UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008,
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 (I.R.S. Employer Identification No.)
incorporation or organization)
600 N. CENTENNIAL, ZEELAND, MICHIGAN 49464
(Address of principal executive offices) (Zip Code)
(616) 772-1800
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [x] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]
(Do not check if a smaller reporting company)
Indicate by a check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PROCEEDING 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 [ ] No [ ]
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.
Shares Outstanding
Class at July 23, 2008
----- ----------------
Common Stock, $0.06 Par Value 141,941,740
Exhibit Index located at page 18
Page 1 of 23
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2008 December 31, 2007
-------------- ------------------
(Unaudited) (Audited)
-------------- ------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 302,118,720 $ 317,717,093
Short-term investments 74,800,675 80,271,688
Accounts receivable, net 71,345,333 64,181,511
Inventories 51,226,435 48,049,560
Prepaid expenses and other 18,666,112 18,274,096
-------------- ------------------
Total current assets 518,157,275 528,493,948
PLANT AND EQUIPMENT - NET 216,322,783 205,609,671
OTHER ASSETS
Long-term investments 127,179,352 155,384,009
Patents and other assets, net 8,811,711 8,535,052
-------------- ------------------
Total other assets 135,991,063 163,919,061
-------------- ------------------
Total assets $ 870,471,121 $ 898,022,680
============== ==================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 34,251,960 $ 30,531,649
Accrued liabilities 35,564,017 37,831,056
-------------- ------------------
Total current liabilities 69,815,977 68,362,705
DEFERRED INCOME TAXES 18,715,357 22,847,779
SHAREHOLDERS' INVESTMENT
Common stock 8,516,504 8,685,257
Additional paid-in capital 252,853,340 245,502,960
Retained earnings 510,011,546 530,290,281
Other shareholders' investment 10,558,397 22,333,698
-------------- ------------------
Total shareholders' investment 781,939,787 806,812,196
-------------- ------------------
Total liabilities and
shareholders' investment $ 870,471,121 $ 898,022,680
============== ==================
See accompanying notes to condensed consolidated financial statements.
- 2-
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
NET SALES $ 170,491,552 $ 163,479,812 $ 348,461,831 $ 320,685,794
COST OF GOODS SOLD 111,411,298 105,782,966 226,734,586 208,410,186
------------- ------------- ------------- -------------
Gross profit 59,080,254 57,696,846 121,727,245 112,275,608
OPERATING EXPENSES:
Engineering, research and development 13,398,456 12,446,469 26,134,743 24,722,131
Selling, general & administrative 9,892,080 8,732,630 19,815,616 17,099,201
------------- ------------- ------------- -------------
Total operating expenses 23,290,536 21,179,099 45,950,359 41,821,332
------------- ------------- ------------- -------------
Income from operations 35,789,718 36,517,747 75,776,886 70,454,276
OTHER INCOME (EXPENSE)
Interest and dividend income 3,239,867 4,748,199 7,300,211 9,318,644
Other, net 990,455 3,699,084 2,405,580 8,662,662
------------- ------------- ------------- -------------
Total other income 4,230,322 8,447,283 9,705,791 17,981,306
------------- ------------- ------------- -------------
Income before provision for income taxes 40,020,040 44,965,030 85,482,677 88,435,582
PROVISION FOR INCOME TAXES 13,161,679 14,008,923 28,176,181 27,981,766
------------- ------------- ------------- -------------
NET INCOME $ 26,858,361 $ 30,956,107 $ 57,306,496 $ 60,453,816
============= ============= ============= =============
EARNINGS PER SHARE:
Basic $ 0.19 $ 0.22 $ 0.40 $ 0.42
Diluted $ 0.19 $ 0.22 $ 0.40 $ 0.42
Cash Dividends Declared per Share $ 0.105 $ 0.095 $ 0.21 $ 0.19
See accompanying notes to condensed consolidated financial statements.
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007
2008 2007
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 57,306,496 $ 60,453,816
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization 17,432,494 15,738,089
(Gain) loss on disposal of assets 635,370 220,514
(Gain) loss on sale of investments (1,817,174) (7,112,255)
Deferred income taxes 2,100,444 (1,269,039)
Stock-based compensation expense related to employee stock options, employee
stock purchases and restricted stock 5,034,362 4,362,765
Excess tax benefits from stock-based compensation (62,647) (102,290)
Change in operating assets and liabilities:
Accounts receivable, net (7,163,822) (16,021,194)
Inventories (3,176,875) 6,734,193
Prepaid expenses and other 175,356 (2,510,355)
Accounts payable 3,720,311 5,967,356
Accrued liabilities, excluding dividends declared (1,852,869) 1,927,709
------------- -------------
Net cash provided by (used for) operating activities 72,331,446 68,389,309
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant and equipment additions (28,593,312) (24,127,055)
Proceeds from sale of plant and equipment 11,002 353,000
(Increase) decrease in investments 16,063,590 7,372,068
(Increase) decrease in other assets 378,389 (333,302)
------------- -------------
Net cash provided by (used for) investing activities (12,140,331) (16,735,289)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock from stock plan transactions 8,004,747 24,674,250
Cash dividends paid (30,193,617) (27,092,920)
Repurchases of common stock (53,663,265) (7,328,015)
Excess tax benefits from stock-based compensation 62,647 102,290
------------- -------------
Net cash provided by (used for) financing activities (75,789,488) (9,644,395)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,598,373) 42,009,625
CASH AND CASH EQUIVALENTS,
beginning of period 317,717,093 245,499,783
------------- -------------
CASH AND CASH EQUIVALENTS,
end of period $ 302,118,720 $ 287,509,408
============= =============
See accompanying notes to condensed consolidated financial statements.
- 4 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The unaudited condensed consolidated financial statements included herein
have been prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to
such rules and regulations, although the Registrant believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these unaudited condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Registrant's 2007 annual report on Form 10-K.
(2) In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting of
only a normal and recurring nature, necessary to present fairly the
financial position of the Registrant as of June 30, 2008, and the results
of operations and cash flows for the interim periods presented.
(3) Adoption of New Accounting Standards
In September 2006, the Financial Accounting Standards Board (FASB) issued
SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). This statement
establishes 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. SFAS No. 157 also expands financial statement
disclosure requirements about a company's use of fair value measurements,
including the effect of such measure on earnings. SFAS No. 157 was
effective for fiscal years beginning after November 15, 2007.
The Company adopted the provisions of SFAS No. 157 related to its
financial assets and liabilities in the first quarter of 2008, which did
not have a material impact on the Company's consolidated financial
position, results of operations or cash flows. The Company's investment
securities are classified as available for sale and are stated at fair
value based on quoted market prices. Assets or liabilities that have
recurring measurements are shown below as of June 30, 2008:
Fair Value Measurements at Reporting Date Using
--------------------------------------------------------
Quoted Prices in
Active Markets Significant Significant
for Identical Other Observable Unobservable
Assets Inputs Inputs
---------------- ---------------- ------------
Total as of
Description June 30, 2008 (Level 1) (Level 2) (Level 3)
- ---------------------- -------------- ---------------- ---------------- ------------
Cash & Cash Equivalents $ 302,118,720 $ 302,118,720 $ -- $ --
Short-Term Investments 74,800,675 16,800,675 58,000,000 --
Long-Term Investments 127,179,352 127,179,352 -- --
-------------- ---------------- ---------------- ------------
Net $ 504,098,747 $ 446,098,747 $ 58,000,000 $ --
The Company's short-term investments primarily consist of Government
Securities (Level 1) and Certificate of Deposits (Level 2). Long-term
investments primarily consist of marketable equity securities.
(4) Inventories consisted of the following at the respective balance sheet
dates:
June 30, 2008 December 31, 2007
-------------- -----------------
Raw materials $ 32,526,563 $ 31,098,379
Work-in-process 5,485,328 4,555,058
Finished goods 13,214,544 12,396,123
-------------- -----------------
$ 51,226,435 $ 48,049,560
============== =================
- 5-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
(5) The following table reconciles the numerators and denominators used in the
calculation of basic and diluted earnings per share (EPS):
Quarter Ended June 30, Six Months Ended June 30,
--------------------------------- ---------------------------------
2008 2007 2008 2007
-------------- -------------- ------------- --------------
Numerators:
Numerator for both basic and
diluted EPS, net income $ 26,858,361 $ 30,956,107 $ 57,306,496 $ 60,453,816
Denominators:
Denominator for basic EPS,
weighted-average shares
outstanding 142,239,378 142,543,923 142,762,929 142,356,126
Potentially dilutive shares
resulting from stock plans 336,248 933,732 142,022 690,882
-------------- -------------- -------------- -------------
Denominator for diluted EPS 142,575,626 143,477,655 142,904,951 143,047,008
============== ============== ============== =============
Shares related to stock plans not
included in diluted average common
shares outstanding because their
effect would be antidilutive 5,073,997 2,606,718 6,127,065 4,038,524
(6) Stock-Based Compensation Plans
At June 30, 2008, the Company had two stock option plans, a restricted
stock plan and an employee stock purchase plan. Effective January 1, 2006,
the Company adopted Statement of Financial Accounting Standards No. 123
(revised), "Share-Based Payment" [SFAS 123(R)] utilizing the modified
prospective approach. Prior to the adoption of SFAS 123(R), the Company
accounted for stock option grants under the recognition and measurement
principles of APB Opinion No. 25 (Accounting for Stock Issued to
Employees) and related interpretations and, accordingly, recognized no
compensation expense for stock option grants in net income. Readers should
refer to Note 6 of our consolidated financial statements in our Annual
Report on Form 10-K for the calendar year ended December 31, 2007, for
additional information related to these stock-based compensation plans.
Under the modified prospective approach, SFAS 123(R) applies to new awards
and to awards that were outstanding on December 31, 2005. Under the
modified prospective approach, compensation cost recognized in the second
quarter of 2008 includes compensation cost for all share-based payments
granted prior to, but not yet vested as of December 31, 2005, based on the
grant-date fair value estimated in accordance with the original provisions
of SFAS 123, and compensation cost for all share-based payments granted
subsequent to December 31, 2005, based on the grant-date fair value
estimated in accordance with the provisions of SFAS 123(R). Prior periods
were not restated to reflect the impact of adopting the new standard.
The Company recognized compensation expense for share-based payments of
$2,044,049 and $4,064,541 for the second quarter and six months ended June
30, 2008, respectively. Compensation cost capitalized as part of inventory
as of June 30, 2008, was $99,846.
- 6-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
(6) Stock-Based Compensation Plans (continued)
Employee Stock Option Plan
The fair value of each option grant in the Employee Stock Option Plan 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 Six Months Ended
June 30, June 30,
--------------------- --------------------
2008 2007 2008 2007
------- ------- ------- -------
Dividend yield 2.08% 1.99% 2.06% 1.99%
Expected volatility 30.70% 29.50% 30.56% 29.20%
Risk-free interest rate 3.34% 4.92% 2.93% 4.71%
Expected term of options (in years) 4.31 4.33 4.31 4.34
Weighted-average grant-date fair value $ 3.57 $ 5.26 $ 3.78 $ 4.72
The Company determined that all employee groups exhibit similar exercise
and post-vesting termination behavior to determine the expected term.
Under the plans, the option exercise price equals the stock's market price
on date of grant. The options vest after one to five years, and expire
after five to seven years.
As of June 30, 2008, there was $11,090,395 of unrecognized compensation
cost related to share-based payments which is expected to be recognized
over the vesting period with a weighted-average period of 4.1 years.
Non-employee Director Stock Option Plan
As of June 30, 2008, there was $225,304 of unrecognized compensation cost
under this plan related to share-based payments which is expected to be
recognized over the balance of the 2008 calendar year. Under the plan, the
option exercise price equals the stock's market price on date of grant.
The options vest after six months, and expire after ten years.
Employee Stock Purchase Plan
In 2003, a new Employee Stock Purchase Plan covering 1,200,000 shares was
approved by the shareholders, replacing a prior plan. Under the plan, the
Company sells shares at 85% of the stock's market price at date of
purchase. Under SFAS 123(R), the 15% discounted value is recognized as
compensation expense.
Restricted Stock Plan
In May of 2008, an amendment to the Company's Second Restricted Stock Plan
was approved by the Shareholders. The plan amendment increased the maximum
number of shares that may be subject to awards to 2,000,000 shares (in the
aggregate) and to change the Plan's termination date from March 2, 2011,
to February 21, 2018. The Company has granted 770,058 shares of restricted
stock prior to the plan amendment (net of cancellations). The purpose of
the Plan is to permit grants of shares, subject to restrictions, to key
employees of the Company as a means of retaining and rewarding them for
long-term performance and to increase their ownership in the Company.
Shares awarded under the 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. As of June 30, 2008, the Company had unearned
stock-based compensation of $5,085,262 associated with these restricted
stock grants. The unearned stock-based compensation related to these
grants is being amortized to compensation expense over the applicable
restriction periods. Amortization expense from restricted stock grants in
the second quarter and six months ended June 30, 2008, were $468,895 and
$969,821, respectively.
- 7 -
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
(7) Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. For the Company, comprehensive
income represents net income adjusted for items such as unrealized gains
and losses on investments and foreign currency translation adjustments.
Comprehensive income was as follows:
June 30, 2008 June 30, 2007
------------- -------------
Quarter Ended $ 25,726,282 $ 35,366,211
Six Months Ended $ 45,531,195 $ 63,870,501
(8) The decrease in common stock during the six months ended June 30, 2008,
was primarily due to the repurchase of 3,404,312 shares pursuant to the
Company's previously announced share repurchase plan for approximately
$53,663,000, partially offset by the issuance of 591,764 shares of the
Company's common stock under its stock-based compensation plans. The
Company has also recorded a $0.105 per share cash dividend in the first
and second quarters. The second quarter dividend of approximately
$14,904,000, was declared on June 3, 2008, and was paid on July 18, 2008.
(9) The Company currently manufactures electro-optic products, including
automatic-dimming rearview mirrors for the automotive industry, and fire
protection products for the commercial building industry. The Company also
developed and manufactures variable dimmable windows for the aircraft
industry and non-auto dimming rearview automotive mirrors with electronic
features:
Quarter Ended June 30, Six Months Ended June 30,
--------------------------------- ---------------------------------
2008 2007 2008 2007
-------------- -------------- -------------- --------------
Revenue:
Automotive Products $ 164,808,314 $ 157,183,786 $ 336,867,204 $ 308,299,621
Other 5,683,238 6,296,026 11,594,627 12,386,173
-------------- -------------- -------------- --------------
Total $ 170,491,552 $ 163,479,812 $ 348,461,831 $ 320,685,794
============== ============== ============== ==============
Income from Operations:
Automotive Products $ 35,919,412 $ 35,215,160 $ 75,936,709 $ 67,994,280
Other (129,694) 1,302,587 (159,823) 2,459,996
-------------- -------------- -------------- --------------
Total $ 35,789,718 $ 36,517,747 $ 75,776,886 $ 70,454,276
============== ============== ============== ==============
The "Other" segment includes Fire Protection Products and Dimmable
Aircraft Windows. Dimmable Aircraft Windows sales were immaterial during
the second quarter and six months ended June 30, 2008, which resulted in
reduced income from operations for the "Other" category.
- 8 -
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS:
SECOND QUARTER 2008 VERSUS SECOND QUARTER 2007
Net Sales. Net sales for the second quarter of 2008 increased by
approximately $7,012,000, or 4%, when compared with the second quarter
last year. Net sales of the Company's automotive mirrors increased by
approximately $7,625,000, or 5%, in the second quarter of 2008, when
compared with the second quarter last year, primarily due to increased
penetration of interior and exterior auto-dimming mirror unit shipments
with overseas customers. Auto-dimming mirror unit shipments increased
1% from approximately 3,874,000 in the second quarter 2007 to 3,913,000
in the current quarter. Unit shipments to customers in North America
for the current quarter decreased by 13% compared with the second
quarter of the prior year, primarily due to lower light vehicle
production levels at the traditional Big Three automakers and the
continuation of UAW strikes. The UAW strikes during the second quarter
negatively impacted automotive revenues by approximately $5.8 million.
Unit shipments to Asian and European transplant automakers partially
offset the impact of the lower production levels at the traditional Big
Three and the UAW strikes. Mirror unit shipments for the current
quarter to automotive customers outside North America increased by 12%
compared with the second quarter in 2007, primarily due to increased
penetration at certain European and Asian automakers. Net sales of the
Company's fire protection products decreased 10% for the current
quarter versus the same quarter of last year, primarily due to a weak
commercial construction market.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased from 64.7% in the second quarter of 2007 to 65.3% in the
second quarter of 2008. This percentage increase primarily reflected
the impact of automotive customer price reductions and the inability to
leverage the Company's fixed overhead costs, partially offset by
purchasing cost reductions and foreign exchange rates. Each positive
and negative factor is estimated to have impacted cost of goods sold by
1-2 percentage points.
Operating Expenses. Engineering, research and development (E, R & D)
expenses for the current quarter increased 8% and approximately
$952,000 when compared with the same quarter last year. Excluding
litigation expenses of $1,427,000 in the second quarter of 2007 (see
discussion under "Trends & Developments"), E, R & D expenses increased
22% when comparing the current quarter to the same quarter last year,
primarily reflecting additional staffing, engineering and testing for
new product development, including mirrors with additional features,
such as SmartBeam(R) and Rear Camera Display. Selling, general and
administrative expenses increased 13% and approximately $1,159,000, for
the current quarter, when compared with the second quarter of 2007,
primarily due to the continued expansion of the Company's overseas
offices and foreign exchange rates. Foreign exchange rates accounted
for approximately four percentage points of the increase.
Total Other Income. Total other income for the current quarter
decreased by approximately $4,217,000, or 50%, when compared with the
second quarter of 2007, primarily due to lower realized gains on the
sale of equity investments (which accounted for approximately
two-thirds of the decrease) and lower interest income due to lower
interest rates.
Taxes. The provision for income taxes varied from the statutory rate
during the current quarter, primarily due to the domestic manufacturing
deduction.
Net Income. Net income for the second quarter of 2008 decreased by
approximately $4,098,000, or 13%, when compared with the same quarter
last year, primarily due to the decrease in total other income.
SIX MONTHS ENDED JUNE 30, 2008, VERSUS SIX MONTHS ENDED JUNE 30, 2007
Net Sales. Net sales for the six months ended June 30, 2008 increased
by approximately $27,776,000, or 9%, when compared with the same period
last year. Net sales of the Company's automotive mirrors increased by
approximately $28,568,000, or 9% period over period, as auto-dimming
mirror unit shipments increased by 6% from approximately 7,653,000 in
the first six months of 2007 to 8,080,000 units in the first six months
of 2008. This increase primarily reflected the increased penetration of
interior and exterior auto-dimming mirrors on 2008
- 9 -
model year vehicles with overseas customers. Unit shipments to
customers in North America decreased by 6% during the first six months
of 2008 versus the same period in 2007, primarily due to lower light
vehicle production levels at the traditional Big Three automakers and
the UAW strikes. The UAW strikes negatively impacted automotive
revenues by approximately $8.3 million during the first six months of
2008 versus the same period in 2007. Mirror unit shipments to
automotive customers outside North America increased by 14% period over
period, primarily due to increased penetration at certain European and
Asian automakers. Net sales of the Company's fire protection products
decreased 7% period over period, primarily due to a weak commercial
construction market.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
remained at approximately 65% in the six months ended June 30, 2008,
when compared to the same period last year, primarily reflecting the
impact of purchasing cost reductions and foreign exchange rates, offset
by annual automotive customer price reductions and the inability to
leverage the Company's fixed overhead costs. Each factor is estimated
to have impacted cost of goods sold as a percentage of net sales by
approximately 1-2%.
Operating Expenses. For the six months ended June 30, 2008,
engineering, research and development expenses increased approximately
$1,413,000, but remained at 8% of net sales, when compared to the same
period last year. Excluding litigation expenses of $104,000 and the
litigation judgment accrual reversal of approximately $335,000 for the
six months ended June 30, 2008, compared with litigation expenses of
approximately $2,851,000 for the same period last year (see discussion
under "Trends and Developments"), E, R & D expenses increased by 21%
when compared with the same period last year, primarily due to
additional staffing, engineering and testing for new product
development, including mirrors with additional features. Selling,
general and administrative expenses increased 16% and approximately
$2,716,000 for the six months ended June 30, 2008, and increased from
5% to 6% of net sales, when compared to the same period last year,
primarily reflecting the continued expansion of the Company's overseas
offices and foreign exchange rates. Foreign exchange rates accounted
for approximately four percentage points of the increase.
Total Other Income. Total other income for the six months ended June
30, 2008, decreased approximately $8,276,000 when compared to the same
period last year, primarily due to lower realized gains on the sale of
equity investments (which accounted for approximately two-thirds of the
decrease) and lower interest income due to lower interest rates.
Taxes. The provision for income taxes varied from the statutory rate
during the six months ended June 30, 2008, primarily due to the
domestic manufacturing deduction and stock option expense benefits.
Net Income. Net income decreased by approximately $3,147,000, or 5% for
the six months ended June 30, 2008, when compared with the same period
last year, primarily due to the decrease in total other income,
partially offset by increased sales and operating profit.
FINANCIAL CONDITION:
Cash flow from operating activities for the six months ended June 30,
2008, increased approximately $3,942,000 to $72,331,000, compared to
$68,389,000, for the same period last year, primarily due to slower
growth in accounts receivable and changes in non-cash items, partially
offset by an increase in inventory. Capital expenditures for the six
months ended June 30, 2008, were $28,593,000, compared to $24,127,000
for the same period last year. The increase was primarily due to the
purchase of additional production equipment.
Accounts receivable as of June 30, 2008, increased approximately
$7,164,000 compared to December 31, 2007. The increase was primarily
due to the higher sales level, as well as monthly sales within each
quarter.
Long-term investments as of June 30, 2008, decreased approximately
$28,205,000 compared to December 31, 2007. The decrease was primarily
due to a decrease in unrealized gains in equity investments.
Management considers the Company's working capital and long-term
investments totaling approximately $575,521,000 as of June 30, 2008,
together with internally generated cash flow and an unsecured
$5,000,000 line of credit from a bank, to be sufficient to cover
anticipated cash needs for the next year and for the foreseeable
future.
- 10 -
On October 8, 2002, the Company announced a share repurchase plan,
under which it may purchase up to 8,000,000 shares (post-split) based
on a number of factors, including market conditions, the market price
of the Company's common stock, anti-dilutive effect on earnings,
available cash and other factors that the Company deems appropriate. On
July 20, 2005, the Company announced that it had raised the price at
which the Company may repurchase shares under the existing plan. On May
16, 2006, the Company announced that the Company's Board of Directors
had authorized the repurchase of an additional 8,000,000 shares under
the plan. On August 14, 2006, the Company announced that the Company's
Board of Directors had authorized the repurchase of an additional
8,000,000 shares under the plan. And, on February 26, 2008, the Company
announced that the Company's Board of Directors had authorized the
repurchase of an additional 4,000,000 shares under the plan.
The following is a summary of quarterly share repurchase activity under
the plan to date:
Total Number of
Shares Purchased Cost of
Quarter Ended (Post-Split) Shares Purchased
- ------------------------- ------------------- ----------------
March 31, 2003 830,000 $ 10,246,810
September 30, 2005 1,496,059 25,214,573
March 31, 2006 2,803,548 47,145,310
June 30, 2006 7,201,081 104,604,414
September 30, 2006 3,968,171 55,614,102
December 31, 2006 1,232,884 19,487,427
March 31, 2007 447,710 7,328,015
March 31, 2008 2,200,752 34,619,490
June 30, 2008 1,203,560 19,043,775
---------------- ----------------
Total 21,383,765 $ 323,303,916
6,616,235 shares remain authorized to be repurchased under the plan.
CRITICAL ACCOUNTING POLICIES:
The preparation of the Company's consolidated condensed financial
statements contained in this report, which have been prepared in
accordance with accounting principles generally accepted in the Unites
States, requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. On an ongoing basis, management evaluates these
estimates. Estimates are based on historical experience and on various
other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that may not be
readily apparent from other sources. Historically, actual results have
not been materially different from the Company's estimates. However,
actual results may differ from these estimates under different
assumptions or conditions.
The Company has identified the critical accounting policies used in
determining estimates and assumptions in the amounts reported in its
Management's Discussion and Analysis of Financial Condition and Results
of Operations in its Annual Report on Form 10-K for the fiscal year
ended December 31, 2007. Management believes there have been no
significant changes in those critical accounting policies.
TRENDS AND DEVELOPMENTS:
The Company previously announced certain development programs with
several automakers for its Rear Camera Display (RCD) Mirror that
consists of a proprietary liquid crystal display (LCD) that shows a
panoramic video of objects behind the vehicle in real time. In
addition, the Company previously announced a number of OEM and dealer
or port-installed programs for its RCD Mirror. The Company recently
announced that its RCD Mirror will be available as optional equipment
on the 2009 General Motors GMT900 and Lambda platforms.
On February 14, 2008, the President signed into law the "Kids
Transportation Safety Act of 2007". The Bill ordered the Secretary of
Transportation at the National Highway Traffic Safety Administration
(NHTSA) to initiate rulemaking to revise the federal standard to expand
the field of view so that drivers can detect objects directly
- 11 -
behind vehicles. The Bill states that the requirements may be met by
the use of additional mirrors, sensors, cameras or other technology to
increase the driver's field of view. The Company's RCD Mirror is a cost
competitive product that is relatively easy to implement and may be
among the technologies that NHTSA will include as a means to meet the
requirements of the legislation.
The Company previously announced it is shipping auto-dimming mirrors
with SmartBeam, its proprietary intelligent high-beam headlamp control
feature, to General Motors, Chrysler and BMW for a number of vehicle
programs. The Company recently announced that SmartBeam will be offered
this spring on the Audi A4, A5 and Q7 in Europe as an option in
conjunction with bi-xenon headlamps.
During 2005, the Company reached an agreement with PPG Aerospace to
work together to provide the variable dimmable windows for the
passenger compartment on the new Boeing 787 Dreamliner series of
aircraft. Gentex will ship about 100 windows for the passenger
compartment of each 787. The Company believes that the commercially
viable market for variable dimmable windows is currently limited to the
aerospace industry. The Company began shipping parts for test planes in
mid-2007. Boeing has now announced three delays in expected aircraft
deliveries to customers, but we currently anticipate that suppliers
will still be required to ship some product in calendar year 2008.
However, we do not at this time expect revenues from this program to be
significant in calendar year 2008.
The Company currently expects that top line revenue growth for the
third quarter and the balance of 2008 will be approximately 10% higher,
compared with the same periods in 2007. These estimates are based on
current light vehicle production forecasts in the regions to which the
Company ships product, as well as the estimated option rates for its
mirrors on prospective vehicle models. Uncertainties, including light
vehicle production levels and sales rates at the traditional Big Three
automakers in North America and the impact of potential automotive
customer (including their Tier 1 suppliers) work stoppages, strikes,
etc. that could disrupt our shipments to these customers, making
forecasting difficult. While the third quarter is always a difficult
quarter to forecast due to customer plant summer shutdowns and model
year product changeover, this year has far more uncertainties
associated with it due to the global economic conditions and the
uncertain light vehicle production environment. The Company also
estimates that engineering, research and development expenses,
excluding Muth litigation costs, are currently expected to increase
approximately 15-20% in calendar year 2008 compared with calendar year
2007. Selling, general and administrative expenses are currently
expected to increase approximately 15-20% in calendar year 2008
compared with calendar year 2007.
The Company utilizes the light vehicle production forecasting services
of CSM Worldwide, and CSM's current mid-July forecasts for light
vehicle production for calendar year 2008 are approximately 13.4
million units for North America, 22.0 million for Europe and 15.0
million for Japan and Korea.
The Company is subject to market risk exposures of varying correlations
and volatilities, including foreign exchange rate risk, interest rate
risk and equity price risk. During the quarter ended June 30, 2008,
there were no material changes in the risk factors previously disclosed
in the Company's report on Form 10-K for the fiscal year ended December
31, 2007.
The Company has some assets, liabilities and operations outside the
United States, which currently are not significant. Because the Company
sells its automotive mirrors throughout the world, the Company could be
significantly affected by weak economic conditions in worldwide markets
that could reduce demand for its products.
The Company continues to experience significant pricing pressures from
its automotive customers, which have affected, and which will continue
to affect, its margins to the extent that the Company is unable to
offset the price reductions with productivity or yield improvements,
engineering and purchasing cost reductions, and increases in unit sales
volume, all of which continue to be a challenge in the current
automotive production environment. In addition, financial pressures at
certain automakers are resulting in increased cost reduction efforts by
them, including requests for additional price reductions, decontenting
certain features from vehicles, dual sourcing initiatives and warranty
cost-sharing programs, which could adversely impact the Company's sales
growth, margins, profitability and, as a result, our share price. The
Company also continues to experience some manufacturing yield issues
and pressure for select raw material cost increases. On top of the
foregoing, the Company is planning for a new computer system which has
the potential for implementation issues during 2009.
- 12 -
The automotive industry is cyclical and highly impacted by levels of
economic activity, which in the current environment is causing
increased financial and production stresses evidenced by continuing
pricing pressures, lower domestic production levels (especially in the
pickup truck and SUV segment in North America due to high fuel prices)
, supplier and potential OEM bankruptcies, and commodity material cost
increases. If the Company's automotive customers (including their Tier
1 suppliers) experience work stoppages, strikes, etc. due to their
union contracts or other negotiations, it could disrupt the Company's
shipments to these customers, which could adversely affect the
Company's sales, margins, profitability and, as a result, our share
price.
Automakers have also been experiencing increased volatility and
uncertainty in executing planned new programs which have, in some
cases, resulted in cancellations or delays of new vehicle platforms,
package reconfigurations and inaccurate volume forecasts. This
increased volatility and uncertainty has made it more difficult for the
Company to forecast future sales, effectively manage costs and utilize
capital, engineering, research and development, and human resource
investments.
In light of the financial stresses within the worldwide automotive
industry, certain automakers and tier one mirror customers are
considering the sale of certain business segments and/or may be
considering bankruptcy. Should one or more of the Company's larger
customers (including their tier 1 suppliers) sell their business or
declare bankruptcy, it could adversely affect our sales, margins,
profitability and, as a result, the Company's share price.
The Company does not have any significant off-balance sheet
arrangements or commitments that have not been recorded in its
consolidated financial statements.
The Company was involved in litigation with K. W. Muth and Muth Mirror
Systems LLC relating to exterior mirrors with turn signal indicators.
The turn signal feature in exterior mirrors that was the subject of the
litigation represents approximately one percent of our revenues, and
the litigation did not involve core Gentex electrochromic technology.
The trial in Wisconsin related to this case occurred in July 2007 and
the Court issued its written ruling in December 2007. The Court found
that Muth's U.S. patent No. 6,005,724 was invalid and unenforceable,
and that Gentex's Razor Turn Signal Mirror did not infringe that
patent. The Court also denied all but one of Muth's other motions with
prejudice, including its motion for an injunction, and its claims for
tortious interference with its business relationships. The sole point
of liability for Gentex was that the Court found that Gentex breached
one provision of the alliance agreement it has with Muth, and entered a
judgment against Gentex, on January 24, 2008, granting Muth damages in
the amount of $2,885,000, which was accrued as of December 31, 2007. On
February 15, 2008, the Company entered into a Settlement And Release
And Covenants Not To Sue ("Agreement") with Muth whereby the parties
agreed to settle the Court's judgment against the Company for damages
at a reduced amount of $2,550,000. In addition, under the Agreement the
parties each agreed to: grant the other party a ten-year covenant not
to sue for each Company's core business, to release each other from all
claims that occurred in the past, and not appeal the Court's rulings.
The Agreement was approved by the Bankrupcty Court on February 29,
2008. The adjustment to the original judgment for damages is reflected
in our first quarter financial results as a reduction to engineering,
research and development expenses.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information called for by this item is provided under the caption
"Trends and Developments" under Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations.
ITEM 4. CONTROLS AND PROCEDURES.
The Company's management, with the participation of its principal
executive officer and principal financial officer, has evaluated the
effectiveness, as of June 30, 2008, of the Company's "disclosure
controls and procedures," as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Based upon that evaluation, the Company's
management, including the principal executive officer and principal
financial officer, concluded that the Company's disclosure controls and
procedures, as of June
- 13 -
30, 2008, were adequate and effective such that the information
required to be disclosed by the Company in the reports filed or
submitted by it under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and information
required to be disclosed by the Company in such reports is accumulated
and communicated to the Company's management, including its principal
executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosure.
In the ordinary course of business, the Company may routinely modify,
upgrade, and enhance its internal controls and procedures over
financial reporting. However, there was no change in the Company's
"internal control over financial reporting" [as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act] that occurred
during the quarter ended June 30, 2008, that has materially affected,
or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
SAFE HARBOR STATEMENT:
Statements in this Quarterly Report on Form 10-Q contain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act, as amended, that are based on management's belief,
assumptions, current expectations, estimates and projections about the
global automotive industry, the economy, the impact of stock option
expense, the ability to leverage fixed manufacturing overhead costs,
unit shipment and revenue growth rates, the ability to control E,R&D
and S,G&A expenses, gross margins and the Company itself. Words like
"anticipates," "believes," "confident," "estimates," "expects,"
"forecast," "likely," "plans," "projects," and "should," and variations
of such words and similar expressions identify forward-looking
statements. These statements do not guarantee future performance and
involve certain risks, uncertainties, and assumptions that are
difficult to predict with regard to timing, expense, likelihood and
degree of occurrence. These risks include, without limitation,
employment and general economic conditions, the pace of automotive
production worldwide, the maintenance of the Company's market share,
the ability to achieve purchasing cost reductions, competitive pricing
pressures, currency fluctuations, interest rates, equity prices, the
financial strength of the Company's customers, supply chain
disruptions, potential sale of OEM business segments or suppliers, the
mix of products purchased by customers, the ability to continue to make
product innovations, the success of certain newer products (e.g.
SmartBeam, Z-Nav(R) and Rear Camera Display Mirror), and other risks
identified in the Company's filings with the Securities and Exchange
Commission. Therefore, actual results and outcomes may materially
differ from what is expressed or forecasted. Furthermore, the Company
undertakes no obligation to update, amend, or clarify forward-looking
statements, whether as a result of new information, future events, or
otherwise.
- 14 -
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS.
Information regarding risk factors appears in Management's Discussion and
Analysis of Financial Condition and Results of Operations in Part I - Item 2
of this Form 10-Q and in Part I - Item 1A - Risk Factors of the Company's
report on Form 10-K for the fiscal year ended December 31, 2007. There have
been no material changes from the risk factors previously disclosed in the
Company's report on Form 10-K for the year ended December 31, 2007.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(c) Issuer Purchases of Equity Securities
The following is a summary of share repurchase activity during the
second quarter ended June 30, 2008:
Total Number of Maximum Number
Total Number Average Price Shares Purchased As of Shares That May Yet
Of Shares Paid Per Part of a Publicly Be Purchased Under
Period Purchased Share Announced Plan the Plan
- ---------- ------------ ------------- ------------------- -----------------------
April 2008 -- $ -- -- 7,819,795
May 2008 -- $ -- -- 7,819,795
June 2008 1,203,560 $ 15.82 1,203,560 6,616,235
------------ -------------------
Total 1,203,560 1,203,560
On October 8, 2002, the Company announced a share repurchase plan,
under which it may purchase up to 8,000,000 shares (post-split)
based on a number of factors, including market conditions, the
market price of the Company's common stock, anti-dilutive effect on
earnings, available cash and other factors that the Company deems
appropriate. This share repurchase plan does not have an expiration
date. On July 20, 2005, the Company announced that it had raised the
price at which the Company may repurchase shares under the existing
plan. On May 16, 2006, the Company announced that the Company's
Board of Directors had authorized the repurchase of an additional
8,000,000 shares under the plan. On August 14, 2006, the Company
announced that the Company's Board of Directors had authorized the
repurchase of an additional 8,000,000 shares under the plan. On
February 26, 2008, the Company announced that the Company's Board of
Directors had authorized the repurchase of an additional 4,000,000
shares under the plan. Cumulatively, the Company has repurchased
21,383,765 shares at a cost of $323,303,916 under the plan to date
(see below). 6,616,235 shares remain authorized to be repurchased
under the plan.
Total Number of
Shares Purchased Cost of
Quarter Ended (Post-Split) Shares Purchased
- ------------------- ----------------- ----------------
March 31, 2003 830,000 $ 10,246,810
September 30, 2005 1,496,059 25,214,573
March 31, 2006 2,803,548 47,145,310
June 30, 2006 7,201,081 104,604,414
September 30, 2006 3,968,171 55,614,102
December 31, 2006 1,232,884 19,487,427
March 31, 2007 447,710 7,328,015
March 31, 2008 2,200,752 34,619,490
June 30, 2008 1,203,560 19,043,775
----------------- ----------------
Total 21,383,765 $ 323,303,916
- 15 -
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of the shareholders of the Company was held on
May 15, 2008.
(b) Nominees Arlyn Lanting, Kenneth La Grand and Rande Somma were
elected to serve three-year terms on the Company's Board of
Directors by the following votes.
Arlyn Lanting Kenneth La Grand Rande Somma
------------- ---------------- -----------
For 133,926,861 134,021,710 134,567,187
Against -- -- --
Withheld 1,910,139 1,815,290 1,269,813
The terms of office for incumbent Directors Fred Bauer, Gary Goode,
Fred Sotok, John Mulder, James Wallace and Wallace Tsuha continued
after the meeting.
(c) A proposal to approve the First Amendment to the Gentex Corporation
Second Restricted Stock Plan:
For 87,836,384
Against 30,521,279
Abstain/Broker Non-votes 17,479,337
A proposal to ratify the appointment of Ernst & Young LLP as the
Company's auditors for the fiscal year ended December 31, 2008, was
approved by the following vote:
For 134,592,039
Against 1,152,599
Abstain/Broker Non-votes 92,362
See Part II, Item 4(b), with respect to the election of the
Directors.
(d) N/A
ITEM 6. EXHIBITS
See Exhibit Index on Page 18.
- 16 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENTEX CORPORATION
Date: August 4, 2008 /s/ Fred T. Bauer
-----------------------------------
Fred T. Bauer
Chairman and Chief Executive Officer
Date: August 4, 2008 /s/ Steven A. Dykman
-----------------------------------
Steven A. Dykman
Vice President - Finance,
Principal Financial and
Accounting Officer
- 17 -
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
3(a) Registrant's Restated Articles of Incorporation, adopted on August 20, 2004, were filed as Exhibit
3(a) to Registrant's Report on Form 10-Q dated November 2, 2004, and the same is hereby incorporated
herein by reference.
3(b) Registrant's Bylaws as amended and restated February 27, 2003, were filed as Exhibit 3(b)(1) to
Registrant's Report on Form 10-Q dated May 5, 2003, and the same are hereby incorporated herein by
reference.
4(a) A specimen form of certificate for the Registrant's common stock, par value $.06 per share, was filed
as part of a Registration Statement on Form S-8 (Registration No. 2-74226C) as Exhibit 3(a), as
amended by Amendment No. 3 to such Registration Statement, and the same is hereby incorporated herein
by reference.
4(b) Amended and Restated Shareholder Protection Rights Agreement, dated as of March 29, 2001, including as
Exhibit A the form of Certificate of Adoption of Resolution Establishing Series of Shares of Junior
Participating Preferred Stock of the Company, and as Exhibit B the form of Rights Certificate and of
Election to Exercise, was filed as Exhibit 4(b) to Registrant's Report on Form 10-Q dated April 27,
2001, and the same is hereby incorporated herein by reference.
10(a)(1) A Lease dated August 15, 1981, was filed as part of a Registration Statement on Form S-1 (Registration
Number 2-74226C) as Exhibit 9(a)(1), and the same is hereby incorporated herein by reference.
10(a)(2) First Amendment to Lease dated June 28, 1985, was filed as Exhibit 10(m) to Registrant's Report on
Form 10-K dated March 18, 1986, and the same is hereby incorporated herein by reference.
*10(b)(1) Gentex Corporation Qualified Stock Option Plan (as amended and restated, effective
February 26, 2004) was included in Registrant's Proxy Statement dated April 6, 2004, filed with
the Commission on April 6, 2004, which is hereby incorporated herein by reference.
*10(b)(2) First Amendment to Gentex Corporation Stock Option Plan (as amended and restated
February 26, 2004) was filed as Exhibit 10(b)(2) to Registrant's Report on Form 10-Q dated
August 2, 2005, and the same is hereby incorporated herein by reference.
*10(b)(3) Specimen form of Grant Agreement for the Gentex Corporation Qualified Stock Option Plan (as amended
and restated, effective February 26, 2004) was filed as Exhibit 10(b)(3) to Registrant's Report on
Form 10-Q dated November 1, 2005, and the same is hereby incorporated herein by reference.
*10(b)(4) Gentex Corporation Second Restricted Stock Plan was filed as Exhibit 10(b)(2) to Registrant's Report
on Form 10-Q dated April 27, 2001, and the same is hereby incorporated herein by reference.
*10(b)(5) First Amendment to the Gentex Corporation Second Restricted Stock Plan. 20
*10(b)(6) Specimen form of Grant Agreement for the Gentex Corporation Restricted Stock Plan, was filed
as Exhibit 10(b)(4) to Registrant's Report on Form 10-Q dated November 2, 2004, and the same
is hereby incorporated herein by reference.
- 18 -
EXHIBIT NO. DESCRIPTION PAGE
- ---------- ----------- ----
*10(b)(7) Gentex Corporation 2002 Non-Employee Director Stock Option Plan (adopted March 6, 2002), was filed as
Exhibit 10(b)(4) to Registrant's Report on Form 10-Q dated April 30, 2002, and the same is
incorporated herein by reference.
*10(b)(8) Specimen form of Grant Agreement for the Gentex Corporation 2002 Non-Employee Director
Stock Option Plan, was filed as Exhibit 10(b)(6) to Registrant's Report on Form 10-Q dated November 2,
2004, and the same is hereby incorporated herein by reference.
10(c) The form of Indemnity Agreement between Registrant and each of the Registrant's directors
and certain officers was filed as Exhibit 10 (e) to Registrant's Report on Form 10-Q dated October
31, 2002, and the same is incorporated herein by reference.
31.1 Certificate of the Chief Executive Officer of Gentex Corporation pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). 21
31.2 Certificate of the Chief Financial Officer of Gentex Corporation pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). 22
32 Certificate of the Chief Executive Officer and Chief Financial Officer of Gentex Corporation
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) 23
* Indicates a compensatory plan or arrangement.
- 19 -
EXHIBIT 10(b)(5)
FIRST AMENDMENT TO THE
GENTEX CORPORATION SECOND RESTRICTED STOCK PLAN
This FIRST AMENDMENT TO THE GENTEX CORPORATION SECOND RESTRICTED STOCK
PLAN ("Amendment") is adopted by the Board of Directors of Gentex Corporation, a
Michigan corporation (the "Company"), as of the 21st day of February, 2008, with
reference to the following:
A. The Gentex Corporation Second Restricted Stock Plan (the "Plan") was
originally approved by the Company's Board of Directors on March 2,
2001, and was approved by the Company's shareholders on May 16,
2001.
B. The Board of Directors has elected to amend the Plan to increase the
maximum number of shares that may be subject to Awards to 2,000,000
shares (in the aggregate) and to change the Plan's termination date
from March 2, 2011 to February 21, 2018. This Amendment is subject
to the approval of the shareholders of the Company.
NOW, THEREFORE, subject to the approval of the shareholders of the
Company, the Plan is amended as follows:
1. In Section 3a, the maximum number of shares that may be subject to
Awards under the Plan is hereby increased to 2,000,000 shares in the
aggregate.
2. In Section 7, the existing termination date of March 2, 2011, is
hereby be deemed replaced with February 21, 2018, as the new
termination date.
3. In all other respects, the Plan shall continue in full force and
effect.
4. Capitalized terms not otherwise defined herein shall be defined as
in the Plan.
CERTIFICATION
The foregoing Amendment was duly adopted by the Board of Directors of the
Company, effective February 21, 2008, subject to the approval of the Company's
shareholders.
/s/ Connie Hamblin
-------------------------------
Connie Hamblin, Secretary
Gentex Corporation
- 20 -
EXHIBIT 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER OF GENTEX COPORATION
I, Fred T. Bauer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gentex
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods, presented
in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures [as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal
control over financial reporting [as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)] for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b) designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under our supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on
such evaluation; and
d) disclosed in this quarterly report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the
registrant's internal control over financial reporting;
and;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over financial
reporting.
Date: August 4, 2008 /s/ Fred T. Bauer
-------------------------------
Fred T. Bauer
Chief Executive Officer
- 21 -
EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER OF GENTEX COPORATION
I, Steven A. Dykman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gentex
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods, presented
in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures [as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal
control over financial reporting [as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)] for the registrant and have:
a) designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b) designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under our supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on
such evaluation; and
d) disclosed in this quarterly report any change in the
registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the
registrant's internal control over financial reporting;
and;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over financial
reporting.
Date: August 4, 2008 /s/ Steven A. Dykman
-------------------------------
Steven A. Dykman
Vice President - Finance
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EXHIBIT 32
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002 (18 U.S.C. SECTION 1350)
Each, Fred T. Bauer, Chief Executive Officer of Gentex Corporation, and Steven
A. Dykman, Chief Financial Officer of Gentex Corporation, certify, to the best
of their knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (18 U.S.C. Section 1350), that:
(1) The quarterly report on Form 10-Q for the quarterly period ended
June 30, 2008, which this statement accompanies, fully complies with
the requirements of Section 13 (a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in this quarterly report on Form 10-Q of
the quarterly period ended June 30, 2008, fairly presents, in all
material respects, the financial condition and results of operations
of Gentex Corporation.
Dated: August 4, 2008 GENTEX CORPORATION
By /s/ Fred T. Bauer
-------------------------------
Fred T. Bauer
Its Chief Executive Officer
By /s/ Steven A. Dykman
-------------------------------
Steven A. Dykman
Its Vice President - Finance and
Chief Financial Officer
A signed original of this written statement has been provided to Gentex
Corporation and will be retained by Gentex Corporation and furnished to the
Securities and Exchange Commission or its staff upon request.
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