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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 June 30, 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 | | |
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)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.06 per share | GNTX | NASDAQ 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, July 22, 2022 |
Common Stock, $.06 Par Value | | 235,129,597 |
GENTEX CORPORATION AND SUBSIDIARIES
For the Three and Six Months Ended June 30, 2022
FORM 10-Q
Index
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Part I - Financial Information | Page |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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Part II - Other Information | |
Item 1A. | | |
Item 2. | | |
Item 6. | | |
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| | |
PART I —FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements.
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2022 and December 31, 2021 | | | | | | | | | | | |
| June 30, 2022 (Unaudited) | | December 31, 2021 (Note) |
ASSETS | | | |
CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 269,372,471 | | | $ | 262,311,670 | |
Short-term investments | 11,992,154 | | | 5,423,612 | |
Accounts receivable, net | 274,404,572 | | | 249,794,906 | |
Inventories | 392,577,825 | | | 316,267,442 | |
Prepaid expenses and other | 43,539,709 | | | 39,178,119 | |
Total current assets | 991,886,731 | | | 872,975,749 | |
| | | |
PLANT AND EQUIPMENT—NET | 488,913,960 | | | 464,121,676 | |
| | | |
OTHER ASSETS | | | |
Goodwill | 313,857,650 | | | 313,960,209 | |
Long-term investments | 157,704,267 | | | 207,693,147 | |
Equity method investments | 39,940,046 | | | — | |
Intangible assets, net | 229,010,910 | | | 239,189,627 | |
Patents and other assets, net | 63,140,670 | | | 33,450,758 | |
Total other assets | 803,653,543 | | | 794,293,741 | |
| | | |
Total assets | $ | 2,284,454,234 | | | $ | 2,131,391,166 | |
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LIABILITIES AND SHAREHOLDERS’ INVESTMENT | | | |
| | | |
CURRENT LIABILITIES | | | |
Accounts payable | $ | 186,623,085 | | | $ | 98,342,928 | |
| | | |
Accrued liabilities | 99,548,802 | | | 83,313,172 | |
Total current liabilities | 286,171,887 | | | 181,656,100 | |
| | | |
OTHER NON-CURRENT LIABILITIES | 11,707,867 | | | 11,746,599 | |
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Total liabilities | 297,879,754 | | | 193,402,699 | |
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SHAREHOLDERS’ INVESTMENT | | | |
Common stock | 14,107,936 | | | 14,186,450 | |
Additional paid-in capital | 900,576,404 | | | 879,413,385 | |
Retained earnings | 1,082,846,019 | | | 1,042,461,388 | |
Accumulated other comprehensive (loss) income | (10,955,879) | | | 1,927,244 | |
Total shareholders’ investment | 1,986,574,480 | | | 1,937,988,467 | |
Total liabilities and shareholders’ investment | $ | 2,284,454,234 | | | $ | 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.
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2022 and 2021
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
NET SALES | $ | 463,423,002 | | | $ | 428,005,026 | | | $ | 931,673,777 | | | $ | 911,729,865 | |
| | | | | | | |
COST OF GOODS SOLD | 315,055,988 | | | 276,408,285 | | | 622,894,804 | | | 576,832,956 | |
Gross profit | 148,367,014 | | | 151,596,741 | | | 308,778,973 | | | 334,896,909 | |
| | | | | | | |
OPERATING EXPENSES: | | | | | | | |
Engineering, research and development | 32,857,419 | | | 29,059,058 | | | 64,832,406 | | | 56,711,139 | |
Selling, general & administrative | 29,718,626 | | | 22,613,062 | | | 54,849,694 | | | 44,527,448 | |
Total operating expenses | 62,576,045 | | | 51,672,120 | | | 119,682,100 | | | 101,238,587 | |
| | | | | | | |
Income from operations | 85,790,969 | | | 99,924,621 | | | 189,096,873 | | | 233,658,322 | |
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OTHER (LOSS) INCOME | | | | | | | |
Investment income | 920,284 | | | 903,139 | | | 1,708,600 | | | 1,926,549 | |
Other (loss) income, net | (1,903,269) | | | 987,959 | | | (2,702,079) | | | 1,497,584 | |
Total other (loss) income | (982,985) | | | 1,891,098 | | | (993,479) | | | 3,424,133 | |
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INCOME BEFORE PROVISION FOR INCOME TAXES | 84,807,984 | | | 101,815,719 | | | 188,103,394 | | | 237,082,455 | |
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PROVISION FOR INCOME TAXES | 12,403,581 | | | 15,309,301 | | | 28,170,366 | | | 37,125,167 | |
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NET INCOME | $ | 72,404,403 | | | $ | 86,506,418 | | | $ | 159,933,028 | | | $ | 199,957,288 | |
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EARNINGS PER SHARE: (1) | | | | | | | |
Basic | $ | 0.31 | | | $ | 0.36 | | | $ | 0.68 | | | $ | 0.83 | |
Diluted | $ | 0.31 | | | $ | 0.36 | | | $ | 0.68 | | | $ | 0.82 | |
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Cash Dividends Declared per Share | $ | 0.120 | | | $ | 0.120 | | | $ | 0.240 | | | $ | 0.240 | |
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(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. |
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2022 and 2021
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net income | $ | 72,404,403 | | | $ | 86,506,418 | | | $ | 159,933,028 | | | $ | 199,957,288 | |
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Other comprehensive (loss) income before tax: | | | | | | | |
Foreign currency translation adjustments | (3,131,326) | | | 963,199 | | | (4,027,746) | | | 110,787 | |
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Unrealized (losses) gains on debt securities, net | (3,414,108) | | | 1,705,281 | | | (11,209,338) | | | (3,413,672) | |
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Other comprehensive (loss) income, before tax | (6,545,434) | | | 2,668,480 | | | (15,237,084) | | | (3,302,885) | |
| | | | | | | |
Income tax impact related to components of other comprehensive (loss) income | (716,963) | | | 358,109 | | | (2,353,961) | | | (716,871) | |
| | | | | | | |
Other comprehensive (loss) income, net of tax | (5,828,471) | | | 2,310,371 | | | (12,883,123) | | | (2,586,014) | |
| | | | | | | |
Comprehensive income | $ | 66,575,932 | | | $ | 88,816,789 | | | $ | 147,049,905 | | | $ | 197,371,274 | |
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Three Months Ended June 30, 2022 and 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock Shares | | Common Stock Amount | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total Shareholders’ Investment |
BALANCE AS OF APRIL 1, 2022 | 234,477,338 | | | $ | 14,068,640 | | | $ | 881,371,438 | | | $ | 1,038,656,230 | | | $ | (5,127,408) | | | $ | 1,928,968,900 | |
Issuance of common stock from stock plan transactions | 492,494 | | | 29,550 | | | 5,641,470 | | | — | | | — | | | 5,671,020 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Issuance of common stock for equity investment purchases | 162,433 | | | 9,746 | | 4,990,266 | | | — | | | — | | | 5,000,012 | |
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock | — | | | — | | | 8,573,230 | | | — | | | — | | | 8,573,230 | |
Dividends declared ($0.12 per share) | — | | | — | | | — | | | (28,214,614) | | | — | | | (28,214,614) | |
Net income | — | | | — | | | — | | | 72,404,403 | | | — | | | 72,404,403 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (5,828,471) | | | (5,828,471) | |
BALANCE AS OF JUNE 30, 2022 | 235,132,265 | | | $ | 14,107,936 | | | $ | 900,576,404 | | | $ | 1,082,846,019 | | | $ | (10,955,879) | | | $ | 1,986,574,480 | |
| | | | | | | | | | | |
BALANCE AS OF APRIL 1, 2021 | 241,538,824 | | | $ | 14,492,329 | | | $ | 859,355,232 | | | $ | 1,085,178,486 | | | $ | 1,954,667 | | | $ | 1,960,980,714 | |
Issuance of common stock from stock plan transactions | 838,896 | | | 50,334 | | | 4,340,710 | | | — | | | — | | | 4,391,044 | |
| | | | | | | | | | | |
Repurchases of common stock | (3,411,131) | | | (204,668) | | | (10,745,063) | | | (104,971,348) | | | — | | | (115,921,079) | |
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock | — | | | — | | | 6,727,513 | | | — | | | — | | | 6,727,513 | |
Dividends declared ($0.12 per share) | — | | | — | | | — | | | (28,675,992) | | | — | | | (28,675,992) | |
Net income | — | | | — | | | — | | | 86,506,418 | | | — | | | 86,506,418 | |
Other comprehensive income | — | | | — | | | — | | | — | | | 2,310,371 | | | 2,310,371 | |
BALANCE AS OF JUNE 30, 2021 | 238,966,589 | | | $ | 14,337,995 | | | $ | 859,678,392 | | | $ | 1,038,037,564 | | | $ | 4,265,038 | | | $ | 1,916,318,989 | |
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Six Months Ended June 30, 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, 2022 | 236,440,840 | | | $ | 14,186,450 | | | $ | 879,413,385 | | | $ | 1,042,461,388 | | | $ | 1,927,244 | | | $ | 1,937,988,467 | |
Issuance of common stock from stock plan transactions | 969,182 | | | 58,151 | | | 8,937,016 | | | — | | | — | | | 8,995,167 | |
| | | | | | | | | | | |
Issuance of common stock for equity investment purchases | 162,433 | | | 9,746 | | 4,990,266 | | | — | | | — | | | 5,000,012 | |
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 | — | | | — | | | 15,361,567 | | | — | | | — | | | 15,361,567 | |
Dividends declared ($0.24 per share) | — | | | — | | | — | | | (56,568,616) | | | — | | | (56,568,616) | |
Net income | — | | | — | | | — | | | 159,933,028 | | | — | | | 159,933,028 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (12,883,123) | | | (12,883,123) | |
BALANCE AS OF JUNE 30, 2022 | 235,132,265 | | | $ | 14,107,936 | | | $ | 900,576,404 | | | $ | 1,082,846,019 | | | $ | (10,955,879) | | | $ | 1,986,574,480 | |
| | | | | | | | | | | |
BALANCE AS OF JANUARY 1, 2021 | 243,692,869 | | | $ | 14,621,572 | | | $ | 852,771,508 | | | $ | 1,089,698,996 | | | $ | 6,851,052 | | | $ | 1,963,943,128 | |
Issuance of common stock from stock plan transactions | 1,439,916 | | | 86,395 | | | 13,570,489 | | | — | | | — | | | 13,656,884 | |
| | | | | | | | | | | |
Repurchases of common stock | (6,166,196) | | | (369,972) | | | (19,285,763) | | | (193,958,107) | | | — | | | (213,613,842) | |
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock | — | | | — | | | 12,622,158 | | | — | | | — | | | 12,622,158 | |
Dividends declared ($0.24 per share) | — | | | — | | | — | | | (57,660,613) | | | — | | | (57,660,613) | |
Net income | — | | | — | | | — | | | 199,957,288 | | | — | | | 199,957,288 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | (2,586,014) | | | (2,586,014) | |
BALANCE AS OF JUNE 30, 2021 | 238,966,589 | | | $ | 14,337,995 | | | $ | 859,678,392 | | | $ | 1,038,037,564 | | | $ | 4,265,038 | | | $ | 1,916,318,989 | |
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2022 and 2021 | | | | | | | | | | | |
| 2022 | | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income | $ | 159,933,028 | | | $ | 199,957,288 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 50,052,518 | | | 51,497,665 | |
(Gain) on disposal of assets | (45,214) | | | (19,891) | |
Loss on disposal of assets | 11,776 | | | 133,036 | |
(Gain) on sale of investments | (391,378) | | | (969,971) | |
Loss on sale of investments | 989,196 | | | 192,346 | |
Change in deferred income taxes | 5,044,744 | | | (3,546,862) | |
Stock-based compensation expense related to employee stock options, employee stock purchases and restricted stock | 15,361,567 | | | 12,622,158 | |
| | | |
Change in operating assets and liabilities: | | | |
Accounts receivable, net | (24,609,666) | | | 50,784,339 | |
Inventories | (76,310,383) | | | (37,608,133) | |
Prepaid expenses and other | (6,035,375) | | | (41,394,722) | |
Accounts payable | 48,905,968 | | | 16,477,865 | |
Accrued liabilities, excluding dividends declared and short-term debt | 16,354,262 | | | 4,117,051 | |
Net cash provided by operating activities | 189,261,043 | | | 252,242,169 | |
| | | |
CASH FLOWS USED FOR INVESTING ACTIVITIES: | | | |
Activity in available-for-sale securities: | | | |
Sales proceeds | 37,429,595 | | | 34,250,068 | |
Maturities and calls | 3,000,000 | | | 16,685,000 | |
Purchases | (19,506,446) | | | (71,596,074) | |
Purchase of equity method investments | (24,250,000) | | | — | |
Plant and equipment additions | (57,998,319) | | | (31,352,443) | |
Proceeds from sale of plant and equipment | 44,881 | | | 99,850 | |
Acquisition of businesses, net of cash acquired | — | | | (12,023,440) | |
Increase in other assets | (1,937,117) | | | (458,637) | |
Net cash used for investing activities | (63,217,406) | | | (64,395,676) | |
| | | |
CASH FLOWS USED FOR FINANCING ACTIVITIES: | | | |
| | | |
| | | |
| | | |
Issuance of common stock from stock plan transactions | 8,995,167 | | | 13,656,884 | |
Cash dividends paid | (56,725,981) | | | (58,227,768) | |
Repurchases of common stock | (71,252,022) | | | (213,613,842) | |
| | | |
Net cash used for financing activities | (118,982,836) | | | (258,184,726) | |
| | | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 7,060,801 | | | (70,338,233) | |
| | | |
CASH AND CASH EQUIVALENTS, beginning of period | 262,311,670 | | | 423,371,036 | |
| | | |
CASH AND CASH EQUIVALENTS, end of period | $ | 269,372,471 | | | $ | 353,032,803 | |
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 June 30, 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 June 30, 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 | (102,559) | |
Balance as of June 30, 2022 | $ | 313,857,650 | |
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:
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of June 30, 2022:
| | | | | | | | | | | | | | |
Other Intangible Assets | Gross | Accumulated Amortization | Net | Assumed Useful Life |
Gentex Patents | $ | 39,495,602 | | $ | (27,389,285) | | $ | 12,106,317 | | Various |
Vaporsens Technology Licenses | 351,290 | | (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 | | (131,250,000) | | 48,750,000 | | 12 years |
Existing Customer Platforms | 43,000,000 | | (37,625,000) | | 5,375,000 | | 10 years |
Exclusive Licensing Agreement | 96,000,000 | | — | | 96,000,000 | | Indefinite |
Vaporsens In-Process R&D | 11,000,000 | | — | | 11,000,000 | | Indefinite |
Argil In-Process R&D | 6,278,132 | | — | | 6,278,132 | | Indefinite |
Air-Craftglass In-Process R&D | 1,507,778 | | — | | 1,507,778 | | Indefinite |
Guardian Trade Names | 1,300,000 | | — | | 1,300,000 | | Indefinite |
Guardian In-Process R&D | 6,800,000 | | — | | 6,800,000 | | Indefinite |
Total Other Intangible Assets | $ | 397,885,910 | | $ | (168,875,000) | | $ | 229,010,910 | | |
| | | | |
Total Patents & Other Intangible Assets | $ | 437,732,802 | | $ | (196,331,652) | | $ | 241,401,150 | | |
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 Licenses | 351,290 | | (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 Platforms | 43,000,000 | | (35,475,000) | | 7,525,000 | | 10 years |
Exclusive Licensing Agreement | 96,000,000 | | — | | 96,000,000 | | Indefinite |
Vaporsens In-Process R&D | 11,000,000 | | — | | 11,000,000 | | Indefinite |
Argil In-Process R&D | 6,278,132 | | — | | 6,278,132 | | Indefinite |
Air-Craftglass In-Process R&D | 1,507,778 | | — | | 1,507,778 | | Indefinite |
Guardian Trade Names | 1,384,857 | | — | | 1,384,857 | | Indefinite |
Guardian In-Process R&D | 7,243,860 | | — | | 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 and $11.1 million during the three and six months ended June 30, 2022, respectively, and approximately $5.6 million and $11.2 million for the same periods ended June 30, 2021, respectively.
Excluding the impact of any future acquisitions, the Company estimates amortization expense for the year ending December 31, 2022 to be approximately $22 million, for the year ending December 31, 2023 to be
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
approximately $20 million, for the year ending December 31, 2024 to be approximately $16 million, and for each of 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 323, Investments - Equity Method and Joint Ventures. The Company's share of the earnings or losses of non-controlled affiliates, over which the Company exercises significant influence (generally a 20% to 50% ownership interest), is included in the consolidated operating results using the equity method of accounting. These equity method investments, over which the Company exercises significant influence, totaled approximately $39.9 million as of June 30, 2022 (including approximately $11.1 million of investments accounted for under ASC 321, Investments - Equity Securities, as of December 31, 2021, for which the Company obtained significant influence during 2022). The Company did not have equity method investments as of December 31, 2021. These investments are classified within Equity Method Investments in the condensed consolidated balance sheets.
The Company has made technology investments in certain non-consolidated affiliates for ownership interests of less than 20% (where the Company does not have the ability to exercise significant influence). These equity investments are accounted for in accordance with ASC 321, Investments - Equity Securities. For these 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 $7.6 million and $16.8 million as of June 30, 2022 and December 31, 2021, respectively. These investments are classified within Long-Term Investments in the condensed consolidated balance sheets.
Assets or liabilities that have recurring fair value measurements are shown below as of June 30, 2022 and December 31, 2021:
As of June 30, 2022:
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 | June 30, 2022 | | (Level 1) | | (Level 2) | | (Level 3) |
Cash & Cash Equivalents | $ | 269,372,471 | | | $ | 269,372,471 | | | $ | — | | | $ | — | |
Short-Term Investments: | | | | | | | |
Certificate of Deposit | 1,752,930 | | | 1,752,930 | | | — | | | — | |
Corporate Bonds | 5,467,319 | | | — | | | 5,467,319 | | | — | |
| | | | | | | |
Municipal Bonds | 1,729,072 | | | — | | | 1,729,072 | | | — | |
Other | 3,042,833 | | | 3,042,833 | | | — | | | — | |
Long-Term Investments: | | | | | | | |
Asset Backed Securities | 23,356,697 | | | — | | | 23,356,697 | | | — | |
Certificate of Deposit | 735,897 | | | 735,897 | | | — | | | — | |
Corporate Bonds | 34,178,081 | | | — | | | 34,178,081 | | | — | |
Government Securities | 38,901,568 | | | — | | | 38,901,568 | | | — | |
Municipal Bonds | 52,972,792 | | | — | | | 52,972,792 | | | — | |
| | | | | | | |
| | | | | | | |
Total | $ | 431,509,660 | | | $ | 274,904,131 | | | $ | 156,605,529 | | | $ | — | |
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 Deposit | 1,507,770 | | | 1,507,770 | | | — | | | — | |
Corporate Bonds | 2,018,440 | | | — | | | 2,018,440 | | | — | |
Government Securities | — | | | — | | | — | | | — | |
Municipal Bonds | — | | | — | | | — | | | — | |
Other | 1,897,402 | | | 1,897,402 | | | — | | | — | |
Long-Term Investments: | | | | | | | |
Asset-backed Securities | 25,799,513 | | | — | | | 25,799,513 | | | — | |
Certificate of Deposit | 2,056,710 | | | 2,056,710 | | | — | | | — | |
Corporate Bonds | 40,354,929 | | | — | | | 40,354,929 | | | — | |
Governmental Securities | 47,944,036 | | | — | | | 47,944,036 | | | — | |
Municipal Bonds | 74,720,480 | | | — | | | 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 June 30, 2022 and December 31, 2021:
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of June 30, 2022: | | | | | | | | | | | | | | | | | | | | | | | |
| | | Unrealized | | |
| Cost | | Gains | | Losses | | Market Value |
Short-Term Investments: | | | | | | | |
Certificate of Deposit | $ | 1,750,990 | | | $ | 4,098 | | | $ | (2,158) | | | $ | 1,752,930 | |
Corporate Bonds | 5,630,319 | | | — | | | (163,000) | | | 5,467,319 | |
| | | | | | | |
Municipal Bonds | 1,740,477 | | | 760 | | | (12,165) | | | 1,729,072 | |
Other | 3,042,833 | | | — | | | — | | | 3,042,833 | |
Long-Term Investments: | | | | | | | |
Asset Backed Securities | 24,055,501 | | | — | | | (698,804) | | | 23,356,697 | |
Certificate of Deposit | 750,000 | | | — | | | (14,103) | | | 735,897 | |
Corporate Bonds | 37,765,445 | | | — | | | (3,587,364) | | | 34,178,081 | |
Government Securities | 41,238,181 | | | 2,361 | | | (2,338,974) | | | 38,901,568 | |
Municipal Bonds | 56,098,534 | | | 188,395 | | | (3,314,137) | | | 52,972,792 | |
Total | $ | 172,072,280 | | | $ | 195,614 | | | $ | (10,130,705) | | | $ | 162,137,189 | |
As of December 31, 2021: | | | | | | | | | | | | | | | | | | | | | | | |
| | | Unrealized | | |
| Cost | | Gains | | Losses | | Market Value |
Short-Term Investments: | | | | | | | |
Certificate of Deposit | $ | 1,500,543 | | | $ | 7,227 | | | $ | — | | | $ | 1,507,770 | |
Corporate Bonds | 1,994,639 | | | 23,801 | | | — | | | 2,018,440 | |
| | | | | | | |
| | | | | | | |
Other | 1,897,402 | | | — | | | — | | | 1,897,402 | |
Long-Term Investments: | | | | | | | |
Asset-backed Securities | 26,352,630 | | | 34,771 | | | (587,888) | | | 25,799,513 | |
Certificate of Deposit | 2,001,714 | | | 54,996 | | | — | | | 2,056,710 | |
Corporate Bonds | 40,716,866 | | | 168,416 | | | (530,353) | | | 40,354,929 | |
Government Securities | 48,385,672 | | | 55,939 | | | (497,575) | | | 47,944,036 | |
Municipal Bonds | 72,175,568 | | | 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 June 30, 2022, are as follows: | | | | | | | | | | | |
| Aggregate Unrealized Losses | | Aggregate Fair Value of Investments |
Loss duration of less than one year | $ | 8,893,651 | | | $ | 143,233,962 | |
Loss duration of greater than one year | 1,237,054 | | | 9,273,913 | |
Total | $ | 10,130,705 | | | $ | 152,507,875 | |
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 year | 574,815 | | | 6,875,230 | |
Total | $ | 1,818,868 | | | $ | 101,292,353 | |