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, 2004, 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 NO. 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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ x ] No [ ]
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 Section 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 21, 2004
----- ----------------
Common Stock, $0.06 Par Value 77,454,000
Exhibit Index located at page 13
Page 1 of 18
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2004 December 31, 2003
------------- -----------------
(Unaudited) (Audited)
------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $389,867,107 $322,662,971
Short-term investments 68,027,307 70,943,685
Accounts receivable, net 61,204,703 58,955,823
Inventories 24,409,997 20,938,696
Prepaid expenses and other 11,558,782 11,848,156
------------ ------------
Total current assets 555,067,896 485,349,331
PLANT AND EQUIPMENT - NET 130,289,256 126,806,882
OTHER ASSETS
Long-term investments 127,061,141 145,615,934
Patents and other assets, net 5,236,949 4,757,619
------------ ------------
Total other assets 132,298,090 150,373,553
------------ ------------
Total assets $817,655,242 $762,529,766
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 21,123,578 $ 18,259,111
Accrued liabilities 35,664,492 32,221,369
------------ ------------
Total current liabilities 56,788,070 50,480,480
DEFERRED INCOME TAXES 18,871,276 18,405,955
SHAREHOLDERS' INVESTMENT
Common stock 4,647,240 4,622,449
Additional paid-in capital 164,995,855 152,874,325
Retained earnings 564,031,993 528,358,825
Other shareholders' investment 8,320,808 7,787,732
------------ ------------
Total shareholders' investment 741,995,896 693,643,331
------------ ------------
Total liabilities and
shareholders' investment $817,655,242 $762,529,766
============ ============
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
--------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
NET SALES $129,646,277 $116,917,332 $258,973,825 $232,225,896
COST OF GOODS SOLD 75,190,805 68,635,744 149,634,081 135,828,313
------------ ------------ ------------ ------------
Gross profit 54,455,472 48,281,588 109,339,744 96,397,583
OPERATING EXPENSES:
Engineering, research and development 7,546,085 6,310,886 14,989,373 12,518,622
Selling, general
& administrative 6,880,091 6,090,320 13,625,212 11,616,996
------------ ------------ ------------ ------------
Total operating expenses 14,426,176 12,401,206 28,614,585 24,135,618
------------ ------------ ------------ ------------
Income from operations 40,029,296 35,880,382 80,725,159 72,261,965
OTHER INCOME:
Interest and dividend income 2,090,881 2,758,764 4,243,840 5,423,975
Other, net 819,615 13,193 2,141,268 (651,063)
------------ ------------ ------------ ------------
Total other income 2,910,496 2,771,957 6,385,108 4,772,912
------------ ------------ ------------ ------------
Income before provision
for income taxes 42,939,792 38,652,339 87,110,267 77,034,877
PROVISION FOR INCOME TAXES 13,955,000 12,562,000 28,310,000 25,036,000
------------ ------------ ------------ ------------
NET INCOME $ 28,984,792 $ 26,090,339 $ 58,800,267 $ 51,998,877
============ ============ ============ ============
EARNINGS PER SHARE:
Basic $ 0.38 $ 0.34 $ 0.76 $ 0.68
Diluted $ 0.37 $ 0.34 $ 0.75 $ 0.68
Cash Dividends Declared per Share $ 0.15 $ 0.00 $ 0.30 $ 0.00
See accompanying notes to condensed consolidated financial statements.
-3-
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
----------------------------------
2004 2003
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 58,800,267 $ 51,998,877
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 11,038,972 10,586,146
(Gain) loss on disposal of asset 976 75,626
(Gain) loss on sale of investments (1,086,065) 1,942,315
Deferred income taxes 361,486 (105,539)
Amortization of deferred compensation 751,363 554,688
Change in operating assets and liabilities:
Accounts receivable, net (2,248,880) (7,850,343)
Inventories (3,471,301) (976,232)
Prepaid expenses and other (62,744) (1,564,550)
Accounts payable 2,864,467 3,468,740
Accrued liabilities, excluding dividends declared 3,458,824 1,456,755
Tax benefit of stock plan transactions 874,413 3,591,854
------------ -------------
Net cash provided by
operating activities 71,281,778 63,178,337
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant and equipment additions (14,174,704) (11,044,112)
Proceeds from sale of plant and equipment 4,500 72,000
(Increase) decrease in investments 23,859,959 (66,876,106)
Increase in other assets (726,324) (64,199)
------------ -------------
Net cash provided by (used for)
investing activities 8,963,431 (77,912,417)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock from
stock plan transactions 10,101,728 7,036,521
Cash dividend paid (23,142,801) 0
Repurchases of common stock 0 (10,246,810)
------------ -------------
Net cash provided by (used for)
financing activities (13,041,073) (3,210,289)
------------ -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 67,204,136 (17,944,369)
CASH AND CASH EQUIVALENTS,
beginning of period 322,662,971 168,834,111
------------ -------------
CASH AND CASH EQUIVALENTS,
end of period $389,867,107 $ 150,889,742
============ =============
See accompanying notes to condensed consolidated financial statements.
-4-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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 2003 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, 2004, and the results
of operations and cash flows for the interim periods presented.
(3) Inventories consisted of the following at the respective balance sheet
dates:
June 30, 2004 December 31, 2003
------------- -----------------
Raw materials $ 13,573,162 $ 11,041,622
Work-in-process 2,734,900 2,401,500
Finished goods 8,101,935 7,495,574
------------ -------------
$ 24,409,997 $ 20,938,696
============ ============
(4) 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,
------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Numerators:
Numerator for both basic and
diluted EPS, net income $28,984,792 $26,090,339 $58,800,267 $51,998,877
Denominators:
Denominator for basic EPS,
weighted-average shares
outstanding 77,061,942 75,992,364 76,960,647 75,974,343
Potentially dilutive shares
resulting from stock plans 1,353,987 886,124 1,471,401 839,651
----------- ----------- ----------- -----------
Denominator for diluted EPS 78,415,929 76,878,488 78,432,048 76,813,994
=========== =========== ========== ==========
Shares related to stock plans not
included in diluted average common
shares outstanding because their effect
would be antidilutive 687,396 705,855 520,658 1,055,485
(5) At June 30, 2004, the Company had two stock option plans and an employee
stock purchase plan. The Company accounts for these plans under the
recognition and measurement principles of APB Opinion No. 25 (Accounting
for Stock Issued to Employees) and related interpretations. No stock-based
employee compensation cost is reflected in net income, since options
granted under these plans have an exercise price equal to the market value
of the underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation.
-5-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
Quarter Ended June 30, Six Months Ended June 30,
------------------------------ -----------------------------
2004 2003 2004 2003
----------- ------------- ------------- ------------
Net income, as reported $28,984,792 $ 26,090,339 $ 58,800,267 $ 51,998,877
Deduct: Total stock-based employee
compensation expense determined
under fair value-based method of all
awards, net of tax effects (3,651,668) (2,335,352) (6,658,147) (4,466,666)
----------- ------------- ------------- ------------
Pro forma net income $25,333,124 $ 23,754,987 $ 52,142,120 $ 47,532,211
=========== ============= ============= ============
Earnings per share:
Basic - as reported $ .38 $ .34 $ .76 $ .68
Basic - pro forma .33 .31 .68 .63
Diluted - as reported .37 .34 .75 .68
Diluted - pro forma .32 .31 .67 .62
(6) 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, 2004 June 30, 2003
------------- -------------
Quarter Ended $28,354,898 $36,795,378
Six Months Ended $59,752,161 $61,625,563
(7) The increase in common stock during the quarter and six months ended June
30, 2004, was attributable to the issuance of 205,079 and 413,184 shares,
respectively, of the Company's common stock under its stock-based
compensation plans. The Company has also recorded a $0.15 per share cash
dividend in each quarter of 2004. The second quarter dividend of
approximately $11,618,000, was declared on May 26, 2004, and is payable on
July 22, 2004.
(8) 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:
Quarter Ended June 30, Six Months Ended June 30,
--------------------------------- --------------------------------
2004 2003 2004 2003
------------- ------------- ------------- ------------
Revenue:
Automotive Products $ 123,833,183 $ 110,894,144 $ 247,564,876 $221,071,003
Fire Protection Products 5,813,094 6,023,188 11,408,949 11,154,893
------------- ------------- ------------- ------------
Total $ 129,646,277 $ 116,917,332 $ 258,973,825 $232,225,896
============= ============= ============= ============
Operating Income:
Automotive Products $ 38,903,960 $ 34,646,655 $ 78,491,452 $ 70,133,741
Fire Protection Products 1,125,336 1,233,727 2,233,707 2,128,224
------------- ------------- ------------- ------------
Total $ 40,029,296 $ 35,880,382 $ 80,725,159 $ 72,261,965
============= ============= ============= ============
-6-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(9) On March 31, 2004, the Financial Accounting Standards Board (FASB) issued
its Exposure Draft, "Share-Based Payment," which is a proposed amendment to
FASB Statement No. 123, "Accounting for Stock-Based Compensation." The
Exposure Draft would require all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. FASB expects that a final standard
would be effective for public companies for fiscal years beginning after
December 15, 2004. The Company does not intend to adopt a fair-value based
method of accounting for stock-based employee compensation until a final
standard is issued by the FASB that requires this accounting. Proforma
disclosures of quarterly earnings are included in Note 5 of this quarterly
statement.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." This standard clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
and addresses consolidation by business enterprises of variable interest
entities. Interpretation No. 46 requires existing unconsolidated variable
interest entities to be consolidated by their primary beneficiaries if the
entities do not effectively disperse risk among the parties involved.
Interpretation No. 46 also enhances the disclosure requirements related to
variable interest entities. This interpretation was effective for any
variable interest entered into by the Company as of the end of the first
quarter of 2004. The adoption of Interpretation No. 46 did not have any
significant effect on the Company's consolidated financial statements.
-7-
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
SECOND QUARTER 2004 VERSUS SECOND QUARTER 2003
Net Sales. Net sales for the second quarter of 2004 increased by
approximately $12,729,000, or 11%, when compared with the second
quarter last year. Net sales of the Company's automotive auto-dimming
mirrors increased by approximately $12,939,000, or 12%, as
auto-dimming mirror unit shipments increased by 18% from
approximately 2,534,000 in the second quarter of 2003 to 3,001,000 in
the current quarter. This increase reflected the increased
penetration of interior base and exterior auto-dimming mirrors on
2004 model year vehicles, during the second quarter of 2004. Unit
shipments to customers in North America for the current quarter
increased by 4% compared with the second quarter of the prior year,
primarily due to increased penetration among Asian transplants.
Mirror unit shipments for the current quarter to automotive customers
outside North America increased by 37% compared with the second
quarter in 2003, primarily due to increased interior and exterior
mirror shipments to European and Asian-Pacific automakers. Net sales
of the Company's fire protection products decreased 3% for the
current quarter, primarily due to lower sales of certain of the
Company's signaling products.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
decreased slightly from 58.7% in the second quarter of 2003 to 58.0%
in the second quarter of 2004. This slight percentage decrease
primarily reflected the higher sales level leveraged over the fixed
overhead costs and product mix, partially offset by annual customer
price reductions. Each factor is estimated to have impacted cost of
goods sold as a percentage of net sales by approximately 1-2%.
Operating Expenses. Research and development expenses for the quarter
increased approximately $1,235,000, from 5.4% to 5.8% of net sales,
when compared with the same quarter last year, primarily reflecting
additional staffing, engineering and testing for new product
development, including mirrors with additional electronic features.
Selling, general and administrative expenses increased approximately
$790,000, for the quarter, but remained at approximately 5% of net
sales, when compared with the second quarter of 2003. This increased
expense primarily reflected the continued expansion of the Company's
overseas sales and engineering offices, as well as the stronger euro
exchange rate.
Total Other Income. Total other income for the quarter increased by
approximately $139,000 when compared with the second quarter of 2003,
primarily due to realized gains on the sale of equity investments in
the current quarter mostly offset by reduced interest income due to
lower interest rates.
SIX MONTHS ENDED JUNE 30, 2004, VERSUS SIX MONTHS ENDED JUNE 30, 2003
Net Sales. Net sales for the six months ended June 30, 2004,
increased by approximately $26,748,000, or 12%, when compared with
the same period last year. Net sales of the Company's automotive
auto-dimming mirrors increased by approximately $26,494,000, or 12%,
as auto-dimming mirror unit shipments increased by 18% from
approximately 5,069,000 in the first 6 months of 2003 to 5,983,000 in
the first six months of 2004. This increase reflected the increased
penetration on 2004 model year vehicles for interior and exterior
electrochromic auto-dimming Mirrors. Unit shipments to customers in
North America increased by 7% for the first six months of 2004,
primarily due to increased penetration among Asian transplants.
Mirror unit shipments to automotive customers outside North America
increased by 31% for the first six months of 2004 compared with the
first six months in 2003, primarily due to increased interior and
exterior mirror sub-assembly shipments to European and Asian-Pacific
automakers. Net sales of the Company's fire protection products
increased 2% for the first six months of 2004, primarily due to
higher sales of certain of the Company's smoke detector and signaling
products.
Cost of Goods Sold. As a percentage of net sales, cost of good sold
decreased from 58.5% to 57.8% in the first six months of 2004, when
compared to the same six-month period in the prior year. This slight
percentage decrease primarily reflected the higher sales level
leveraged over the fixed overhead costs and product mix, partially
offset
-8-
by annual customer price reductions. Each factor is estimated to
have impacted cost of goods sold as a percentage of net sales by
approximately 1-2%.
Operating Expenses. For six months ended June 30, 2004, engineering,
research and development expenses increased approximately $2,471,000,
from 5.4% to 5.8% of net sales, when compared with the same period
last year, primarily reflecting additional staffing for new product
development, including mirrors with additional electronic features.
Selling, general and administrative expenses increased approximately
$2,008,000 for the first six months of 2004, and increased from 5.0%
to 5.3% of net sales when compared to the first six months of 2003.
This increased expense primarily reflected the continued expansion of
the Company's overseas sales and engineering office as well as the
stronger euro exchange rate.
Other Income - Net. Other income for the six months ended June 30,
2004, increased by approximately $1,612,000 when compared with the
first six months of 2003, primarily due to realized gains on the sale
of equity investments in the current year period compared to realized
losses on the sale of equity investments in the prior year period,
partially offset by reduced interest income due to lower interest
rates.
FINANCIAL CONDITION:
Cash flow from operating activities for the six months ended June 30,
2004, increased $8,104,000 to $71,282,000, compared to $63,178,000,
for the same period last year, primarily due to increased net income.
Capital expenditures for the six months ended June 30, 2004, were
$14,175,000, compared to $11,044,000 for the same period last year.
The Company now expects that the construction of its fourth
automotive manufacturing facility and a new corporate facility will
be completed in early 2006. The completion date has been pushed back
due to improved capacity utilization. The Company plans to invest
approximately $40-45 million for the new facilities during 2004-2006,
which will be funded from its cash and equivalents on hand.
Cash and cash equivalents as of June 30, 2004, increased
approximately $67,204,000 compared to December 31, 2003. The increase
was primarily due to cash flow from operations.
Management considers the Company's working capital and long-term
investments totaling approximately $625,341,000 as of June 30, 2004,
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.
On October 8, 2002, the Company announced a share repurchase plan,
under which the Company may purchase up to 4,000,000 shares 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.
During the quarter ended March 31, 2003, the Company repurchased
415,000 shares at a cost of approximately $10,247,000. No shares have
been repurchased subsequently by the Company.
TRENDS AND DEVELOPMENTS:
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, 2004, there were no significant changes in the market risks
reported in the Company's 2003 Form 10-K report.
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, it could
be significantly affected by weak economic conditions in worldwide
markets that could reduce demand for its products.
The Company continues to experience 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 improvements,
engineering and purchasing cost reductions, and increases in unit
sales volume. In addition, profit pressures at certain automakers are
resulting in increased cost reduction efforts by them, including
requests for additional price reductions, decontenting certain
features from vehicles, and warranty cost-
-9-
sharing programs, which could adversely impact the Company's sales
growth and margins. The Company also continues to experience from
time to time some pressure for select raw material cost increases.
Automakers have 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 and effectively utilize capital,
engineering, research and development, and human resource
investments.
The Company does not have any significant off-balance sheet
arrangements or commitments that have not been recorded in its
consolidated financial statements.
On October 1, 2002, Magna International acquired Donnelly
Corporation, the Company's major competitor for sales of
automatic-dimming rearview mirrors to domestic and foreign vehicle
manufacturers and their mirror suppliers. The Company sells certain
automatic-dimming rearview mirror sub-assemblies to Magna Donnelly.
To date, the Company is not aware of any significant impact of
Magna's acquisition of Donnelly upon the Company; however, any
ultimate significant impact has not yet been determined.
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 Results of Operations and Financial Condition.
ITEM 4. CONTROLS AND PROCEDURES
As of June 30, 2004, an evaluation was performed under the
supervision and with the participation of the Company's management,
including the CEO and CFO, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures [(as
defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)]. Based on
that evaluation, the Company's management, including the CEO and CFO,
concluded that the Company's disclosure controls and procedures were
adequate and effective as of June 30, 2004, to ensure that material
information relating to the Company would be made known to them by
others within the Company, particularly during the period in which
this Form 10-Q was being prepared. During the period covered by this
quarterly report, there have been no changes in the Company's
internal controls over financial reporting that have materially
affected or are likely to materially affect the Company's internal
controls over financial reporting.
Statements in this Quarterly Report on Form 10-Q which express
"belief", "anticipation" or "expectation" as well as other statements
which are not historical fact, are forward-looking statements and
involve risks and uncertainties described under the headings
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Trends and Developments" that could cause
actual results to differ materially from those projected. All
forward-looking statements in this Report are based on information
available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements.
-10-
PART II. OTHER INFORMATION
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 13, 2004.
(b) The following nominees were elected to serve three-year
terms on the Company's Board of Directors by the
following votes.
Frederick Sotok John Mulder Wallace Tshuha
--------------- ----------- --------------
For 67,530,668 67,639,277 69,798,115
Against - - -
Withheld 3,078,734 2,970,125 811,288
Broker Non-Votes - - -
The terms of office for incumbent Directors Fred Bauer,
Gary Goode, Kenneth La Grand, Arlyn Lanting, Ted
Thompson and Leo Weber, continued after the meeting.
(c) A proposal to approve the Gentex Corporation Qualified
Stock Option Plan was approved by the following vote:
For 56,588,089
Against 3,741,411
Abstain / Broker Non-Votes 261,381
A proposal to amend the Articles of Incorporation
(to increase the authorized shares of common
stock) was approved by the following vote:
For 66,165,123
Against 4,196,101
Abstain / Broker Non-Votes 248,177
A proposal to ratify the appointment of Ernst &
Young LLP as the Company's auditors for the
fiscal year ended December 31, 2004, was approved
by the following vote:
For 67,494,407
Against 2,928,244
Abstain / Broker Non-Votes 186,750
See Part II, Item 4 (b), with respect to the election of
directors.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 13.
(b) During the three months ended June 30, 2004, one report
on Form 8-K was filed on April 20, 2004, to disclose the
Company's financial results for the first quarter ended
March 31, 2004.
-11-
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 3, 2004 /s/ Fred T. Bauer
------------------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: August 3, 2004 /s/ Enoch C. Jen
------------------------------------
Enoch C. Jen
Vice President - Finance,
Principal Financial and
Accounting Officer
-12-
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- --------- ------------------------------ -----
3(a)(1) Registrant's Articles of Incorporation were filed in 1981 as Exhibit 2(a) to a Registration
Statement on Form S-18 (Registration No. 2-74226C), an Amendment to those Articles was filed as
Exhibit 3 to Registrant's Report on Form 10-Q in August of 1985, an additional Amendment to
those Articles was filed as Exhibit 3(a)(1) to Registrant's Report on Form 10-Q in August of
1987, an additional Amendment to those Articles was filed as Exhibit 3(a)(2) to Registrant's
Report on Form 10-K dated March 10, 1992, an Amendment to Articles of Incorporation, adopted on
May 9, 1996, was filed as Exhibit 3(a)(2) to Registrant's Report on Form 10-Q dated July 31,
1996, and an Amendment to Articles of Incorporation, adopted on May 21, 1998, was filed as
Exhibit 3(a)(2) to Registrant's Report on Form 10-Q dated July 30, 1998, all of which are
hereby incorporated herein be reference.
3(a)(2) Amendment to Articles of Incorporation, adopted by the shareholders on May 13, 2004. 15
3(b)(1) 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-18 (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-18
(Registration Number 2-74226C) as Exhibit 9(a)(1), and the same is hereby incorporated
herein by reference.
10(a)(2) A 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) 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.
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EXHIBIT NO. DESCRIPTION PAGE
- ---------- ------------------------------------ ----
*10(b)(3) 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(e) 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). 16
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). 17
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) 18
*Indicates a compensatory plan or arrangement.
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EXHIBIT 3(a)(2)
GENTEX CORPORATION ARTICLES OF INCORPORATION
ARTICLE III
The total number of shares of all classes of stock which the Corporation
shall have the authority to issue is 205,000,000 shares, consisting of
200,000,000 shares of Common Stock, par value $.06 per share and 5,000,000
shares of Preferred Stock, no par value.
The authorized shares of Common Stock of the par value of $.06 per share
are all of one class with equal voting power, and each such share shall be equal
to every other such share.
The shares of Preferred Stock may be divided into and issued in one or
more series. The Board of Directors is hereby authorized to cause the Preferred
Stock to be issued from time to time in one or more series with such
designations and such relative voting, dividend, liquidation and other rights,
preferences and limitations as shall be stated and expressed in the resolution
providing for the issue of such Preferred Stock adopted by the Board of
Directors. The Board of Directors by vote of a majority of the whole Board is
expressly authorized to adopt such resolution or resolutions and issue such
stock from time to time as it may deem desirable.
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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)] 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) 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 period covered by this
quarterly report based on such evaluation; and
c) 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 3, 2004
/s/ Fred T. Bauer
-------------------------
Fred T. Bauer
Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER OF GENTEX COPORATION
I, Enoch C. Jen, 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)] 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) 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 period covered by this
quarterly report based on such evaluation; and
c) 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 3, 2004
/s/ Enoch C. Jen
------------------------
Enoch C. Jen
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 Enoch C.
Jen, 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, 2004, 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, 2004, fairly presents, in all
material respects, the financial condition and results of operations
of Gentex Corporation.
Dated: August 3, 2004 GENTEX CORPORATION
By /s/ Fred T. Bauer
--------------------------
Fred T. Bauer
Its Chief Executive Officer
By /s/ Enoch C. Jen
--------------------------
Enoch C. Jen
Its Vice President-Finance/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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