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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, 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 July 18, 2002
----- ----------------
Common Stock, $0.06 Par Value 75,818,143
Exhibit Index located at page 10
Page 1 of 10
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
At June 30, 2002 and December 31, 2001
ASSETS
June 30, 2002 December 31, 2001
--------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $157,517,861 $139,784,721
Short-term investments 53,365,644 65,859,016
Accounts receivable, net 39,916,700 31,994,939
Inventories 15,049,237 14,405,350
Prepaid expenses and other 6,281,425 7,814,468
--------------- -----------------
Total current assets 272,130,867 259,858,494
PLANT AND EQUIPMENT - NET 121,754,886 110,862,310
OTHER ASSETS
Long-term investments 158,830,300 132,771,234
Patents and other assets, net 3,881,428 3,330,760
--------------- -----------------
Total other assets 162,711,728 136,101,994
--------------- -----------------
Total assets $556,597,481 $506,822,798
=============== =================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $13,862,227 $9,378,937
Accrued liabilities 14,749,249 11,606,467
--------------- -----------------
Total current liabilities 28,611,476 20,985,404
DEFERRED INCOME TAXES 5,161,994 6,836,865
SHAREHOLDERS' INVESTMENT
Common stock 4,549,089 4,510,317
Additional paid-in capital 116,202,636 105,327,971
Other shareholders' investment 402,072,286 369,162,241
--------------- -----------------
Total shareholders' investment 522,824,011 479,000,529
--------------- -----------------
Total liabilities and
shareholders' investment $556,597,481 $506,822,798
=============== =================
See accompanying notes to condensed consolidated financial statements.
-2-
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
------------------------------ -------------------------------
2002 2001 2002 2001
---- ---- ---- ----
NET SALES $97,346,344 $77,074,568 $186,394,812 $156,471,374
COST OF GOODS SOLD 58,280,926 46,710,921 112,138,732 94,382,078
------------------------------ -------------------------------
Gross profit 39,065,418 30,363,647 74,256,080 62,089,296
OPERATING EXPENSES:
Research and development 5,623,863 5,325,034 11,209,603 10,225,844
Selling, general
& administrative 5,243,953 4,780,327 10,284,298 9,704,414
------------------------------ -------------------------------
Total operating expenses 10,867,816 10,105,361 21,493,901 19,930,258
------------------------------ -------------------------------
Income from operations 28,197,602 20,258,286 52,762,179 42,159,038
OTHER INCOME:
Interest and dividend income 2,915,457 3,253,200 5,676,305 6,907,776
Other, net 460,708 483,338 1,215,009 487,970
------------------------------ -------------------------------
Total other income 3,376,165 3,736,538 6,891,314 7,395,746
------------------------------ -------------------------------
Income before provision
for income taxes 31,573,767 23,994,824 59,653,493 49,554,784
PROVISION FOR INCOME TAXES 10,263,000 7,799,000 19,389,500 16,106,000
------------------------------ -------------------------------
NET INCOME $21,310,767 $16,195,824 $40,263,993 $33,448,784
============================== ===============================
Earnings Per Share:
Basic $0.28 $0.22 $0.53 $0.45
Diluted $0.28 $0.21 $0.53 $0.44
Weighted Average Shares:
Basic 75,685,015 74,677,817 75,494,641 74,521,573
Diluted 76,619,056 75,865,525 76,482,761 75,701,341
See accompanying notes to condensed consolidated financial statements.
-3-
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002 and 2001
2002 2001
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $40,263,993 $33,448,784
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 9,239,381 7,599,259
(Gain) loss on disposal of equipment 11,180 155,797
Deferred income taxes 2,008,634 239,088
Amortization of deferred compensation 581,818 454,873
Change in operating assets and liabilities:
Accounts receivable, net (7,921,761) 4,971,858
Inventories (643,887) 527,177
Prepaid expenses and other 1,879,434 (2,525,072)
Accounts payable 4,483,290 223,400
Accrued liabilities 3,142,782 1,134,712
------------- ------------
Net cash provided by
operating activities 53,044,864 46,229,876
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments 12,493,372 (6,893,480)
Plant and equipment additions (20,235,959) (29,069,936)
Proceeds from sale of plant and equipment 189,926 1,241,285
(Increase) decrease in long-term investments (37,573,053) 4,977,167
(Increase) decrease in other assets (597,096) (521,539)
------------- ------------
Net cash used for
investing activities (45,722,810) (30,266,503)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and tax benefit of
stock plan transactions 10,411,086 7,244,055
------------- ------------
Net cash provided by
financing activities 10,411,086 7,244,055
------------- ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 17,733,140 23,207,428
CASH AND CASH EQUIVALENTS,
beginning of period 139,784,721 110,195,583
------------- ------------
CASH AND CASH EQUIVALENTS,
end of period $157,517,861 $133,403,011
============= ============
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 June 30, 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:
June 30, 2002 December 31, 2001
------------- -----------------
Raw materials $ 7,501,534 $ 8,376,321
Work-in-process 1,869,728 1,649,389
Finished goods 5,677,975 4,379,640
------------ ------------
$ 15,049,237 $ 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:
June 30, 2002 June 30, 2001
------------- -------------
Quarter Ended $14,494,227 $18,237,099
Six Months Ended 32,830,578 33,000,485
(5) The increase in common stock and additional paid-in capital during the
quarter and six months ended June 30, 2002, is attributable to the issuance
of 284,066 and 646,192 shares, respectively, 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 June 30, Six Months Ended June 30,
-------------------------------- -------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Revenue:
Automotive Products $91,566,416 $71,413,728 $175,459,835 $145,532,925
Fire Protection Products 5,779,928 5,660,840 10,934,977 10,938,449
----------- ----------- ------------ ------------
Total $97,346,344 $77,074,568 $186,394,812 $156,471,374
=========== =========== ============ ============
Operating Income:
Automotive Products $27,141,179 $18,936,770 $ 50,692,070 $ 39,943,740
Fire Protection Products 1,056,423 1,321,516 2,070,109 2,215,298
----------- ----------- ------------ ------------
Total $28,197,602 $20,258,286 $ 52,762,179 $ 42,159,038
=========== =========== ============ ============
-5-
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
SECOND QUARTER 2002 VERSUS SECOND QUARTER 2001
Net Sales. Net sales for the second quarter of 2002 increased by
approximately $20,272,000, or 26%, when compared with the second
quarter last year. Net sales of the Company's automotive mirrors
increased by $20,153,000, or 28%, as automatic-dimming mirror unit
shipments increased by 29% from approximately 1,753,000 in the second
quarter of 2001 to 2,265,000 in the current quarter. This increase
reflected the increased penetration of interior and exterior
electrochromic Night Vision Safety(TM) (NVS(R)) Mirrors on 2002
mid-sized and some early 2003 model year vehicles. Shipments to
customers in North America increased by 25%, primarily due to
increased penetration and higher North American automotive production
levels. Mirror unit shipments to automotive customers outside North
America increased by 35% compared with the second quarter in 2001,
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%, primarily due to
higher sales of certain of the Company's signaling products.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
decreased from 61% in the second quarter of 2001 to 60% in the second
quarter of 2002. This decreased percentage primarily reflected the
higher sales level leveraged over the fixed overhead costs.
Operating Expenses. Research and development expenses increased
approximately $299,000, but decreased from 7% to 6% of net sales,
when compared with the same quarter last year, primarily reflecting
additional staffing for new product development, including mirrors
with additional electronic features. Selling, general and
administrative expenses increased approximately $464,000, but
decreased from 6% to 5% of net sales, when compared with the second
quarter of 2001. This increased expense primarily reflected the
continued expansion of the Company's overseas sales and engineering
offices, including the opening of an office in Korea.
Other Income - Net. Other income decreased by approximately $360,000
when compared with the second quarter of 2001, primarily due to
declining interest rates on investments.
SIX MONTHS ENDED JUNE 30, 2002, VERSUS SIX MONTHS ENDED JUNE 30, 2001
Net Sales. Net sales for the six months ended June 30, 2002,
increased by approximately $29,923,000, or 19%, when compared with
the same period last year. Automatic-dimming mirror unit shipments
increased by 20% from approximately 3,603,000 in the first six months
of 2001 to 4,321,000 in the first six months of 2002. This increase
reflected the increased penetration on 2002 mid-sized and some early
2003 model year vehicles for interior electrochromic Night Vision
Safety(TM) (NVS(R)) Mirrors. Shipments to customers in North America
increased by 20%, primarily due to increased penetration and higher
North American automotive production levels. Mirror unit shipments to
automotive customers outside North America increased by 19% compared
with the first six months in 2001, 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 were flat.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
remained unchanged at 60% in the first six months of 2002. This
unchanged percentage primarily reflected customer price reductions,
offset by the higher sales level leveraged over the fixed overhead
costs.
Operating Expenses. For the six months ended June 30, 2002, research
and development expenses increased approximately $984,000, but
decreased from 7% to 6% 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 $580,000, but remained at 6% of net sales, when
compared with the first six months of 2001. This increased expense
primarily reflected the continued expansion of the Company's overseas
sales and engineering offices to support future growth opportunities.
-6-
SIX MONTHS ENDED JUNE 30, 2002, VERSUS SIX MONTHS ENDED JUNE 30, 2001
(CONT.)
Other Income - Net. Other income for the six months ended June 30,
2002, decreased by approximately $504,000 when compared with the
first six months 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 $402,350,000 at June 30, 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 current year and 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 June 30, 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.
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 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company
was held on May 9, 2002, at which:
(a) The following nominees were elected to serve
three-year terms on the Company's Board of
Directors by the following votes.
Arlyn Lanting Kenneth La Grand Ted Thompson
------------- ---------------- ------------
For 65,393,429 54,546,803 64,486,896
Against - - -
Withheld 386,738 11,233,364 1,293,271
Broker Non-Votes - - -
The terms of office for incumbent Directors
Fred Bauer, Mickey Fouts, John Mulder, Fred
Sotok and Leo Weber, continued after the
meeting.
(b) A proposal to approve the Gentex 2002
Non-Employee Director Stock Option Plan was
approved by the following vote:
For 62,728,850
Against 4,077,960
Abstain 426,521
Broker Non-Votes -
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 June 30, 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: 7/30/02 /s/ Fred T. Bauer
---------------------- -------------------------------
Fred T. Bauer
Chairman and Chief
Executive Officer
Date: 7/30/02 /s/ Enoch C. Jen
----------------------- -------------------------------
Enoch C. Jen
Vice President - Finance,
Principal Financial and
Accounting Officer
-9-
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(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(b)(3) Gentex Corporation 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 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.
-10-