Gentex Corporation (NASDAQ:GNTX) Q3 2019 Results Conference Call October 18, 2019 9:30 AM ET Company Participants Josh O’Berski - Director of IR Steve Downing - President and CEO Kevin Nash - CFO, VP of Finance, and Treasurer Neil Boehm - CTO and VP of Engineering Conference Call Participants Chris Van Horn - B. Riley FBR Aileen Smith - Bank of America James Picariello - KeyBanc Capital Markets Ryan Brinkman - JP Morgan David Kelley - Jefferies David Whiston - Morningstar Operator Ladies and gentlemen, than ...

FORM 10-Q Filing Information [FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) - The report is a Quarterly Report (Form 10-Q) for the period ended June 30, 2019, filed by Gentex Corporation (Commission File Number: 0-10235)[2](index=2&type=chunk) Shares Outstanding | Class | Shares Outstanding, July 19, 2019 (shares) | | :--- | :--- | | Common Stock, $.06 Par Value | 254,775,618 | - The registrant is a large accelerated filer and is not a shell company[4](index=4&type=chunk) Table of Contents [Table of Contents](index=3&type=section&id=Index) PART I – FINANCIAL INFORMATION [PART I – FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Unaudited Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, cash flow statements, and detailed notes, providing a snapshot of the company's financial position and performance for the periods ended June 30, 2019 [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Summary | Metric | June 30, 2019 (USD) | December 31, 2018 (USD) | | :--- | :--- | :--- | | Total Assets | $2,142,802,873 | $2,085,434,068 | | Total Liabilities | $238,468,638 | $223,682,408 | | Total Shareholders' Investment | $1,904,334,235 | $1,861,751,660 | | Cash and cash equivalents | $260,332,892 | $217,025,278 | | Total current assets | $930,402,907 | $850,930,254 | [Unaudited Condensed Consolidated Statements of Income](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Consolidated Income Statement Summary | Metric | Three Months Ended June 30, 2019 (USD) | Three Months Ended June 30, 2018 (USD) | Six Months Ended June 30, 2019 (USD) | Six Months Ended June 30, 2018 (USD) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $468,711,354 | $454,981,440 | $937,300,351 | $920,401,545 | | Gross profit | $176,537,604 | $172,804,472 | $346,182,108 | $345,432,873 | | Income from operations | $127,904,966 | $126,683,004 | $249,501,298 | $255,198,337 | | Net Income | $108,958,625 | $109,023,982 | $213,239,036 | $220,272,725 | | Basic EPS | $0.42 | $0.40 | $0.82 | $0.81 | | Diluted EPS | $0.42 | $0.40 | $0.82 | $0.80 | | Cash Dividends Declared per Share | $0.115 | $0.110 | $0.230 | $0.220 | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Comprehensive Income Summary | Metric | Three Months Ended June 30, 2019 (USD) | Three Months Ended June 30, 2018 (USD) | Six Months Ended June 30, 2019 (USD) | Six Months Ended June 30, 2018 (USD) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $108,958,625 | $109,023,982 | $213,239,036 | $220,272,725 | | Other comprehensive income (loss), net of tax | $774,955 | $(2,692,093) | $2,099,559 | $(1,029,759) | | Comprehensive Income | $109,733,580 | $106,331,889 | $215,338,595 | $219,242,966 | [Unaudited Condensed Consolidated Statements of Shareholders' Investment](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Investment) Shareholders' Investment Summary | Metric | As of January 1, 2019 (USD) | As of June 30, 2019 (USD) | | :--- | :--- | :--- | | Common Stock Shares | 259,328,613 | 254,779,119 | | Common Stock Amount | $15,559,717 | $15,286,747 | | Additional Paid-In Capital | $745,324,144 | $777,238,253 | | Retained Earnings | $1,102,468,137 | $1,111,310,014 | | Accumulated Other Comprehensive Income (Loss) | $(1,600,338) | $499,221 | | Total Shareholders' Investment | $1,861,751,660 | $1,904,334,235 | - During the six months ended June 30, 2019, the company repurchased common stock totaling **$166.14 million** and declared cash dividends of **$58.69 million**[19](index=19&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary | Cash Flow Activity (Six Months Ended June 30) | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $273,467,294 | $292,384,554 | | Net cash (used for) investing activities | $(48,037,964) | $(156,183,468) | | Net cash (used for) financing activities | $(182,121,716) | $(409,236,441) | | Net increase (decrease) in cash and cash equivalents | $43,307,614 | $(273,035,355) | | Cash and cash equivalents, end of period | $260,332,892 | $296,699,141 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [(1) Basis of Presentation](index=11&type=section&id=(1)%20Basis%20of%20Presentation) - The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, including only normal and recurring adjustments[26](index=26&type=chunk) [(2) Adoption of New Accounting Pronouncements](index=11&type=section&id=(2)%20Adoption%20of%20New%20Accounting%20Pronouncements) - The company adopted ASU 2016-02, Leases, effective January 1, 2019, which did not have a material impact on its financial statements[27](index=27&type=chunk) - The company is evaluating ASU 2016-13, Financial Instruments - Credit Losses, for adoption on January 1, 2020[28](index=28&type=chunk) [(3) Goodwill and Other Intangible Assets](index=11&type=section&id=(3)%20Goodwill%20and%20Other%20Intangible%20Assets) - Goodwill remained constant at **$307.4 million** as of June 30, 2019, and December 31, 2018, with no interim impairment testing needed[29](index=29&type=chunk)[31](index=31&type=chunk) Intangible Asset Carrying Values | Intangible Asset | Net Carrying Value (June 30, 2019) (USD) | Net Carrying Value (December 31, 2018) (USD) | | :--- | :--- | :--- | | Gentex Patents | $15,304,338 | $15,723,266 | | HomeLink® Trade Names and Trademarks | $52,000,000 | $52,000,000 | | HomeLink® Technology | $93,750,000 | $101,250,000 | | Existing Customer Platforms | $18,275,000 | $20,425,000 | | Exclusive Licensing Agreement | $96,000,000 | $96,000,000 | | Total Patents & Other Intangible Assets | $275,329,338 | $285,398,266 | - Amortization expense for patents and intangible assets was approximately **$11.2 million** for the six months ended June 30, 2019, and is estimated to be around **$22 million** annually for 2019-2021[32](index=32&type=chunk)[33](index=33&type=chunk) [(4) Investments](index=12&type=section&id=(4)%20Investments) - The company classifies its government, municipal, and corporate bonds as Level 2 assets, while certificates of deposit are Level 1 assets[37](index=37&type=chunk)[38](index=38&type=chunk) Investment Fair Value Summary | Investment Category | Total Fair Value (June 30, 2019) (USD) | Total Fair Value (December 31, 2018) (USD) | | :--- | :--- | :--- | | Cash & Cash Equivalents | $260,332,892 | $217,025,278 | | Short-Term Investments | $190,565,065 | $169,412,999 | | Long-Term Investments | $121,061,221 | $137,979,082 | | Total Fair Value | $564,359,178 | $520,567,359 | - Unrealized losses on investments totaled **$40,879** as of June 30, 2019, with no investment losses considered other than temporary[44](index=44&type=chunk) Fixed Income Securities Maturity | Fixed Income Securities Maturity (June 30, 2019) | Amount (USD) | | :--- | :--- | | Due within one year | $189,280,485 | | Due between one and five years | $91,584,216 | | Due over five years | $21,877,006 | | Total | $302,741,707 | [(5) Inventories](index=19&type=section&id=(5)%20Inventories) Inventory Composition | Inventory Component | June 30, 2019 (USD) | December 31, 2018 (USD) | | :--- | :--- | :--- | | Raw materials | $146,975,452 | $139,058,541 | | Work-in-process | $31,237,909 | $35,386,615 | | Finished goods | $46,881,102 | $50,836,443 | | Total Inventory | $225,094,463 | $225,281,599 | [(6) Earnings Per Share](index=19&type=section&id=(6)%20Earnings%20Per%20Share) - The company uses the two-class method for EPS computation due to unvested share-based payment awards with non-forfeitable dividends[48](index=48&type=chunk) Earnings Per Share Metrics | EPS Metric | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Basic Earnings Per Share ($/share) | $0.42 | $0.82 | | Diluted Earnings Per Share ($/share) | $0.42 | $0.82 | | Basic weighted average shares outstanding (shares) | 255,219,868 | 256,350,600 | | Diluted weighted average shares outstanding (shares) | 256,579,621 | 257,694,885 | [(7) Stock-Based Compensation Plans](index=21&type=section&id=(7)%20Stock-Based%20Compensation%20Plans) - The 2019 Omnibus Incentive Plan, approved by shareholders in May 2019, replaced prior plans and covers **45,000,000 shares** of common stock for various awards[52](index=52&type=chunk)[55](index=55&type=chunk) Share-Based Compensation Expense and Unrecognized Costs | Compensation Expense (Share-Based Payments) | Three Months Ended June 30, 2019 (USD) | Six Months Ended June 30, 2019 (USD) | | :--- | :--- | :--- | | Total Compensation Expense | $5,200,045 | $9,986,839 | | Amortization expense from restricted stock grants | $3,274,411 | $6,046,175 | | Amortization expense from performance share grants | $257,756 | $257,756 | | Unrecognized compensation cost (stock options, Jun 30, 2019) | - | $7,397,810 | | Unearned stock-based compensation (restricted stock, Jun 30, 2019) | - | $43,851,893 | | Unearned stock-based compensation (performance shares, Jun 30, 2019) | - | $2,726,924 | - The company's Employee Stock Purchase Plan allows employees to purchase shares at **85% of market price**, with **1,063,052 shares** issued under the plan as of June 30, 2019[66](index=66&type=chunk) [(8) Comprehensive Income](index=24&type=section&id=(8)%20Comprehensive%20Income) - Comprehensive income includes net income adjusted for unrealized gains/losses on debt investments, foreign currency translation adjustments, and derivatives[68](index=68&type=chunk) Accumulated Other Comprehensive Income (Loss) Components | Component (Net of Tax) | Balance at End of Period (June 30, 2019) (USD) | | :--- | :--- | | Foreign currency translation adjustments | $(1,851,574) | | Unrealized gains (losses) on available-for-sale debt securities | $2,350,795 | | Unrealized gains (losses) on derivatives | $0 | | Accumulated other comprehensive income (loss), end of period | $499,221 | Reclassification from AOCI | Reclassification from AOCI (Six Months Ended June 30) | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Realized gain on sale of securities (net of tax) | $172,995 | $565,541 | | Realized gain (loss) on interest rate swap (net of tax) | $0 | $(4,837) | | Total net reclassifications for the period | $172,995 | $560,704 | [(9) Debt and Financing Arrangements](index=25&type=section&id=(9)%20Debt%20and%20Financing%20Arrangements) - The company has a **$150 million** senior revolving credit facility, with no outstanding balance as of June 30, 2019, and was in compliance with all covenants[73](index=73&type=chunk)[75](index=75&type=chunk) [(10) Equity](index=27&type=section&id=(10)%20Equity) - Common stock decreased by **4.5 million shares** during the six months ended June 30, 2019, primarily due to repurchases of **7.8 million shares**, partially offset by **3.3 million shares** issued under stock plans[77](index=77&type=chunk) - The quarterly cash dividend rate increased by **$0.005 per share** in Q1 2019, resulting in a **$0.115 per share** dividend declared in Q2 2019[78](index=78&type=chunk) [(11) Contingencies](index=27&type=section&id=(11)%20Contingencies) - The company is involved in various legal proceedings but does not anticipate any material adverse effects on its financial position or results[79](index=79&type=chunk) [(12) Segment Reporting](index=27&type=section&id=(12)%20Segment%20Reporting) - The company operates in two segments: Automotive Products (digital vision, connected car products, electronics) and Other (variably dimming windows for aerospace, fire protection products)[80](index=80&type=chunk) Segment Performance | Segment | Revenue (Six Months Ended June 30, 2019) (USD) | Income from Operations (Six Months Ended June 30, 2019) (USD) | | :--- | :--- | :--- | | Automotive Products | $912,423,707 | $241,247,925 | | Other | $24,876,644 | $8,253,373 | | Total | $937,300,351 | $249,501,298 | [(13) Income Taxes](index=27&type=section&id=(13)%20Income%20Taxes) - The effective tax rate for the six months ended June 30, 2019, was **16.4%**, up from **15.5%** in the prior year, primarily due to a decrease in discrete tax benefits related to stock-based compensation[82](index=82&type=chunk) [(14) Revenue](index=28&type=section&id=(14)%20Revenue) Automotive Products Revenue by Geography | Automotive Products Revenue by Geography (Six Months Ended June 30, 2019) | Amount (USD) | | :--- | :--- | | U.S. | $285,931,010 | | Germany | $151,601,619 | | Japan | $112,055,986 | | Mexico | $86,589,093 | | Other | $276,245,999 | | Total Automotive Products | $912,423,707 | Revenue by Major Source | Revenue by Major Source (Six Months Ended June 30, 2019) | Amount (USD) | | :--- | :--- | | Automotive Mirrors & Electronics | $822,400,934 | | HomeLink Modules | $90,022,773 | | Fire Protection Products | $12,211,499 | | Windows Products | $12,665,145 | | Total Revenue | $937,300,351 | [(15) Leases](index=28&type=section&id=(15)%20Leases) - As of June 30, 2019, the weighted average remaining lease term for operating leases was **2 years**, with a weighted average discount rate of **2.9%**[85](index=85&type=chunk) Future Minimum Lease Payments | Year Ending December 31 | Future Minimum Lease Payments (USD) | | :--- | :--- | | 2019 (excluding six months ended June 30, 2019) | $745,751 | | 2020 | $576,623 | | 2021 | $138,888 | | 2022 | $54,656 | | 2023 | $11,083 | | Thereafter | $12,725 | | Total future minimum lease payments | $1,539,726 | | Less imputed interest | $(26,933) | | Total | $1,512,793 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis covers financial performance, condition, key drivers, trends, and future outlook [Results of Operations: Second Quarter 2019 vs. Second Quarter 2018](index=31&type=section&id=RESULTS%20OF%20OPERATIONS%3A%20SECOND%20QUARTER%202019%20VERSUS%20SECOND%20QUARTER%202018) - Net sales for Q2 2019 increased by **3%** to **$468.7 million**, primarily driven by a **3%** increase in automotive net sales and a **13%** increase in other net sales[88](index=88&type=chunk)[89](index=89&type=chunk)[92](index=92&type=chunk) Auto-Dimming Mirror Unit Shipments | Metric | Q2 2019 (thousands of units) | Q2 2018 (thousands of units) | % Change | | :--- | :--- | :--- | :--- | | Total Auto-Dimming Mirror Units | 10,819 | 10,567 | 2% | | North American Exterior Mirrors | 1,320 | 950 | 39% | | International Exterior Mirrors | 1,953 | 2,115 | (8)% | - Gross profit margin decreased due to annual customer price reductions (**150-200 basis points** negative impact) and tariffs (**50-100 basis points** negative impact), partially offset by product mix improvements (**50-100 basis points** positive impact) and purchasing cost reductions (**100-150 basis points** positive impact)[93](index=93&type=chunk) - Net income for Q2 2019 was relatively flat at **$109.0 million** compared to Q2 2018[98](index=98&type=chunk) [Results of Operations: Six Months Ended June 30, 2019 vs. Six Months Ended June 30, 2018](index=32&type=section&id=SIX%20MONTHS%20ENDED%20JUNE%2030%2C2019%20VERSUS%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202018) - Net sales for the six months ended June 30, 2019, increased by **2%** to **$937.3 million**, with automotive net sales up **1%** driven by a **2%** increase in automotive mirror unit shipments[99](index=99&type=chunk)[100](index=100&type=chunk) - Cost of goods sold as a percentage of net sales increased to **63.1%** for the first six months of 2019, up from **62.5%** in the same period last year, primarily due to customer price reductions and tariffs[101](index=101&type=chunk) - Engineering, research and development (E, R & D) expenses increased **6%** to **$56.4 million**, and selling, general & administrative (S, G & A) expenses increased **9%** to **$40.2 million**, both primarily due to increased staffing levels[13](index=13&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Net income for the six months ended June 30, 2019, decreased by **3%** to **$213.2 million**, compared to **$220.3 million** in the prior year, attributed to decreased gross margin and increased operating expenses[105](index=105&type=chunk) [Financial Condition](index=33&type=section&id=FINANCIAL%20CONDITION) - Cash and cash equivalents increased by **$43.3 million** to **$260.3 million** as of June 30, 2019, driven by positive cash flows from operations[105](index=105&type=chunk) Working Capital and Long-Term Investments | Metric | June 30, 2019 (USD) | December 31, 2018 (USD) | | :--- | :--- | :--- | | Working Capital | $752,842,110 | $681,769,335 | | Long Term Investments | $121,061,221 | $137,979,082 | | Total | $873,903,331 | $819,748,417 | - The company repurchased **7,799,647 shares** during the six months ended June 30, 2019, with **26,041,610 shares** remaining under the authorized plan[114](index=114&type=chunk)[158](index=158&type=chunk) - Capital expenditures for the six months ended June 30, 2019, were approximately **$45.5 million**[109](index=109&type=chunk) [Business Update](index=35&type=section&id=BUSINESS%20UPDATE) - The company's Q2 2019 revenue growth outpaced worldwide light vehicle production growth by approximately **11%**, driven by product launches in 2018 and 2019[115](index=115&type=chunk) - Growth is attributed to electrochromic technology, the Full Display Mirror®, and other electronic features like the Integrated Toll Module and HomeLink®[115](index=115&type=chunk) - Interior and exterior auto-dimming mirrors and advanced electronic features were launched on **33 new vehicle models** in Q2 2019, with increased launches for HomeLink® and Full Display Mirror®[116](index=116&type=chunk) [Product Update](index=35&type=section&id=PRODUCT%20UPDATE) - The Full Display Mirror® (FDM) is shipping to **five OEMs** (General Motors, Subaru, Toyota, Nissan, and Jaguar Land Rover) and is currently on **30 vehicle nameplates**, with ongoing negotiations for future OEM adoptions[118](index=118&type=chunk) - The company's Camera Monitoring System (CMS) uses **three cameras** for a comprehensive view, streaming to the FDM, and is designed to meet automaker, driver, safety, and regulatory requirements, including UN-ECE Regulation 46[119](index=119&type=chunk)[121](index=121&type=chunk) - Next-generation HomeLink Connect™ uses RF and wireless cloud-based connectivity for vehicle-to-home automation, with expansion efforts in new markets like China[122](index=122&type=chunk)[123](index=123&type=chunk) - The Integrated Toll Module (ITM®) began volume shipments to Audi in Q1 2019, with further nameplate launches expected with Audi and two additional OEMs in 2020 or 2021[124](index=124&type=chunk) - The company has an exclusive licensing agreement with Fingerprint Cards AB for ActiveIRIS® iris-scanning biometric technology for automotive applications, aiming to integrate it with HomeLink® for enhanced security and personalization[125](index=125&type=chunk) - SmartBeam® Generation 4, the proprietary high beam control system, offers advanced features like dynamic forward lighting and is expected to meet new FMVSS 108 standards, though it faces increased competition from multi-function driver assist camera products[127](index=127&type=chunk)[130](index=130&type=chunk) - The latest generation of dimmable aircraft windows will be offered as optional content on the new Boeing 777X, building on its existing supply for the Boeing 787 Dreamliner[131](index=131&type=chunk) [Other Business Considerations](index=38&type=section&id=OTHER) - Automotive revenues constitute approximately **97-98%** of the company's total revenue[132](index=132&type=chunk) - The company faces ongoing pricing pressure from automotive customers and competitors, which it attempts to offset through engineering and purchasing cost reductions, productivity improvements, and increased unit sales volume[132](index=132&type=chunk)[133](index=133&type=chunk) - The company relies on patents and trade secrets for competitive advantage and actively manages intellectual property rights to minimize infringement risks[134](index=134&type=chunk) [Outlook and Guidance](index=40&type=section&id=OUTLOOK) Calendar Year 2019 Light Vehicle Production Forecast | Region | Calendar Year 2019 Light Vehicle Production Forecast (Millions of units) | % Change YoY | | :--- | :--- | :--- | | North America | 16.65 | (2)% | | Europe | 21.44 | (3)% | | Japan and Korea | 13.28 | 1% | | China | 25.04 | (7)% | | Total Light Vehicle Production | 76.41 | (3)% | Guidance for Calendar Year 2019 | Guidance for Calendar Year 2019 | Range | | :--- | :--- | | Revenue | $1.87 - $1.90 billion | | Gross Profit Margin (%) | 36.5% - 37.5% | | Operating Expenses (USD) | $195 - $200 million | | Capital Expenditures (USD) | $90 - $100 million | | Effective Annual Tax Rate (%) | 16.0% - 17.0% | - The company maintains its 2020 revenue growth estimate of **3% to 8%** over 2019, despite ongoing uncertainties in light vehicle production, tariffs, and market conditions[140](index=140&type=chunk)[146](index=146&type=chunk) [Critical Accounting Policies](index=42&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) - The preparation of financial statements requires management to make estimates and assumptions, which are continuously evaluated and have historically not differed materially from actual results[147](index=147&type=chunk) - Detailed critical accounting policies are referenced in the company's 2018 Annual Report on Form 10-K[148](index=148&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces foreign exchange and interest rate risks, with no material changes from the 2018 Form 10-K - The company is subject to foreign exchange rate risk and interest rate risk, which could lead to realized losses on fixed income investments or other-than-temporary impairment adjustments[149](index=149&type=chunk) - There were no material changes in market risk factors from the previously disclosed 2018 Form 10-K[149](index=149&type=chunk) - Uncertain economic conditions in foreign markets could reduce demand for the company's automotive products[150](index=150&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20And%20Procedures) Management concluded disclosure controls were effective as of June 30, 2019, with no material changes in internal control - The company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2019[151](index=151&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2019[152](index=152&type=chunk) Safe Harbor Statement [Safe Harbor Statement](index=42&type=section&id=SAFE%20HARBOR%20STATEMENT) - This report contains forward-looking statements subject to various risks and uncertainties, including market conditions, customer preferences, competition, and regulatory changes[153](index=153&type=chunk)[155](index=155&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the company undertakes no obligation to publicly update or revise them[155](index=155&type=chunk) PART II – OTHER INFORMATION [PART II – OTHER INFORMATION](index=45&type=section&id=Part%20II%20-%20Other%20Information) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section refers to risk factors detailed in Item 2 of this 10-Q and the 2018 Form 10-K, with no material changes - Risk factors are discussed in Item 2 of this Form 10-Q and in Part I – Item 1A of the company's 2018 Form 10-K[157](index=157&type=chunk) - No material changes to risk factors were reported, except as described in Item 2 and Item 3 of this Form 10-Q[157](index=157&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase plan, including shares repurchased and remaining authorization - The company has an ongoing share repurchase plan authorized by the Board of Directors as part of its capital allocation strategy[158](index=158&type=chunk) Share Repurchase Activity | Period | Total Number of Shares Purchased (shares) | Weighted Average Price Paid Per Share ($/share) | Maximum Number of Shares That May Yet Be Purchased Under the Plan or Program (shares) | | :--- | :--- | :--- | :--- | | 1st Quarter 2019 Total | 4,724,938 | $20.37 | - | | 2nd Quarter 2019 Total | 3,074,709 | $22.72 | - | | 2019 Total (Six Months) | 7,799,647 | $21.30 | 26,041,610 | - As of June 30, 2019, the company had repurchased a total of **120,958,118 shares** at a cost of **$1.71 billion** under its share repurchase plan[159](index=159&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index for a list of documents filed as exhibits to the Form 10-Q - The Exhibit Index is located on page 36 (actual page 47) of the report[160](index=160&type=chunk) Signatures [Signatures](index=46&type=section&id=Signatures) - The report was signed on August 2, 2019, by Steven R. Downing, President and Chief Executive Officer, and Kevin C. Nash, Vice President, Finance, Chief Financial Officer and Treasurer[162](index=162&type=chunk) Exhibit Index [Exhibit Index](index=47&type=section&id=Exhibit%20Index) - The Exhibit Index lists various documents, including CEO and CFO certifications under the Sarbanes-Oxley Act (Sections 302 and 906) and Inline XBRL documents[164](index=164&type=chunk)

Start Time: 09:30 January 1, 0000 10:12 AM ET Gentex Corporation (NASDAQ:GNTX) Q2 2019 Earnings Conference Call July 19, 2019, 09:30 AM ET Company Participants Steve Downing - President and CEO Kevin Nash - CFO, VP of Finance, and Treasurer Neil Boehm - CTO and VP of Engineering Josh O’Berski - Director of IR Conference Call Participants Chris Van Horn - B. Riley FBR David Leiker - Robert W. Baird Ryan Brinkman - JPMorgan Aileen Smith - Bank of America Merrill Lynch James Picariello - KeyBanc Capital Market ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark one) ü QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 or FORM 10-Q 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) (State or other jurisdiction of incorporation or or ...

Gentex Corporation (NASDAQ:GNTX) Q1 2019 Earnings Conference Call April 24, 2019 9:30 AM ET Company Participants Josh O'Berski - Director of Investor Relations Steven Downing - President and Chief Executive Officer Kevin Nash - Chief Financial Officer, Vice President of Finance, and Treasurer Neil Boehm - Chief Technology Officer and Vice President of Engineering Conference Call Participants Chris Van Horn - B. Riley FBR Richard Carlson - BMO Capital Markets John Murphy - Bank of America James Picariello - ...

PART I [Business Overview](index=3&type=section&id=Item%201.%20Business) The company leads in auto-dimming mirrors for the automotive sector, which generated 98% of 2018 revenue, alongside aerospace and fire protection products - The company's main businesses include automotive auto-dimming mirrors and electronic products, dimmable aircraft windows, and fire protection products[9](index=9&type=chunk)[14](index=14&type=chunk) - Automotive products are the company's largest business segment, accounting for **98% of the company's total revenue** in 2018[13](index=13&type=chunk)[18](index=18&type=chunk) - The company is a global leader in electrochromic auto-dimming mirror manufacturing, with a global market share of approximately **92% in 2018** and **93% in 2017**[19](index=19&type=chunk)[26](index=26&type=chunk) - The company continuously develops new products, including advanced features such as SmartBeam®, HomeLink®, frameless mirror designs, LED map lights, compass and temperature displays, telematics, ITM® systems, hands-free communication, rear camera displays (RCD), and full display mirrors (FDM®); biometric authentication systems and camera monitoring systems (CMS) are currently under development[20](index=20&type=chunk) - The company announced in January 2019 that its latest generation of dimmable aircraft windows would be offered as an optional feature on the Boeing 777X[13](index=13&type=chunk)[32](index=32&type=chunk) - The company holds **38 U.S. registered trademarks** and **635 U.S. patents**, with 31 trademarks and 514 patents related to electrochromic technology, automotive mirrors, microphones, displays, camera, sensor technology, and/or HomeLink® products[39](index=39&type=chunk) Net Sales Contribution from Major Automotive Customers in 2018 | Customer Name | 2018 Net Sales Contribution | | :--------------- | :-------------------------- | | Volkswagen Group | 15% | | Toyota Motor | 13% | | Daimler Group | 10% | Auto-Dimming Mirror Regional Shipment Contribution | Region | 2018 | 2017 | 2016 | 2008 | | :--------- | :--- | :--- | :--- | :--- | | Domestic | 19% | 19% | 23% | 24% | | (1) Multinational | 12% | 12% | 13% | 14% | | North America | 31% | 31% | 36% | 38% | | Europe | 45% | 46% | 44% | 45% | | Asia Pacific | 24% | 23% | 20% | 17% | | Total | 100% | 100% | 100% | 100% | [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from automotive industry cyclicality, customer concentration, pricing pressure, competition, global trade policies, technological shifts, supply chain disruptions, and regulatory complexities - Approximately **98% of the company's net sales** are derived from the automotive industry, which is cyclical and susceptible to economic activity levels, facing risks such as production fluctuations, uncertain customer orders, component shortages, plant shutdowns, increased commodity costs, and shifts in consumer preferences[51](index=51&type=chunk) - **Three automotive customers** (Volkswagen Group, Toyota Motor, and Daimler Group) each accounted for **10% or more** of the company's annual net sales in 2018; losing these customers or a decline in their production could significantly harm the company's business[53](index=53&type=chunk) - The company continuously faces pricing pressure from automotive customers and competitors; failure to offset price reductions through engineering and procurement cost reductions, productivity improvements, or increased shipments of high-value-added products will impact profit margins[54](index=54&type=chunk)[55](index=55&type=chunk) - The geopolitical environment (e.g., US-China, US-Europe tariffs) continues to create uncertainty, potentially disrupting the automotive supply chain and negatively impacting the company's business[56](index=56&type=chunk) - Competitive risks include major competitor Magna Mirrors having more resources, full display mirror (FDM®) systems facing competition from other companies, and the long-term trend of camera monitoring systems (CMS) potentially replacing traditional mirrors[57](index=57&type=chunk)[61](index=61&type=chunk) - Inadequate intellectual property protection (especially in China) poses an increasing risk to technology companies, and the loss of patents or trade secrets could adversely affect the company's business[64](index=64&type=chunk) - Supply chain disruptions (e.g., component shortages, natural disasters, shutdowns, bankruptcies) and IT infrastructure failures (e.g., cybersecurity attacks, data breaches) could severely impact the company's operations and financial condition[69](index=69&type=chunk)[70](index=70&type=chunk)[72](index=72&type=chunk) - Changes in government regulations, such as the Dodd-Frank Act's disclosure requirements for conflict minerals, and Euro NCAP and NHTSA evaluations of driver assistance systems and adaptive high-beam systems, could affect the company's product market and competitive position[74](index=74&type=chunk)[78](index=78&type=chunk) [Unresolved Staff Comments](index=14&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments as of the end of the reporting period - The company has no unresolved staff comments[83](index=83&type=chunk) [Properties](index=14&type=section&id=Item%202.%20Properties) The company operates manufacturing and office facilities in Michigan, with sales and engineering offices globally, and maintains sufficient production capacity - The company's primary operating facilities are located in Zeeland and Holland, Michigan, USA, including manufacturing, office, and chemical laboratories[83](index=83&type=chunk) - The company has sales and engineering offices in Europe (Germany, UK, France, Sweden) and Asia (Japan, South Korea, China)[21](index=21&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - In 2018, the company constructed a new **265,000 square foot** distribution center in Zeeland at a cost of approximately **$22 million**, which became operational in the fourth quarter[91](index=91&type=chunk)[92](index=92&type=chunk) - The company estimates its existing buildings can produce approximately **33 million to 36 million interior mirror units** annually, with **29.7 million units** shipped in 2018; exterior mirror manufacturing facilities can produce approximately **14 million to 17 million units** annually, with approximately **12 million units** shipped in 2018[98](index=98&type=chunk)[99](index=99&type=chunk) [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal proceedings but anticipates no material adverse impact on its financial condition or operations - The company does not believe there are currently any matters constituting significant pending legal proceedings that would have a material adverse effect on its financial condition, future operating results, or cash flows[100](index=100&type=chunk) [Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - This item is not applicable[101](index=101&type=chunk) PART II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=17&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, with 3,086 shareholders, a quarterly dividend of $0.11 per share, and an active stock repurchase program - The company's common stock trades on the Nasdaq Global Select Market® under the ticker symbol GNTX[102](index=102&type=chunk) - As of February 1, 2019, there were **3,086 registered holders** of the company's common stock and restricted stock[102](index=102&type=chunk) - The company's Board of Directors approved an increase in the quarterly dividend to **$0.11 per share** in March 2018 and plans to continue paying quarterly cash dividends[104](index=104&type=chunk) - The company implemented a stock repurchase program and authorized the repurchase of an additional **20,000,000 shares** on March 9, 2018[105](index=105&type=chunk) Summary of Stock Repurchase Activity in 2018 | Period | Total Number of Shares Purchased | Average Price Paid Per Share ($) | Total Number of Shares Purchased As Part of a Publicly Announced Plan* | | :------------- | :------------------------------- | :------------------------------- | :--------------------------------------------------------------------- | | January 2018 | 6,649,731 | $21.33 | 6,649,731 | | February 2018 | 1,944,826 | $22.60 | 1,944,826 | | March 2018 | 736,942 | $22.81 | 736,942 | | April 2018 | 1,531,711 | $22.59 | 1,531,711 | | May 2018 | 2,121,554 | $23.18 | 2,121,554 | | June 2018 | 2,631,552 | $23.88 | 2,631,552 | | July 2018 | 2,079,020 | $22.47 | 2,079,020 | | August 2018 | 3,303,809 | $23.59 | 3,303,809 | | September 2018 | 2,125,420 | $22.53 | 2,125,420 | | October 2018 | 928,097 | $20.56 | 928,097 | | November 2018 | 1,050,870 | $22.16 | 1,050,870 | | December 2018 | 1,345,835 | $20.60 | 1,345,835 | | Total | 26,449,367 | | 26,449,367 | [Selected Financial Data](index=18&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data from 2014-2018 shows consistent growth in net sales and income, increasing EPS and dividends, and zero long-term debt post-2016 Selected Financial Data 2014-2018 | Metric | 2018 ($) | 2017 ($) | 2016 ($) | 2015 ($) | 2014 ($) | | :------------------------- | :------------ | :------------ | :------------ | :------------ | :------------ | | Net Sales | 1,834,064 | 1,794,873 | 1,678,925 | 1,543,618 | 1,375,501 | | Net Income | 437,883 | 406,792 | 347,591 | 318,470 | 288,605 | | Earnings Per Share (Diluted) | $1.62 | $1.41 | $1.19 | $1.08 | $0.98 | | Gross Margin | 37.6% | 38.7% | 39.8% | 39.1% | 39.2% | | Cash Dividends Per Share | $0.440 | $0.390 | $0.355 | $0.335 | $0.31 | | Total Assets | 2,085,434 | 2,352,054 | 2,309,620 | 2,148,673 | 2,022,540 | | Long-Term Debt at Year-End | $— | $— | 178,125 | 225,625 | 258,125 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) 2018 net sales grew 2% driven by international mirror shipments, while net income rose 8% due to lower taxes, despite a slight gross margin decline from pricing pressure Comparison of Operating Results 2018 vs. 2017 | Metric | 2018 ($ Millions) | 2017 ($ Millions) | Change ($ Millions) | Change (%) | | :--------------------------- | :---------------- | :---------------- | :------------------ | :--------- | | Net Sales | $1,834.1 | $1,794.9 | $39.2 | 2.2% | | Cost of Sales as % of Net Sales | 62.4% | 61.3% | 1.1% | 1.8% | | Gross Profit | 37.6% | 38.7% | (0.6)% | (1.5)% | | Research and Development Expenses | 5.8% | 5.6% | $7.4 | 7.4% | | Selling, General and Administrative Expenses | 4.1% | 4.0% | $3.8 | 5.3% | | Operating Income | 27.7% | 29.2% | (2.9)% | (9.9)% | | Net Income | 23.9% | 22.7% | $31.1 | 7.6% | | Effective Tax Rate | 16.1% | 23.5% | (7.4)% | (31.5)% | - Automotive net sales grew in 2018, primarily due to a **6% increase in auto-dimming mirror shipments**, from **39.3 million units in 2017** to **41.6 million units in 2018**, mainly reflecting increased international market penetration[111](index=111&type=chunk) - Gross margin decreased in 2018, primarily due to annual customer price reductions not being fully offset by lower procurement costs, and lower-than-expected sales preventing full absorption of fixed overhead[113](index=113&type=chunk) - Net income increased by **8% in 2018**, primarily due to a lower effective tax rate, largely attributable to the Tax Cuts and Jobs Act of 2017 reducing the statutory federal income tax rate from **35% to 21%**[117](index=117&type=chunk)[118](index=118&type=chunk) Cash and Cash Equivalents and Current Ratio | Metric | 2018 ($ Millions) | 2017 ($ Millions) | 2016 ($ Millions) | | :----------------------- | :---------------- | :---------------- | :---------------- | | Cash and Cash Equivalents | $217.0 | $569.7 | $546.5 | | Current Ratio | 5.0 | 4.9 | 7.7 | Summary of Cash Flows | Cash Flow Source/Use | 2018 ($ Millions) | 2017 ($ Millions) | 2016 ($ Millions) | | :------------------------ | :---------------- | :---------------- | :---------------- | | Cash Flow from Operating Activities | $552.4 | $501.0 | $477.0 | | Cash Flow from Investing Activities | ($185.8) | ($77.7) | ($251.4) | | Cash Flow from Financing Activities | ($719.3) | ($400.0) | ($230.7) | - Cash outflow from financing activities significantly increased in 2018, primarily due to common stock repurchases rising from **$231.4 million in 2017** to **$591.6 million in 2018**[130](index=130&type=chunk) - The company expects 2019 revenue to be between **$1.83 billion and $1.93 billion**, with a gross margin between **36% and 37%**, including approximately **$20 million in tariff costs**[138](index=138&type=chunk)[139](index=139&type=chunk) - The company anticipates 2019 capital expenditures of approximately **$90 million to $100 million**, primarily for production equipment purchases, to be financed through existing cash and operating cash flows[141](index=141&type=chunk) - The company expects 2020 revenue to grow by approximately **3% to 8%** compared to 2019[144](index=144&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign exchange and interest rate risks, though most non-U.S. sales are USD-denominated, and no hedging activities are currently undertaken - The company faces foreign currency exchange rate risk and interest rate risk, where interest rate fluctuations could negatively impact the financial performance of fixed-income investments[145](index=145&type=chunk) - Most of the company's non-U.S. sales are denominated in U.S. dollars, with approximately **8% in 2018**, **8% in 2017**, and **7% in 2016** of net sales denominated in non-U.S. currencies; the company currently does not engage in foreign currency hedging activities[147](index=147&type=chunk) [Financial Statements and Supplementary Data](index=25&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents consolidated financial statements for 2016-2018, including balance sheets, income statements, and cash flow statements, along with quarterly data - This report includes consolidated balance sheets as of December 31, 2018, and 2017, and consolidated statements of income, comprehensive income, shareholders' investment, and cash flows for the years ended December 31, 2018, 2017, and 2016[158](index=158&type=chunk) Quarterly Financial Data 2018 and 2017 (Unaudited) | Metric | 2018 Q1 ($ Thousands) | 2017 Q1 ($ Thousands) | 2018 Q2 ($ Thousands) | 2017 Q2 ($ Thousands) | 2018 Q3 ($ Thousands) | 2017 Q3 ($ Thousands) | 2018 Q4 ($ Thousands) | 2017 Q4 ($ Thousands) | | :------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Sales | $465,420 | $453,535 | $454,981 | $443,139 | $460,253 | $438,628 | $453,409 | $459,570 | | Gross Profit | $172,628 | $175,801 | $172,804 | $167,208 | $172,990 | $171,230 | $172,044 | $180,290 | | Operating Income | $128,515 | $134,427 | $126,683 | $125,865 | $127,428 | $129,073 | $125,499 | $133,994 | | Net Income | $111,249 | $97,557 | $109,024 | $88,536 | $111,336 | $90,230 | $106,275 | $130,469 | | Basic Earnings Per Share ($) | $0.40 | $0.34 | $0.40 | $0.31 | $0.42 | $0.32 | $0.41 | $0.46 | | Diluted Earnings Per Share ($) | $0.40 | $0.33 | $0.40 | $0.31 | $0.42 | $0.31 | $0.41 | $0.46 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=25&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) No changes in accountants or disagreements on accounting and financial disclosure occurred during the 24 months ended December 31, 2018 - During the 24-month period ended December 31, 2018, there were no changes in accountants, nor any disagreements with accountants on accounting and financial disclosure[160](index=160&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and independent auditors confirmed the effectiveness of disclosure controls and internal control over financial reporting as of December 31, 2018 - The company's Chief Executive Officer and Chief Financial Officer assessed the effectiveness of disclosure controls and procedures as of December 31, 2018, and concluded they were adequate and effective[161](index=161&type=chunk) - Management assessed the effectiveness of internal control over financial reporting based on the COSO (2013) framework and concluded that the company maintained effective internal control over financial reporting as of December 31, 2018[162](index=162&type=chunk) - Independent registered public accounting firm Ernst & Young LLP audited the effectiveness of the company's internal control over financial reporting as of December 31, 2018, and issued an unqualified opinion[164](index=164&type=chunk)[216](index=216&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - No material changes occurred in the company's internal control over financial reporting during the reporting period[165](index=165&type=chunk) [Other Information](index=26&type=section&id=Item%209B.%20Other%20Information) This section contains no other information - There is no other information in this section[166](index=166&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=27&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section lists executive officers, details their tenure, and notes the adoption of a Code of Ethics, with further governance details in the proxy statement Company Executive Officers | Name | Age | Position | Tenure in Current Position | | :------------ | :-- | :----------------------------------------- | :------------------------- | | Steve Downing | 41 | President and Chief Executive Officer | January 2018 | | Kevin Nash | 44 | Vice President of Finance, CFO and Treasurer | February 2018 | | Scott Ryan | 38 | Vice President, General Counsel and Corporate Secretary | August 2018 | | Neil Boehm | 47 | Chief Technology Officer and VP of Engineering | February 2018 | | Matthew Chiodo | 54 | Vice President of Sales | February 2018 | - The company has adopted a Code of Ethics applicable to its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and all other executive officers, which is available on the company's website[177](index=177&type=chunk) [Executive Compensation](index=29&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation was adjusted in 2019, with annual incentives tied to revenue, operating income, and EPS, and long-term incentives using PSAs and RS to align with shareholder value Executive Officer Base Salaries 2018 vs. 2019 | Executive Officer Name | Position | 2018 Base Salary (USD) | 2019 Base Salary (USD) | | :--------------------- | :----------------------------------------- | :--------------------- | :--------------------- | | Steve Downing | President and Chief Executive Officer | $650,000 | $750,000 | | Kevin Nash | Vice President of Finance, CFO and Treasurer | $340,000 | $400,000 | | Neil Boehm | Vice President of Engineering and CTO | $333,000 | $407,000 | | Matt Chiodo | Vice President of Sales | $336,000 | $380,000 | | Scott Ryan | Vice President, General Counsel and Corporate Secretary | $315,000 | $350,000 | - The Annual Incentive Plan provides cash awards to executive officers based on three key performance indicators: revenue (**33.33%**), operating income (**33.33%**), and diluted earnings per share (**33.33%**)[181](index=181&type=chunk)[185](index=185&type=chunk) - In 2018, the CEO's annual plan bonus target ranged from **0%-200% of base salary**, while other executive officers' targets were **0%-150%**; in 2019, the CEO's threshold increased to **50%**, and other executive officers' thresholds increased to **37.5%**[182](index=182&type=chunk)[183](index=183&type=chunk) 2018 Annual Incentive Plan Performance vs. Actual Results | Performance Metric | Weight | Threshold ($ Thousands) | Target ($ Thousands) | Maximum ($ Thousands) | Actual Performance ($ Thousands) | | :----------------------- | :------ | :---------------------- | :------------------- | :-------------------- | :------------------------------- | | Revenue | 33.33% | $1,794,873 | $1,930,000 | $2,065,000 | $1,834,064 | | Operating Income | 33.33% | $523,359 | $554,000 | $597,000 | $515,001 | | Diluted Earnings Per Share | 33.33% | $1.410 | $1.640 | $1.780 | $1.644 | - The company implemented the 2019 Omnibus Incentive Plan (OIP) and Long-Term Incentive Plan, designed to balance short-term goals with long-term shareholder value creation through Performance Share Awards (PSAs) and Restricted Stock (RS)[189](index=189&type=chunk)[192](index=192&type=chunk) - In the Long-Term Incentive Plan, **70% of awards** are granted through PSAs, linked to EBITDA and ROIC; **30%** are granted through RS, serving as an incentive and retention tool[192](index=192&type=chunk)[194](index=194&type=chunk)[196](index=196&type=chunk) - Equity compensation for non-employee directors has been adjusted, replacing previous stock options with **$100,000 worth of restricted stock awards**, which will vest one year after the grant date[198](index=198&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=32&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership details for management and beneficial owners are incorporated by reference, with no identified change of control arrangements - Information regarding security ownership of management, certain beneficial owners, and equity compensation plan summaries is incorporated by reference into the proxy statement[199](index=199&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=31&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain transactions and director independence is incorporated by reference into the proxy statement - Information regarding certain transactions and director independence is incorporated by reference into the proxy statement[200](index=200&type=chunk) [Principal Accounting Fee and Services](index=31&type=section&id=Item%2014.%20Principal%20Accounting%20Fee%20and%20Services) Details on principal accounting fees, services, and the audit committee's pre-approval policy are incorporated by reference into the proxy statement - Detailed information regarding principal accounting fees and services, along with the audit committee's policy on pre-approval of audit and non-audit services, is incorporated by reference into the proxy statement[201](index=201&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=34&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, the independent auditor's report, and an exhibit index, noting that financial statement schedules are not applicable - This section lists the financial statements and the report of the independent registered public accounting firm submitted with the report[206](index=206&type=chunk) - Financial statement schedules are not required or applicable[206](index=206&type=chunk) - The exhibit index can be found on page 67[206](index=206&type=chunk) [Form 10-K Summary](index=34&type=section&id=Item%2016.%20Form%2010-K%20Summary) This report does not include a Form 10-K summary - This report does not contain a Form 10-K summary[204](index=204&type=chunk) [Financial Statements and Supplementary Data](index=39&type=section&id=Financial%20Statements%20and%20Supplementary%20Data) This section presents detailed consolidated financial statements for 2016-2018, including balance sheets, income statements, and cash flow statements, along with comprehensive notes on accounting policies and specific financial items - The company's financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles and audited by Ernst & Young LLP, which issued an unqualified audit opinion[215](index=215&type=chunk)[217](index=217&type=chunk) Consolidated Balance Sheet Summary (As of December 31) | Metric | 2018 (USD) | 2017 (USD) | | :------------------------- | :------------ | :------------ | | Cash and Cash Equivalents | 217,025,278 | 569,734,496 | | Short-Term Investments | 169,412,999 | 152,538,054 | | Accounts Receivable, Net | 213,537,799 | 231,121,788 | | Inventories, Net | 225,281,599 | 216,765,583 | | Property, Plant and Equipment, Net | 498,473,766 | 492,479,330 | | Goodwill | 307,365,845 | 307,365,845 | | Intangible Assets, Net | 269,675,000 | 288,975,000 | | Total Assets | 2,085,434,068 | 2,352,053,912 | | Accounts Payable | 92,810,316 | 89,898,467 | | Deferred Income Taxes | 54,521,489 | 58,888,644 | | Total Stockholders' Equity | 1,861,751,660 | 2,049,518,261 | Consolidated Statements of Income Summary (For the Years Ended December 31) | Metric | 2018 (USD) | 2017 (USD) | 2016 (USD) | | :------------------------- | :------------ | :------------ | :------------ | | Net Sales | 1,834,063,697 | 1,794,872,578 | 1,678,924,756 | | Cost of Sales | 1,143,597,005 | 1,100,344,312 | 1,010,472,512 | | Gross Profit | 690,466,692 | 694,528,266 | 668,452,244 | | Total Operating Expenses | 182,341,145 | 171,169,914 | 156,709,309 | | Operating Income | 508,125,547 | 523,358,352 | 511,742,935 | | Provision for Income Taxes | 84,163,850 | 125,004,782 | 162,969,497 | | Net Income | 437,883,097 | 406,791,922 | 347,591,276 | | Diluted Earnings Per Share ($) | $1.62 | $1.41 | $1.19 | Consolidated Statements of Cash Flows Summary (For the Years Ended December 31) | Cash Flow Source/Use | 2018 (USD) | 2017 (USD) | 2016 (USD) | | :------------------------------- | :------------ | :------------ | :------------ | | Net Cash Provided by Operating Activities | 552,418,646 | 501,002,780 | 477,048,185 | | Net Cash Used in Investing Activities | (185,821,194) | (77,712,570) | (251,446,108) | | Net Cash Used in Financing Activities | (719,306,670) | (400,032,789) | (230,682,529) | | Net Increase (Decrease) in Cash and Cash Equivalents | (352,709,218) | 23,257,421 | (5,080,452) | | Cash and Cash Equivalents at Year-End | 217,025,278 | 569,734,496 | 546,477,075 | - The company entered into a new **$150 million senior revolving credit facility** on October 15, 2018, with an option for an additional **$100 million**; as of December 31, 2018, there was no outstanding balance under this facility, and the company was in compliance with all covenant terms[292](index=292&type=chunk)[294](index=294&type=chunk) - The Tax Cuts and Jobs Act of 2017 reduced the federal income tax rate to **21%**, resulting in a provisional **$38.4 million reduction** in the company's 2017 income tax expense; related accounting treatments were completed in 2018 with no significant adjustments[297](index=297&type=chunk)[298](index=298&type=chunk) - The company contributed approximately **$8.2 million in 2018**, **$7.7 million in 2017**, and **$6.5 million in 2016** to its 401(k) retirement savings plan, with the increase primarily due to higher employee participation[308](index=308&type=chunk) - The company's goodwill is **$307.4 million**, related to the HomeLink® acquisition, with no impairment recorded in 2018 and 2017; intangible assets include the HomeLink® trademark (indefinite life), HomeLink® technology (12-year life), and an exclusive license agreement (indefinite life)[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk) Revenue by Geographic Location and Major Product Source (For the Years Ended December 31) | Revenue Category | 2018 (USD) | 2017 (USD) | | :------------------- | :------------ | :------------ | | **Automotive Products** | | | | United States | 583,672,971 | 567,492,812 | | Germany | 333,002,878 | 351,123,204 | | Japan | 209,311,790 | 185,261,067 | | Other Countries | 665,210,657 | 654,250,385 | | **Other Products** | | | | Fire Protection Products | 22,109,784 | 18,790,474 | | Window Products | 20,755,617 | 17,954,636 | | **Total Revenue** | 1,834,063,697 | 1,794,872,578 |

Gentex Corporation (NASDAQ:GNTX) Q4 2018 Earnings Conference Call January 30, 2019 9:30 AM ET Company Participants Josh O'Berski - IR, Manager Steven Downing - President and CEO Kevin Nash - VP of Finance and CFO Neil Boehm - VP of Engineering and CTO Conference Call Participants Rich Kwas - Wells Fargo Securities Richard Carlson - BMO Capital Markets Chris Van Horn - B. Riley FBR John Murphy - Bank of America Merrill Lynch James Picariello - KeyBanc Capital Ryan Brinkman - J.P. Morgan David Whiston - Morni ...