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 SEPTEMBER 30, 2006, 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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (check
one):
Large Accelerated Filer x Accelerated Filer Non-accelerated Filer
--- --- ---
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
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 October 20, 2006
----- -------------------
Common Stock, $0.06 Par Value 143,238,050
Exhibit Index located at page 17
Page 1 of 21
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GENTEX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September December
30, 2006 31, 2005
------------ ------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $251,224,408 $439,681,693
Short-term investments 81,842,157 67,331,928
Accounts receivable, net 71,098,343 60,924,437
Inventories 44,353,691 39,836,822
Prepaid expenses and other 11,463,484 11,212,647
------------ ------------
Total current assets 459,982,083 618,987,527
PLANT AND EQUIPMENT - NET 183,664,510 164,030,341
OTHER ASSETS
Long-term investments 135,523,153 132,524,966
Patents and other assets, net 7,551,255 7,102,968
------------ ------------
Total other assets 143,074,408 139,627,934
------------ ------------
Total assets $786,721,001 $922,645,802
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 32,575,153 $ 23,607,927
Accrued liabilities 37,873,457 34,480,332
------------ ------------
Total current liabilities 70,448,610 58,088,259
DEFERRED INCOME TAXES 22,888,034 22,962,168
SHAREHOLDERS' INVESTMENT
Common stock 8,594,283 9,362,639
Additional paid-in capital 195,700,888 194,476,306
Retained earnings 472,630,956 623,301,775
Other shareholders' investment 16,458,230 14,454,655
------------ ------------
Total shareholders' investment 693,384,357 841,595,375
------------ ------------
Total liabilities and
shareholders' investment $786,721,001 $922,645,802
============ ============
See accompanying notes to condensed consolidated financial statements.
-2-
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
NET SALES $141,265,647 $138,114,897 $422,677,471 $398,141,062
COST OF GOODS SOLD 93,387,125 86,918,447 275,669,763 249,326,226
------------ ------------ ------------ ------------
Gross profit 47,878,522 51,196,450 147,007,708 148,814,836
OPERATING EXPENSES:
Engineering, research and development 10,536,334 9,140,231 30,658,131 25,916,046
Selling, general & administrative 7,737,384 6,762,837 23,041,411 20,613,966
------------ ------------ ------------ ------------
Total operating expenses 18,273,718 15,903,068 53,699,542 46,530,012
------------ ------------ ------------ ------------
Income from operations 29,604,804 35,293,382 93,308,166 102,284,824
OTHER INCOME (EXPENSE)
Interest and dividend income 4,794,928 4,456,050 15,181,565 11,578,709
Other, net 1,308,341 1,033,387 5,588,374 2,794,306
------------ ------------ ------------ ------------
Total other income 6,103,269 5,489,437 20,769,939 14,373,015
------------ ------------ ------------ ------------
Income before provision for income taxes 35,708,073 40,782,819 114,078,105 116,657,839
PROVISION FOR INCOME TAXES 11,370,152 12,847,000 36,133,077 36,748,000
------------ ------------ ------------ ------------
NET INCOME $ 24,337,921 $ 27,935,819 $ 77,945,028 $ 79,909,839
============ ============ ============ ============
EARNINGS PER SHARE:
Basic $ 0.17 $ 0.18 $ 0.52 $ 0.51
Diluted $ 0.17 $ 0.18 $ 0.52 $ 0.51
Cash Dividends Declared per Share $ 0.095 $ 0.09 $ 0.275 $ 0.26
See accompanying notes to condensed consolidated financial statements.
-3-
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For nine months
ended September 30,
----------------------------
2006 2005
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 77,945,028 $ 79,909,839
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 20,613,394 18,123,855
(Gain) loss on disposal of assets 74,784 440,254
(Gain) loss on sale of investments (4,620,523) (3,012,538)
Deferred income taxes (1,664,489) (1,856,619)
Amortization of deferred compensation 1,277,801 1,303,406
Stock based compensation expense related to employee
stock options and employee stock purchases 5,276,900 0
Tax benefit of stock plan transactions 0 1,777,169
Excess tax benefits from stock based compensation (214,212) 0
Change in operating assets and liabilities:
Accounts receivable, net (10,173,906) (20,358,912)
Inventories (4,516,869) (6,313,927)
Prepaid expenses and other 576,552 (771,654)
Accounts payable 8,967,226 7,668,807
Accrued liabilities, excluding dividends declared 3,975,320 8,269,956
------------- ------------
Net cash provided by operating activities 97,517,006 85,179,636
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Plant and equipment additions (40,406,163) (41,775,680)
Proceeds from sale of plant and equipment 294,361 40,753
(Increase) decrease in investments (10,707,990) 13,504,039
Increase in other assets 259,826 (1,102,532)
------------- ------------
Net cash provided by (used for) investing
activities (50,559,966) (29,333,420)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock from stock plan transactions 12,832,072 12,796,239
Cash dividends paid (41,096,783) (39,793,723)
Repurchases of common stock (207,363,826) (25,214,573)
Excess tax benefits from stock based compensation 214,212 0
------------- ------------
Net cash provided by (used for) financing
activities (235,414,325) (52,212,057)
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (188,457,285) 3,634,159
CASH AND CASH EQUIVALENTS,
beginning of period 439,681,693 395,538,719
------------- ------------
CASH AND CASH EQUIVALENTS,
end of period $ 251,224,408 $399,172,878
============= ============
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 2005 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 September 30, 2006, 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:
September 30, 2006 December 31, 2005
------------------ -----------------
Raw materials $27,856,244 $24,628,200
Work-in-process 4,141,178 3,739,394
Finished goods 12,356,269 11,469,228
----------- -----------
$44,353,691 $39,836,822
=========== ===========
(4) All earnings per share amounts, weighted daily average of shares of common
stock outstanding, common stock, and additional paid-in capital have been
restated, to reflect the Company's announcement on April 1, 2005, of a
two-for-one stock split effected in the form of a 100 percent common stock
dividend for each outstanding share, issued to shareholders on May 6, 2005.
The ex-dividend date was May 9, 2005.
(5) The following table reconciles the numerators and denominators used in the
calculation of basic and diluted earnings per share (EPS):
Nine Months Ended
Quarter Ended September 30, September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Numerators:
Numerator for both basic and
diluted EPS, net income $ 24,337,921 $ 27,935,819 $ 77,945,028 $ 79,909,839
Denominators:
Denominator for basic EPS,
weighted-average shares
outstanding 144,879,673 155,817,978 149,871,596 155,545,871
Potentially dilutive shares
resulting from stock plans 212,411 1,640,438 569,929 1,591,194
------------ ------------ ------------ ------------
Denominator for diluted EPS 145,092,084 157,458,416 150,441,525 157,137,065
============ ============ ============ ============
Shares related to stock plans not
included in diluted average common
shares outstanding because their
effect would be antidilutive 9,045,847 3,104,212 6,770,393 4,430,072
(6) Stock-Based Compensation Plans
At September 30, 2006, the Company had two stock option plans, a restricted
plan and an employee stock purchase plan, which are described more fully
below. Effective January 1, 2006, the Company adopted Statement of
Financial Accounting Standards No. 123 (revised), "Shares-Based Payment"
[SFAS 123(R)] utilizing the modified prospective approach. Prior to the
adoption of SFAS 123(R) we accounted for stock option grants under the
recognition and meas-urement 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
-5-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(6) Stock-Based Compensation Plans (continued)
of our consolidated financial statements in our Annual Report on Form 10-K
for the calendar year ended December 31, 2005, 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 third
quarter of 2006 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.
As a result of adopting SFAS 123(R) on January 1, 2006, the Company's
income before taxes, net income and basic and diluted earnings per share
for the third quarter and nine months ended September 30, 2006, were
$1,807,010, $1,266,162, and $.01 per share lower, and $5,276,900,
$3,513,977 and $.02 per share lower, respectively, than if we had continued
to account for stock-based compensation under APB Opinion No. 25 for our
stock option grants. Compensation cost capitalized as part of inventory as
of September 30, 2006, was $91,852. The cumulative effect of the change in
accounting for forfeitures was not material.
We receive a tax deduction for certain stock option exercises during the
period the options are exercised, generally for the excess of the price at
which the options are sold over the exercise price of the options. Prior to
the adoption of SFAS 123(R), we reported all tax benefits resulting from
the exercise of stock options as operating cash flows in our consolidated
statement of cash flows. In accordance with SFAS 123(R), for the nine
months ended September 30, 2006, we revised our consolidated statement of
cash flows presentation to report the tax benefits from the exercise of
stock options as financing cash flows. For the nine months ended September
30, 2006, $214,212 of tax benefits from the exercise of stock options and
vested restricted stock were reported as financing cash flows rather than
operating cash flows.
Net cash proceeds from the exercise of stock options and employee stock
purchases were $4,089,009 and $12,927,745, respectively, for the third
quarter and nine months ended September 30, 2006. The actual income tax
benefit realized from stock option exercises and vested restricted stock
are $319,057 and $1,223,936, respectively, for the same periods.
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 for the
third quarter and nine months ended September 30, 2005:
Three Months Ended Nine Months Ended
September 30, 2005 September 30, 2005
------------------ ------------------
Net Income, as reported $27,935,819 $ 79,909,839
Deduct: Total stock-based employee
compensation expense determined
under fair value-based method of all
awards, net of tax effects (1,332,871) (19,349,947)
----------- ------------
Pro forma net income $26,602,948 $ 60,559,892
=========== ============
Earnings per share:
Basic - as reported $ .18 $ .51
Basic - pro forma $ .17 $ .39
Diluted - as reported $ .18 $ .51
Diluted - pro forma $ .17 $ .39
On March 30, 2005, in response to the required implementation of SFAS No.
123(R), the Company accelerated the vesting of current "under water" stock
options. As a result of the vesting acceleration, approximately 2.3 million
shares became immediately exercisable and an additional approximate $13.6
million of proforma stock-based employee compensation
-6-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(6) Stock-Based Compensation Plans (continued)
expense was recognized in the first quarter 2005, that otherwise would have
been recognized as follows: $6.1 million in 2005; $4.5 million in 2006;
$2.2 million in 2007 and $0.8 million in 2008-2009. The objective of this
Company action was primarily to avoid recognizing compensation expense
associated with these options in future financial statements, upon the
Company's adoption of SFAS 123(R), effective January 1, 2006. In addition,
the Company also received shareholder approval of an amendment to its
Employee Stock Option Plan to allow the grant of non-qualified stock
options.
Employee Stock Option Plan
In 2004, a new Employee Stock Option Plan was approved, replacing the prior
plan. The Company may grant options for up to 18,000,000 shares under its
new Employee Stock Option Plan. The Company has granted options on
5,378,608 shares (net of shares from canceled options) under the new plan
through September 30, 2006. 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 three to seven years.
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 Nine Months Ended
September 30, September 30,
------------------ -----------------
2006 2005 2006 2005
------ ------ ------ ------
Dividend yield 1.94% 2.05% 1.97% 2.05%
Expected volatility 29.80% 26.04% 30.18% 38.12%
Risk-free interest rate 4.69% 4.13% 4.89% 4.00%
Expected term of options (in years) 4.93 4.39 4.57 4.37
Weighted-average grant-date fair value $ 3.97 $ 3.99 $ 4.15 $ 5.21
The Company determined that all employee groups exhibit similar exercise
and post-vesting termination behavior to determine the expected term.
As of September 30, 2006, there was $9,579,726 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 4.4 years.
A summary of the status of the Company's employee stock option plan for the
third quarter and nine months ended September 30, 2006, and changes during
the same periods, are presented in the table and narrative below:
Three Months Ended September 30, 2006 Nine Months Ended September 30, 2006
------------------------------------------ ------------------------------------------
Wtd. Avg. Aggregate Wtd. Avg. Aggregate
Remaining Intrinsic Remaining Intrinsic
Shares Wtd. Avg. Contract Value Shares Wtd. Avg. Contract Value
(000) Ex. Price Life (000) (000) Ex. Price Life (000)
------ --------- --------- --------- ------ --------- --------- ---------
Outstanding at Beginning of Period 10,646 $17 10,510 $17
Granted 466 14 1,322 15
Exercised (300) 12 $ 725 (914) 12 $3,105
Forfeited (89) 17 (195) 18
------ --- ------ ---
Outstanding at End of Period 10,723 17 3.0 Yrs $1,923 10,723 17 3.0 Yrs $1,923
------ --- ------- ------ ------ --- ------- ------
Exercisable at End of Period 7,434 $17 2.3 Yrs $1,502 7,434 $17 2.3 Yrs $1,502
A summary of the status of the Company's non-vested employee stock option
activity for the third quarter and nine months ended September 30, 2006,
are presented in the table and narrative below:
-7-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(6) Stock-Based Compensation Plans (cont.)
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
------------------- -------------------
Wtd. Avg. Wtd. Avg.
Shares Grant Date Shares Grant Date
(000) Fair Value (000) Fair Value
------ ---------- ------ ----------
Non-vested stock options at beginning of period 3,113 $5.13 3,069 $5.65
Granted 466 3.97 1,322 4.15
Vested (270) 7.03 (1,041) 7.03
Forfeited (20) 5.05 (61) 5.51
----- ----- ------ -----
Non-vested stock options at end of period 3,289 $4.91 3,289 $4.91
Non-employee Director Stock Option Plan
The Company has a Non-employee Director Stock Option Plan covering
1,000,000 shares that was approved, replacing a prior plan. The Company has
granted options on 315,240 shares (net of shares from canceled options)
under the current plan through September 30, 2006. 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.
As of September 30, 2006, there was $61,173 of unrecognized compensation
cost related to share-based payments which is expected to be recognized
over the balance of the 2006 calendar year.
A summary of the status of the Company's Non-employee Director Stock Option
Plan for the third quarter and nine months ended September 30, 2006, and
changes during the third quarter and nine months ended September 30, 2006,
are presented in the table and narrative below:
Three Months Ended September 30, 2006 Nine Months Ended September 30, 2006
------------------------------------------ ------------------------------------------
Wtd. Avg. Aggregate Wtd. Avg. Aggregate
Remaining Intrinsic Remaining Intrinsic
Shares Wtd. Avg. Contract Value Shares Wtd. Avg. Contract Value
(000) Ex. Price Life (000) (000) Ex. Price Life (000)
------ --------- --------- --------- ------ --------- --------- ---------
Outstanding at Beginning of Period 453 $15 445 $14
Granted 0 0 48 15
Exercised (40) 7 $267 (80) 6 $662
Forfeited (72) 16 (72) 16
--- --- --- ---
Outstanding at End of Period 341 15 6.5 Yrs $311 341 15 6.5 Yrs $311
--- --- ------- ---- --- --- ------- ----
Exercisable at End of Period 293 $15 6.0 Yrs $311 293 $15 6.0 Yrs $311
A summary of the status of the Company's non-vested non-employee director
stock option plan activity for the third quarter and nine months ended
September 30, 2006, are presented in the table and narrative below:
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
------------------- -------------------
Wtd. Avg. Wtd. Avg.
Shares Grant Date Shares Grant Date
(000) Fair Value (000) Fair Value
------ ---------- ------ ----------
Non-vested stock options at beginning of period 48 $5.61 0 $ 0
Granted 0 0 48 5.61
Vested 0 0 0 0
Forfeited 0 0 0 0
--- ----- --- -----
Non-vested stock options at end of period 48 $5.61 48 $5.61
Employee Stock Purchase Plan
In 2003, a new Employee Stock Purchase Plan covering 1,200,000 shares was
approved, replacing a prior plan. The Company has sold a total of 412,502
shares under the new plan through September 30, 2006. The Company sells
shares at
-8-
GENTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
(6) Stock-Based Compensation Plans (cont.)
85% of the stock's market price at date of purchase. The weighted average
fair value of shares sold in 2006 was approximately $13.03.
Restricted Stock Plan
The Company has a Restricted Stock Plan covering 1,000,000 shares of common
stock that was approved, the purpose of which 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 a
committee, appointed by the Board of Directors, but may not exceed ten
years. The Company has 549,790 shares outstanding as of September 30, 2006,
and 131,410 shares were granted with a restriction period of five years at
market prices ranging from $14.00 to $17.09 year to date. As of September
30, 2006, the Company has unearned stock-based compensation of $5,179,679
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.
(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:
September 30, 2006 September 30, 2005
------------------ ------------------
Quarter Ended $26,549,014 $31,843,635
Nine Months Ended $80,280,623 $81,765,670
(8) The decrease in common stock during the nine months ended September 30,
2006, was primarily due the repurchase of 13,972,800 shares for
approximately $207,364,000, partially offset by the issuance of 1,166,868
shares, respectively, of the Company's common stock under its stock-based
compensation plans. The Company has also recorded a $0.09 per share cash
dividend in the first and second quarters and a $0.095 per share cash
dividend in the third quarter. The third quarter dividend of approximately
$13,608,000, was declared on August 14, 2006, and was paid on October 20,
2006.
(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:
Quarter Ended September 30, Nine Months Ended September 30,
--------------------------- -------------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenue:
Automotive Products $135,100,675 $131,696,221 $404,380,294 $379,781,156
Fire Protection Products 6,164,972 6,418,676 18,297,177 18,359,906
------------ ------------ ------------ ------------
Total $141,265,647 $138,114,897 $422,677,471 $398,141,062
============ ============ ============ ============
Operating Income:
Automotive Products $ 28,304,238 $ 33,810,716 $ 89,549,115 $ 98,146,950
Fire Protection Products 1,300,566 1,482,666 3,759,051 4,137,874
------------ ------------ ------------ ------------
Total $ 29,604,804 $ 35,293,382 $ 93,308,166 $102,284,824
============ ============ ============ ============
(10) In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes." This
interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
statement No. 109, "Accounting for Income Taxes." Interpretation No. 48
prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. This Interpretation also provides
guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. This
Interpretation is effective for fiscal years beginning after December 15,
2006. The adoption of Interpretation No. 48 is not expected to have any
significant effect on the Company's consolidated financial position or
results of operations.
-9-
GENTEX CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
THIRD QUARTER 2006 VERSUS THIRD QUARTER 2005
Net Sales. Net sales for the third quarter of 2006 increased by
approximately $3,151,000, or 2%, when compared with the third quarter last
year. Net sales of the Company's automotive auto-dimming mirrors increased
by approximately $3,404,000, or 3%, in the third quarter of 2006, when
compared with the third quarter last year, primarily due to improved
product mix with additional electronic content in mirrors and an increase
in auto-dimming mirror unit shipments from approximately 3,198,000 in the
third quarter of 2005 to 3,210,000 in the current quarter. Unit shipments
to customers in North America for the current quarter decreased by 8%
compared with the third quarter of the prior year, primarily due to lower
production levels at the traditional Big Three. Mirror unit shipments for
the current quarter to automotive customers outside North America increased
by 8% compared with the third quarter in 2005, primarily due to increased
penetration at certain European and Asian automakers. Net sales of the
Company's fire protection products decreased 4% for the current quarter
versus the same quarter of last year.
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased from 63% in the third quarter of 2005 to 66% in the third quarter
of 2006, when comparing the current quarter to the same quarter last year,
primarily reflecting the impact of automotive customer price reductions.
Stock option expense impacted cost of goods sold by $566,000.
Operating Expenses. Engineering, research and development expenses for the
current quarter increased 15% and approximately $1,396,000, when compared
with the same quarter last year. Excluding stock option expense of
$605,000, E, R & D expenses increased by 9% 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 electronic features. Selling, general and
administrative expenses increased 14% and approximately $975,000, for the
current quarter, when compared with the third quarter of 2005. Excluding
stock option expense of $637,000, S, G & A expenses increased by 5%, when
comparing the current quarter to the same quarter last year, primarily
reflecting the continued expansion of the Company's overseas sales offices,
partially offset by a reduction in state taxes.
Total Other Income. Total other income for the current quarter increased by
approximately $614,000 when compared with the third quarter of 2005,
primarily due to increased interest income due to higher interest rates
partially offset by lower investable funds, and realized gains on the sale
of equity investments.
Taxes. The provision for income taxes varied from the statutory rate during
the current quarter, primarily due to Extra Territorial Income Exclusion
Act exempted taxable income, domestic manufacturing deduction, tax-exempt
investment income and stock option expense.
Net Income. The Company's net income for the current quarter decreased by
$3,598,000, or 13%, when compared with the same quarter last year.
Excluding stock option expense of $1,266,000, the Company's net income
decreased 8%.
NINE MONTHS ENDED SEPTEMBER 30, 2006, VERSUS NINE MONTHS ENDED SEPTEMBER
30, 2005
Net Sales. Net sales for the nine months ended September 30, 2006,
increased by $24,536,000, or 6%, when compared with the same period last
year. Net sales of the Company's automotive auto-dimming mirrors increased
by $24,599,000, or 6%, as auto-dimming mirror unit shipments increased by
7% from approximately 9,323,000 in the first nine months of 2005 to
10,010,000 units in the first nine months of 2006. This increase primarily
reflected the increased penetration of interior and exterior auto-dimming
mirrors on 2006 and 2007 model year vehicles. Unit shipments to customers
in North America increased by 3% as a result of increased unit shipments to
transplants, partially offset by reduced shipments to domestic automakers
due to their lower production levels. Mirror shipments to automotive
customers outside North America increased by 11%, primarily due to
increased penetration at certain European and Asian automakers. Net sales
of the Company's fire protection products were flat.
-10-
Cost of Goods Sold. As a percentage of net sales, cost of goods sold
increased from 63% in the nine months ended September 30, 2005, to 65% in
the nine months ended September 30, 2006, when compared to the same period
last year, primarily reflecting the impact of automotive customer price
reductions. Stock option expense impacted cost of goods sold by $1,683,000.
Operating Expenses. For the nine months ended September 30, 2006,
engineering, research and development expenses increased approximately
$4,742,000, but remained at 7% of net sales, when compared to the same
period last year. Excluding stock option expense of $1,881,000, E, R & D
expenses increased by 11% for the current period versus the same period
last year, primarily due to additional staffing, engineering and testing
for new product development, including mirrors with additional electronic
features. Selling, general and administrative expenses increased
approximately $2,427,000 for the nine months ended September 30, 2006, but
remained at 5% of net sales, when compared to the same period last year.
Excluding stock option expense of $1,712,000, S, G & A expense increased by
3% versus the same period in the prior year, primarily reflecting the
continued expansion of the Company's overseas sales offices.
Total Other Income. Total other income for the nine months ended September
30, 2006, increased $6,397,000 when compared to the same period last year,
primarily due to increased interest income due to higher interest rates and
realized gains on the sale of equity investments.
Taxes. The provision for income taxes varied from the statutory rate during
the nine months ended September 30, 2006, primarily due to Extra
Territorial Income Exclusion Act exempted taxable income, domestic
manufacturing deduction, tax-exempt investment income and stock option
expense.
Net Income. The Company's net income for the nine months ended September
30, 2006, decreased $1,965,000, or 2%, when compared to the same period
last year, primarily due to stock option expense and automotive customer
price reductions. Excluding stock option expense of $3,514,000, the
Company's net income increased by 2%.
FINANCIAL CONDITION:
Cash flow from operating activities for the nine months ended September 30,
2006, increased to $97,517,000, compared to $85,180,000, for the same
period last year, primarily due to slower growth in accounts receivable.
Capital expenditures for the nine months ended September 30, 2006,
increased to $40,406,000, compared to $41,776,000 for the same period last
year, primarily due to increased purchase of manufacturing equipment.
The Company has completed the construction of its fourth automotive
manufacturing facility and a new technical center. The Company has invested
approximately $38 million for the new facilities during 2004-2006, which
was funded from its cash and cash equivalents on hand.
Accounts receivable as of September 30, 2006, increased approximately
$10,174,000 compared to December 31, 2005. The increase was primarily due
to the higher sales level, as well as monthly sales within each quarter.
Management considers the Company's working capital and long-term
investments totaling approximately $525,057,000 as of September 30, 2006,
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 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 eight million 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 eight million shares under the plan. During the
quarter ended March 31, 2003, the Company repurchased 830,000 shares
(post-split) at a cost of approximately $10,247,000. During the quarter
ended September 30, 2005, the Company repurchased approximately 1,496,000
shares at a cost of approximately $25,215,000. During the
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quarter ended March 31, 2006, the Company repurchased approximately
2,804,000 shares at a cost of approximately $47,145,000. During the quarter
ended June 30, 2006, the Company repurchased approximately 7,201,000 shares
at a cost of approximately $104,604,000. During the quarter ended September
30, 2006, the Company repurchased approximately 3,968,000 shares at a cost
of approximately $55,614,000. Approximately 7,701,000 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 are not 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, 2005. Management believes there have been no changes in those
critical accounting policies, except as noted below.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with the
fair value recognition provisions of SFAS No. 123(R). The Company utilizes
the Black-Scholes model, which requires the input of subjective
assumptions. These assumptions include estimating (a) the length of time
employees will retain their vested stock options before exercising them
("expected term"), (b) the volatility of the Company's common stock price
over the expected term, (c) the number of options that will ultimately not
complete their vesting requirements ("forfeitures") and (d) expected
dividends. Changes in the subjective assumptions can materially affect the
estimate of fair value of stock-based compensation and consequently, the
related amounts recognized on the consolidated condensed statements of
operations.
TRENDS AND DEVELOPMENTS:
During the first quarter of 2005, the Company negotiated an extension to
its long-term agreement with General Motors (GM) in the ordinary course of
the Company's business. Under the extension, the Company will be sourced
all of the interior auto-dimming rearview mirrors programs for GM and its
worldwide affiliates through August 2009, and includes all but two
low-volume models that had previously been awarded to a competitor under a
lifetime contract. The new business also includes the GMT360 program, which
is the mid-size truck/SUV platform that previously did not offer
auto-dimming mirrors. The new GM programs will be transferred to the
Company by no later than the 2007 model year. We have estimated that this
new business represented incremental auto-dimming mirror units in the range
of 500,000 on an annualized basis at that time. The Company also negotiated
a price reduction for the GM OnStar(R) feature in its auto-dimming mirrors,
effective January 1, 2005, in connection with GM's stated plan to make
their OnStar system standard across their vehicle models over the next
several years.
During the quarter ended September 30, 2005, the Company negotiated an
extension to its long-term agreement with DaimlerChrysler in the ordinary
course of the Company's business. Under the extension, the Company will be
sourced virtually all Mercedes and Chrysler interior and exterior
auto-dimming rearview mirrors through December 2009.
The Company currently expects that auto-dimming mirror unit shipments will
be 5% higher in the fourth quarter of calendar year 2006, compared with the
fourth quarter of 2005. These estimates are based on 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.
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The Company utilizes the light vehicle production forecasting services of
CSM Worldwide, and CSM's current forecasts for light vehicle production for
calendar 2006 are approximately 15.3 million units for North America, 20.3
million for Europe and 14.2 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 September 30, 2006, 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, 2005.
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 or yield 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-sharing programs, which could adversely impact the Company's sales
growth and margins. The Company also continues to experience some
manufacturing yield issues and pressure for select raw material cost
increases. The automotive industry is experiencing increasing financial and
production stresses due to continuing pricing pressures, lower domestic
production levels, supplier bankruptcies, and commodity 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 March 30, 2005, in response to the required implementation of SFAS No.
123(R) as disclosed in Note 6, the Company accelerated the vesting of
current "under water" stock options. As a result of the vesting
acceleration, approximately 2.3 million shares became immediately
exercisable and an additional approximate $13.6 million of proforma
stock-based employee compensation expense was recognized in the first
quarter. The objective of this Company action is primarily to avoid
recognizing compensation expense associated with these options in future
financial statements, upon the Company's adoption of SFAS No. 123(R). In
addition, the Company has also received shareholder approval of an
amendment to its Employee Stock Option Plan to allow the grant of
non-qualified stock options.
On April 1, 2005, the Company announced a two-for-one stock split effected
in the form of a 100 percent common stock dividend for each outstanding
share, issued to shareholders on May 6, 2005. The ex-dividend date was May
9, 2005.
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.
-13-
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
The management, with the participation of its principal executive officer
and principal financial officer, has evaluated the effectiveness, as of
September 30, 2006, 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 September 30, 2006,
were effective to provide reasonable assurance that 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 to provide reasonable assurance that 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
September 30, 2006, 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 expenses on earnings, the ability to
leverage fixed manufacturing overhead costs, unit shipment growth rates 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 economic recovery in the U.S.
and in international markets, the pace of automotive production worldwide,
the types of products purchased by customers, competitive pricing
pressures, currency fluctuations, the financial strength of the Company's
customers, the mix of products purchased by customers, the ability to
continue to make product innovations, the success of newly introduced
products (e.g. SmartBeam), 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, 2005. There have
been no material changes from the risk factors previously disclosed in the
Company's report form on Form 10-K.
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 third quarter ended September 30, 2006:
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
------ ------------ ------------- ------------------- ----------------------
July 2006 630,297 $13.34 630,297 3,039,015
August 2006 1,763,771 $13.97 1,763,771 9,275,244
September 2006 1,574,103 $14.33 1,574,103 7,701,141
--------- ---------
Total 3,968,171 3,968,171
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. During the
quarter ended March 31, 2003, the Company repurchased 830,000
shares (post-split) at a cost of approximately $10,247,000.
During the quarter ended September 30, 2005, the Company
repurchased approximately 1,496,000 shares at a cost of
approximately $25,215,000. During the quarter ended March 31,
2006, the Company repurchased approximately 2,804,000 shares at a
cost of approximately $47,145,000. During the quarter ended June
30, 2006, the Company repurchased approximately 7,201,000 shares
at a cost of approximately $104,604,000. On May 16, 2006, the
Company announced that the Company's Board of Directors had
authorized the repurchase of an additional eight million 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 eight million shares under the plan.
ITEM 6. EXHIBITS
(a) See Exhibit Index on Page 17.
-15-
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: October 31, 2006 /s/ Fred T. Bauer
----------------------------------------
Fred T. Bauer
Chairman and Chief Executive Officer
Date: October 31, 2006 /s/ Enoch C. Jen
----------------------------------------
Enoch C. Jen
Senior Vice President & Chief Financial
Officer, Principal Financial and
Accounting Officer
-16-
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) 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.
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EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
*10(b)(6) 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)(7) 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(b)(8) Confidential Severance Agreement and Release between Gentex
Corporation and Garth Deur was filed as Exhibit 10(b)(8) to
Registrant's Report on Form 10-Q dated August 1, 2006, 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). 19
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). 20
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) 21
----------
* Indicates a compensatory plan or arrangement.
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