Gentex Corp 10-K for FY2019

Gentex Corp (GNTX)

10-K 2020-02-26 For: 2019-12-31

Added on April 07, 2026

About this 10-K

Gentex Corp filed this 10-K on February 26, 2020, covering the fiscal year ended December 31, 2019 (FY2019).

Headline figures

Fiscal year ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.86B; up 1.4% from $1.83B a year earlier
Net income: $424.68M; down 3.0% from net income of $437.88M a year earlier
Diluted EPS: $1.66; up 2.5% from $1.62 a year earlier

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Michigan		38-2030505
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

600 N. Centennial Street,		49464
Zeeland,	Michigan
(Address of principal executive offices)		(Zip Code)



Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.06 per share	GNTX	NASDAQ Global Select Market



Large accelerated filer	ü	Accelerated filer
Non-accelerated filer		Smaller reporting company	☐
		Emerging growth company	☐



Part I		Page
Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15

Part II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	24
Item 9A.	Controls and Procedures	24
Item 9B.	Other Information	25

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	26
Item 11.	Executive Compensation	28
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31
Item 13.	Certain Relationships and Related Transactions, and Director Independence	31
Item 14.	Principal Accounting Fee and Services	31

Part IV
Item 15.	Exhibits, Financial Statement Schedules	32
Item 16.	Form 10-K Summary	32
	Signatures	33
	Exhibit Index	64



Owned Locations	Square Footage	Date of Acquisition/Build⁽¹⁾	Use
Zeeland, MI	26,600	1970	Manufacturing, Office
Zeeland, MI	161,200	1972	Manufacturing, Office
Zeeland, MI	70,000	1989	Manufacturing
Zeeland, MI	70,000	1989	Office
Zeeland, MI	359,100	1996	Manufacturing
Zeeland, MI	168,900	2000	Manufacturing
Zeeland, MI	334,000	2006	Manufacturing, Office
Zeeland, MI	100,000	2010	Manufacturing, Warehouse
Zeeland, MI	31,800	2011	Office
Zeeland, MI	349,600	2016	Manufacturing, Warehouse
Zeeland, MI	258,400	2018	Warehouse
Holland, MI	242,300	2012	Manufacturing, Warehouse
Erlenbach, Germany	90,000	2003	Office
Shanghai, China	25,000	2006	Office, Warehouse
Shanghai, China	40,000	2017	Office, Warehouse



☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


•	Exposure to local economic, political and labor conditions;


•	Unexpected changes in laws, regulations, trade or monetary or fiscal policy, including interest rates, foreign currency exchange rates and changes in the rate of inflation in the U.S. and other foreign countries;


•	Tariffs (as discussed herein), quotas, customs and other import or export restrictions and other trade barriers;


•	Natural disasters, political crises, and public health crises (such as the coronavirus in Wuhan, China), which have caused and will likely continue to cause downtime and closures at both supplier and customer facilities;


•	Difficulty of enforcing agreements, collecting receivables and protecting assets through non-U.S. legal systems;


•	Withholding and other taxes on remittances and other payments by subsidiaries;


•	Compliance with the requirements of an increasing body of applicable anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws of various other countries; and


•	Exposure related to buying, selling and financing in currencies other than the local currencies of the countries in which we operate.


(a)	General Development of Business


(b)	[Reserved]


(c)	Narrative Description of Business


(d)	[Reserved]


•	Volatility in commodity prices may adversely affect our business, financial condition and/or results of operations. If commodity prices rise, and if we are unable to recover these cost increases from our customers, such increases could have an adverse effect on our business, financial condition and/or results of operations;


•	Increasing interest rates impact our financial performance due to an increase in realized losses on the sale of fixed income investments and/or recognized losses due to an Other-Than-Temporary Impairment adjustment on held-to-maturity securities;


•	General economic conditions continue to be of concern in many of the regions in which we do business, given that our primary industry is greatly impacted by overall general economic conditions. Any continued adverse worldwide economic conditions, currency exchange rates, trade war, war or significant terrorist acts, could each affect worldwide automotive sales and production levels;


•	Manufacturing yield issues may negatively impact our business, financial condition and/or results of operations; and


•	Obligations and costs associated with addressing quality issues or warranty claims may adversely affect our business, financial condition and/or results of operations.


•	Variations in our anticipated or actual operating results or the results of our competitors;


•	Changes in investors’ or analysts’ perceptions of the risks and conditions of our business and in particular our primary industry;


•	Intellectual property litigation and infringement claims;


•	Market conditions, including the industry in which we operate; and



Country	Number of Leased Offices
Germany	3
Japan	3
United Kingdom	1
France	1
Sweden	1
Korea	1



Issuer Purchase of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased As Part of a Publicly Announced Plan*	Maximum Number of Shares That May Yet Be Purchased Under the Plan*
January 2019	75,001	$	21.42	75,001	33,766,256
February 2019	2,499,850	20.24		2,499,850	31,266,406
March 2019	2,150,087	20.49		2,150,087	29,116,319
April 2019	240,037	23.07		240,037	28,876,282
May 2019	1,858,307	22.20		1,858,307	27,017,975
June 2019	976,365	23.64		976,365	26,041,610
July 2019	380,220	27.22		380,220	25,661,390
August 2019	1,828,442	26.69		1,828,442	23,832,948
September 2019	1,360,915	27.54		1,360,915	22,472,033
October 2019	520,345	27.98		520,345	21,951,688
November 2019	900,765	28.75		900,765	21,050,923
December 2019	985,604	28.66		985,604	20,065,319
Total	13,775,938			13,775,938



(dollars in thousands, except per share data)
	2019			2018			2017			2016			2015
Net Sales	$	1,858,897		$1,834,064			$1,794,873			$1,678,925			$1,543,618
Net Income	424,684			437,883			406,792			347,591			318,470
Earnings Per Share (Fully Diluted)	$	1.66		$	1.62		$	1.41		$	1.19		$	1.08
Gross Profit Margin	37.0		%	37.6		%	38.7		%	39.8		%	39.1		%
Cash Dividends per Common Share	$	0.460		$	0.440		$	0.390		$	0.355		$	0.335
Total Assets	$	2,168,803		$	2,085,434		$	2,352,054		$	2,309,620		$	2,148,673
Long-Term Debt Outstanding at Year End	$	—		$	—		$	—		$	178,125		$	225,625



	Percentage of Net Sales						Percentage Change
							2019		2018
	Year Ended December 31,						Vs		Vs
	2019		2018		2017		2018		2017
Net Sales	100.0	%	100.0	%	100.0	%	1.4	%	2.2	%
Cost of Goods Sold	63.0		62.4		61.3		2.4		3.9
Gross Profit	37.0		37.6		38.7		(0.3	)	(0.6	)
Operating Expenses:
Engineering, Research and Development	6.2		5.8		5.6		7.0		7.4
Selling, General and Administrative	4.6		4.1		4.0		13.1		5.3
Total Operating Expenses:	10.7		9.9		9.5		9.6		6.5
Operating Income	26.3		27.7		29.2		(3.9	)	(2.9	)
Other Income/(Expense)	0.6		0.8		0.5		(14.7	)	65.0
Income Before Provision for Income Taxes	26.9		28.5		29.6		(4.1	)	(1.8	)
Provision for Income Taxes	4.1		4.6		7.0		(10.0	)	(32.7	)
Net Income	22.8	%	23.9	%	22.7	%	(3.0	)%	7.6	%



	Total	Less than 1 Year	1-3 Years	3-5 Years	More than 5 Years
Operating leases	1.1	0.7	0.4
Purchase obligations	138.1	138.1	—	—	—
Dividends payable	28.9	28.9	—	—	—
Total	168.1	167.7	0.4



Document	Page
Report of Independent Registered Public Accounting Firm	35
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	37
Consolidated Balance Sheets as of December 31, 2019 and 2018	38
Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017	39
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017	40
Consolidated Statements of Shareholders’ Investment for the years ended December 31, 2019, 2018 and 2017	41
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017	41
Notes to Consolidated Financial Statements	42



Quarterly Results of Operations (in thousands, except per share data)
	First				Second				Third				Fourth
	2019		2018		2019		2018		2019		2018		2019		2018
Net Sales	$	468,589	$	465,420	$	468,711	$	454,981	$	477,761	$	460,253	$	443,836	$	453,409
Gross Profit	169,645		172,628		176,538		172,804		180,321		172,990		161,805		172,044
Operating Income	121,596		128,515		127,905		126,683		128,136		127,428		110,901		125,499
Net Income	104,280		111,249		108,959		109,024		111,898		111,336		99,547		106,275
Basic Earnings per share⁽¹⁾	$	0.40	$	0.40	$	0.42	$	0.40	$	0.44	$	0.42	$	0.39	$	0.41
Diluted Earnings per share⁽¹⁾	$	0.40	$	0.40	$	0.42	$	0.40	$	0.44	$	0.42	$	0.39	$	0.41
⁽¹⁾Basic and diluted earnings per share are computed independently for each quarter presented. Therefore the sum of quarterly basic and diluted per share information may not equal annual basis and diluted earnings per share.



NAME	AGE	POSITION	CURRENT POSITION HELD SINCE
Steve Downing	42	President and Chief Executive Officer	January 2018
Neil Boehm	48	Chief Technology Officer and Vice President, Engineering	February 2018
Kevin Nash	45	Vice President, Finance, Chief Financial Officer and Treasurer	February 2018
Matthew Chiodo	55	Vice President, Sales	February 2018
Scott Ryan	39	Vice President, General Counsel and Corporate Secretary	August 2018



Executive Officer	Position	2019 Base Salary		2020 Base Salary
Steve Downing	President and CEO	$	750,000	$	750,000
Neil Boehm	VP, Engineering and CTO	$	407,000	$	407,000
Kevin Nash	VP, Finance, CFO and Treasurer	$	400,000	$	400,000
Matt Chiodo	VP, Sales	$	380,000	$	380,000
Scott Ryan	VP, General Counsel and Corporate Secretary	$	350,000	$	350,000



Executive Officer	Annual Plan Threshold		Annual Plan Target		Annual Plan Maximum
Steve Downing	50	%	100	%	200	%
Neil Boehm	37.5	%	75	%	150	%
Kevin Nash	37.5	%	75	%	150	%
Matt Chiodo	37.5	%	75	%	150	%
Scott Ryan	37.5	%	75	%	150	%



Performance Metric	Weight		Threshold*	Target*	Maximum*	Actual Performance*
Revenue	33.33	%	$1,504,000	$1,880,000	$2,256,000	$1,858,897
Operating Income	33.33	%	$411,300	$514,126	$616,951	$505,447
Earnings per Diluted Share	33.33	%	$1.384	$1.730	$2.076	$1.733
* amounts in thousands (000) except for per share amounts. Amounts may be modified in the discretion of the Compensation Committee as appropriate to ensure the performance metrics are not unsuitable. Threshold, Target, and Maximum for Operating Income and Earnings per Diluted Share were adjusted to address the estimated impact of tariffs and the Actual Performance was similarly adjusted with respect to the actual impact of tariffs.