31, 2026 to be approximately $12 million.


(3)    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 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, are then held at cost. These technology investments totaled approximately $18.6 million and $16.8 million as of March 31, 2022 and December 31, 2021, respectively. These investments are classified within Long-Term Investments in the consolidated balance sheets. 
Assets or liabilities that have recurring fair value measurements are shown below as of March 31, 2022 and December 31, 2021:
As of March 31, 2022:
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, 2022(Level 1)(Level 2)(Level 3)
Cash & Cash Equivalents$279,708,413 $279,708,413 $ $ 
Short-Term Investments:
Certificate of Deposit753,625 753,625   
Corporate Bonds2,001,860  2,001,860  
Municipal Bonds1,251,802  1,251,802  
Other2,884,333 2,884,333   
Long-Term Investments:
Asset Backed Securities24,781,272  24,781,272  
Certificate of Deposit1,767,238 1,767,238   
Corporate Bonds41,177,112  41,177,112  
Government Securities38,685,508  38,685,508  
Municipal Bonds50,853,579  50,853,579  
Total$443,864,742 $285,113,609 $158,751,133 $ 

10


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


As of December 31, 2021:
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, 2021(Level 1)(Level 2)(Level 3)
Cash & Cash Equivalents$262,311,670 $262,311,670 $ $ 
Short-Term Investments:
Certificate of Deposit1,507,770 1,507,770   
Corporate Bonds2,018,440  2,018,440  
Government Securities    
Municipal Bonds    
Other1,897,402 1,897,402   
Long-Term Investments:
Asset-backed Securities25,799,513  25,799,513  
Certificate of Deposit2,056,710 2,056,710  
Corporate Bonds40,354,929  40,354,929  
Governmental Securities47,944,036  47,944,036  
Municipal Bonds74,720,480  74,720,480  
Total$458,610,950 $267,773,552 $190,837,398 $ 

The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of March 31, 2022 and December 31, 2021:

As of March 31, 2022:
Unrealized
Cost
Gains
Losses
Market Value
Short-Term Investments:
Certificate of Deposit$751,354 $2,600 $(329)$753,625 
Corporate Bonds1,996,774 5,086  2,001,860 
Municipal Bonds1,250,203 1,599  1,251,802 
Other2,884,333   2,884,333 
Long-Term Investments:
Asset Backed Securities25,406,929  (625,657)24,781,272 
Certificate of Deposit1,750,000 19,888 (2,650)1,767,238 
Corporate Bonds43,589,074  (2,411,962)41,177,112 
Government Securities40,547,178  (1,861,670)38,685,508 
Municipal Bonds52,501,468 254,830 (1,902,719)50,853,579 
Total$170,677,313 $284,003 $(6,804,987)$164,156,329 


11


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


As of December 31, 2021:    
Unrealized
CostGainsLossesMarket Value
Short-Term Investments:
Certificate of Deposit$1,500,543 $7,227 $1,507,770 
Corporate Bonds1,994,639 23,801  2,018,440 
Government Securities  
Municipal Bonds  
Other1,897,402 1,897,402 
Long-Term Investments:
Asset-backed Securities26,352,630 34,771 (587,888)25,799,513 
Certificate of Deposit2,001,714 54,996  2,056,710 
Corporate Bonds40,716,866 168,416 (530,353)40,354,929 
Government Securities48,385,672 55,939 (497,575)47,944,036 
Municipal Bonds72,175,568 2,747,964 (203,052)74,720,480 
Total$195,025,034 $3,093,114 $(1,818,868)$196,299,280 

Unrealized losses on investments as of March 31, 2022, are as follows:
Aggregate Unrealized LossesAggregate Fair Value of Investments
Loss duration of less than one year$5,817,906 $135,887,611 
Loss duration of greater than one year987,081 10,371,045 
       Total
$6,804,987 $146,258,656 

Unrealized losses on investments as of December 31, 2021, are as follows:
Aggregate Unrealized Losses
Aggregate Fair Value of Investments
Loss duration of less than one year$1,244,053 $94,417,123 
Loss duration of greater than one year574,815 6,875,230 
       Total
$1,818,868 $101,292,353 

Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The guidance 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 Company utilized the guidance provided by ASC 326 to determine whether any of the available-for-sale debt securities held by the Company were impaired. No investments were considered to be impaired during the periods presented. The Company has the intention and current ability to hold its debt investments until any amortized cost basis has been recovered.

Fixed income securities as of March 31, 2022 have contractual maturities as follows:
Due within one year
$4,007,287 
Due between one and five years
96,407,502 
Due over five years
60,857,208 
$161,271,997 
12


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


4)    Inventories
Inventories consisted of the following at the respective balance sheet dates:
March 31, 2022December 31, 2021
Raw materials
$260,985,427 $235,014,277 
Work-in-process
37,592,293 34,032,164 
Finished goods
64,158,801 47,221,001 
Total Inventory
$362,736,521 $316,267,442 


(5)    Earnings Per Share

The Company has unvested share-based payment awards with a right to receive non-forfeitable dividends, which are considered participating securities under ASC 260, Earnings Per Share. The Company allocates earnings to participating securities and computes earnings per share using the two-class method. Under the two-class method, net income per share is computed by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, net income is allocated to both common shares and participating securities based on their respective weighted average shares outstanding for the period. For a period of net loss, net loss is not allocated to participating securities.

The following table sets forth the computation of basic and diluted net income per common share under the two-class method for the three months ended March 31, 2022 and March 31, 2021:
Three Months Ended March 31,
20222021
Basic Earnings Per Share
Net Income$87,528,626 $113,450,870 
Less: Dividends and undistributed earnings allocated to participating securities1,360,047 1,671,188 
Net Income available to common shareholders$86,168,579 $111,779,682 
Basic weighted average shares outstanding232,151,296 239,559,370 
Net Income per share - Basic$0.37 $0.47 
Diluted Earnings Per Share
Allocation of Net Income used in basic computation$86,168,579 $111,779,682 
Reallocation of undistributed earnings2,500 10,883 
Net Income available to common shareholders - Diluted$86,171,079 $111,790,565 
Number of shares used in basic computation232,151,296 239,559,370 
Additional weighted average dilutive common stock equivalents638,515 2,133,781 
Diluted weighted average shares outstanding232,789,811 241,693,151 
Net Income per share - Diluted$0.37 $0.46 
Shares related to stock plans not included in diluted average common shares outstanding because their effect would be anti-dilutive1,572,223 271,383 

13


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(6)    Stock-Based Compensation Plans
As of March 31, 2022, the Company had two equity incentive plans, which include the Gentex Corporation 2019 Omnibus Incentive Plan ("2019 Omnibus Plan"), and an employee stock purchase plan. Those plans and any prior material amendments thereto have previously been approved by shareholders.
The 2019 Omnibus Plan provides for the potential awards to: i) employees; and ii) non-employee directors of the Company or its subsidiaries, which potential awards may be stock options (both incentive stock options and non-qualified stock options), appreciation rights, restricted stock awards and restricted stock units, performance share awards and performance units, and other awards that are stock-based, cash-based or a combination of both. The 2019 Omnibus Plan replaced the Company's Employee Stock Option Plan, Second Restricted Stock Plan, and Amended and Restated Non-Employee Director Stock Option Plan (the "Prior Plans"), which were also approved by shareholders. Any existing awards previously granted under the Prior Plans remain outstanding in accordance with their terms and are governed by the Prior Plans as applicable.
Readers should refer to Note 5 of the consolidated financial statements in the Company's Annual Report on Form 10-K for the calendar year ended December 31, 2021, for additional information related to the Prior Plans.
The Company recognized total compensation expense for share-based payments of $6,788,337 for the three months ended March 31, 2022. The Company recognized compensation expense for share-based payments of $5,894,645 for the three months ended March 31, 2021. A portion of the compensation cost for share based payment awards is capitalized as part of inventory.
2019 Omnibus Incentive Plan

The purpose of the 2019 Omnibus Incentive Plan is to attract and retain employees, officers, and directors of the Company and its subsidiaries and to motivate and provide such persons incentives and rewards for performance. Pursuant to the terms of the Plan, each type of award counts against the available shares based on a predetermined conversion rate (shown in the table below). As of March 31, 2022, 7,751,391 share awards have been made under the Plan, resulting in 18,990,474 shares granted of the 45,000,000 total shares available to be issued under the Plan. The shares issued are presented net of shares from canceled/expired options and shares.

Shares GrantedConversion RateTotal Shares Under 2019 Omnibus Plan
Non-Qualified Stock Options4,078,488 1.004,078,488 
Restricted Stock3,072,533 4.0612,474,484 
Performance Shares600,370 4.062,437,502 
Total7,751,391 18,990,474 
Employee Stock Options
Under the 2019 Omnibus Plan and the Employee Stock Option Plan, the option exercise price equals the stock’s market price on the date of grant. The options vest after one to five years, and expire after five to ten years. As of March 31, 2022, there was $9,068,470 of unearned compensation cost associated with stock options granted under the 2019 Omnibus Incentive Plan and the Employee Stock Option Plan, which is expected to be recognized over the remaining vesting periods.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the indicated periods:
14


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Three Months Ended March 31,
20222021
Dividend Yield (1)
1.80 %1.90 %
Expected volatility (2)
28.16 %27.85 %
Risk-free interest rate (3)
2.42 %0.92 %
Expected term of options (years) (4)
4.154.14
Weighted-avg. grant date fair value
$6.38$6.85
1.Represents the Company’s estimated cash dividend yield over the expected term of option grant.
2.Amount is determined based on analysis of historical price volatility of the Company’s common stock. The expected volatility is based on the daily percentage change in the price of the stock over a period equal to the expected term of the option grant.
3.Represents the U.S. Treasury yield over the expected term of the option grant.
4.Represents the period of time that options granted are expected to be outstanding. Based on analysis of historical option exercise activity, the Company has determined that all employee groups exhibit similar exercise and post-vesting termination behavior.

Restricted Shares
Restricted shares awarded under the 2019 Omnibus Plan and the Second Restricted Stock Plan entitle the shareholder to all rights of common stock ownership except that the shares may not be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction period. The restriction period is determined by the Compensation Committee, appointed by the Board of Directors, but may not exceed ten years under the terms of such plans. As of March 31, 2022, the Company had unearned stock-based compensation of $46,976,947 associated with the restricted stock grants issued under the 2019 Omnibus Plan and the prior plan. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable restriction periods. Compensation expense from restricted stock grants in the three months ended March 31, 2022 was $5,290,805. Compensation expense from restricted stock grants in the three months ended March 31, 2021 was $4,302,975.

Performance Shares

Performance shares awarded under the 2019 Omnibus Plan are considered performance condition awards as attainment is based on the Company's performance relative to pre-established metrics. The fair value of such performance share awards was determined using the Company's average closing stock price on the twenty days preceding the date of grant. The expected attainment of the metrics for these awards is then analyzed each reporting period, and the related expense is adjusted based on expected attainment, if the then expected attainment differs from previous expectations. The cumulative effect on current and prior periods of a change in expected attainment is recognized in the period of change.

As of March 31, 2022, the Company had unearned stock-based compensation of $9,620,235 associated with these performance share grants. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable performance periods.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan covering 2,000,000 shares of common stock. Under the plan, the Company sells shares at 85% of the stock’s market price at date of purchase. Under ASC 718, Compensation - Stock Compensation, the 15% discounted value is recognized as compensation expense. As of March 31, 2022, the Company has issued 1,576,179 shares under this plan.


(7)    Comprehensive Income

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 unrealized gains and losses on certain debt investments and foreign currency translation adjustments.

15


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


The following table presents the net changes in the Company's accumulated other comprehensive income by component (all amounts shown are net of tax):
Three Months Ended March 31,
20222021
Foreign currency translation adjustments:
Balance at beginning of period$920,589 $769,045 
Other Comprehensive loss before reclassifications
(896,420)(852,412)
Net current-period change(896,420)(852,412)
Balance at end of period
24,169 (83,367)
Unrealized gains on available-for-sale debt securities:
Balance at beginning of period
1,006,655 6,082,007 
Other Comprehensive loss before reclassifications
(6,423,937)(3,692,619)
Amounts reclassified from accumulated other comprehensive income
265,705 (351,354)
Net current-period change
(6,158,232)(4,043,973)
Balance at end of period
(5,151,577)2,038,034 
Accumulated other comprehensive (loss) income, end of period
$(5,127,408)$1,954,667 

The following table presents details of reclassifications out of accumulated other comprehensive (loss) income for the three months ended March 31, 2022 and 2021:
Details about Accumulated Other Comprehensive Income ComponentsAmounts Reclassified from Other Comprehensive (Loss) IncomeAffected Line item in the Consolidated Statements of Income
Three Months Ended March 31,
20222021
Unrealized (losses) gains on available-for-sale debt securities
Realized (loss) gain on sale
 of securities
$(336,335)$444,752 Investment income
Provision for income taxes70,630 (93,398)Provision for income taxes
Total net reclassifications for the period$(265,705)$351,354 Net of tax


(8)    Debt and Financing Arrangements

On October 15, 2018, the Company entered into a Credit Agreement (“Credit Agreement”) with PNC as the administrative agent and sole lender.

Pursuant to this Credit Agreement, the Company has access to a $150 million senior revolving credit facility (“Revolver”). Under the terms of the Credit Agreement, the Company is entitled to further request an additional aggregate principal amount of up to $100 million, subject to the satisfaction of certain conditions. In addition, the Company is entitled to the benefit of swing loans from amounts otherwise available under the Revolver in the aggregate principal amount of up to $20 million and to request Letters of Credit from amounts otherwise available under the Revolver in the aggregate principle amount up to $20 million, both subject to certain conditions. The obligations of the Company under the Credit Agreement are not secured, but are subject to certain covenants. As of March 31, 2022, there was no outstanding balance on the Revolver. The Revolver expires on October 15, 2023.
16


GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



The Credit Agreement contains customary representations and warranties and certain covenants that place certain limitations on the Company.

As of March 31, 2022, the Company is in compliance with its covenants under the Credit Agreement.


(9)    Equity

The decrease in common stock during the three months ended March 31, 2022, was primarily due to the repurchases of 2.4 million shares, partially offset by the issuance of 0.5 million shares of the Company’s common stock, net of cancellations, under the Company’s stock-based compensation plans. The total net decrease was 2.0 million shares.

The Company recorded a cash dividend of $0.120 per share during the first quarter of 2022 as compared to a cash dividend of $0.120 per share during the first quarter of 2021. The first quarter 2022 dividend of $28.1 million was declared on March 3, 2022, and was paid on April 20, 2022.


(10)    Contingencies
The Company is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business, including proceedings relating to product liability, intellectual property, safety and health, employment, regulatory, and other matters. Such matters are subject to many uncertainties and outcomes are not predictable. The Company does not believe, however, that at the current time any of these matters constitute material pending legal proceedings that will have a material adverse effect on the financial position or future results of operations or cash flows of the Company.

(11)    Segment Reporting

The Company's automotive segment develops and manufactures digital vision and connected car products and electronics, including: automatic-dimming rearview mirrors with and without electronic features; non-auto dimming rearview mirrors with and without electronic features; and other electronics. The Company also develops and manufactures variably dimming windows and laminate products for the aerospace industry and fire protection products for the commercial construction industry. In 2020, the Company acquired Vaporsens, which specializes in nanofiber chemical sensing. These three non-automotive segments are combined into the "Other" segment as shown below. In first quarter of 2021, the Company acquired Guardian, which is combined in the Automotive Segment below. Further information in regards to the Guardian transaction is included in Note 15 of the financial statements.
Three Months Ended March 31,
20222021
Revenue:
Automotive Products$457,952,554 $475,617,436 
Other10,298,222 8,107,403 
Total$