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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, 2023 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, April 28, 2023
Common Stock, $.06 Par Value						233,702,848

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GENTEX CORPORATION AND SUBSIDIARIES

For the Three Months Ended March 31, 2023

FORM 10-Q

Index

Part I - Financial Information						Page
Item 1.			Unaudited Condensed Consolidated Financial Statements			3
			Unaudited Condensed Consolidated Balance Sheets			3
			Unaudited Condensed Consolidated Statements of Income			4
			Unaudited Condensed Consolidated Statements of Comprehensive Income			5
			Unaudited Condensed Consolidated Statements of Shareholders' Investment			6
			Unaudited Condensed Consolidated Statements of Cash Flows			7
			Notes to Unaudited Condensed Consolidated Financial Statements			8
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			31
Item 4.			Controls and Procedures			31
Part II - Other Information
Item 1A.			Risk Factors			33
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 6.			Exhibits			33
			Signatures			33
			Exhibit Index			35

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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 March 31, 2023 and December 31, 2022

			March 31, 2023 (Unaudited)						December 31, 2022 (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	215,452,160					$	214,754,638
Restricted Cash			4,000,000						4,000,000
Short-term investments			25,635,492						23,007,385
Accounts receivable, net			332,867,128						276,493,752
Inventories			401,769,976						404,360,270
Prepaid expenses and other			25,316,437						26,036,331
Total current assets			1,005,041,193						948,652,376
PLANT AND EQUIPMENT—NET			575,276,023						550,033,036
OTHER ASSETS
Goodwill			313,686,026						313,807,494
Long-term investments			229,398,824						202,331,983
Intangible assets, net			214,535,910						219,360,910
Deferred tax asset			23,795,400						25,528,700
Patents and other assets, net			71,614,459						67,515,425
Total other assets			853,030,619						828,544,512
Total assets			$	2,433,347,835					$	2,327,229,924
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Accounts payable			$	166,922,435					$	151,740,046
Accrued liabilities			130,108,297						98,812,706
Total current liabilities			297,030,732						250,552,752
OTHER NON-CURRENT LIABILITIES			13,061,457						10,884,351
Total liabilities			310,092,189						261,437,103
SHAREHOLDERS’ INVESTMENT
Common stock			14,023,563						14,050,160
Additional paid-in capital			928,284,890						917,499,323
Retained earnings			1,193,171,690						1,148,386,272
Accumulated other comprehensive loss			(12,224,497)						(14,142,934)
Total shareholders’ investment			2,123,255,646						2,065,792,821
Total liabilities and shareholders’ investment			$	2,433,347,835					$	2,327,229,924

Note: The condensed consolidated balance sheet at December 31, 2022 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.

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GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended March 31, 2023 and 2022

 

									Three Months Ended March 31,
															2023						2022
NET SALES															$	550,761,311					$	468,250,776
COST OF GOODS SOLD															376,024,080						307,838,816
Gross profit															174,737,231						160,411,960
OPERATING EXPENSES:
Engineering, research and development															34,653,747						31,974,987
Selling, general & administrative															26,832,837						25,131,068
Total operating expenses															61,486,584						57,106,055
Income from operations															113,250,647						103,305,905
OTHER INCOME (LOSS)
Investment income															2,939,195						788,316
Other loss, net															(194,740)						(798,810)
Total other income (loss)															2,744,455						(10,494)
INCOME BEFORE PROVISION FOR INCOME TAXES															115,995,102						103,295,411
PROVISION FOR INCOME TAXES															18,416,841						15,766,785
NET INCOME															$	97,578,261					$	87,528,626
EARNINGS PER SHARE: (1)
Basic															$	0.42					$	0.37
Diluted															$	0.42					$	0.37
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.

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GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended March 31, 2023 and 2022

									Three Months Ended March 31,
															2023						2022
Net income															$	97,578,261					$	87,528,626
Other comprehensive income (loss) before tax:
Foreign currency translation adjustments															(121,167)						(896,420)
Unrealized gains (losses) on debt securities, net															2,581,777						(7,795,230)
Other comprehensive income (loss), before tax															2,460,610						(8,691,650)
Income tax impact related to components of other comprehensive income (loss)															542,173						(1,636,998)
Other comprehensive income (loss), net of tax															1,918,437						(7,054,652)
Comprehensive income															$	99,496,698					$	80,473,974

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GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

For the Three Months Ended March 31, 2023 and 2022

			Common  Stock Shares						Common  Stock Amount						Additional  Paid-In Capital						Retained  Earnings						Accumulated  Other Comprehensive Loss						Total  Shareholders’ Investment
BALANCE AS OF JANUARY 1, 2023			234,169,335						$	14,050,160					$	917,499,323					$	1,148,386,272					$	(14,142,934)					$	2,065,792,821
Issuance of common stock from stock plan transactions			603,636						36,218						5,919,804						—						—						5,956,022
Repurchases of common stock			(1,046,926)						(62,815)						(3,653,772)						(24,746,045)						—						(28,462,632)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock			—						—						8,519,535						—						—						8,519,535
Dividends declared ($0.12 per share)			—						—						—						(28,046,798)						—						(28,046,798)
Net income			—						—						—						97,578,261						—						97,578,261
Other comprehensive income			—						—						—						—						1,918,437						1,918,437
BALANCE AS OF MARCH 31, 2023			233,726,045						$	14,023,563					$	928,284,890					$	1,193,171,690					$	(12,224,497)					$	2,123,255,646
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			476,688						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, 2022			234,477,338						$	14,068,640					$	881,371,438					$	1,038,656,230					$	(5,127,408)					$	1,928,968,900

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GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2023 and 2022

			2023						2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	97,578,261					$	87,528,626
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			24,041,648						24,711,500
(Gain) on disposal of assets			(106,743)						(33,982)
Loss on disposal of assets			41,843						11,067
(Gain) on sale of investments and equity method investment income			(1,199,707)						(367,879)
Loss on sale of investments and equity method investment losses			1,671,583						704,214
Change in deferred income taxes			141,959						—
Stock-based compensation expense related to employee stock options, employee stock purchases and restricted stock			8,519,535						6,788,337
Change in operating assets and liabilities:
Accounts receivable, net			(56,373,376)						(31,666,772)
Inventories			2,590,294						(46,469,079)
Prepaid expenses and other			(629,502)						16,082,077
Accounts payable			11,112,425						42,968,193
Accrued liabilities, excluding dividends declared			33,525,890						15,702,241
Net cash provided by operating activities			120,914,110						115,958,543
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales proceeds			3,128,110						37,158,611
Maturities and calls			1,465,000						1,000,000
Purchases			(32,178,155)						(15,889,063)
Plant and equipment additions			(42,819,075)						(23,892,169)
Proceeds from sale of plant and equipment			118,410						33,740
Increase in other assets			(2,110,935)						(455,419)
Net cash used for investing activities			(72,396,645)						(2,044,300)
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Issuance of common stock from stock plan transactions			5,956,022						3,324,147
Cash dividends paid			(28,099,993)						(28,589,625)
Repurchases of common stock			(25,675,972)						(71,252,022)
Net cash used for financing activities			(47,819,943)						(96,517,500)
NET INCREASE IN CASH AND CASH EQUIVALENTS			697,522						17,396,743
CASH, CASH EQUIVALENTS, and RESTRICTED CASH, beginning of period			218,754,638						262,311,670
CASH, CASH EQUIVALENTS, and RESTRICTED CASH, end of period			$	219,452,160					$	279,708,413

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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 2022 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, 2023, 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, 2023 and December 31, 2022 was $313.7 million and $313.8 million, respectively, as set forth in the table below:

			Carrying Amount
Balance as of December 31, 2022			$	313,807,494
Acquisitions			—
Divestitures			—
Impairments			—
Other			(121,468)
Balance as of March 31, 2023			$	313,686,026

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 component shortages, supply chain constraints, inflation, 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 ("In-Process 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:

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of March 31, 2023:

Other Intangible Assets			Gross			Accumulated Amortization			Net			Assumed Useful Life
Gentex Patents			$	40,619,268		$	(28,072,946)		$	12,546,322		Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks			$	52,000,000		$	—		$	52,000,000		Indefinite
HomeLink® Technology			180,000,000			(142,500,000)			37,500,000			12 years
Existing Customer Platforms			43,000,000			(40,850,000)			2,150,000			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		$	(183,350,000)		$	214,535,910
Total Patents & Other Intangible Assets			$	438,505,178		$	(211,422,946)		$	227,082,232

As of December 31, 2022:

Other Intangible Assets			Gross			Accumulated Amortization			Net			Assumed Useful Life
Gentex Patents			$	40,653,851		$	(27,820,383)		$	12,833,468		Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks			$	52,000,000		$	—		$	52,000,000		Indefinite
HomeLink® Technology			180,000,000			(138,750,000)			41,250,000			12 years
Existing Customer Platforms			43,000,000			(39,775,000)			3,225,000			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		$	(178,525,000)		$	219,360,910
Total Patents & Other Intangible Assets			$	438,539,761		$	(206,345,383)		$	232,194,378

Amortization expense on patents and intangible assets was approximately $5.3 million during the three months ended March 31, 2023, and approximately $5.5 million for the same period ended March 31, 2022.

Excluding the impact of any future acquisitions, the Company estimates amortization expense for the year ending December 31, 2023 to be approximately $20 million, for the year ending December 31, 2024 to be approximately $16 million, for the year ending December 31, 2025 to be approximately $12 million, and for each of the years ending December 31, 2026 and December 31, 2027 to be approximately $5 million.

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(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 investments are classified within Equity Method Investments in the condensed consolidated balance sheets. The Company has also 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, the equity investments are held at cost.

Such technology investments totaled approximately $86.9 million and $69.5 million as of March 31, 2023 and December 31, 2022, respectively. On March 9, 2023, the Company purchased a 15% equity investment in Adasky, LTD. for $21.5 million. Adasky is an Israeli-based leading developer and manufacturer of intelligent thermal sensing technologies. $2.2 million and $3.8 million of these technology investments are classified within Short-Term Investments in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively. $84.7 million and $65.7 million of these investments are classified within Long-Term Investments in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively.  

Assets or liabilities that have recurring fair value measurements are shown below as of March 31, 2023 and December 31, 2022:

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of March 31, 2023:

									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, 2023						(Level 1)						(Level 2)						(Level 3)
Cash & Cash Equivalents			$	215,452,160					$	215,452,160					$	—					$	—
Restricted Cash			4,000,000						4,000,000						—						—
Short-Term Investments:
Certificate of Deposit			1,741,295						1,741,295						—						—
Corporate Bonds			5,495,110						—						5,495,110						—
Government Securities			6,155,223						—						6,155,223						—
Municipal Bonds			3,963,985						—						3,963,985						—
Other			4,474,175						1,007,150						3,467,025						—
Long-Term Investments:
Asset Backed Securities			18,718,258						—						18,718,258						—
Certificate of Deposit			239,107						239,107						—						—
Corporate Bonds			37,242,499						—						37,242,499						—
Government Securities			36,922,649						—						36,922,649						—
Municipal Bonds			50,870,849						—						50,870,849						—
Common Stock			720,910						720,910						—						—
Total			$	385,996,220					$	223,160,622					$	162,835,598					$	—

As of December 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			December 31, 2022						(Level 1)						(Level 2)						(Level 3)
Cash & Cash Equivalents			$	214,754,638					$	214,754,638					$	—					$	—
Restricted Cash			4,000,000						4,000,000						—						—
Short-Term Investments:
Certificate of Deposit			1,736,163						1,736,163						—						—
Corporate Bonds			5,473,341						—						5,473,341						—
Government Securities			4,423,041						—						4,423,041						—
Municipal Bonds			5,174,773						—						5,174,773						—
Other			2,347,602						1,093,602						1,254,000						—
Long-Term Investments:
Asset-backed Securities			18,829,696						—						18,829,696						—
Certificate of Deposit			238,925						238,925						—						—
Corporate Bonds			36,310,477						—						36,310,477						—
Governmental Securities			36,532,634						—						36,532,634						—
Municipal Bonds			48,430,166						—						48,430,166
Common Stock			293,300						293,300						—						—
Total			$	378,544,756					$	222,116,628					$	156,428,128					$	—

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of March 31, 2023 and December 31, 2022:

As of March 31, 2023:

									Unrealized
			Cost						Gains						Losses						Market Value
Short-Term Investments:
Certificate of Deposit			$	1,750,000					$	93					$	(8,798)					$	1,741,295
Corporate Bonds			5,542,607						—						(47,497)						5,495,110
Government Securities			6,190,793						2,058						(37,628)						6,155,223
Municipal Bonds			3,998,537						—						(34,552)						3,963,985
Other			4,474,175						—						—						4,474,175
Long-Term Investments:
Asset Backed Securities			18,852,424						—						(134,166)						18,718,258
Certificate of Deposit			250,000						—						(10,893)						239,107
Corporate Bonds			40,819,361						20,678						(3,597,540)						37,242,499
Government Securities			39,525,976						—						(2,603,327)						36,922,649
Municipal Bonds			54,635,848						314,881						(4,079,880)						50,870,849
Common Stock			720,911						—						—						720,911
Total			$	176,760,632					$	337,710					$	(10,554,281)					$	166,544,061

As of December 31, 2022:    

									Unrealized
			Cost						Gains						Losses						Market Value
Short-Term Investments:
Certificate of Deposit			$	1,750,256					$	—					$	(14,093)					$	1,736,163
Corporate Bonds			5,571,417						—						(98,076)						5,473,341
Government Securities			4,476,613						—						(53,572)						4,423,041
Municipal Bonds			5,223,500						—						(48,727)						5,174,773
Other			2,347,602						—						—						2,347,602
Long-Term Investments:
Asset-backed Securities			19,151,229						—						(321,533)						18,829,696
Certificate of Deposit			250,000						—						(11,075)						238,925
Corporate Bonds			40,410,206						—						(4,099,729)						36,310,477
Government Securities			39,637,461						—						(3,104,827)						36,532,634
Municipal Bonds			53,476,883						235,713						(5,282,430)						48,430,166
Common Stock			292,638						662						—						293,300
Total			$	172,587,805					$	236,375					$	(13,034,062)					$	159,790,118

Unrealized losses on investments as of March 31, 2023, are as follows:

			Aggregate Unrealized Losses						Aggregate Fair Value of Investments
Loss duration of less than one year			$	321,165					$	23,213,314
Loss duration of greater than one year			10,233,116						130,046,373
Total			$	10,554,281					$	153,259,687

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Unrealized losses on investments as of December 31, 2022, are as follows:

			Aggregate Unrealized Losses						Aggregate Fair Value of Investments
Loss duration of less than one year			$	4,816,103					$	77,701,146
Loss duration of greater than one year			8,217,959						76,643,586
Total			$	13,034,062					$	154,344,732

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, 2023 have contractual maturities as follows:

Due within one year			$	17,355,612
Due between one and five years			93,840,749
Due over five years			50,152,613
			$	161,348,974

(4)    Inventories

Inventories consisted of the following at the respective balance sheet dates:

			March 31, 2023						December 31, 2022
Raw materials			$	301,876,129					$	304,184,004
Work-in-process			44,534,016						45,512,275
Finished goods			55,359,831						54,663,991
Total Inventory			$	401,769,976					$	404,360,270

(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

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

two-class method for the three months ended March 31, 2023 and March 31, 2022:

												Three Months Ended March 31,
																		2023						2022
Basic Earnings Per Share
Net Income																		$	97,578,261					$	87,528,626
Less: Dividends and undistributed earnings allocated to participating securities																		1,456,913						1,360,047
Net Income available to common shareholders																		$	96,121,348					$	86,168,579
Basic weighted average shares outstanding																		230,605,626						232,151,296
Net Income per share - Basic																		$	0.42					$	0.37
Diluted Earnings Per Share
Allocation of Net Income used in basic computation																		$	96,121,348					$	86,168,579
Reallocation of undistributed earnings																		1,276						2,500
Net Income available to common shareholders - Diluted																		$	96,122,624					$	86,171,079
Number of shares used in basic computation																		230,605,626						232,151,296
Additional weighted average dilutive common stock equivalents																		290,220						638,515
Diluted weighted average shares outstanding																		230,895,846						232,789,811
Net Income per share - Diluted																		$	0.42					$	0.37
Shares related to stock plans not included in diluted average common shares outstanding because their effect would be anti-dilutive																		1,810,685						1,572,223

(6)    Stock-Based Compensation Plans

As of March 31, 2023, 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, 2022, for additional information related to the Prior Plans.

The Company recognized total compensation expense for share-based payments of $8,519,535 for the three months ended March 31, 2023. The Company recognized compensation expense for share-based

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

payments of $6,788,337 for the three months ended March 31, 2022. 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 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 2019 Omnibus 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, 2023, 8,991,744 share awards have been made under the Plan, resulting in 22,671,217 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 Granted						Conversion Rate						Total Shares Under 2019 Omnibus Plan
Non-Qualified Stock Options						4,521,328						1.00						4,521,328
Restricted Stock						3,609,000						4.06						14,652,540
Performance Shares						861,416						4.06						3,497,349
Total						8,991,744												22,671,217

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, 2023, there was $8,754,103 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:

									Three Months Ended March 31,
															2023						2022
Dividend Yield (1)															1.76		%				1.80		%
Expected volatility (2)															29.04		%				28.16		%
Risk-free interest rate (3)															3.60		%				2.42		%
Expected term of options (years) (4)															4.15						4.15
Weighted-avg. grant date fair value															$6.84						$6.38

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, 2023, the Company had unearned stock-based compensation of $45,419,558 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

15

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GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

restricted stock grants in the three months ended March 31, 2023 was $5,946,054. Compensation expense from restricted stock grants in the three months ended March 31, 2022 was $5,290,805.

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, 2023, the Company had unearned stock-based compensation of $19,418,307 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

Prior to July 1, 2022, the Company had in place an employee stock purchase plan covering 2,000,000 shares of common stock. Under that plan, the Company sold shares at 85% of the stock’s market price at date of purchase. Under ASC 718, Compensation - Stock Compensation, the 15% discounted value was recognized as compensation expense. As of March 31, 2023, the Company has issued 1,624,122 shares under this prior plan.

In May 2022, the 2022 Gentex Corporation Employee Stock Purchase Plan covering 2,000,000 shares of common stock was approved by shareholders replacing the above referenced prior plan effective July 1, 2022. Under the plan, the Company sells shares at 85% of the stock's market price at date of purchase. Under ASC 718, the 15% discounted value is recognized as compensation expense. As of March 31, 2023, the Company has issued 156,103 shares under this plan.

(7)    Comprehensive Income (Loss)

Comprehensive income (loss) 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.

16

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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 loss by component (all amounts shown are net of tax):

												Three Months Ended March 31,
																		2023			2022
Foreign currency translation adjustments:
Balance at beginning of period																		$	(4,032,239)		$	920,589
Other Comprehensive loss before reclassifications																		(121,167)			(896,420)
Net current-period change																		(121,167)			(896,420)
Balance at end of period																		(4,153,406)			24,169
Unrealized (losses) gains on available-for-sale debt securities:
Balance at beginning of period																		(10,110,695)