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 MARCH 31, 2002, 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
---------------- ---------------
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 USERS:
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 April 17, 2002
----- -----------------
Common Stock, $0.06 Par Value 75,534,077
Exhibit Index located at page 10
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2002 AND DECEMBER 31, 2001
ASSETS
March 31, 2002 December 31, 2001
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CURRENT ASSETS
Cash and cash equivalents $140,071,475 $139,784,721
Short-term investments 72,368,560 65,859,016
Accounts receivable, net 35,640,571 31,994,939
Inventories 13,574,196 14,405,350
Prepaid expenses and other 7,325,763 7,814,468
------------ ------------
Total current assets 268,980,565 259,858,494
PLANT AND EQUIPMENT - NET 121,392,609 110,862,310
OTHER ASSETS
Long-term investments 150,374,602 132,771,234
Patents and other assets, net 3,554,635 3,330,760
------------ ------------
Total other assets 153,929,237 136,101,994
------------ ------------
Total assets $544,302,411 $506,822,798
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 11,453,570 $ 9,378,937
Accrued liabilities 22,561,380 11,606,467
------------ ------------
Total current liabilities 34,014,950 20,985,404
DEFERRED INCOME TAXES 6,709,096 6,836,865
SHAREHOLDERS' INVESTMENT
Common stock 4,532,045 4,510,317
Additional paid-in capital 111,553,111 105,327,971
Other shareholders' investment 387,493,209 369,162,241
------------ ------------
Total shareholders' investment 503,578,365 479,000,529
------------ ------------
Total liabilities and
shareholders' investment $544,302,411 $506,822,798
============ ============
See accompanying notes to condensed consolidated financial statements.
-2-
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
2002 2001
----------- -----------
NET SALES $89,048,468 $79,396,806
COST OF GOODS SOLD 53,857,806 47,671,157
----------- -----------
Gross profit 35,190,662 31,725,649
OPERATING EXPENSES:
Research and development 5,585,740 4,900,810
Selling, general
& administrative 5,040,345 4,924,088
----------- -----------
Total operating expenses 10,626,085 9,824,898
----------- -----------
Operating income 24,564,577 21,900,751
OTHER INCOME:
Interest and dividend income 2,760,848 3,654,576
Other, net 754,301 4,633
----------- -----------
Total other income 3,515,149 3,659,209
----------- -----------
Income before provision
for income taxes 28,079,726 25,559,960
PROVISION FOR INCOME TAXES 9,126,500 8,307,000
----------- -----------
NET INCOME $18,953,226 $17,252,960
=========== ===========
Earnings Per Share:
Basic $ 0.25 $ 0.23
Diluted $ 0.25 $ 0.23
Weighted Average Shares:
Basic 75,313,856 74,375,407
Diluted 76,347,821 75,555,508
See accompanying notes to condensed consolidated financial statements.
-3-
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,953,226 $ 17,252,960
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 4,576,614 3,764,949
(Gain) loss on disposal of equipment (27,250) 171,665
Deferred income taxes 73,459 (135,991)
Amortization of deferred compensation 268,967 218,686
Change in operating assets and liabilities:
Accounts receivable, net (3,645,632) (2,066,710)
Inventories 831,154 258,823
Prepaid expenses and other 589,117 (1,537,453)
Accounts payable 2,074,633 3,444,896
Accrued liabilities 10,954,913 9,867,150
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Net cash provided by
operating activities 34,649,201 31,238,975
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments (6,509,544) (8,849,792)
Plant and equipment additions (15,253,685) (17,248,034)
Proceeds from sale of plant and equipment 189,926 1,214,285
(Increase) decrease in long-term investments (18,465,197) 6,594,225
(Increase) decrease in other assets (296,465) (134,793)
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Net cash used for
investing activities (40,334,965) (18,424,109)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 5,972,518 3,496,768
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Net cash provided by
financing activities 5,972,518 3,496,768
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NET INCREASE IN CASH AND
CASH EQUIVALENTS 286,754 16,311,634
CASH AND CASH EQUIVALENTS,
beginning of period 139,784,721 110,195,583
------------- -------------
CASH AND CASH EQUIVALENTS,
end of period $ 140,071,475 $ 126,507,217
============= =============
See accompanying notes to condensed consolidated financial statements.
-4-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) The 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 condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Registrant's 2001 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 March 31, 2002, and December 31,
2001, 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:
March 31, 2002 December 31, 2001
-------------- -----------------
Raw materials $ 7,359,879 $ 8,376,321
Work-in-process 1,584,723 1,649,389
Finished goods 4,629,594 4,379,640
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$13,574,196 $14,405,350
=========== ===========
(4) 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 certain
investments and foreign currency translation adjustments. Comprehensive
income was as follows:
March 31, 2002 March 31, 2001
-------------- --------------
Quarter Ended $18,336,351 $14,763,386
(5) The increase in common stock and additional paid-in capital during the
quarter ended March 31, 2002, is attributable to the issuance of 362,126
shares of the Company's common stock under its stock-based compensation
plans.
(6) 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 March 31,
-----------------------------
Revenue: 2002 2001
---- ----
Automotive Products $83,893,419 $74,119,197
Fire Protection Products 5,155,049 5,277,609
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Total $89,048,468 $79,396,806
=========== ===========
Operating Income:
Automotive Products $23,550,891 $21,006,969
Fire Protection Products 1,013,686 893,782
----------- -----------
Total $24,564,577 $21,900,751
=========== ===========
-5-
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
FIRST QUARTER 2002 VERSUS FIRST QUARTER 2001
Net Sales. Net sales for the first quarter of 2002 increased by
approximately $9,652,000, or 12%, when compared with the first
quarter last year. Net sales of the Company's automotive mirrors
increased by $9,774,000, or 13%, as automatic mirror unit shipments
increased by 11% from approximately 1,850,000 in the first quarter of
2001 to 2,056,000 in the current quarter. This increase primarily
reflected the increased penetration of interior electrochromic Night
Vision Safety(TM) (NVS(R)) Mirrors on 2002 model year mid-sized
vehicle models. Unit shipments to customers in North America
increased by 15.5%, primarily due to increased penetration, as North
American light vehicle production schedules increased by
approximately 3%. Mirror unit shipments to automotive customers
outside North America increased by 6% compared with the first quarter
in 2001, primarily due to increased interior mirror shipments to
European and Asian-Pacific automakers. Net sales of the Company's
fire protection products decreased 2%, primarily due to lower hotel /
motel construction after the September 11, 2001, terrorist attack.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
remained unchanged at 60% in the first quarter of 2002 compared to
the first quarter of 2001. This unchanged percentage primarily
reflected annual customer price reductions offset by the higher sales
level leveraged over the fixed overhead costs.
Operating Expenses. Research and development expenses increased
approximately $685,000, but remained unchanged at 6% 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
$116,000, but remained unchanged at 6% of net sales, when compared
with the first quarter of 2001.
Other Income - Net. Other income decreased by approximately $144,000
when compared with the first quarter of 2001, primarily due to
declining interest rates on investments, partially offset by realized
gains from sales of equity investments.
FINANCIAL CONDITION:
Management considers the Company's working capital and long-term
investments totaling approximately $385,340,000 at March 31, 2002,
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.
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. There were no significant
changes in the market risks reported in the Company's 2001 10-K
report during the quarter ended March 31, 2002.
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.
In addition to price reductions over the life of its long-term
agreements, 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, the Company continues to experience from
time to time some pressure for select raw material cost increases.
-6-
TRENDS AND DEVELOPMENTS, CONTINUED:
The Company currently supplies NVS(R) Mirrors to DaimlerChrysler AG
and General Motors Corporation under long-term agreements. The
long-term supply agreement with DaimlerChrysler AG runs through the
2003 Model Year, while the GM contract is through the 2004 Model Year
for inside mirrors.
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.
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.
-7-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on Page 10.
(b) No reports on Form 8-K were filed during the three months
ended March 31, 2002.
-8-
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: 4/30/02 /s/ Fred T. Bauer
------------------- ---------------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 4/30/02 /s/ Enoch C. Jen
-------------------- ---------------------------------
Enoch C. Jen
Vice President - Finance,
Principal Financial and
Accounting Officer
-9-
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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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(b)(1) Registrant's Bylaws as amended and restated August 18, 2000.
were filed on Exhibit 3(b)(1) to Registrant's Report on Form
10-Q dated October 27, 2000, and the same is 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 (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 August 25, 1997) was filed as Exhibit
10(b)(1) to Registrant's Report on Form 10-Q, and the same 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.
-10-
EXHIBIT NO. DESCRIPTION
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*10(b)(3) Gentex Corporation Non-Employee Director Stock Option Plan (as
amended and restated, effective March 7, 1997), was filed as
Exhibit 10(b)(4) to Registrant's Report on Form 10-K dated March
7, 1997, and the same is incorporated herein by reference.
*10(b)(4) Gentex Corporation 2002 Nonemployee Director Stock Option Plan
(adopted March 6, 2002).
10(e) The form of Indemnity Agreement between Registrant and each of
the Registrant's directors was filed as a part of a Registration
Statement on Form S-2 (Registration No. 33-30353) as Exhibit
10(k) and the same is hereby incorporated herein by reference.
---------------------------------------------------
*Indicates a compensatory plan or arrangement.