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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q 
(Mark one)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023 or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 0-10235
GENTEX CORPORATION
(Exact name of registrant as specified in its charter)
Michigan
38-2030505
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
600 N. Centennial
Zeeland
Michigan49464
(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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.06 per shareGNTXNASDAQ Global Select Market
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:  þ    No:  o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes:  þ    No:  o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes:  ☐  No:   þ
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 Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes:  ☐ No:  o
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.
Class
Shares Outstanding, July 28, 2023
Common Stock, $.06 Par Value
233,435,809

1

GENTEX CORPORATION AND SUBSIDIARIES
For the Three and Six Months Ended June 30, 2023
FORM 10-Q
Index
Part I - Financial Information
Page
Item 1.
Item 2.
Item 3.
Item 4.
Part II - Other Information
Item 1A.
Item 2.
Item 6.


2

PART I —FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements.
GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2023 and December 31, 2022
June 30, 2023 (Unaudited)
December 31, 2022
(Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$237,665,601 $214,754,638 
Restricted Cash— 4,000,000 
Short-term investments20,172,297 23,007,385 
Accounts receivable, net350,409,472 276,493,752 
Inventories390,026,268 404,360,270 
Prepaid expenses and other27,032,788 26,036,331 
Total current assets1,025,306,426 948,652,376 
PLANT AND EQUIPMENT—NET596,694,337 550,033,036 
OTHER ASSETS
Goodwill313,647,268 313,807,494 
Long-term investments239,621,466 202,331,983 
Intangible assets, net209,710,910 219,360,910 
Deferred tax asset28,943,561 25,528,700 
Patents and other assets, net73,183,124 67,515,425 
Total other assets865,106,329 828,544,512 
Total assets$2,487,107,092 $2,327,229,924 
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Accounts payable$168,456,476 $151,740,046 
Accrued liabilities107,605,540 98,812,706 
Total current liabilities276,062,016 250,552,752 
OTHER NON-CURRENT LIABILITIES15,095,750 10,884,351 
Total liabilities291,157,766 261,437,103 
SHAREHOLDERS’ INVESTMENT
Common stock14,005,799 14,050,160 
Additional paid-in capital942,660,764 917,499,323 
Retained earnings1,252,525,531 1,148,386,272 
Accumulated other comprehensive loss(13,242,768)(14,142,934)
Total shareholders’ investment2,195,949,326 2,065,792,821 
Total liabilities and shareholders’ investment$2,487,107,092 $2,327,229,924 

Note: The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
3

GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2023 and 2022
 
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
NET SALES
$583,472,846 $463,423,002 $1,134,234,157 $931,673,777 
COST OF GOODS SOLD
390,389,807 315,055,988 766,413,887 622,894,804 
Gross profit193,083,039 148,367,014 367,820,270 308,778,973 
OPERATING EXPENSES:
Engineering, research and development37,973,790 32,857,419 72,627,537 64,832,406 
Selling, general & administrative27,819,861 29,718,626 54,652,698 54,849,694 
Total operating expenses65,793,651 62,576,045 127,280,235 119,682,100 
Income from operations127,289,388 85,790,969 240,540,035 189,096,873 
OTHER INCOME (LOSS)
Investment income2,890,934 920,284 5,830,128 1,708,600 
Other loss, net(1,576,538)(1,903,269)(1,771,277)(2,702,079)
Total other income (loss)1,314,396 (982,985)4,058,851 (993,479)
INCOME BEFORE PROVISION FOR INCOME TAXES128,603,784 84,807,984 244,598,886 188,103,394 
PROVISION FOR INCOME TAXES19,448,381 12,403,581 37,865,222 28,170,366 
NET INCOME$109,155,403 $72,404,403 $206,733,664 $159,933,028 
EARNINGS PER SHARE: (1)
Basic$0.47 $0.31 $0.88 $0.68 
Diluted$0.47 $0.31 $0.88 $0.68 
Cash Dividends Declared per Share$0.120 $0.120 $0.240 $0.240 
(1) Earnings Per Share has been adjusted to exclude the portion of net income allocated to participating securities as a result of share-based payment awards.

4

GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2023 and 2022
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net income$109,155,403 $72,404,403 $206,733,664 $159,933,028 
Other comprehensive (loss) income before tax:
Foreign currency translation adjustments(1,456,377)(3,131,326)(1,577,544)(4,027,746)
Unrealized gains (losses) on debt securities, net554,565 (3,414,108)3,136,342 (11,209,338)
Other comprehensive (loss) income, before tax(901,812)(6,545,434)1,558,798 (15,237,084)
Income tax impact related to components of other comprehensive income (loss)116,459 (716,963)658,632 (2,353,961)
Other comprehensive (loss) income, net of tax(1,018,271)(5,828,471)900,166 (12,883,123)
Comprehensive income$108,137,132 $66,575,932 $207,633,830 $147,049,905 

5


GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Three Months Ended June 30, 2023 and 2022
Common 
Stock
Shares		Common 
Stock
Amount		Additional 
Paid-In
Capital		Retained 
Earnings		Accumulated 
Other
Comprehensive
Income (Loss)		Total 
Shareholders’
Investment
BALANCE AS OF APRIL 1, 2023233,726,045 $14,023,563 $928,284,892 $1,193,171,690 $(12,224,497)$2,123,255,648 
Issuance of common stock from stock plan transactions624,323 37,459 7,889,328 — 7,926,787 
Repurchases of common stock(920,374)(55,223)(3,258,126)(21,790,142)— (25,103,491)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock— — 9,744,670 — — 9,744,670 
Dividends declared ($0.12 per share)
— — — (28,011,420)— (28,011,420)
Net income— — — 109,155,403 — 109,155,403 
Other comprehensive loss— — — — (1,018,271)(1,018,271)
BALANCE AS OF JUNE 30, 2023233,429,994 $14,005,799 $942,660,764 $1,252,525,531 $(13,242,768)$2,195,949,326 
BALANCE AS OF APRIL 1, 2022234,477,338 $14,068,640 $881,371,438 $1,038,656,230 $(5,127,408)$1,928,968,900 
Issuance of common stock from stock plan transactions492,494 29,550 5,641,470 — — 5,671,020 
Issuance of common stock related to acquisitions162,433 9,746 4,990,266 — — 5,000,012 
Repurchases of common stock— — — — — — 
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock— — 8,573,230 — — 8,573,230 
Dividends declared ($0.12 per share)
— — — (28,214,614)— (28,214,614)
Net income— — — 72,404,403 — 72,404,403 
Other comprehensive loss— — — — (5,828,471)(5,828,471)
BALANCE AS OF JUNE 30, 2022235,132,265 $14,107,936 $900,576,404 $1,082,846,019 $(10,955,879)$1,986,574,480 

6

GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Six Months Ended June 30, 2023 and 2022
Common 
Stock
Shares		Common 
Stock
Amount		Additional 
Paid-In
Capital		Retained 
Earnings		Accumulated 
Other
Comprehensive
Loss		Total 
Shareholders’
Investment
BALANCE AS OF JANUARY 1, 2023234,169,335 $14,050,160 $917,499,323 $1,148,386,272 $(14,142,934)$2,065,792,821 
Issuance of common stock from stock plan transactions1,227,959 73,677 13,809,133 — — 13,882,810 
Repurchases of common stock(1,967,300)(118,038)(6,911,897)(46,536,187)— (53,566,122)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock— — 18,264,205 — — 18,264,205 
Dividends declared ($0.24 per share)
— — — (56,058,218)— (56,058,218)
Net income— — — 206,733,664 — 206,733,664 
Other comprehensive income— — — — 900,166 900,166 
BALANCE AS OF JUNE 30, 2023233,429,994 $14,005,799 $942,660,764 $1,252,525,531 $(13,242,768)$2,195,949,326 
BALANCE AS OF JANUARY 1, 2022236,440,840 $14,186,450 $879,413,385 $1,042,461,388 $1,927,244 $1,937,988,467 
Issuance of common stock from stock plan transactions969,182 58,151 8,937,016 — — 8,995,167 
Issuance of common stock related to acquisitions162,433 9,746 4,990,266 — — 5,000,012 
Repurchases of common stock(2,440,190)(146,411)(8,125,830)(62,979,781)— (71,252,022)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock— — 15,361,567 — — 15,361,567 
Dividends declared ($0.24 per share)
— — — (56,568,616)— (56,568,616)
Net income— — — 159,933,028 — 159,933,028 
Other comprehensive loss— — — — (12,883,123)(12,883,123)
BALANCE AS OF JUNE 30, 2022235,132,265 $14,107,936 $900,576,404 $1,082,846,019 $(10,955,879)$1,986,574,480 

7

GENTEX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$206,733,664 $159,933,028 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization48,841,936 50,052,518 
(Gain) on disposal of assets(214,593)(45,214)
Loss on disposal of assets220,568 11,776 
(Gain) on sale of investments and equity method investment income(2,747,586)(391,378)
Loss on sale of investments and equity method investment losses4,201,138 989,196 
Change in deferred income taxes(5,122,661)5,044,744 
Stock-based compensation expense related to employee stock options, employee stock purchases and restricted stock18,264,205 15,361,567 
Change in operating assets and liabilities:
Accounts receivable, net(73,915,719)(24,609,666)
Inventories14,334,001 (76,310,383)
Prepaid expenses and other(2,722,437)(6,035,375)
Accounts payable22,410,431 48,905,968 
Accrued liabilities, excluding dividends declared11,483,186 16,354,262 
Net cash provided by operating activities241,766,133 189,261,043 
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales proceeds21,523,990 37,429,595 
Maturities and calls11,650,000 3,000,000 
Purchases(65,945,596)(43,756,446)
Plant and equipment additions(90,277,995)(57,998,319)
Proceeds from sale of plant and equipment140,610 44,881 
Increase in other assets(3,486,284)(1,937,117)
Net cash used for investing activities(126,395,275)(63,217,406)
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Issuance of common stock from stock plan transactions13,882,810 8,995,167 
Cash dividends paid(56,146,939)(56,725,981)
Repurchases of common stock(54,195,766)(71,252,022)
Net cash used for financing activities(96,459,895)(118,982,836)
NET INCREASE IN CASH AND CASH EQUIVALENTS18,910,963 7,060,801 
CASH, CASH EQUIVALENTS, and RESTRICTED CASH, beginning of period218,754,638 262,311,670 
CASH, CASH EQUIVALENTS, and RESTRICTED CASH, end of period$237,665,601 $269,372,471 

8

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



(1)    Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by the Company, 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 Company 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 Company's 2022 annual report on Form 10-K. 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 Company as of June 30, 2023, and the results of operations and cash flows for the interim periods presented.

(2)    Goodwill and Other Intangible Assets

Goodwill represents the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company recorded Goodwill of: $307.4 million as part of the HomeLink® acquisition in 2013; $3.7 million as part of the acquisition of Vaporsens, Inc. ("Vaporsens") in the second quarter of 2020; $0.2 million as part of the acquisition of Air-Craftglass Production BV ("Air-Craftglass") in the third quarter of 2020; $1.0 million as a part of the acquisition of Argil, Inc. ("Argil") in the fourth quarter of 2020; and $2.0 million as part of the acquisition of Guardian Optical Technologies ("Guardian") in the first quarter of 2021. The carrying value of Goodwill as of both June 30, 2023 and December 31, 2022 was $313.6 million and $313.8 million, respectively, as set forth in the table below:

Carrying Amount
Balance as of December 31, 2022$313,807,494 
Acquisitions— 
Divestitures— 
Impairments— 
Other(160,226)
Balance as of June 30, 2023$313,647,268 

In addition to annual impairment testing, which is performed as of the first day of the fourth quarter, the Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value of goodwill or other intangible assets thus resulting in the need for interim impairment testing, including long-term revenue growth projections, profitability, discount rates, recent market valuations from transactions by comparable companies, volatility in the Company's market capitalization, and general industry, market and macroeconomic conditions. The impact of component shortages, supply chain constraints, inflation, and labor shortages were again considered in the most recently completed quarter, but did not indicate the need for interim impairment testing.

The Company also acquired In-Process Research & Development ("In-Process R & D") as part of the acquisitions of: Vaporsens; Air-Craftglass; Argil; and Guardian, each of which has been previously disclosed.

The patents and intangible assets and related change in carrying values are set forth in the tables below:





9

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



As of June 30, 2023:
Other Intangible AssetsGrossAccumulated AmortizationNetAssumed Useful Life
Gentex Patents$40,639,478 $(28,251,342)$12,388,136 Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$52,000,000 $— $52,000,000 Indefinite
HomeLink® Technology
180,000,000 (146,250,000)33,750,000 12 years
Existing Customer Platforms43,000,000 (41,925,000)1,075,000 10 years
Exclusive Licensing Agreement96,000,000 — 96,000,000 Indefinite
Vaporsens In-Process R&D11,000,000 — 11,000,000 Indefinite
Argil In-Process R&D6,278,132 — 6,278,132 Indefinite
Air-Craftglass In-Process R&D1,507,778 — 1,507,778 Indefinite
Guardian Trade Names1,300,000 — 1,300,000 Indefinite
Guardian In-Process R&D6,800,000 — 6,800,000 Indefinite
Total Other Intangible Assets$397,885,910 $(188,175,000)$209,710,910 
Total Patents & Other Intangible Assets$438,525,388 $(216,426,342)$222,099,046 

As of December 31, 2022:
Other Intangible Assets
Gross
Accumulated Amortization
Net
Assumed Useful Life
Gentex Patents
$40,653,851 $(27,820,383)$12,833,468 Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$52,000,000 $— $52,000,000 Indefinite
HomeLink® Technology
180,000,000 (138,750,000)41,250,000 12 years
Existing Customer Platforms43,000,000 (39,775,000)3,225,000 10 years
Exclusive Licensing Agreement
96,000,000 — 96,000,000 Indefinite
    Vaporsens In-Process R&D11,000,000 — 11,000,000 Indefinite
    Argil In-Process R&D6,278,132 — 6,278,132 Indefinite
    Air-Craftglass In-Process R&D1,507,778 — 1,507,778 Indefinite
    Guardian Trade Names1,300,000 — 1,300,000 Indefinite
    Guardian In-Process R&D6,800,000 — 6,800,000 Indefinite
Total Other Intangible Assets$397,885,910 $(178,525,000)$219,360,910 
Total Patents & Other Intangible Assets$438,539,761 $(206,345,383)$232,194,378 

Amortization expense on patents and intangible assets was approximately $5.2 million and $10.5 million during the three and six months ended June 30, 2023, respectively, compared to approximately $5.5 million and $11.1 million for the same periods ended June 30, 2022, respectively.

Excluding the impact of any future acquisitions, the Company estimates amortization expense for the year ending December 31, 2023 to be approximately $20 million, for the year ending December 31, 2024 to be
10

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


approximately $16 million, for the year ending December 31, 2025 to be approximately $13 million, and for each of the years ending December 31, 2026 and December 31, 2027 to be approximately $5 million.


(3)    Investments
The Company follows the provisions of Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, and for its non-financial assets and liabilities subject to fair value measurements. ASC 820 provides a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases, require estimates of fair-market value. This standard also expanded financial statement disclosure requirements with respect to a company’s use of fair-value measurements, including the effect of such measurements on earnings. The cost of securities sold is based on the specific identification method.
The Company determines the fair value of its government securities, asset-backed securities, municipal bonds, and corporate bonds by utilizing monthly valuation statements that are provided by its broker. The broker determines the investment valuation by utilizing the bid price in the market and also refers to third party sources to validate valuations, and as such are classified as Level 2 assets.
The Company's certificates of deposit are classified as available for sale and are considered as Level 1 assets. These investments are carried at cost, which approximates fair value.

The Company also periodically makes technology investments in certain non-consolidated third parties. These equity investments are accounted for in accordance with ASC 323, Investments - Equity Method and Joint Ventures. The Company's share of the earnings or losses of non-controlled affiliates, over which the Company exercises significant influence (generally a 20% to 50% ownership interest), is included in the consolidated operating results using the equity method of accounting. The Company has also made technology investments in certain non-consolidated affiliates for common share ownership interests of less than 20% (where the Company does not have the ability to exercise significant influence). These equity investments are accounted for in accordance with ASC 321, Investments - Equity Securities. For these equity investments that do not have readily determinable fair values, and where the Company has not identified any observable events that would cause adjustment of the valuation to date, the equity investments are held at cost.

Such technology investments totaled approximately $94.0 million and $69.5 million as of June 30, 2023 and December 31, 2022, respectively. On March 9, 2023, the Company purchased a 15% equity investment in Adasky, LTD. for $21.5 million. Adasky is an Israeli-based leading developer and manufacturer of intelligent thermal sensing technologies. $2.2 million and $3.8 million of these technology investments are classified within Short-Term Investments in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively. $91.8 million and $65.7 million of these investments are classified within Long-Term Investments in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, respectively.  
Assets or liabilities that have recurring fair value measurements are shown below as of June 30, 2023 and December 31, 2022:






11

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



As of June 30, 2023:
Fair Value Measurements at Reporting Date Using
Total as of
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable
Inputs
Significant
Unobservable
Inputs
Description
June 30, 2023(Level 1)(Level 2)(Level 3)
Cash & Cash Equivalents$237,665,601 $237,665,601 $— $— 
Short-Term Investments:
Certificate of Deposit1,244,803 1,244,803 — — 
Corporate Bonds1,917,173 — 1,917,173 — 
Government Securities4,715,195 — 4,715,195 — 
Municipal Bonds3,475,351 — 3,475,351 — 
Other4,671,277 1,204,252 3,467,025 — 
Long-Term Investments:
Asset Backed Securities16,904,936 — 16,904,936 — 
Certificate of Deposit982,015 982,015 — — 
Corporate Bonds46,808,383 — 46,808,383 — 
Government Securities29,169,577 — 29,169,577 — 
Municipal Bonds52,836,126 — 52,836,126 — 
Common Stock1,094,374 1,094,374 — — 
Total$401,484,811 $242,191,045 $159,293,766 $— 

As of December 31, 2022:
Fair Value Measurements at Reporting Date Using
Total as of
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable
Inputs
Significant
Unobservable
Inputs
Description
December 31, 2022(Level 1)(Level 2)(Level 3)
Cash & Cash Equivalents$214,754,638 $214,754,638 $— $— 
Restricted Cash4,000,000 4,000,000 — — 
Short-Term Investments:
Certificate of Deposit1,736,163 1,736,163 — — 
Corporate Bonds5,473,341 — 5,473,341 — 
Government Securities4,423,041 — 4,423,041 — 
Municipal Bonds5,174,773 — 5,174,773 — 
Other2,347,602 1,093,602 1,254,000 — 
Long-Term Investments:
Asset-backed Securities18,829,696 — 18,829,696 — 
Certificate of Deposit238,925 238,925 — — 
Corporate Bonds36,310,477 — 36,310,477 — 
Governmental Securities36,532,634 — 36,532,634 — 
Municipal Bonds48,430,166 — 48,430,166 
Common Stock293,300 293,300 — — 
Total$378,544,756 $222,116,628 $156,428,128 $— 

12

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of June 30, 2023 and December 31, 2022:

As of June 30, 2023:
Unrealized
Cost
Gains
Losses
Market Value
Short-Term Investments:
Certificate of Deposit$1,250,000 $— $(5,197)$1,244,803 
Corporate Bonds1,988,060 — (70,887)1,917,173 
Government Securities4,754,815 — (39,620)4,715,195 
Municipal Bonds3,493,481 — (18,130)3,475,351 
Other4,671,277 — — 4,671,277 
Long-Term Investments:
Asset Backed Securities17,111,473 — (206,537)16,904,936 
Certificate of Deposit1,000,000 — (17,985)982,015 
Corporate Bonds50,055,216 1,660 (3,248,493)46,808,383 
Government Securities30,736,849 — (1,567,272)29,169,577 
Municipal Bonds57,325,671 336,990 (4,826,535)52,836,126 
Common Stock842,085 252,288 — 1,094,373 
Total$173,228,927 $590,938 $(10,000,656)$163,819,209 


As of December 31, 2022:    
Unrealized
CostGainsLossesMarket Value
Short-Term Investments:
Certificate of Deposit$1,750,256 $— $(14,093)$1,736,163 
Corporate Bonds5,571,417 — (98,076)5,473,341 
Government Securities4,476,613 — (53,572)4,423,041 
Municipal Bonds5,223,500 — (48,727)5,174,773 
Other2,347,602 — — 2,347,602 
Long-Term Investments:
Asset-backed Securities19,151,229 — (321,533)18,829,696 
Certificate of Deposit250,000 — (11,075)238,925 
Corporate Bonds40,410,206 — (4,099,729)36,310,477 
Government Securities39,637,461 — (3,104,827)36,532,634 
Municipal Bonds53,476,883 235,713 (5,282,430)48,430,166 
Common Stock292,638 662 — 293,300 
Total$172,587,805 $236,375 $(13,034,062)$159,790,118 

Unrealized losses on investments as of June 30, 2023, are as follows:
Aggregate Unrealized LossesAggregate Fair Value of Investments
Loss duration of less than one year$516,647 $40,487,017 
Loss duration of greater than one year9,484,009 111,100,115 
       Total
$10,000,656 $151,587,132 
13

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



Unrealized losses on investments as of December 31, 2022, are as follows:
Aggregate Unrealized Losses
Aggregate Fair Value of Investments
Loss duration of less than one year$4,816,103 $77,701,146 
Loss duration of greater than one year8,217,959 76,643,586 
       Total
$13,034,062 $154,344,732 

Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The guidance modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. The Company utilized the guidance provided by ASC 326 to determine whether any of the available-for-sale debt securities held by the Company were impaired. No investments were considered to be impaired during the periods presented. The Company has the intention and current ability to hold its debt investments until any amortized cost basis has been recovered.

Fixed income securities as of June 30, 2023 have contractual maturities as follows:
Due within one year
$11,352,521 
Due between one and five years
95,024,741 
Due over five years
51,676,296 
$158,053,558 

(4)    Inventories
Inventories consisted of the following at the respective balance sheet dates:
June 30, 2023December 31, 2022
Raw materials
$280,764,776 $304,184,004 
Work-in-process
44,861,244 45,512,275 
Finished goods
64,400,248 54,663,991 
Total Inventory
$390,026,268 $404,360,270 


(5)    Earnings Per Share

The Company has unvested share-based payment awards with a right to receive non-forfeitable dividends, which are considered participating securities under ASC 260, Earnings Per Share. The Company allocates earnings to participating securities and computes earnings per share using the two-class method. Under the two-class method, net income per share is computed by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, net income is allocated to both common shares and participating securities based on their respective weighted average shares outstanding for the period. For a period of net loss, net loss is not allocated to participating securities.

The following table sets forth the computation of basic and diluted net income per common share under the two-class method for the three and six months ended June 30, 2023 and June 30, 2022:
14

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Basic Earnings Per Share
Net Income$109,155,403 $72,404,403 $206,733,664 $159,933,028 
Less: Dividends and undistributed earnings allocated to participating securities1,616,981 1,094,827 3,095,900 2,460,845 
Net Income available to common shareholders$107,538,422 $71,309,576 $203,637,764 $157,472,183 
Basic weighted average shares outstanding230,005,782 230,982,301 230,135,955 231,245,466 
Net Income per share - Basic$0.47 $0.31 $0.88 $0.68 
Diluted Earnings Per Share
Allocation of Net Income used in basic computation$107,538,422 $71,309,576 $203,637,764 $157,472,183 
Reallocation of undistributed earnings1,147 1,295 2,462 3,701 
Net Income available to common shareholders - Diluted$107,539,569 $71,310,871 $203,640,226 $157,475,884 
Number of shares used in basic computation230,005,782 230,982,301 230,135,955 231,245,466 
Additional weighted average dilutive common stock equivalents222,568 456,483 255,153 544,919 
Diluted weighted average shares outstanding230,228,350 231,438,784 230,391,108 231,790,385 
Net Income per share - Diluted$0.47 $0.31 $0.88 $0.68 
Shares related to stock plans not included in diluted average common shares outstanding because their effect would be anti-dilutive2,355,346 1,792,677 2,274,875 1,549,824 

(6)    Stock-Based Compensation Plans
As of June 30, 2023, the Company had two equity incentive plans, which include the Gentex Corporation 2019 Omnibus Incentive Plan ("2019 Omnibus Plan"), and an employee stock purchase plan. Those plans and any prior material amendments thereto have previously been approved by shareholders.
The 2019 Omnibus Plan provides for the potential awards to: i) employees; and ii) non-employee directors of the Company or its subsidiaries, which potential awards may be stock options (both incentive stock options and non-qualified stock options), appreciation rights, restricted stock awards and restricted stock units, performance share awards and performance units, and other awards that are stock-based, cash-based or a combination of both. The 2019 Omnibus Plan replaced the Company's Employee Stock Option Plan, Second Restricted Stock Plan, and Amended and Restated Non-Employee Director Stock Option Plan (the "Prior Plans"), which were also approved by shareholders. Any existing awards previously granted under the Prior Plans remain outstanding in accordance with their terms and are governed by the Prior Plans as applicable.
15

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Readers should refer to Note 5 of the consolidated financial statements in the Company's Annual Report on Form 10-K for the calendar year ended December 31, 2022, for additional information related to the Prior Plans.
The Company recognized total compensation expense for share-based payments of $9,744,670 and $18,264,205 for the three and six months ended June 30, 2023, respectively. The Company recognized compensation expense for share-based payments of $8,573,230 and $15,361,567 for the three and six months ended June 30, 2022, respectively. A portion of the compensation cost for share based payment awards is capitalized as part of inventory.
2019 Omnibus Incentive Plan

The purpose of the 2019 Omnibus Plan is to attract and retain employees, officers, and directors of the Company and its subsidiaries and to motivate and provide such persons incentives and rewards for performance. Pursuant to the terms of the 2019 Omnibus Plan, each type of award counts against the available shares based on a predetermined conversion rate (shown in the table below). As of June 30, 2023, 9,445,055 share awards have been made under the Plan, resulting in 23,954,574 shares granted of the 45,000,000 total shares available to be issued under the Plan. The shares issued are presented net of shares from canceled/expired options and shares.

Shares GrantedConversion RateTotal Shares Under 2019 Omnibus Plan
Non-Qualified Stock Options4,703,382 1.004,703,382 
Restricted Stock3,877,858 4.0615,744,103 
Performance Shares863,815 4.063,507,089 
Total9,445,055 23,954,574 
Employee Stock Options
Under the 2019 Omnibus Plan and the Employee Stock Option Plan, the option exercise price equals the stock’s market price on the date of grant. The options vest after one to five years and expire after five to ten years. As of June 30, 2023, there was $8,765,464 of unearned compensation cost associated with stock options granted under the 2019 Omnibus Incentive Plan and the Employee Stock Option Plan, which is expected to be recognized over the remaining vesting periods.
The fair value of each option grant 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 June 30,Six Months Ended June 30,
2023202220232022
Dividend Yield (1)
1.75 %1.78 %1.76 %1.79 %
Expected volatility (2)
28.97 %28.68 %29.01 %28.42 %
Risk-free interest rate (3)
4.13 %3.01 %3.87 %2.72 %
Expected term of options (years) (4)
4.154.154.154.15
Weighted-avg. grant date fair value$7.38$6.49$7.11$6.43
1.Represents the Company’s estimated cash dividend yield over the expected term of option grant.
2.Amount is determined based on analysis of historical price volatility of the Company’s common stock. The expected volatility is based on the daily percentage change in the price of the stock over a period equal to the expected term of the option grant.
3.Represents the U.S. Treasury yield over the expected term of the option grant.
4.Represents the period of time that options granted are expected to be outstanding. Based on analysis of historical option exercise activity, the Company has determined that all employee groups exhibit similar exercise and post-vesting termination behavior.





16

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Restricted Shares
Restricted shares awarded under the 2019 Omnibus Plan and the Second Restricted Stock Plan entitle the shareholder to all rights of common stock ownership, except that the shares may not be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction period. The restriction period is determined by the Compensation Committee, appointed by the Board of Directors, but may not exceed ten years under the terms of such plans. As of June 30, 2023, the Company had unearned stock-based compensation of $47,040,485 associated with the restricted stock grants issued under the 2019 Omnibus Plan and the Second Restricted Stock Plan. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable restriction periods. Compensation expense from restricted stock grants in the three and six months ended June 30, 2023 was $5,862,755 and $11,808,809, respectively. Compensation expense from restricted stock grants in the three and six months ended June 30, 2022 was $5,335,072 and $10,625,877, respectively.

Performance Shares

Performance shares awarded under the 2019 Omnibus Plan are considered performance condition awards as attainment is based on the Company's performance relative to pre-established metrics. The fair value of such performance share awards was determined using the Company's average closing stock price on the twenty days preceding the date of grant. The expected attainment of the metrics for these awards is then analyzed each reporting period, and the related expense is adjusted based on expected attainment, if the then expected attainment differs from previous expectations. The cumulative effect on current and prior periods of a change in expected attainment is recognized in the period of change.

As of June 30, 2023, the Company had unearned stock-based compensation of $20,063,943 associated with these performance share grants. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable performance periods. Compensation expense related to these performance share grants in the three and six months ended June 30, 2023 was $1,635,022 and $2,137,228, respectively. Compensation expense related to these performance share grants in the three and six months ended June 30, 2022 was $1,442,676 and $1,122,206, respectively.

As part of its objective of attracting and retaining management to fulfill the Company's strategic goals, the Compensation Committee recommended and the Board approved on February 16, 2023, a retention grant of performance share awards ("PSAs"). In addition to the retention of management, the PSAs have been granted to further align management goals with those of the Company's shareholders. For that reason, the PSAs have been granted with performance criteria and will be based upon achievement of the Company's relative total shareholder return ("TSR") over a four year period (2023-2026), against a predetermined peer group. The grant date fair value of PSAs with TSR targets was determined using a Monte Carlo simulation. Compensation expense related to these retention grants in the three and six months ended June 30, 2023 was $516,493 and $641,218, respectively.

Employee Stock Purchase Plan

Prior to July 1, 2022, the Company had in place an employee stock purchase plan covering 2,000,000 shares of common stock. Under that plan, the Company sold shares at 85% of the stock’s market price at date of purchase. Under ASC 718, Compensation - Stock Compensation, the 15% discounted value was recognized as compensation expense. As of June 30, 2023, the Company has issued 1,624,122 shares under this prior plan.

In May 2022, the 2022 Gentex Corporation Employee Stock Purchase Plan covering 2,000,000 shares of common stock was approved by shareholders replacing the above referenced prior plan effective July 1, 2022. Under the plan, the Company sells shares at 85% of the stock's market price at date of purchase. Under ASC 718, the 15% discounted value is recognized as compensation expense. As of June 30, 2023, the Company has issued 205,505 shares under this plan.

17

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



(7)    Comprehensive Income (Loss)

Comprehensive income (loss) 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 unrealized gains and losses on certain debt investments and foreign currency translation adjustments.

The following table presents the net changes in the Company's accumulated other comprehensive loss by component (all amounts shown are net of tax):
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Foreign currency translation adjustments:
Balance at beginning of period$(4,153,406)$24,169 $(4,032,239)$920,589 
Other Comprehensive loss before reclassifications
(1,456,377)(3,131,326)(1,577,544)(4,027,746)
Net current-period change(1,456,377)(3,131,326)(1,577,544)(4,027,746)
Balance at end of period
(5,609,783)(3,107,157)(5,609,783)(3,107,157)
Unrealized (losses) gains on available-for-sale debt securities:
Balance at beginning of period
(8,071,091)(5,151,577)(10,110,695)1,006,655 
Other Comprehensive income (loss) before reclassifications
547,342 (2,903,717)825,060 (9,327,653)
Amounts reclassified from accumulated other comprehensive income
(109,236)206,572 1,652,650 472,276 
Net current-period change
438,106 (2,697,145)2,477,710 (8,855,377)
Balance at end of period
(7,632,985)(7,848,722)(7,632,985)(7,848,722)
Accumulated other comprehensive loss, end of period
$(13,242,768)$(10,955,879)$(13,242,768)$(10,955,879)

The following table presents details of reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2023 and 2022:
Details about Accumulated Other Comprehensive Loss ComponentsAmounts Reclassified from Other Comprehensive LossAffected Line item in the Consolidated Statements of Income
Three Months Ended June 30,
Six Months Ended June 30,
2023202220232022
Unrealized gains (losses) on available-for-sale debt securities
Realized gain (loss) on sale of securities$138,274 $(261,483)$(2,091,962)$(597,818)Investment income
Provision for income taxes(29,038)54,911 439,312 125,542 Provision for income taxes
Total net reclassifications for the period$109,236 $(206,572)$(1,652,650)$(472,276)


18

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)




(8)    Debt and Financing Arrangements

On October 15, 2018, the Company entered into a credit agreement with PNC as the administrative agent and sole lender, which has now been amended and restated as discussed below.

On February 21, 2023, as previously disclosed, the Company entered into an amended and restated credit agreement ("Credit Agreement") that provides for, among other things, a three-year unsecured revolving credit facility with a borrowing capacity of up to $250.0 million ("Revolver") that matures on February 21, 2026, replacing in its entirety the Company's above referenced prior $150.0 million revolving credit facility scheduled to mature on October 15, 2023. Included in the Revolver is a $20.0 million sublimit for standby letters of credit and a $35.0 million sublimit for swingline loans, each subject to certain conditions. Funds are available under the Revolver for working capital, capital expenditures, and other lawful corporate purposes, including, but not limited to, acquisitions and common stock repurchases, subject in each case to compliance with certain financial covenants, as defined in the Credit Agreement. As of June 30, 2023, there was no outstanding balance on the Revolver.

As of June 30, 2023, the Company is in compliance with its covenants under the Credit Agreement.


(9)    Equity

The decrease in common stock during the six months ended June 30, 2023, was primarily due to the repurchases of 2.0 million shares, partially offset by the issuance of 1.2 million shares of the Company’s common stock, net of cancellations, under the Company’s stock-based compensation plans. The total net decrease was 0.7 million shares.

The Company recorded a cash dividend of $0.120 per share during the second quarter of 2023 as compared to a cash dividend of $0.120 per share during the second quarter of 2022. The second quarter 2023 dividend of $28.0 million was declared on May 31, 2023 and was paid on July 19, 2023.


(10)    Contingencies
The Company is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business, including proceedings relating to product liability, intellectual property, safety and health, employment, regulatory, and other matters. Such matters are subject to many uncertainties and outcomes are not predictable. The Company does not believe, however, that at the current time any of these matters constitute material pending legal proceedings that will have a material adverse effect on the financial position or future results of operations or cash flows of the Company.


(11)    Segment Reporting

The Company's automotive segment develops and manufactures digital vision and connected car products and electronics, including: automatic-dimming rearview mirrors with and without electronic features; non-auto dimming rearview mirrors with and without electronic features; and other electronics. The Company also develops and manufactures variably dimming windows and laminate products for the aerospace industry and fire protection products for the commercial construction industry. In 2020, the Company acquired Vaporsens, which specializes in nanofiber chemical sensing. These three non-automotive segments are combined into the "Other" segment as shown below.
19

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Revenue:
Automotive Products$574,109,748 $452,951,028 $1,111,532,736 $910,903,581 
Other9,363,098 10,471,974 22,701,421 20,770,196 
Total$583,472,846 $463,423,002 $1,134,234,157 $931,673,777 
Income (Loss) from operations:
Automotive Products$128,729,058 $86,908,119 $240,168,856 $190,383,628 
Other(1,439,670)(1,117,150)371,179 (1,286,755)
Total$127,289,388 $85,790,969 $240,540,035 $189,096,873 



(12)    Income Taxes
The effective tax rate was 15.5% in the six months ended June 30, 2023, compared to an effective tax rate of 15.0% for the same period in 2022. Generally, effective tax rates for these periods differ from statutory federal income tax rates, due to provisions for state and local income taxes, permanent tax differences, the foreign-derived intangible income tax deduction, and research and development tax credits.

(13)    Revenue

The following table shows the Company’s Automotive revenue and Other Products revenue disaggregated by geographical location for Automotive Products for the three and six month periods ended June 30, 2023 and June 30, 2022:
Three Months Ended June 30,Six Months Ended June 30,
Revenue
2023202220232022
Automotive Products
U.S.
$177,940,475 $145,818,259 $348,722,079 $288,012,229 
Germany73,990,846 71,580,008 154,570,311 139,145,328 
  Japan84,178,56746,655,756156,334,551101,418,244
Mexico36,803,254 29,792,178 71,090,798 61,927,257 
Other201,196,606159,104,827380,814,997 320,400,523 
Total Automotive Products$