~~XBRL~~

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 September 30, ~~2020~~2021 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
Michigan						49464
(Address of principal executive offices)						(Zip Code)

(616) 772-1800

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.06 per share	GNTX	NASDAQ 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: o 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, October ~~23, 2020~~22, 2021
Common Stock, $.06 Par Value						~~245,056,522~~236,520,081

GENTEX CORPORATION AND SUBSIDIARIES

For the Three and Nine Months Ended September 30, ~~2020~~2021

FORM 10-Q

Index

PART I —FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements.

GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, ~~2020~~2021 and December 31, ~~2019~~

September 30, 2020 (Unaudited)
December 31, 2019
(Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 400,499,542 $ 296,321,622
Short-term investments 52,578,480 140,384,053
Accounts receivable, net 268,457,875 235,410,326
Inventories 233,358,102 248,941,855
Prepaid expenses and other 20,424,567 29,319,036
Total current assets 975,318,566 950,376,892
PLANT AND EQUIPMENT—NET 474,019,432 498,316,100
OTHER ASSETS
Goodwill 311,216,556 307,365,845
Long-term investments 159,011,362 139,909,323
Intangible assets, net 247,911,399 250,375,000
Patents and other assets, net 24,997,791 22,460,033
Total other assets 743,137,108 720,110,201
Total assets $ 2,192,475,106 $ 2,168,803,193
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Accounts payable $ 90,246,791 $ 97,553,917
Current portion of long-term debt 25,000,000 0
Accrued liabilities 121,242,379 74,292,883
Total current liabilities 236,489,170 171,846,800
OTHER NON-CURRENT LIABILITIES 15,071,701 7,414,424
DEFERRED INCOME TAXES 45,301,936 51,454,149
Total liabilities 296,862,807 230,715,373
SHAREHOLDERS’ INVESTMENT
Common stock 14,703,703 15,076,651
Additional paid-in capital 830,408,683 807,928,139
Retained earnings 1,046,052,853 1,116,372,133
Accumulated other comprehensive income (loss) 4,447,060 (1,289,103)
Total shareholders’ investment 1,895,612,299 1,938,087,820
Total liabilities and shareholders’ investment $ 2,192,475,106 $ 2,168,803,193
2020


	September 30, 2021 (Unaudited)		December 31, 2020 (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	269,965,105	$	423,371,036
Short-term investments	6,936,547		27,164,369
Accounts receivable, net	241,225,710		284,925,335
Inventories	292,599,881		226,291,843
Prepaid expenses and other	63,979,883		17,577,981
Total current assets	874,707,126		979,330,564

PLANT AND EQUIPMENT—NET	451,811,914		468,135,135

OTHER ASSETS
Goodwill	314,805,654		311,922,787
Long-term investments	204,671,558		162,028,068
Intangible assets, net	243,163,539		249,748,127
Patents and other assets, net	27,268,962		26,776,489
Total other assets	789,909,713		750,475,471

Total assets	$	2,116,428,753	$	2,197,941,170

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

CURRENT LIABILITIES
Accounts payable	$	100,532,642	$	84,784,423

Accrued liabilities	91,909,057		92,952,434
Total current liabilities	192,441,699		177,736,857

OTHER NON-CURRENT LIABILITIES	18,680,307		17,300,442



DEFERRED INCOME TAXES	17,676,461		38,960,743

Total liabilities	228,798,467		233,998,042

SHAREHOLDERS’ INVESTMENT
Common stock	14,192,076		14,621,572
Additional paid-in capital	865,063,949		852,771,508
Retained earnings	1,005,103,661		1,089,698,996
Accumulated other comprehensive income	3,270,600		6,851,052
Total shareholders’ investment	1,887,630,286		1,963,943,128
Total liabilities and shareholders’ investment	$	2,116,428,753	$	2,197,941,170

Note: The condensed consolidated balance sheet at December 31, ~~2019~~2020 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.

GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
NET SALES $ 474,638,584 $ 477,761,417 $ 1,158,325,866 $ 1,415,061,768
COST OF GOODS SOLD 286,401,872 297,440,131 769,556,865 888,558,373
Gross profit 188,236,712 180,321,286 388,769,001 526,503,395
OPERATING EXPENSES:
Engineering, research and development 27,812,730 29,398,725 86,421,121 85,847,249
Selling, general & administrative 21,571,093 22,786,881 65,206,080 63,019,167
Total operating expenses 49,383,823 52,185,606 151,627,201 148,866,416
Income from operations 138,852,889 128,135,680 237,141,800 377,636,979
OTHER INCOME
Investment income 1,825,257 3,353,510 5,733,939 8,756,638
Other income, net 2,218,852 90,323 3,423,881 376,983
Total other income 4,044,109 3,443,833 9,157,820 9,133,621
INCOME BEFORE PROVISION FOR INCOME TAXES 142,896,998 131,579,513 246,299,620 386,770,600
PROVISION FOR INCOME TAXES 25,804,396 19,681,661 42,075,250 61,633,712
NET INCOME $ 117,092,602 $ 111,897,852 $ 204,224,370 $ 325,136,888
EARNINGS PER SHARE: (1)
Basic $ 0.48 $ 0.44 $ 0.83 $ 1.27
Diluted $ 0.48 $ 0.44 $ 0.82 $ 1.26
Cash Dividends Declared per Share $ 0.120 $ 0.115 $ 0.360 $ 0.345
(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.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
NET SALES	$	399,598,744	$	474,638,584	$	1,311,328,609	$	1,158,325,866

COST OF GOODS SOLD	258,698,723		286,401,872		835,531,679		769,556,865
Gross profit	140,900,021		188,236,712		475,796,930		388,769,001

OPERATING EXPENSES:
Engineering, research and development	29,750,973		27,812,730		86,462,112		86,421,121
Selling, general & administrative	22,984,108		21,571,093		67,511,555		65,206,080
Total operating expenses	52,735,081		49,383,823		153,973,667		151,627,201

Income from operations	88,164,940		138,852,889		321,823,263		237,141,800

OTHER INCOME
Investment income	856,351		1,825,257		2,782,900		5,733,939
Other income, net	872,943		2,218,852		2,370,527		3,423,881
Total other income	1,729,294		4,044,109		5,153,427		9,157,820

INCOME BEFORE PROVISION FOR INCOME TAXES	89,894,234		142,896,998		326,976,690		246,299,620

PROVISION FOR INCOME TAXES	13,233,686		25,804,396		50,358,854		42,075,250

NET INCOME	$	76,660,548	$	117,092,602	$	276,617,836	$	204,224,370

EARNINGS PER SHARE: (1)
Basic	$	0.32	$	0.48	$	1.15	$	0.83
Diluted	$	0.32	$	0.48	$	1.15	$	0.82

Cash Dividends Declared per Share	$	0.120	$	0.120	$	0.360	$	0.360

(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.

GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net Income		$	117,092,602	$	111,897,852	$204,224,370		$325,136,888
Net income										Net income	$	76,660,548	$	117,092,602	$	276,617,836	$	204,224,370

Other comprehensive income before tax:
Other comprehensive income (loss) before tax:										Other comprehensive income (loss) before tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	1,823,667		(1,623,102)		1,268,204		(1,799,789)		Foreign currency translation adjustments	(349,165)		1,823,667		(238,378)		1,268,204

Unrealized (losses) gains on debt securities, net	Unrealized (losses) gains on debt securities, net	(146,647)		457,438		5,655,644		3,338,762		Unrealized (losses) gains on debt securities, net	(816,801)		(146,647)		(4,230,473)		5,655,644

Other comprehensive income (loss), before tax	Other comprehensive income (loss), before tax	1,677,020		(1,165,664)		6,923,848		1,538,973		Other comprehensive income (loss), before tax	(1,165,966)		1,677,020		(4,468,851)		6,923,848

Income tax impact related to components of other comprehensive income		(30,796)		96,062		1,187,685		701,140
Income tax impact related to components of other comprehensive income (loss)										Income tax impact related to components of other comprehensive income (loss)	(171,528)		(30,796)		(888,399)		1,187,685

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	1,707,816		(1,261,726)		5,736,163		837,833		Other comprehensive income (loss), net of tax	(994,438)		1,707,816		(3,580,452)		5,736,163

Comprehensive Income		$	118,800,418	$	110,636,126	$	209,960,533	$	325,974,721
Comprehensive income										Comprehensive income	$	75,666,110	$	118,800,418	$	273,037,384	$	209,960,533

GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

For the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020


														Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Investment
BALANCE AS OF JULY 1, 2021													BALANCE AS OF JULY 1, 2021	238,966,589	$	14,337,995	$	859,678,392	$	1,038,037,564	$	4,265,038	$	1,916,318,989
Issuance of common stock from stock plan transactions													Issuance of common stock from stock plan transactions	398,873	23,932		7,093,058		—		—		7,116,990

Repurchases of common stock													Repurchases of common stock	(2,830,850)	(169,851)		(9,200,264)		(81,211,798)		—		(90,581,913)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock													Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	—	—		7,492,763		—		—		7,492,763
Dividends declared ($0.12 per share)													Dividends declared ($0.12 per share)	—	—		—		(28,382,653)		—		(28,382,653)
Net income													Net income	—	—		—		76,660,548		—		76,660,548
Other comprehensive income													Other comprehensive income	—	—		—		—		(994,438)		(994,438)
BALANCE AS OF SEPTEMBER 30, 2021													BALANCE AS OF SEPTEMBER 30, 2021	236,534,612	$	14,192,076	$	865,063,949	$	1,005,103,661	$	3,270,600	$	1,887,630,286
		Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Investment
BALANCE AS OF JULY 1, 2020	BALANCE AS OF JULY 1, 2020	245,775,488	$	14,746,529	$	818,678,880	$	986,442,760	$	2,739,244	$	1,822,607,413	BALANCE AS OF JULY 1, 2020	245,775,488	$	14,746,529	$	818,678,880	$	986,442,760	$	2,739,244	$	1,822,607,413
Issuance of common stock from stock plan transactions	Issuance of common stock from stock plan transactions	461,983	27,719		7,938,770		—		—		7,966,489		Issuance of common stock from stock plan transactions	461,983	27,719		7,938,770		—		—		7,966,489

Repurchases of common stock	Repurchases of common stock	(1,175,756)	(70,545)		(3,515,510)		(28,074,807)		—		(31,660,862)		Repurchases of common stock	(1,175,756)	(70,545)		(3,515,510)		(28,074,807)		—		(31,660,862)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	—	—		7,306,543		—		—		7,306,543		Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	—	—		7,306,543		—		—		7,306,543
Dividends declared ($0.12 per share)	Dividends declared ($0.12 per share)	—	—		—		(29,407,702)		—		(29,407,702)		Dividends declared ($0.12 per share)	—	—		—		(29,407,702)		—		(29,407,702)
Net income	Net income	—	—		—		117,092,602		—		117,092,602		Net income	—	—		—		117,092,602		—		117,092,602
Other comprehensive income	Other comprehensive income	—	—		—		—		1,707,816		1,707,816		Other comprehensive income	—	—		—		—		1,707,816		1,707,816
BALANCE AS OF SEPTEMBER 30, 2020	BALANCE AS OF SEPTEMBER 30, 2020	245,061,715	$	14,703,703	$	830,408,683	$	1,046,052,853	$	4,447,060	$	1,895,612,299	BALANCE AS OF SEPTEMBER 30, 2020	245,061,715	$	14,703,703	$	830,408,683	$	1,046,052,853	$	4,447,060	$	1,895,612,299

BALANCE AS OF JULY 1, 2019		254,779,119	$	15,286,747	$	777,238,253	$	1,111,310,014	$	499,221	$	1,904,334,235
Issuance of common stock from stock plan transactions		1,771,463	106,287		26,180,774		—		—		26,287,061
Repurchases of common stock		(3,569,577)	(214,174)		(9,744,945)		(86,665,884)		—		(96,625,003)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock		—	—		5,788,286		—		—		5,788,286
Dividends declared ($0.115 per share)		—	—		—		(29,092,442)		—		(29,092,442)
Net income		—	—		—		111,897,852		—		111,897,852
Other comprehensive loss		—	—		—		—		(1,261,726)		(1,261,726)
BALANCE AS OF SEPTEMBER 30, 2019		252,981,005	$	15,178,860	$	799,462,368	$	1,107,449,540	$	(762,505)	$	1,921,328,263

GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

For the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~

2020


														Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Investment
BALANCE AS OF JANUARY 1, 2021													BALANCE AS OF JANUARY 1, 2021	243,692,869	$	14,621,572	$	852,771,508	$	1,089,698,996	$	6,851,052	$	1,963,943,128
Issuance of common stock from stock plan transactions													Issuance of common stock from stock plan transactions	1,838,789	110,327		20,663,547		—		—		20,773,874

Repurchases of common stock													Repurchases of common stock	(8,997,046)	(539,823)		(28,486,027)		(275,169,905)		—		(304,195,755)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock													Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	—	—		20,114,921		—		—		20,114,921
Dividends declared ($0.36 per share)													Dividends declared ($0.36 per share)	—	—		—		(86,043,266)		—		(86,043,266)
Net income													Net income	—	—		—		276,617,836		—		276,617,836
Other comprehensive loss													Other comprehensive loss	—	—		—		—		(3,580,452)		(3,580,452)
BALANCE AS OF SEPTEMBER 30, 2021													BALANCE AS OF SEPTEMBER 30, 2021	236,534,612	$	14,192,076	$	865,063,949	$	1,005,103,661	$	3,270,600	$	1,887,630,286
		Common Stock Shares	Common Stock Amount		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Investment
BALANCE AS OF JANUARY 1, 2020	BALANCE AS OF JANUARY 1, 2020	251,277,515	$	15,076,651	$	807,928,139	$	1,116,372,133	$	(1,289,103)	$	1,938,087,820	BALANCE AS OF JANUARY 1, 2020	251,277,515	$	15,076,651	$	807,928,139	$	1,116,372,133	$	(1,289,103)	$	1,938,087,820
Issuance of common stock from stock plan transactions	Issuance of common stock from stock plan transactions	1,815,270	108,917		23,568,264		—		—		23,677,181		Issuance of common stock from stock plan transactions	1,815,270	108,917		23,568,264		—		—		23,677,181
Issuance of common stock related to acquisitions	Issuance of common stock related to acquisitions	163,718	9,823		3,549,406		—		—		3,559,229		Issuance of common stock related to acquisitions	163,718	9,823		3,549,406		—		—		3,559,229
Repurchases of common stock	Repurchases of common stock	(8,194,788)	(491,688)		(23,730,322)		(186,258,436)		—		(210,480,446)		Repurchases of common stock	(8,194,788)	(491,688)		(23,730,322)		(186,258,436)		—		(210,480,446)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	—	—		19,093,196		—		—		19,093,196		Stock-based compensation expense related to stock options, employee stock purchases and restricted stock	—	—		19,093,196		—		—		19,093,196
Dividends declared ($0.36 per share)	Dividends declared ($0.36 per share)	—	—		—		(88,285,214)		—		(88,285,214)		Dividends declared ($0.36 per share)	—	—		—		(88,285,214)		—		(88,285,214)
Net income	Net income	—	—		—		204,224,370		—		204,224,370		Net income	—	—		—		204,224,370		—		204,224,370
Other comprehensive income	Other comprehensive income	—	—		—		—		5,736,163		5,736,163		Other comprehensive income	—	—		—		—		5,736,163		5,736,163
BALANCE AS OF SEPTEMBER 30, 2020	BALANCE AS OF SEPTEMBER 30, 2020	245,061,715	$	14,703,703	$	830,408,683	$	1,046,052,853	$	4,447,060	$	1,895,612,299	BALANCE AS OF SEPTEMBER 30, 2020	245,061,715	$	14,703,703	$	830,408,683	$	1,046,052,853	$	4,447,060	$	1,895,612,299

BALANCE AS OF JANUARY 1, 2019		259,328,613	$	15,559,717	$	745,324,144	$	1,102,468,137	$	(1,600,338)	$	1,861,751,660
Issuance of common stock from stock plan transactions		5,021,616	301,297		67,920,578				—		68,221,875
Repurchases of common stock		(11,369,224)	(682,154)		(29,709,788)		(232,371,433)		—		(262,763,375)
Stock-based compensation expense related to stock options, employee stock purchases and restricted stock		—	—		15,927,434		—		—		15,927,434
Dividends declared ($0.345 per share)		—	—		—		(87,784,052)		—		(87,784,052)
Net income		—	—		—		325,136,888		—		325,136,888
Other comprehensive income		—	—		—		—		837,833		837,833
BALANCE AS OF SEPTEMBER 30, 2019		252,981,005	$	15,178,860	$	799,462,368	$	1,107,449,540	$	(762,505)	$	1,921,328,263

GENTEX CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~

2020 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 204,224,370 $ 325,136,888
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 78,489,026 79,331,513
(Gain) on disposal of assets (281,542) (148,376)
Loss on disposal of assets 146,195 495,697
(Gain) on sale of investments (1,504,757) (593,351)
Loss on sale of investments 143,370 0
Change in deferred income taxes (9,559,993) 2,189,818
Stock-based compensation expense related to employee stock options, employee stock purchases and restricted stock 23,266,906 15,927,434
Change in operating assets and liabilities:
Accounts receivable, net (32,832,997) (39,570,916)
Inventories 15,659,539 (13,395,196)
Prepaid expenses and other 8,934,297 (2,729,945)
Accounts payable (7,389,582) 2,499,481
Accrued liabilities, excluding dividends declared and short-term debt 49,749,418 14,797,251
Net cash provided by operating activities 329,044,250 383,940,298
CASH FLOWS (USED FOR) INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales proceeds 15,559,590 57,087,935
Maturities and calls 117,172,368 9,714,000
Purchases (59,933,780) (66,360,636)
Plant and equipment additions (37,048,073) (58,322,472)
Proceeds from sale of plant and equipment 331,465 1,937,207
Acquisition of businesses, net of cash acquired (8,043,217) 0
Increase in other assets (3,326,783) (3,111,644)
Net cash (used for) investing activities 24,711,570 (59,055,610)
CASH FLOWS (USED FOR) FINANCING ACTIVITIES:
Proceeds from borrowings on Credit Agreement 75,000,000 0
Repayment of borrowings on Credit Agreement (50,000,000) 0
Issuance of common stock from stock plan transactions 23,677,181 68,221,875
Cash dividends paid (87,774,635) (87,217,383)
Repurchases of common stock (210,480,446) (262,763,375)
Net cash (used for) financing activities (249,577,900) (281,758,883)
NET INCREASE IN CASH AND CASH EQUIVALENTS 104,177,920 43,125,805
CASH AND CASH EQUIVALENTS, beginning of period 296,321,622 217,025,278
CASH AND CASH EQUIVALENTS, end of period $ 400,499,542 $ 260,151,083
2020


	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	276,617,836	$	204,224,370
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	75,105,881		78,489,026
(Gain) on disposal of assets	(459,528)		(281,542)
Loss on disposal of assets	213,430		146,195
(Gain) on sale of investments	(969,971)		(1,504,757)
Loss on sale of investments	192,346		143,370
Change in deferred income taxes	(20,269,706)		(9,559,993)
Stock-based compensation expense related to employee stock options, employee stock purchases and restricted stock	20,114,921		23,266,906

Change in operating assets and liabilities:
Accounts receivable, net	43,704,625		(32,832,997)
Inventories	(66,308,038)		15,659,539
Prepaid expenses and other	(45,504,501)		8,934,297
Accounts payable	15,748,219		(7,389,582)
Accrued liabilities, excluding dividends declared and short-term debt	1,195,477		49,749,418
Net cash provided by operating activities	299,380,991		329,044,250

CASH FLOWS (USED FOR) FROM INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales proceeds	34,250,068		15,559,590
Maturities and calls	26,110,000		117,172,368
Purchases	(86,228,584)		(59,933,780)
Plant and equipment additions	(44,357,786)		(37,048,073)
Proceeds from sale of plant and equipment	2,550,805		331,465
Acquisition of businesses, net of cash acquired	(12,023,440)		(8,043,217)
Increase in other assets	(2,763,847)		(3,326,783)
Net cash (used for) provided by investing activities	(82,462,784)		24,711,570

CASH FLOWS (USED FOR) FINANCING ACTIVITIES:
Proceeds from borrowings on Credit Agreement	—		75,000,000
Repayment of borrowings on Credit Agreement	—		(50,000,000)

Issuance of common stock from stock plan transactions	20,773,874		23,677,181
Cash dividends paid	(86,902,257)		(87,774,635)
Repurchases of common stock	(304,195,755)		(210,480,446)

Net cash (used for) financing activities	(370,324,138)		(249,577,900)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(153,405,931)		104,177,920

CASH AND CASH EQUIVALENTS, beginning of period	423,371,036		296,321,622

CASH AND CASH EQUIVALENTS, end of period	$	269,965,105	$	400,499,542

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 ~~2019~~2020 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 September 30, ~~2020,~~2021, and the results of operations and cash flows for the interim periods presented.

(2) ~~Adoption of New Accounting Pronouncements~~

~~Effective January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instrument~~s. This guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings in the period of adoption. Based on the insignificant impact of this ASU on the Company's financial statements, a cumulative-effect adjustment to retained earnings was not deemed necessary. The standard requires a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis. The standard requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset. It also 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 adoption of this standard did not have a material impact on the Company's consolidated balance sheet, consolidated income statement, or consolidated statement of cash flows.

~~(3)~~ 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 ofof: $307.4 million as part of the HomeLink® acquisition in ~~2013~~2013; $3.7 million as part of the acquisition of Vaporsens, Inc. ("Vaporsens") in the second quarter of 2020; and $0.9 million as a part of the acquisition of Argil, Inc. ("Argil") in the fourth quarter of 2020. During the third quarter of 2021, the Company made adjustments as part of the open measurement periods for Argil and for Air-Craftglass Production BV ("Air-Craftglass"), which was acquired in the third quarter of 2020. The Company reduced Goodwill recorded for Argil by $0.1 million and recorded an additional ~~$3.9~~$0.2 million for Air-Craftglass during the third quarter of 2021. The Company also recorded $2.8 million in Goodwill as part of the acquisition of ~~Vaporsens that occurred~~Guardian Optical Technologies ("Guardian") in the ~~second~~first quarter of ~~2020.~~2021. See Note 1615 for more information on ~~the Vaporsens transaction.~~these transactions. The carrying value of Goodwill as of both September 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$311.2~~$314.8 million and ~~$307.4~~$311.9 million, ~~respectively.~~

respectively, as set forth in the table below:


	Carrying Amount
Balance as of December 31, ~~2019~~2020	$	~~307,365,845~~311,922,787
Acquisitions	~~3,850,711~~2,848,364
Divestitures	0—
Impairments	0—
Other (Net Measurement Period Adjustments)	034,503
Balance as of September 30, ~~2020~~2021	$	~~311,216,556~~314,805,654

~~GENTEX CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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 COVID-19, ~~was~~the recent microchip shortage, supply chain constraints, 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 ("I P R & D") as part of the acquisition of: Vaporsens; Air-Craftglass; and Argil, each of which has been previously disclosed. The Company also acquired I P R & D as part of the acquisition of ~~Vaporsens that occurred~~Guardian in the ~~second~~first quarter of ~~2020 and the acquisition of Air-Craftglass Production BV ("Air-Craftglass") in the third quarter of 2020.~~2021. See Note 1615 for more information on ~~these transactions.~~the Guardian transaction.

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of September 30, ~~2020:~~2021:

Other Intangible Assets Gross Accumulated Amortization Net Assumed Useful Life
Gentex Patents $ 38,011,452 $ (23,982,357) $ 14,029,095 Various
Vaporsens Technology Licenses 292,943 (35,002) 257,941 Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$ 52,000,000 $ — $ 52,000,000 Indefinite
HomeLink® Technology
180,000,000 (105,000,000) 75,000,000 12 years
Existing Customer Platforms 43,000,000 (30,100,000) 12,900,000 10 years
Exclusive Licensing Agreement 96,000,000 — 96,000,000 Indefinite
Vaporsens In-Process R&D 11,000,000 — 11,000,000 Indefinite
Air-Craftglass In-Process R&D 1,011,399 — 1,011,399 Indefinite
Total Other Intangible Assets $ 383,011,399 $ (135,100,000) $ 247,911,399
Total Patents & Other Intangible Assets $ 421,315,794 $ (159,117,359) $ 262,198,435


Other Intangible Assets	Gross		Accumulated Amortization		Net		Assumed Useful Life
Gentex Patents	$	39,124,090	$	(25,858,926)	$	13,265,164	Various
Vaporsens Technology Licenses	346,654		(62,740)		283,914		Various

Other Intangible Assets
HomeLink® Trade Names and Trademarks	$	52,000,000	$	—	$	52,000,000	Indefinite
HomeLink® Technology	180,000,000		(120,000,000)		60,000,000		12 years
Existing Customer Platforms	43,000,000		(34,400,000)		8,600,000		10 years
Exclusive Licensing Agreement	96,000,000		—		96,000,000		Indefinite
Vaporsens In-Process R&D	11,000,000		—		11,000,000		Indefinite
Argil In-Process R&D	6,278,132		—		6,278,132		Indefinite
Air-Craftglass In-Process R&D	800,000		—		800,000		Indefinite
Guardian In-Process R&D	8,485,407		—		8,485,407		Indefinite
Total Other Intangible Assets	$	397,563,539	$	(154,400,000)	$	243,163,539

Total Patents & Other Intangible Assets	$	437,034,283	$	(180,321,666)	$	256,712,617

As of December 31, ~~2019:~~2020:


Other Intangible Assets	Gross		Accumulated Amortization		Net		Assumed Useful Life
Gentex Patents	$	38,625,292	$	(24,528,853)	$	14,096,439	Various
Vaporsens Technology Licenses	300,985		(38,856)		262,129		Various

Other Intangible Assets
HomeLink® Trade Names and Trademarks	$	52,000,000	$	—	$	52,000,000	Indefinite
HomeLink® Technology	180,000,000		(108,750,000)		71,250,000		12 years
Existing Customer Platforms	43,000,000		(31,175,000)		11,825,000		10 years
Exclusive Licensing Agreement	96,000,000		—		96,000,000		Indefinite
Vaporsens In-Process R&D	11,000,000		—		11,000,000		Indefinite
Argil In-Process R&D	6,278,132		—		6,278,132		Indefinite
Air-Craftglass In-Process R&D	1,394,995		—		1,394,995		Indefinite
Total Other Intangible Assets	$	389,673,127	$	(139,925,000)	$	249,748,127

Total Patents & Other Intangible Assets	$	428,599,404	$	(164,492,709)	$	264,106,695

Other Intangible Assets Gross Accumulated Amortization Net Assumed Useful Life
Gentex Patents $ 37,328,963 $ (22,491,010) $ 14,837,953 Various
Other Intangible Assets
HomeLink® Trade Names and Trademarks
$ 52,000,000 $ — $ 52,000,000 Indefinite
HomeLink® Technology
180,000,000 (93,750,000) 86,250,000 12 years
Existing Customer Platforms 43,000,000 (26,875,000) 16,125,000 10 years
Exclusive Licensing Agreement 96,000,000 — 96,000,000 Indefinite
Total Other Intangible Assets $ 371,000,000 $ (120,625,000) $ 250,375,000
Total Patents & Other Intangible Assets $ 408,328,963 $ (143,116,010) $ 265,212,953
Amortization expense on patents and intangible assets was approximately $5.5 million and $16.7 million during the three and nine months ended September 30, 2021, respectively, compared to approximately $5.6 million and $16.8 million for the same periods ended September 30, 2020, respectively.

Excluding the impact of any future acquisitions, the Company estimates amortization expense for each of the years ending December 31, 2021 and 2022 to be approximately $22 million annually, for the year ending December 31, 2023 to be approximately $20 million, for the year ending December 31, 2024 to be approximately $16 million, and for the year ending December 31, 2025 to be approximately $12 million.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Amortization expense on patents and intangible assets was approximately $5.6 million and $16.8 million during the three and nine months ended September 30, 2020, respectively, compared to approximately $5.6 million and $16.8 million for the same periods ended September 30, 2019, respectively.

Excluding the impact of any future acquisitions, the Company estimates amortization expense for each of the years ending December 31, 2020 and 2021 to be approximately $22 million annually, for the year ending December 31, 2022 to be approximately $21 million, for the year ending December 31, 2023 to be approximately $19 million, and for the year ending December 31, 2024 to be approximately $16 million.

~~(4)~~(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 321, Investments - Equity Securities. 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, ~~such equity investments~~ are then held at cost. These technology investments totaled approximately ~~$8.6~~$14.0 million and ~~$9.0~~$4.0 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These investments are classified within Long-Term Investments in the consolidated balance ~~sheet.~~sheets.

Assets or liabilities that have recurring fair value measurements are shown below as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

As of September 30, 2021:


			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	September 30, 2021		(Level 1)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	269,965,105	$	269,965,105	$	—	$	—
Short-Term Investments:
Certificate of Deposit	1,765,030		1,765,030		—		—
Corporate Bonds	2,032,660		—		2,032,660		—

Municipal Bonds	1,334,868		—		1,334,868		—
Other	1,803,989		1,803,989		—		—
Long-Term Investments:
Asset Backed Securities	27,739,691		—		27,739,691		—
Certificate of Deposit	2,073,655		2,073,655		—		—
Corporate Bonds	32,845,042		—		32,845,042		—
Government Securities	39,596,133		—		39,596,133		—
Municipal Bonds	88,368,667		—		88,368,667		—


Total	$	467,524,840	$	275,607,779	$	191,917,061	$	—

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~As of September 30, 2020:~~

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 September 30, 2020 (Level 1) (Level 2) (Level 3)
Cash & Cash Equivalents $ 400,499,542 $ 400,499,542 $ 0 $ 0
Short-Term Investments:
Certificate of Deposit 1,270,465 1,270,465 0 0
Corporate Bonds 14,105,245 0 14,105,245 0
Government Securities 23,235,183 0 23,235,183 0
Municipal Bonds 11,025,844 0 11,025,844 0
Other 2,941,743 2,941,743 0 0
Long-Term Investments:
Asset Backed Securities 42,012,670 0 42,012,670 0
Certificate of Deposit 3,913,968 3,913,968 0 0
Corporate Bonds 8,975,930 0 8,975,930 0
Government Securities 0 0 0 0
Municipal Bonds 95,487,532 0 95,487,532 0
Total $ 603,468,122 $ 408,625,718 $ 194,842,404 $ 0

As of December 31, ~~2019:~~

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, 2019 (Level 1) (Level 2) (Level 3)
Cash & Cash Equivalents $ 296,321,622 $ 296,321,622 $ 0 $ 0
Short-Term Investments:
Certificate of Deposit 50,099,795 50,099,795 0 0
Corporate Bonds 29,219,685 0 29,219,685 0
Government Securities 58,432,823 0 58,432,823 0
Other 2,631,750 2,631,750 0 0
Long-Term Investments:
Asset-backed Securities 25,791,029 0 25,791,029 0
Certificate of Deposit 3,557,798 3,557,798 0
Corporate Bonds 22,815,998 0 22,815,998 0
Governmental Securities 6,088,190 0 6,088,190 0
Municipal Bonds 72,638,690 0 72,638,690 0
Total $ 567,597,380 $ 352,610,965 $ 214,986,415 $ 0
2020:


			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, 2020		(Level 1)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	423,371,036	$	423,371,036	$	—	$	—
Short-Term Investments:
Certificate of Deposit	1,516,693		1,516,693		—		—
Corporate Bonds	7,155,600		—		7,155,600		—
Government Securities	6,678,450		—		6,678,450		—
Municipal Bonds	10,284,765		—		10,284,765		—
Other	1,528,861		1,528,861		—		—
Long-Term Investments:
Asset-backed Securities	37,924,537		—		37,924,537		—
Certificate of Deposit	3,645,520		3,645,520		0		—
Corporate Bonds	9,024,035		—		9,024,035		—

Municipal Bonds	107,407,831		—		107,407,831		—
Total	$	608,537,328	$	430,062,110	$	178,475,218	$	—

The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

As of September 30, 2021:


			Unrealized
	Cost		Gains		Losses		Market Value
Short-Term Investments:
Certificate of Deposit	$	1,750,589	$	14,441	$	—	$	1,765,030
Corporate Bonds	1,992,456		40,204		—		2,032,660

Municipal Bonds	1,334,020		848		—		1,334,868
Other	1,803,989		—		—		1,803,989
Long-Term Investments:
Asset Backed Securities	28,223,803		80,480		(564,592)		27,739,691
Certificate of Deposit	2,002,082		71,573		—		2,073,655
Corporate Bonds	32,791,105		300,347		(246,410)		32,845,042
Government Securities	39,704,080		9,126		(117,073)		39,596,133
Municipal Bonds	84,489,341		4,009,321		(129,995)		88,368,667
Total	$	194,091,465	$	4,526,340	$	(1,058,070)	$	197,559,735

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of ~~September 30,~~December 31, 2020:

Unrealized
Cost Gains Losses Market Value
Short-Term Investments:
Certificate of Deposit $ 1,252,187 $ 18,278 $ 0 $ 1,270,465
Corporate Bonds 13,970,360 134,885 0 14,105,245
Government Securities 23,105,527 129,656 0 23,235,183
Municipal Bonds 10,864,899 160,945 0 11,025,844
Other 2,941,743 0 0 2,941,743
Long-Term Investments:
Asset Backed Securities 41,521,603 1,086,633 (595,566) 42,012,670
Certificate of Deposit 3,754,312 159,656 0 3,913,968
Corporate Bonds 8,598,910 377,020 0 8,975,930
Municipal Bonds 89,916,703 5,580,670 (9,841) 95,487,532
Total $ 195,926,244 $ 7,647,743 $ (605,407) $ 202,968,580


			Unrealized
	Cost		Gains		Losses		Market Value
Short-Term Investments:
Certificate of Deposit	$	1,502,187	$	14,506	$	—	$	1,516,693
Corporate Bonds	7,084,638		70,962		—		7,155,600
Government Securities	6,635,132		43,318		—		6,678,450
Municipal Bonds	10,160,376		124,389		—		10,284,765
Other	1,528,861		—		—		1,528,861
Long-Term Investments:
Asset-backed Securities	37,681,113		800,802		(557,378)		37,924,537
Certificate of Deposit	3,503,898		141,622		—		3,645,520
Corporate Bonds	8,595,020		429,015		—		9,024,035

Municipal Bonds	100,776,325		6,635,428		(3,922)		107,407,831

Total	$	177,467,550	$	8,260,042	$	(561,300)	$	185,166,292

~~As of December 31, 2019:~~

Unrealized
Cost Gains Losses Market Value
Short-Term Investments:
Certificate of Deposit $ 50,099,795 $ 0 $ 0 $ 50,099,795
Corporate Bonds 29,025,624 194,061 0 29,219,685
Government Securities 58,343,911 99,917 (11,005) 58,432,823
Other 2,631,750 0 0 2,631,750
Long-Term Investments:
Asset-backed Securities 25,971,156 0 (180,127) 25,791,029
Certificate of Deposit 3,500,000 58,808 (1,010) 3,557,798
Corporate Bonds 22,306,130 509,868 0 22,815,998
Government Securities 6,012,705 75,485 0 6,088,190
Municipal Bonds 71,997,996 1,036,116 (395,422) 72,638,690
Total $ 269,889,067 $ 1,974,255 $ (587,564) $ 271,275,758

Unrealized losses on investments as of September 30, ~~2020,~~2021, are as follows:

Aggregate Unrealized Losses Aggregate Fair Value
Loss duration of less than one year $ 605,407 $ 24,572,356
Loss duration of greater than one year 0 0
Total $ 605,407 $ 24,572,356


	Aggregate Unrealized Losses		Aggregate Fair Value of Investments
Loss duration of less than one year	$	496,385	$	63,013,355
Loss duration of greater than one year	561,685		7,864,526
Total	$	1,058,070	$	70,877,881

Unrealized losses on investments as of December 31, ~~2019,~~2020, are as follows:

Aggregate Unrealized Losses Aggregate Fair Value
Loss duration of less than one year $ 587,564 $ 90,721,081
Loss duration of greater than one year 0 0
Total $ 587,564 $ 90,721,081

~~GENTEX CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


	Aggregate Unrealized Losses		Aggregate Fair Value of Investments
Loss duration of less than one year	$	561,300	$	12,317,187
Loss duration of greater than one year	—		—
Total	$	561,300	$	12,317,187

~~As stated in~~ ~~Note 1, effective~~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. ~~NaN~~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 ~~the~~any amortized cost basis has been recovered.

Fixed income securities as of September 30, ~~2020~~2021 have contractual maturities as follows:


Due within one year	$	~~49,192,972~~5,132,558
Due between one and five years	~~30,466,413~~61,209,692
Due over five years	~~113,325,115~~129,413,495
	$	~~192,984,500~~195,755,745

~~(5)~~

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4) Inventories

Inventories consisted of the following at the respective balance sheet dates:

September 30, 2020 December 31, 2019
Raw materials $ 160,155,658 $ 164,974,553
Work-in-process 30,308,212 33,069,255
Finished goods 42,894,232 50,898,047
Total Inventory $ 233,358,102 $ 248,941,855


	September 30, 2021		December 31, 2020
Raw materials	$	209,029,089	$	151,688,455
Work-in-process	33,882,944		32,791,675
Finished goods	49,687,848		41,811,713
Total Inventory	$	292,599,881	$	226,291,843

~~(6)~~(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 nine months ended September 30, ~~2020~~2021 and September 30, ~~2019:~~

2020:

~~GENTEX CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Basic Earnings Per Share	Basic Earnings Per Share									Basic Earnings Per Share
Net (Loss) Income		$	117,092,602	$	111,897,852	$	204,224,370	$	325,136,888
Net Income										Net Income	$	76,660,548	$	117,092,602	$	276,617,836	$	204,224,370
Less: Dividends and undistributed earnings allocated to participating securities	Less: Dividends and undistributed earnings allocated to participating securities	1,697,281		1,389,659		2,906,048		3,699,548		Less: Dividends and undistributed earnings allocated to participating securities	1,240,581		1,697,281		4,240,503		2,906,048
Net (Loss) Income available to common shareholders		$	115,395,321	$	110,508,193	$	201,318,322	$	321,437,340
Net Income available to common shareholders										Net Income available to common shareholders	$	75,419,967	$	115,395,321	$	272,377,333	$	201,318,322

Basic weighted average shares outstanding	Basic weighted average shares outstanding	241,898,117		251,075,859		243,240,699		252,811,950		Basic weighted average shares outstanding	234,005,573		241,898,117		236,628,999		243,240,699
Net (Loss) Income per share - Basic		$	0.48	$	0.44	$	0.83	$	1.27
Net Income per share - Basic										Net Income per share - Basic	$	0.32	$	0.48	$	1.15	$	0.83

Diluted Earnings Per Share	Diluted Earnings Per Share									Diluted Earnings Per Share
Allocation of Net (Loss) Income used in basic computation		$	115,395,321	$	110,508,193	$	201,318,322	$	321,437,340
Allocation of Net Income used in basic computation										Allocation of Net Income used in basic computation	$	75,419,967	$	115,395,321	$	272,377,333	$	201,318,322
Reallocation of undistributed earnings	Reallocation of undistributed earnings	4,742		6,051		6,731		15,389		Reallocation of undistributed earnings	2,943		4,742		13,289		6,731
Net (Loss) Income available to common shareholders - Diluted		$	115,400,063	$	110,514,244	$	201,325,053	$	321,452,729
Net Income available to common shareholders - Diluted										Net Income available to common shareholders - Diluted	$	75,422,910	$	115,400,063	$	272,390,622	$	201,325,053

Number of shares used in basic computation	Number of shares used in basic computation	241,898,117		251,075,859		243,240,699		252,811,950		Number of shares used in basic computation	234,005,573		241,898,117		236,628,999		243,240,699
Additional weighted average dilutive common stock equivalents	Additional weighted average dilutive common stock equivalents	918,950		1,503,123		1,026,916		1,455,901		Additional weighted average dilutive common stock equivalents	897,636		918,950		1,108,216		1,026,916
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	242,817,067		252,578,982		244,267,615		254,267,851		Diluted weighted average shares outstanding	234,903,209		242,817,067		237,737,215		244,267,615

Net (Loss) Income per share - Diluted		$	0.48	$	0.44	$	0.82	$	1.26
Net Income per share - Diluted										Net Income per share - Diluted	$	0.32	$	0.48	$	1.15	$	0.82

Shares related to stock plans not included in diluted average common shares outstanding because their effect would be anti-dilutive	Shares related to stock plans not included in diluted average common shares outstanding because their effect would be anti-dilutive	412,775		3,054		412,775		170,386		Shares related to stock plans not included in diluted average common shares outstanding because their effect would be anti-dilutive	987,757		412,775		180,669		412,775

~~(7)~~(6) Stock-Based Compensation Plans

As of September 30, ~~2020,~~2021, the Company had 2 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.

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, ~~2019,~~2020, for additional information related to the Prior Plans.

The Company recognized total compensation expense for share-based payments of $7,492,763 for the three months ended September 30, 2021, and total compensation expense for share-based payments of

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

$20,114,921 for the nine months ended September 30, 2021. The Company recognized ~~total~~ compensation expense for share-based payments ~~of $6,904,725~~ for the three months endedSeptember 30, 2020 of $6,904,725and ~~total compensation expense for share-based payments of~~ $22,865,087 for the nine months ended September 30, 2020, which included approximately $4,173,710 in severance expense that was recognized during the second quarter ~~2020. The Company recognized compensation expense for share-based payments~~ of ~~$5,712,132 and $15,927,434 for the three and nine months ended September 30, 2019, respectively.~~ 2020.A portion of the compensation cost for share based payment awards is capitalized as part of inventory.

2019 Omnibus Incentive Plan

~~The 2019 Omnibus Incentive Plan covers 45,000,000 shares of common stock.~~ The purpose of the 2019 Omnibus Incentive 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 Plan, each type of award counts against the available shares based on a predetermined conversion rate (shown in the table below). As of September 30, ~~2020, 9,191,249~~2021, 6,156,962 share awards have been granted under the Plan, resulting in 15,031,810 shares, ~~(net~~of 45,000,000 total shares available, to be issued under the Plan. The shares issued are presented net of shares from canceled/expired ~~options) have been issued under the 2019 Omnibus Plan, which includes stock~~ options ~~(at a set conversion rate), restricted shares,~~ and ~~performance share awards.~~shares.


	Shares Granted	Conversion Rate	Total Shares Under 2019 Omnibus Plan
Non-Qualified Stock Options	3,256,685	1.00	3,256,685
Restricted Stock / Performance Shares	2,900,277	4.06	11,775,125
Total	6,156,962		15,031,810

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 September 30, ~~2020,~~2021, there was ~~$7,153,596~~$9,556,647 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 September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Dividend Yield (1)	Dividend Yield (1)	1.98	%	1.99	%	1.99	%	2.02	%	Dividend Yield (1)	1.83	%	1.98	%	1.86	%	1.99	%
Expected volatility (2)	Expected volatility (2)	27.72	%	24.25	%	27.38	%	23.84	%	Expected volatility (2)	27.47	%	27.72	%	27.67	%	27.38	%
Risk-free interest rate (3)	Risk-free interest rate (3)	0.28	%	1.55	%	0.31	%	1.85	%	Risk-free interest rate (3)	0.98	%	0.28	%	0.92	%	0.31	%
Expected term of options (years) (4)	Expected term of options (years) (4)	4.16		4.16		4.16		4.18		Expected term of options (years) (4)	4.14		4.16		4.15		4.16
Weighted-avg. grant date fair value	Weighted-avg. grant date fair value	$4.64		$4.76		$4.38		$4.23		Weighted-avg. grant date fair value	$6.32		$4.64		$6.49		$4.38

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.

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 September 30, ~~2020,~~2021, the Company had unearned stock-based compensation of ~~$40,755,008~~$48,175,427 associated with the restricted stock grants issued under the 2019 Omnibus Plan and the prior plan. The unearned stock-based compensation related to these grants is being amortized

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

to compensation expense over the applicable restriction periods. Amortization expense from restricted stock in the three months ended September 30, 2021 was $5,215,981 and amortization expense from restricted stock grants in the nine months ended September 30, 2021 was $13,978,358. Amortization expense from restricted stock grants for the three months ended September 30, 2020 was $4,366,025 and amortization expense from restricted stock grants in the nine months ended September 30, 2020 was $16,271,774, which included $4,148,477 of severance related expense ~~that occurred in~~for the second quarter of 2020. ~~Amortization expense from restricted stock grants for the three and nine months ended September 30, 2019 was $3,843,962 and $9,890,137, respectively.~~

~~GENTEX CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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 September 30, ~~2020,~~2021, the Company had unearned stock-based compensation of ~~$5,133,550~~$7,967,733 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. Amortization expense from performance share grants in the three and nine months ended September 30, ~~2020~~2021 was ~~$1,403,799~~$581,830 and ~~$2,361,359,~~$1,387,584, respectively. Amortization expense from performance share grants in the three and nine months ended September 30, ~~2019~~2020 was ~~$263,392~~$1,403,799 and ~~$633,576,~~$2,361,359, respectively.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan covering 2,000,000 shares of common stock. Under the plan, the Company sells shares at 85% of the stock’s market price at date of purchase. Under ASC 718, Compensation - Stock Compensation, the 15% discounted value is recognized as compensation expense. As of September 30, ~~2020,~~2021, the Company has issued ~~1,321,981~~1,463,744 shares under this plan.

~~(8)~~(7) Comprehensive Income

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on certain debt investments and foreign currency translation ~~adjustments, and derivatives.~~adjustments.

The following table presents the net changes in the Company's accumulated other comprehensive income by component (all amounts shown are net of tax):

1716

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Foreign currency translation adjustments:	Foreign currency translation adjustments:									Foreign currency translation adjustments:
Balance at beginning of period	Balance at beginning of period	$	(2,940,052)	$	(1,851,574)	$	(2,384,589)	$	(1,674,887)	Balance at beginning of period	$	879,832	$	(2,940,052)	$	769,045	$	(2,384,589)
Other Comprehensive income (loss) before reclassifications	Other Comprehensive income (loss) before reclassifications	1,823,667		(1,623,102)		1,268,204		(1,799,789)		Other Comprehensive income (loss) before reclassifications	(349,165)		1,823,667		(238,378)		1,268,204

Net current-period change	Net current-period change	1,823,667		(1,623,102)		1,268,204		(1,799,789)		Net current-period change	(349,165)		1,823,667		(238,378)		1,268,204
Balance at end of period	Balance at end of period	(1,116,385)		(3,474,676)		(1,116,385)		(3,474,676)		Balance at end of period	530,667		(1,116,385)		530,667		(1,116,385)

Unrealized gains on available-for-sale debt securities:	Unrealized gains on available-for-sale debt securities:									Unrealized gains on available-for-sale debt securities:
Balance at beginning of period	Balance at beginning of period	5,679,296		2,350,795		1,095,486		74,549		Balance at beginning of period	3,385,206		5,679,296		6,082,007		1,095,486
Other Comprehensive income before reclassifications		208,503		657,128		5,543,455		3,106,369
Other Comprehensive income (loss) before reclassifications										Other Comprehensive income (loss) before reclassifications	(645,273)		208,503		(2,727,750)		5,543,455
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	(324,354)		(295,752)		(1,075,496)		(468,747)		Amounts reclassified from accumulated other comprehensive income	—		(324,354)		(614,324)		(1,075,496)
Net current-period change	Net current-period change	(115,851)		361,376		4,467,959		2,637,622		Net current-period change	(645,273)		(115,851)		(3,342,074)		4,467,959
Balance at end of period	Balance at end of period	5,563,445		2,712,171		5,563,445		2,712,171		Balance at end of period	2,739,933		5,563,445		2,739,933		5,563,445

Accumulated other comprehensive income (loss), end of period		$	4,447,060	$	(762,505)	$	4,447,060	$	(762,505)
Accumulated other comprehensive income, end of period										Accumulated other comprehensive income, end of period	$	3,270,600	$	4,447,060	$	3,270,600	$	4,447,060

The following table presents details of reclassifications out of accumulated other comprehensive income for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020:


Details about Accumulated Other Comprehensive Income Components	Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Other Comprehensive Income								Affected Line item in the Statement of Consolidated Income	Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Other Comprehensive Income								Affected Line item in the Consolidated Statements of Income
		Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended September 30,				Nine Months Ended September
		2020		2019		2020		2019				2021		2020		2021		2020
Unrealized gains on available-for-sale debt securities	Unrealized gains on available-for-sale debt securities										Unrealized gains on available-for-sale debt securities
Realized gain on sale of securities	Realized gain on sale of securities	$	410,575	$	374,370	$	1,361,387	$	593,351	Investment income	Realized gain on sale of securities	$	—	$	410,575	$	777,625	$	1,361,387	Investment income
Provision for income taxes	Provision for income taxes	(86,221)		(78,618)		(285,891)		(124,604)		Provision for income taxes	Provision for income taxes	—		(86,221)		(163,301)		(285,891)		Provision for income taxes
Total net reclassifications for the period	Total net reclassifications for the period	$	324,354	$	295,752	$	1,075,496	$	468,747	Net of tax	Total net reclassifications for the period	$	—	$	324,354	$	614,324	$	1,075,496	Net of tax

~~(9)~~(8) Debt and Financing Arrangements

On October 15, 2018, the Company entered into a Credit Agreement (“Credit Agreement”) with PNC as the administrative agent and sole lender.

Pursuant to this Credit Agreement, the Company has access to a $150 million senior revolving credit facility (“Revolver”). Under the terms of the Credit Agreement, the Company is entitled to further request an additional aggregate principal amount of up to $100 million, subject to the satisfaction of certain conditions. In addition, the Company is entitled to the benefit of swing loans from amounts otherwise available under the Revolver in the aggregate principal amount of up to $20 million and to request Letters of Credit from amounts otherwise available under the Revolver in the aggregate principle amount up to $20 million, both subject to certain conditions. The obligations of the Company under the Credit Agreement are not secured, but are subject to certain covenants.

As of September 30, 2021, there was 0 outstanding balance on the Revolver. The Revolver expires on October 15, 2023.

1817

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

During the three months ended September 30, 2020, the Company made principal repayments of $50 million, plus accrued interest, on the Revolver. The Company used cash and cash equivalents to fund the payments. As of September 30, 2020, there was an outstanding balance of $25 million on the Revolver. The Company has the ability and intent to repay the full outstanding balance using cash, and anticipates paying the remaining balance during the fourth quarter of 2020; therefore, this balance has been classified as a current liability. The Revolver expires on October 15, 2023.

As of September 30, 2020, the borrowing rate on its Revolver is derived from the one month LIBOR, and based on the Company's leverage ratio as of September 30, 2020, the interest rate on its borrowings is equal to 1.03%. ~~During the three and nine months ended September 30, 2020, interest expense was $0.2 million and $0.6 million, respectively, which was recorded with the "Other income (loss), net" section of the~~ ~~Unaudited Consolidated Statements of Income~~. Based on the loan balance as of September 30, 2020, a 1 percent increase in the Company's borrowing rate would increase net interest expense paid by the Company on its borrowings by approximately $0.1 million on an annual basis.

The Credit Agreement contains customary representations and warranties and certain covenants that place certain limitations on the Company.

As of September 30, ~~2020,~~2021, the Company is in compliance with its covenants under the Credit Agreement.

~~(10)~~

(9) Equity

The decrease in common stock during the nine months ended September 30, ~~2020,~~2021, was primarily due to the repurchases of ~~8.2~~9.0 million shares, partially offset by the issuance of ~~1.9~~1.8 million shares of the Company’s common stock, net of cancellations, under the Company’s stock-based compensation ~~plans and the issuance of 0.1 million shares of the Company's common stock as part of the acquisition of Vaporsens (see~~ ~~Note 16~~ ~~for more information).~~plans. The total net decrease was ~~6.2~~7.2 million shares.

The ~~Company announced a $0.005 (1/2 cent) per share increase in its quarterly cash dividend rate during the first quarter of 2020. As such, the~~ Company recorded a cash dividend of $0.120 per share during the third quarter of ~~2020~~2021 as compared to a cash dividend of ~~$0.115~~$0.120 per share during the third quarter of ~~2019.~~2020. The third quarter ~~2020~~2021 dividend of ~~$29.4~~$28.4 million was declared on August ~~31, 2020,~~4, 2021, and was paid on October 21, ~~2020.~~2021.

~~(11)~~(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.

~~(12)~~(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, which are combined into the "Other" segment. During the second quarter of~~industry. In 2020, the Company ~~also~~ acquired Vaporsens, which specializes in nanofiber chemical ~~sensing research and development, which was also~~sensing. These three non-automotive segments are combined ininto the "Other" segment as shown below.In first quarter of 2021, the Company acquired Guardian, which is combined in the Automotive Segment below. Further information in regards to the ~~Vaporsens~~Guardian transaction is included in Note 1615 of the financial statements.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue:
Automotive Products	$	391,338,185	$	464,673,587	$	1,287,578,273	$	1,126,597,020
Other	8,260,559		9,964,997		23,750,336		31,728,846
Total	$	399,598,744	$	474,638,584	$	1,311,328,609	$	1,158,325,866
Income (Loss) from operations:
Automotive Products	$	89,121,170	$	138,428,628	$	325,579,533	$	233,149,936
Other	(956,230)		424,261		(3,756,270)		3,991,864
Total	$	88,164,940	$	138,852,889	$	321,823,263	$	237,141,800

(12) Income Taxes

1918

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Revenue:
Automotive Products $ 464,673,587 $ 464,280,707 $ 1,126,597,020 $ 1,376,704,413
Other 9,964,997 13,480,710 31,728,846 38,357,355
Total $ 474,638,584 $ 477,761,417 $ 1,158,325,866 $ 1,415,061,768
Income from operations:
Automotive Products $ 138,428,628 $ 123,342,538 $ 233,149,936 $ 364,590,462
Other 424,261 4,793,142 3,991,864 13,046,517
Total $ 138,852,889 $ 128,135,680 $ 237,141,800 $ 377,636,979

~~(13) Income Taxes~~

The effective tax rate was ~~17.1%~~15.4% in the nine months ended September 30, ~~2020~~2021, compared to ~~15.9%~~an effective tax rate of 17.1% for the same period in ~~2019.~~2020. 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, and the foreign-derived intangible income tax deduction and research and development tax credits.

~~(14)~~(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 nine month periods ended September ~~30, 2020~~30,2021 and September 30, ~~2019:~~2020:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Revenue	Revenue	2020		2019		2020		2019		Revenue	2021		2020		2021		2020
Automotive Products	Automotive Products									Automotive Products
U.S.	U.S.	$	156,521,110	$	145,798,028	$	347,952,489	$	431,729,037	U.S.	$	128,570,314	$	156,521,110	$	410,852,689	$	347,952,489
Germany	Germany	56,514,969		74,047,596		153,166,702		225,649,215		Germany	55,162,289		56,514,969		183,513,145		153,166,702
Japan	Japan	64,353,263		60,641,977		152,824,143		172,697,963		Japan	53,750,242		64,353,263		161,814,352		152,824,143
Mexico	Mexico	33,342,171		43,884,609		92,882,253		130,473,702		Mexico	25,239,690		33,342,171		85,574,821		92,882,253
Other	Other	153,942,074		139,908,497		379,771,433		416,154,496		Other	128,615,650		153,942,074		445,823,266		379,771,433
Total Automotive Products	Total Automotive Products	$	464,673,587	$	464,280,707	$	1,126,597,020	$	1,376,704,413	Total Automotive Products	$	391,338,185	$	464,673,587	$	1,287,578,273	$	1,126,597,020
Other Products (U.S.)	Other Products (U.S.)	9,964,997		13,480,710		31,728,846		38,357,355		Other Products (U.S.)	8,260,559		9,964,997		23,750,336		31,728,846
Total Revenue	Total Revenue	$	474,638,584	$	477,761,417	$	1,158,325,866	$	1,415,061,768	Total Revenue	$	399,598,744	$	474,638,584	$	1,311,328,609	$	1,158,325,866

Revenue by geographic area may fluctuate based on many factors, including: exposure to local economic, political and labor conditions; a pandemic; global supply chain constraints; 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; and tariffs, quotas, customs and other import or export restrictions and other trade barriers.

The following table disaggregates the Company’s Automotive revenue and Other revenue by major source for the three and nine month periods ended September 30, ~~2020~~2021 and September 30, ~~2019:~~2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
Revenue	2021		2020		2021		2020
Automotive Segment
Automotive Mirrors & Electronics	$	360,415,449	$	427,426,159	$	1,185,997,034	$	1,039,112,012
HomeLink Modules*	30,922,736		37,247,428		101,581,239		87,485,008
Total Automotive Products	$	391,338,185	$	464,673,587	$	1,287,578,273	$	1,126,597,020

Other Segment
Fire Protection Products	5,886,227		6,378,303		18,010,048		17,384,594
Aerospace Products	2,374,332		3,586,694		5,740,288		14,344,252
Total Other	$	8,260,559	$	9,964,997	$	23,750,336	$	31,728,846

*Excludes HomeLink revenue where HomeLink electronics are integrated into interior auto-dimming mirrors.

(14) Leases

2019

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
Revenue 2020 2019 2020 2019
Automotive Segment
Automotive Mirrors & Electronics $ 427,426,159 $ 418,746,334 $ 1,039,112,012 $ 1,241,147,268
HomeLink Modules* 37,247,428 45,534,373 87,485,008 135,557,145
Total Automotive Products $ 464,673,587 $ 464,280,707 $ 1,126,597,020 $ 1,376,704,413
Other Segment
Fire Protection Products 6,378,303 5,977,245 17,384,594 18,188,744
Windows Products 3,586,694 7,503,465 14,344,252 20,168,611
Total Other $ 9,964,997 $ 13,480,710 $ 31,728,846 $ 38,357,355
*Excludes HomeLink revenue where HomeLink electronics are integrated into interior auto-dimming mirrors.

~~(15) Leases~~

The Company has operating leases for corporate offices, warehouses, vehicles, and other equipment, which are included within "Plant and Equipment - Net" section of the Condensed Consolidated Balance Sheets. The leases have remaining lease terms of 1 year to 5 years. The weighted average remaining lease term for operating leases as of September 30, ~~2020~~2021 was 2 years, with a weighted average discount rate of ~~1.2%~~1.1%.

Future minimum lease payments for operating leases as of September 30, ~~2020~~2021 were as follows:

Year ending December 31,
2020 (excluding the nine months ended September 30, 2020) $ 394,431
2021 1,345,977
2022 825,645
2023 268,705
2024 32,956
Thereafter 5,951
Total future minimum lease payments 2,873,665
Less imputed interest (24,182)
Total $ 2,849,483


Year ending December 31,

2021 (excluding the nine months ended September 30, 2021)	$	388,416
2022	1,072,816
2023	548,316
2024	48,833
2025	6,287
Thereafter	127
Total future minimum lease payments	2,064,795
Less imputed interest	(10,858)
Total	$	2,053,937


Reported as of September 30, ~~2020~~2021

Accrued Liabilities	$	~~1,419,060~~1,247,544
Other Non-Current Liabilities	~~1,430,423~~806,393
Total	$	~~2,849,483~~2,053,937

~~GENTEX CORPORATION AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~(16)~~(15) Acquisitions

On ~~April 3,~~September 18, 2020, the Company acquired ~~Vaporsens, Inc (“Vaporsens”)~~the stock of Air-Craftglass, a Belgian company specializing in research and development of laminate products for ~~$10.6 million in a stock purchase deal, which was in addition to~~ the ~~previous $3.0 million equity investment by the Company in Vaporsens.~~aviation industry, for an initial payment of $1.1 million. The Company funded the acquisition with ~~$7.1 million in~~a cash ~~payments, with~~payment from cash on hand. The transaction also included contingent consideration based on future revenues of Air-Craftglass. The valuation process was completed during the ~~remaining $3.5 million~~third quarter of consideration paid with common stock of the Company. Vaporsens specializes in nanofiber chemical sensing research and development, which the Company anticipates using to complement and expand its product offerings. Vaporsens2021.

Air-Craftglass is now a 100% owned subsidiary of the Company, and ~~has been~~is classified within the “Other” segment.

The assets acquired and liabilities assumed as a part of this stock purchase were recorded at fair value on the acquisition date. The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business Combinations. There were no revenues of the business of ~~Vaporsens~~Air-Craftglass which were included in the Company’s condensed consolidated ~~statement~~statements of income and comprehensive income for the ~~quarter or~~ year to date ~~periods~~period ended September 30, ~~2020.~~2021.

On December 14, 2020, the Company acquired the stock of Argil for $3.7 million, which was in addition to the previous $4.2 million cash equity investment by the Company in Argil. The ~~following table summarizes~~Company funded the ~~fair values~~acquisition with a cash payment from cash on hand. Argil specializes in electrochromic technology and research and development, which the Company anticipates using to complement and expand its product offerings and leverage for manufacturing efficiencies. The Company is still in the process of verifying data and finalizing information related to the valuation and recording of identifiable intangible assets, deferred taxes, net working capital, and the resulting effects on the amount of recorded goodwill. The Company

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

expects to finalize these matters within the measurement period, which will remain open through the fourth quarter of 2021.

Argil is now 100% owned and merged with the Company, and has been classified within the “Automotive” segment. The assets acquired and ~~the~~ liabilities assumed as part of this stock purchase were recorded at fair value on the acquisition date. The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business Combinations. There were no revenues of the ~~acquisition~~business of Argil which were included in the Company’s condensed consolidated statements of income and comprehensive income for the year to date ~~of April 3, 2020. The valuation process is not complete and the final determination of the fair values may result in further adjustments to the values presented below:~~period ended September 30, 2021.


	~~Fair Value~~
~~Current Assets~~	$	~~435,722~~
~~Personal Property~~	~~562,840~~
~~Technology Licenses~~	~~245,335~~
~~In-Process R&D~~	~~11,000,000~~
~~Goodwill~~	~~3,850,711~~
~~Total assets acquired~~	~~16,094,608~~
~~Current liabilities~~	~~255,522~~
~~Deferred Tax Liability~~	~~2,220,086~~
~~Total Liabilities assumed~~	~~2,475,608~~
~~Net Assets Acquired~~	$	~~13,619,000~~

On March 3, 2021 the Company acquired Guardian for approximately $12.0 million.

Guardian is an Israeli research and development company that specializes in in-cabin sensing technologies for the automotive industry. The ~~allocation of~~Company funded the ~~purchase price above is considered preliminary and was based upon valuation information available and estimates and assumptions made as of September 30, 2020.~~acquisition with a cash payment from cash on hand. The Company is still in the process of verifying data and finalizing information related to the valuation and recording of identifiable intangible assets, deferred taxes, net working capital, and the resulting effects on the amount of recorded goodwill. The Company expects to finalize these matters within the measurement period, which is currently expected to remain open through the ~~end of calendar year 2020.~~

On September 18, 2020, the Company acquired Air-Craftglass, a Belgian company specializing in research and development for aircraft windows, for an initial payment of $1.1 million in a stock purchase deal. The Company funded the acquisition with a cash payment from cash on hand. The transaction also included contingent consideration based on future revenues. The Company is still in the process of verifying data and finalizing information related to the valuation and recording of identifiable intangible assets, deferred taxes, net working capital, contingent consideration liability, and the resulting effects on the amount of recorded goodwill. The Company expects to finalize these matters within the measurement period, which is currently expected to remain open through the secondfourth quarter of 2021.

~~Air-Craftglass~~Guardian is now a 100% owned subsidiary of the Company as Gentex Technologies (Israel), LTD, and ~~will be~~is classified within the ~~“Other”~~Automotive segment. ~~The assets acquired and liabilities assumed were recorded at fair value on the acquisition date.~~ The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business Combinations. There were no revenues of the business of Guardian which were included in the Company’s condensed consolidated statement of income and comprehensive income for the year to date period ended September 30, 2021.

The following table summarizes the fair values of the assets acquired, and the liabilities assumed, as of the acquisition date of March 3, 2021:


	Fair Value
Current Assets	$	32,000
Personal Property	15,000
In-Process R&D	6,795,461
Trade Names and Trademarks	1,301,542
Deferred Tax Asset	1,049,073
Goodwill	2,848,364
Total Net Assets Acquired	$	12,041,440

Through September 30, 2021, the Company has incurred acquisition-related costs of approximately $375,000, which has been expensed as incurred in the "Selling, general & administrative" section of its Condensed Consolidated Income Statement.

2221

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Combinations~~. There were no revenues of the business of Air-Craftglass which were included in the the Company’s consolidated statement of income and comprehensive income for the quarter or year to date periods ended September 30, 2020.

Through September 30, 2020, the Company has incurred acquisition-related costs of approximately $600,000, which has been expensed as incurred in the "Selling, general & administrative" section of its Condensed Consolidated Income Statement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~RESULTS OF OPERATIONS:~~

THIRD QUARTER ~~2020~~2021 VERSUS THIRD QUARTER ~~2019~~2020

Net Sales. Net sales for the third quarter of ~~2020~~2021 decreasedby ~~$3.1~~$75.0 millionor 1%16% when compared with the third quarter of ~~2019.~~2020.

Automotive net sales for the third quarter of ~~2020~~2021 were ~~$464.7~~$391.3 million, compared with automotive net sales of ~~$464.3~~$464.7 million in the third quarter of ~~2019. Automotive net sales were strong~~2020. Auto-dimming mirror unit shipments by the Company decreased 7% during the quarter, compared to the third quarter of ~~2020 despite the 3% quarter over quarter decrease in interior auto-dimming mirror unit shipments, which strength was primarily driven by ongoing revenue growth of the Company's Full Display Mirror~~® product. The 3% decrease in automotive mirror unit shipments in the third quarter of 2020 to 10.6 million units compared with 10.8 million units in the third quarter of 2019, was driven primarily by a 5% quarter over quarter decrease in international auto-dimming mirror unit shipments, stemming largely from the COVID-19 pandemic and related shutdowns.2020.

The below table represents the Company's auto-dimming mirror unit shipments for the three and nine months ended September 30, ~~2020,~~2021, and ~~2019~~2020 (in thousands).


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended September 30,			Nine Months Ended September 30,
		2020	2019	% Change	2020	2019	% Change		2021	2020	% Change	2021	2020	% Change
North American Interior Mirrors	North American Interior Mirrors	2,234	2,139	4%	5,040	6,571	(23)%	North American Interior Mirrors	1,897	2,234	(15)%	5,843	5,040	16%
North American Exterior Mirrors	North American Exterior Mirrors	1,404	1,412	(1)%	3,093	3,961	(22)%	North American Exterior Mirrors	1,355	1,404	(4)%	4,345	3,093	40%
Total North American Mirror Units	Total North American Mirror Units	3,638	3,551	2%	8,133	10,532	(23)%	Total North American Mirror Units	3,252	3,638	(11)%	10,188	8,133	25%

International Interior Mirrors	International Interior Mirrors	4,940	5,189	(5)%	11,670	15,785	(26)%	International Interior Mirrors	4,629	4,940	(6)%	15,219	12,889	18%
International Exterior Mirrors	International Exterior Mirrors	1,981	2,101	(6)%	7,028	6,025	17%	International Exterior Mirrors	1,928	1,981	(3)%	6,605	5,191	27%
Total International Mirror Units	Total International Mirror Units	6,921	7,290	(5)%	18,697	21,810	(14)%	Total International Mirror Units	6,557	6,921	(5)%	21,823	18,080	21%

Total Interior Mirrors	Total Interior Mirrors	7,174	7,328	(2)%	16,709	22,356	(25)%	Total Interior Mirrors	6,526	7,174	(9)%	21,062	17,928	17%
Total Exterior Mirrors	Total Exterior Mirrors	3,385	3,513	(4)%	10,121	9,986	1%	Total Exterior Mirrors	3,283	3,385	(3)%	10,949	8,285	32%
Total Auto-Dimming Mirror Units	Total Auto-Dimming Mirror Units	10,559	10,841	(3)%	26,830	32,342	(17)%	Total Auto-Dimming Mirror Units	9,809	10,559	(7)%	32,011	26,213	22%

Note: Percent change and amounts may not total due to rounding.

Other net sales were $~~10.0~~8.3 million in the third quarter of ~~2020,~~2021, a decrease of ~~26%~~17%, compared to ~~$13.5~~$10.0 million in the third quarter of ~~2019.~~2020. This decrease is in large part attributable to a ~~52%~~34% quarter over quarter decline in variable dimmable aircraft windows sales, which decreased to $2.4 million in the third quarter of 2021 from $3.6 million in the third quarter of ~~2020 from $7.5~~2020. Fire protection sales decreased by 8% in the third quarter of 2021 to $5.9 million, compared to $6.4 million in the third quarter of ~~2019. Fire protection sales increased by 7% in the third quarter of 2020 to $6.4 million, compared to $6.0 million in the third quarter of 2019.~~2020.

Cost of Goods Sold. As a percentage of net sales, cost of goods sold ~~decreased~~increased to 64.7% in the third quarter of 2021 versus 60.3% in the third quarter of ~~2020 versus 62.3% in the third quarter of 2019.The quarter over quarter net increase in gross margin was directly impacted by the increasing strength in orders during~~2020. Compared to the third quarter of 2020, ~~as well as~~gross margin was primarily impacted by the ~~previously announced $35 million~~lower sales levels stemming from the 23% quarter over quarter decline in ~~annualized structural cost reductions that took place in~~light vehicle production the ~~second quarter of 2020.~~Company's primary regions. Gross margin was also negatively impacted ~~positively~~ by ~~purchasing cost~~customer price reductions and ~~improvements~~increases in ~~tariff~~freight and other supply chain related ~~costs, which together were able to offset the typical impact caused by annual customer price reductions.~~costs. On a quarter over quarter basis, the ~~savings as~~fixed overhead leverage had a ~~result~~negative impact of ~~structural cost~~approximately 250 - 300 basis points on the gross margin. Customer price reductions ~~that took place~~and increases in ~~the second quarter~~freight and other supply chain costs each had a negative impact of ~~2020~~approximately 150 - 200 basis points. These impacts were partially offset by price reductions on raw materials and product mix, which each had a positive impact of approximately 150 - 200 basis points on gross margin ~~and the above-referenced purchasing cost reductions and tariffs independently had a positive impact of approximately 50 - 100 basis points on gross margin, each~~ on a quarter over quarter basis. ~~These positive impacts were partially offset by annual customer price~~

~~reductions, which had a negative impact of approximately 200 - 250 basis points on gross margin on a quarter over quarter basis.~~

Operating Expenses. Engineering, research and development ("E, R & D") expenses for the third quarter of ~~2020 decreased~~2021 increased by ~~5% or $1.6~~$1.9 million when compared with the third quarter of ~~2019, primarily due to reductions in wages and discretionary spending as a result of the structural cost reductions that took place in the second quarter~~ 2020.

Selling, general and administrative ("S, G & A") expenses ~~decreased~~increased by 5%7% or ~~$1.2~~$1.4 million for the third quarter of ~~2020~~2021 compared to the third quarter of ~~2019.~~2020. S, G & A expenses ~~remained at~~were 6% of net sales in the third quarter of 2021, compared to 5% of net sales in the third quarter of ~~2020, similar to the third quarter of 2019.~~2020. S, G, & A expenses ~~decreased~~increased on a quarter over quarter basis primarily due to ~~reductions~~increases in wages and ~~discretionary spending.~~selling expenses.

Total operating expenses were $52.7 million in the third quarter of 2021, which increased by 7% or $3.4 million, from $49.4 million in the third quarter of 2020, which decreased by 5% or $2.8 million, from $52.2 million in the third quarter of 2019. The decrease in total operating expenses was primarily driven by reductions in wages and discretionary spending, such as decreased spending for trade shows and travel expenses.2020.

Total Other Income. Total other income for the third quarter of ~~2020 increased~~2021 decreased by ~~$0.6~~$2.3 million when compared with the third quarter of ~~2019.~~2020.

Provision for Income Taxes. The effective tax rate was ~~18.1%~~14.7% for, and an income tax expense of $13.2 million was recorded in, the third quarter of 2021 compared to an income tax expense of $25.8 million ~~in the third quarter of 2020 compared to a 15.0% effective tax rate and income tax expense of $19.7 million~~ for the same quarter of ~~2019.~~2020. Typically, effective tax rates for the Company differ from statutory federal income tax rates, due to provisions for state and local income taxes, permanent tax differences, research and development tax credits and the foreign-derived intangible income tax deduction.

Net Income. Net income for the third quarter of ~~2020~~2021 was ~~$117.1~~$76.7 million, ~~up from a~~compared to net income of ~~$111.9~~$117.1 million the third quarter of ~~2019.~~2020. The decrease in net income was driven by the quarter over quarter change in sales, gross margins, and operating profits.

Earnings Per Share. The Company had earnings per diluted share for the third quarter of ~~2020~~2021 of ~~$0.48 which~~$0.32, compared to earnings per diluted share of ~~$0.44~~$0.48 for the third quarter of ~~2019.~~2020.

NINE MONTHS ENDED SEPTEMBER 30, ~~2020~~2021 VERSUS NINE MONTHS ENDED SEPTEMBER 30, ~~2019~~2020

Net Sales. Net Sales for the nine months ended September 30, ~~2020 decreased~~2021increased by ~~$256.7~~$153.0 million or ~~18%~~13% when compared with the same period in ~~2019.~~2020.

Automotive net sales for the first nine months of ~~2020~~2021 were ~~$1.13~~$1.3 billion, ~~down 18%~~up 14% compared with automotive net sales of ~~$1.38~~$1.13 billion million for the first nine months of ~~2019,~~2020, driven by a ~~17%~~22% period over period ~~decrease~~increase in automotive mirror unit shipments. North American automotive mirror shipments in the nine months ended September 30, ~~2020 decreased 23%~~2021 increased 25% to ~~8.1~~10.2 million units compared with the same period in ~~2019.~~2020.

Cost of Goods Sold. As a percentage of net sales, cost of goods sold ~~increased~~decreased to ~~66.4%~~63.7% for the first nine months of ~~2020,~~2021, versus ~~62.8%~~66.4% in the same period last year. The period over period ~~decrease~~increase in the gross profit margin was primarily the result of the Company's ~~inability to~~better leverage of fixed overhead, positive structural cost savings put in place during the second quarter of 2020, ~~as a result of COVID-19 related shutdowns~~ and ~~decreases~~purchasing cost reductions. These improvements in ~~demand, as well as annual customer price reductions, which~~gross margin were partially offset by ~~improvements in product mix related to Full Display Mirror~~® ~~as well as purchasing cost reductions and structural cost~~annual customer price reductions. On a period over period basis, ~~the inability to leverage~~better fixed overhead leverage had a ~~negative~~positive impact of approximately ~~200~~300 - ~~300~~350 basis points on gross margin, and the savings as a result of structural cost reductions that took place in the second quarter of 2020 had a positive impact of approximately 150 - 200 basis points on gross margin. Purchasing cost reductions had a positive impact of approximately 50 - 100 basis points on gross margin on a period over period basis. These positive impacts were partially offset by annual customer price reductions, which had ~~an additional~~a negative impact of approximately 150 - 200 basis points ~~each on gross margin. Purchasing cost reductions, product mix improvements, and structural cost reductions each independently had a positive impact~~ on gross margin on a period over period ~~basis of approximately 50 - 100 basis points.~~basis.

Operating Expenses. E, R & D ~~expenses~~ for the nine months ended September 30, ~~2020~~2021 were $86.5 million, compared with $86.4 million for the same period last year.

S, G & A for the first nine months of 2021 increased 1%3.5% or ~~$0.6~~$2.3 million when compared with the same period last year. ~~The increase was primarily due to severance~~

~~related costs incurred~~In the first nine months of 2021, the Company recognized S, G & A savings from the structural cost savings put in place in the second quarter of 2020, ~~and staffing levels in the first six months of 2020, which~~but those savings were ~~partially~~mostly offset by ~~lower overall expense levels as a result~~increases in wages and selling expenses, professional fees, and outbound freight costs. A lack of international travel and the cancellation of most industry-based trade shows due to the COVID-19 ~~pandemic.~~

~~S, G & A~~pandemic also impacted operating expenses for ~~the first~~both nine months of 2020 increased 3% or $2.2 million when compared with the same period last year, primarily due to severance related costs, wages and benefits, other resources associated with mitigation of the impacts of the global COVID-19 pandemic, and increased legal and professional fees associated with acquisitions of new technology described in ~~Note 16~~ ~~of the financial statements included in this Form 10-Q.~~month periods.

Total Other Income. Total other income for the nine months ended September 30, ~~2020~~2021 was ~~$9.2~~$5.2 million compared with ~~$9.1~~$9.2 million for the same period last year.

Provision for Income Taxes. The effective tax rate was ~~17.1%~~15.4% for the nine months ended September 30, ~~2020~~2021 compared to ~~15.9%~~17.1% for the same period of ~~2019.~~2020.

Net Income. Net income for the nine months ended September 30, ~~2020 decreased~~2021 increased by ~~$120.9~~$72.4 million or ~~37%~~35% to ~~$204.2~~$276.6 million versus ~~$325.1~~$204.2 million in the same period last ~~year, due to~~year. The increase in net income was driven

by the ~~lower net~~period over period increase in sales, higher gross profits, and the ~~corresponding decrease~~continued operating leverage as a result of the structural cost savings that were put in ~~gross profit, as well as~~place during the ~~increases in operating expenses described above.~~second quarter of 2020.

Earnings Per Share. The Company had earnings per diluted share for the nine months ended September 30, ~~2020~~2021 of~~$0.82~~ $1.15 which compared to earnings per diluted share of~~$1.26~~ $0.82 for the nine months ended September 30, ~~2019,~~2020. The increase in earnings per share is primarily asdue to the higher net income but also positively impacted by a ~~result~~lower diluted share count when compared to the same period of ~~the COVID-19 pandemic and the related shutdowns as explained above.~~2020.

2624

FINANCIAL CONDITION:

The Company's cash and cash equivalents as of September 30, ~~2020~~2021 were ~~$400.5~~$270.0 million, which ~~increased $104.2~~decreased $153.4 million compared to ~~$296.3~~$423.4 million as of December 31, ~~2019.~~2020. The ~~increase~~decrease was primarily due to ~~cash flows from operations and the draw-down of $75 million on the Company's line of credit during the first quarter of 2020 (as described in~~ ~~Note 9~~ ~~of the financial statements included in this Form 10-Q), which was partially offset by~~ share repurchases, dividend payments and capital expenditures, ~~and repayment of $50 million on the line of credit~~which were partially offset by cash flows from operations, during the nine months ended September 30, ~~2020.~~2021.

Short-term investments as of September 30, ~~2020~~2021 were ~~$52.6~~$6.9 million,down from ~~$140.4~~$27.2 millionas of December 31, 2020, and long-term investments were $204.7 million as of September 30, 2021, compared to $162.0 million as of December 31, ~~2019, and long-term investments were $159.0 million as of September 30, 2020, compared to $139.9 million as of December 31, 2019.~~2020. Changes in the investment balances were primarily driven by ~~changes in fixed income~~maturities of investments and additional investment ~~maturities within~~purchases during the ~~investment portfolio.~~nine months ended September 30, 2021.

Accounts receivable as of September 30, ~~2020 increased~~2021 decreased approximately ~~$33.0~~$43.7 million compared to December 31, ~~2019,~~2020, primarily due to the ~~increase in~~timing of sales during the most recently completed ~~quarter.~~nine months. As of September 30, ~~2020,~~2021, all of the Company's material tier one and OEM customers continue to be in good standing.

Inventories as of September 30, ~~2020~~2021 were ~~$233.4~~$292.6 million, compared to ~~$248.9~~$226.3 million as of December 31, ~~2019,~~2020, primarily due to ~~decreases~~increases in ~~finished goods and~~ raw materials on hand. Throughout 2020, the Company's purchasing and supply chain teams have had to manage through supply chain stresses, which have included managing rolling shutdowns in the Company's supplier base, managing run-out situations on certain components, working through the second quarter order reductions, and now meeting rebounding demand that occurred in the third, and is expected to occur in the fourth, quarter of 2020. materials.

Accounts payable as of September 30, ~~2020 decreased~~ 2021increasedapproximately ~~$7.3~~$15.7 million to ~~$90.2~~$100.5 million when compared to December 31, ~~2019,~~2020, primarily driven by ~~lower purchases from suppliers in the quarter, lower levels of capital expenditures and less discretionary spending during the quarter.~~month end payment timing.

Accrued liabilities as of September 30, ~~2020 increased~~2021 decreased approximately ~~$46.9~~$1.0 million compared to December 31, ~~2019, primarily due to an increase in accrued salaries and wages, accrued severance liabilities, and tax liabilities due to timing of certain wage and tax payments.~~2020.

The current portion of long-term debt as of September 30, 2020 increased $25.0 million compared to December 31, 2019. This is a result of the draw-down of $75.0 million on the Company's $150 million line of credit during the first quarter of 2020, of which $50 million was paid off during the third quarter. See ~~Note 9~~ ~~of the financial statements included in this Form 10-Q for additional details.~~

Cash flow from operating activities for the nine months ended September 30, ~~2020~~2021 decreased~~$54.9~~ $29.7 million to ~~$329.0~~$299.4 million, compared with ~~$383.9~~$329.0 million during the same nine month period last year, primarily due to ~~lower net income, which was partially offset by~~ changes in working capital.

Capital expenditures for the nine months ended September 30, ~~2020~~2021 were approximately ~~$37.0~~$44.4 million, compared with approximately ~~$58.3~~$37.0 million for the same nine month period last ~~year, as a result of spending containment strategies.~~year.

The Company believes its existing and planned facilities are currently suitable, adequate, and have the capacity required for current and near-term planned business. Nevertheless, the Company continues to evaluate longer term facility needs.

The Company estimates that it currently has building capacity to manufacture approximately 33 - 36 million interior mirror units annually and approximately 14 - 17 million exterior mirror units annually, based on current product mix. The Company also evaluates equipment capacity on an ongoing basis and adds equipment as needed.

Management considers the current working capital and long-term investments, in addition to internally generated cash flow, its Credit Agreement, and credit worthiness, to be sufficient to cover anticipated cash needs for the foreseeable future considering its contractual obligations and commitments.

The following is a summary of working capital and long-term investments:

September 30, 2020 December 31, 2019
Working Capital $ 738,829,396 $ 778,530,092
Long Term Investments 159,011,362 139,909,323
Total $ 897,840,758 $ 918,439,415

The decrease in working capital as of September 30, 2020 is primarily due to lower sales and lower net income, as well as share repurchases, dividend payments and capital expenditures. In order to continue to maintain flexibility and liquidity during the COVID-19 pandemic, in the first quarter of 2020 the Company drew-down $75 million on its line of credit, of which $50 million was paid off in the third quarter of 2020, which is classified as short-term debt as discussed in ~~Note 9~~ ~~of the financial statements included in this Form 10-Q. The Company believes it has the ability to repay the remaining balance in the fourth quarter of 2020.~~


	September 30, 2021		December 31, 2020
Working Capital	$	682,265,427	$	801,593,707
Long Term Investments	204,671,558		162,028,068
Total	$	886,936,985	$	963,621,775

The Company has a previously announced share repurchase plan under which the Board of Directors has authorized the repurchase of shares of the Company's common stock, which remains a part of the broader publicly disclosed capital allocation strategy. ~~During the third quarter of 2020, the Company repurchased 1,175,756 shares under the share repurchase plan.~~ Future share repurchases may vary from time to time and will take into account macroeconomic events (including the COVID-19 pandemic), market trends, and other factors the Company deems appropriate (including the market price of the stock, anti-dilutive effect of repurchases, and available cash). As previously announced, the Company's Board of Directors authorized the repurchase of an additional 25,000,000 shares under the plan. During the nine months ended

September 30, ~~2020,~~2021, the Company repurchased ~~8,194,788~~8,997,046 shares.The Company has ~~11,870,531~~25,422,220 shares remaining under the plan as of September 30, ~~2020,~~2021, as is further detailed in Part II, Item 2 of this Form 10-Q.

BUSINESS UPDATE

For the third quarter of ~~2020,~~2021, the Company reported net sales of ~~$474.6~~$399.6 million,which was a decrease of 1%16% compared to net sales of ~~$477.8~~$474.6 million in the third quarter of ~~2019. The Company’s decrease of 1% in net sales was in comparison to~~2020. On a quarter-over-quarter basis, global light vehicle production ~~levels that dropped 4% for~~in the ~~third quarter~~Company's primary regions of ~~2020~~Europe, North America, Japan/Korea and China decreased 23% when compared to the third quarter of ~~2019. However,~~2020. Additionally, when compared to the mid-July 2021 IHS Markit light vehicle production ~~declines were even more severe~~forecast in ~~Europe~~the Company’s primary regions, actual light vehicle production during the third quarter of 2021 declined in excess of 3.1 million units, or 19%, as a result of the ongoing industry-wide part shortages and global supply chain constraints. The largest shortfall in light vehicle production for the ~~Japan/Korea~~third quarter of 2021 came from the European and North American markets, which ~~each~~together, experienced ~~a 8%~~actual light vehicle production levels that declined by approximately 27% compared to the third quarter ~~over quarter~~of 2020. The reduction ~~which~~in light vehicle production compared to forecast was ~~partially offset~~led by ~~the China market increase~~several OEM customers that deploy high levels of 11%, while North America remained relatively flat. The Company's main revenue generating markets are North America, Europe, and Japan/Korea which were collectively down 5% quarter over quarter. The Company's overall revenue out-performance in comparison to production declines in the Company's ~~primary underlying markets was largely due~~product content, including both interior and exterior auto-dimming mirrors and other electronic features such as Full Display Mirror® and HomeLink®. The total impact to the ~~relative success~~Company from the shortfall in vehicle production was a reduction in actual mirror unit shipments of approximately 2.5 to 3 million mirrors versus the Company's beginning of the quarter forecast.

When looking forward into the fourth quarter and into 2022, the Company believes that the overall demand for vehicles and its products should still provide opportunities for the Company to continue to outperform the underlying market.

In the third quarter of 2021, the Company had 12net new launches of interior and exterior auto-dimming mirrors and electronic features. Of these new launches, 75% contained advanced features with Full Display Mirror®.

~~Interior and exterior auto-dimming mirrors and advanced electronic features were launched on 23 net new nameplates during~~ being the ~~third quarter of 2020, net of previously announced losses. Of these new launches~~primary driver. Also in the third quarter of ~~2020, approximately 50% contained advanced features, which was primarily driven by HomeLink~~®~~, Integrated Toll Module~~®~~, and Full Display Mirror~~®.

~~Despite challenging economic conditions created by the COVID-19 pandemic, the~~2021, there were several new base inside auto-dimming mirror launches, ~~included new models in all~~and of these, 40% were for the ~~Company's major markets, while advanced feature launches were led by new models for both HomeLink~~China domestic market.

®~~, Integrated Toll Module~~®,~~and Full Display Mirror~~®.

PRODUCT UPDATE

Camera Systems

The Full Display Mirror® began production in the fourth quarter of 2015. Current automotive design trends are yielding vehicles with small rear windows that are often further obstructed by headrests, passengers, and roof support pillars which can significantly hinder the mirror’s rearward view. The Company's Full Display Mirror® is an intelligent rear vision system that uses a custom, internally or externally mounted video camera and mirror-integrated video display to optimize a vehicle driver’s rearward view. This rear vision system consists of a hybrid Full Display Mirror® that offers bi-modal functionality. In mirror mode, the product functions as an auto-dimming rearview mirror which means that during nighttime driving, digital light

sensors talk to one another via a microprocessor to automatically darken the mirror when glare is detected. With the flip of a switch, the mirror enters display mode, and a clear, bright display appears through the mirror’s reflective surface, providing a wide, unobstructed rearward view. The bi-modality of the Full Display Mirror® is essential, because in the event of any failure of the camera or display, the product is able to function as a mirror, which meets long-standing safety requirements in the automotive industry. In addition, the driver has the ability to switch between modes to accommodate usage preferences for various weather conditions, lighting conditions, and driving tasks.

~~In the first quarter of 2020, the Company announced Aston Martin at CES, and began shipping to Mitsubishi, as OEMs for Full Display Mirror~~®. As of the ~~third~~second quarter of ~~2020,~~2021, the Company is shipping production Full Display Mirrors® to ~~eight~~eleven different automaker customers, which are General Motors, Subaru, Toyota, Nissan, Jaguar Land Rover, Mitsubishi, Aston Martin, Stellantis, along with Maserati and ~~FCA.~~Fiat, and Mercedes. As of the end of the third quarter of ~~2020,~~2021, the Company is shipping Full Display Mirror® on ~~50 nameplates, of which 18 nameplates were launched during 2020.~~60 nameplates. The second quarter 2020 launch of the Full Display Mirror® for the Toyota Harrier was the first Full Display Mirror® to launch with Digital Video Recording ("DVR") capability. This mirror and system launched in the Japan market, and combine the superior functionality of the Full Display Mirror® with the added capability to record video from

the rearward facing and forward-facing cameras simultaneously. Per OEM request, the data is stored to an SD storage card. This integrated solution provides consumers with the features they want, while allowing the OEM to control the integration and execution in the vehicle. The Company remains confident that on-going discussions with certain other customers, in the future, may cause such customers to consider adding the Full Display Mirror® into their product road-map for future vehicles. As of the end of the third quarter of 2021 the Company has been awarded Full Display Mirror® programs with 14 OEMs.

~~In 2017,~~To enhance capability and usability of the Company's Full Display Mirror®, the Company previously introduced ~~a new~~its three-camera rear vision system that streams rear video in multiple composite views to its Full Display Mirror®. The Company believes it is the industry’s first practical and comprehensive rear vision solution designed to meet automaker, driver, safety and regulatory requirements. The Company's rear vision system, known generally as a camera monitoring system ("CMS"), uses three cameras to provide a comprehensive view of the sides and rear of the vehicle. The side-view cameras are discretely housed in downsized, automatic-dimming exterior mirrors. Their video feeds are combined with that of a roof-mounted or rear window based camera and stitched together into multiple composite views, which are streamed to the driver using the Full Display Mirror®. The system’s modular nature lets the automaker customize functionality while offering it as an affordable, optional feature thereby enhancing safety by allowing the system to fail safe. During any failures due to weather conditions or otherwise that disrupt the digital view, drivers can still safely use the interior and exterior mirrors. The system also supports user preference by permitting drivers to use standard mirror views, camera views, or both. The system can also be tuned to meet the various regulatory field-of-view requirements around the world by using different types of flat and curved glass, combined with simple alterations to the video viewing modes. Downsized exterior mirrors provide automakers with significant weight savings and fuel efficiency improvements. To further enhance safety, the Company's CMS solution can also work in conjunction with a vehicle’s side blind zone warning system. When a trailing vehicle enters a side blind zone, a warning indicator illuminates in both the interior and exterior mirrors while the corresponding side-view video feed appears in the display until the vehicle passes. ~~In January 2020, the Company announced a collaboration with Aston Martin to bring CMS to future Aston Martin vehicles.~~

On March 31, 2014, the Alliance of Automobile Manufacturers petitioned the National Highway Traffic Safety Administration ("NHTSA") to allow automakers to use cameras as an option to replace conventional rearview mirrors within the United States. At the annual SAE Government-Industry Meeting in January 2017, NHTSA requested that SAE develop Recommended Procedures for test protocols and performance criteria for CMS that would replace mirror systems on light vehicles in the U.S. market. SAE assigned the task to the Driver Vision Committee, and the SAE Driver Vision Committee created a CMS Task Force to draft the Recommended Procedures. NHTSA published a report dated October 2018 related to camera monitoring systems for outside mirror replacements. On October 10, 2019, an Advanced Notice of Proposed Rulemaking (ANPRM) was published seeking public comment on permitting camera-based rear visibility systems, as an alternative to inside and outside rearview mirrors required under Federal motor vehicle safety standard (FMVSS) No. 111, “Rear Visibility,” which currently requires that vehicles be equipped with rearview mirrors to provide drivers with a view of objects that are to their side or to their side and rear. This ANPRM builds on NHTSA's prior efforts to obtain supporting technical information, data, and analysis on CMS so that the agency can determine whether these systems can provide the same level of safety as the rearview mirrors currently required under FMVSS No. 111. The ANPRM states that one reason

NHTSA is seeking additional information is because research conducted by NHTSA and others between 2006 and 2017 has consistently shown that prototype and preproduction camera-based rear visibility systems can exhibit safety-relevant performance issues.

On October 18, 2019, a petition for temporary exemption from FMVSS 111 submitted by Audi of America was published requesting NHTSA to grant a two-year exemption to sell up to 2,500 vehicles for each twelve month period (up to 5,000 vehicles) that are equipped with camera monitoring systems and do not include FMVSS 111 compliant outside mirrors.

In July 2016, a revision to UN-ECE Regulation 46 was published with an effective date of June 18, 2016, which allows for CMS to replace mirrors in Japan and European countries. Since January 2017, camera monitoring systems are also permitted as an alternative to replace mirrors in the Korean market. Notwithstanding the foregoing, the Company continues to believe rearview mirrors provide a robust, simple and cost effective means to view the surrounding areas of a vehicle and remain the primary safety function for rear vision today. Cameras when used as the primary rear vision delivery mechanism have some inherent limitations such as: electrical failure; cameras being blocked or obstructed; depth perception

challenges; and viewing angles of the camera. Nonetheless, the Company continues designing and manufacturing not only rearview mirrors, but CMOS imagers and video displays as well. The Company believes that combining video displays with mirrors may well provide a more robust product by addressing all driving conditions in a single solution that can be controlled by the driver. As noted, the Company is currently in production with a rear vision camera system that streams rear video to a rearview-mirror-integrated display using the Company's Full Display Mirror®. The Company's CMS solution uses three cameras to provide a comprehensive view of the sides and rear of the vehicle. The Company also continues development in the areas of imager performance, camera dynamic range, lens design, image processing from the camera to the display, and camera lens cleaning. The Company acknowledges that as such technology evolves over time, such as cameras replacing mirrors and/or autonomous driving, there could be increased competition.

~~The Company's HomeLink~~® products are the auto industry's most widely used and trusted car-to-home communication system, with an estimated 50 million units on the road. The system consists of two or three in-vehicle buttons that can be programmed to operate garage doors, security gates, home lighting, and other radio-frequency-controlled devices. During the first quarter of 2017, the Company demonstrated the next generation of HomeLink®~~, commonly referred to as HomeLink Connect~~® ~~which uses both RF and wireless cloud-based connectivity to deliver complete vehicle-to-home automation. With HomeLink Connect~~®~~, a HomeLink~~® ~~button press communicates with the HomeLink Connect~~® app on the user’s smartphone. The app contains predefined, user-programmed actions, from single device operations to entire home automation scenes. The app, in turn, communicates to the home’s smart hub over the cloud activates the appropriate devices, including security systems, door locks, thermostats, lighting, and other home automation devices, providing comprehensive vehicle-to-home automation. The ability to prepare the home for arrival or departure can occur with one button press. For the automaker, it allows them to offer a customizable, yet proven solution without the engineering effort or security concerns associated with integrating 3rd party software into the vehicle’s computer network. The Company also continues to work on providing HomeLink® applications for alternative automobile and vehicle types which include but are not limited to motorcycles, mopeds, snowmobiles, tractors, combines, lawn mowers, loaders, bulldozers, road-graders, backhoes and golf carts. The Company further continues to work with compatibility partners for HomeLink® applications in newer markets like China. The unique attributes of the China market allow for potential different use cases of these products and offer the potential for additional growth opportunities for the of the HomeLink® ~~brand and products. In 2017, the Company began its first volume production shipments of HomeLink~~® ~~units on vehicles for the China market.~~

~~helps automakers seamlessly integrate toll collection into the car. Since the Integrated Toll Module~~® ~~or ITM~~® enables travel across almost all United States toll roads, and others in North America, motorists would no longer need multiple toll tags for different regions of the country or to manage multiple toll accounts. The Company's vehicle-integrated solution simplifies and expedites local, regional, and national travel. ITM® provides transportation agencies with an interoperability solution without costly infrastructure changes to the thousands of miles of toll lanes throughout North America. The Company believes that this product could potentially represent another growth opportunity over the next several years.

~~The Company has its first OEM award of ITM~~® ~~with Audi. In the first quarter of 2019, the Company began its first volume shipments of the ITM~~® ~~product to Audi. During the second quarter of 2019, the first consumers began registering their ITM~~® systems online to activate the device and began using the system for normal tolling use. The Company continues to monitor and assess feedback from consumers, dealers, and the OEM in order to help others understand the use case and acceptance of this product. In late June of 2020, Audi published a press release on the 2021 Audi Q5, in which they announced it will implement the ITM® ~~product as well. During the third quarter of 2020, the Company made its first production shipments of ITM~~® ~~on 6 new platforms for Audi. Currently, the Company is shipping ITM~~® ~~on 9 platforms, which are: the A4, A5, A6, A7, Q5, Q7, Q8, e-tron, and the e-tron Sportback. Over the next 18 months, the Company expects further ITM~~® ~~nameplate launches with Audi, as well as the initial launch of ITM~~® ~~at its second OEM. The launch is targeted to begin production shipments toward the end of calendar year 2020. In April 2020, the Company was honored with an Automotive News PACE Award for its ITM~~® ~~product, which recognizes automotive suppliers for superior innovation, technological advancement, and business performance.~~

Further, the Company has previously announced an embedded biometric solution for vehicles that leverages iris scanning technology to create a secure environment in the vehicle. There are many use cases for authentication, which range from vehicle security to start functionality to personalization of mirrors, music, seat location and temperature, to the ability to control transactions not only for the ITM® system, but also the ride sharing car of the future. The Company believes iris recognition is among the most secure forms of biometric identification, with a false acceptance rate as low as one in 10 million, far superior to facial, voice, and other biometric systems. The Company's future plans include integrating biometric authentication with HomeLink® ~~and HomeLink Connect~~®~~. The biometric system will allow HomeLink~~® to provide added security and convenience for multiple drivers by activating the unique home automation presets of different authorized users. The Company announced in January 2018 that it completed an exclusive licensing agreement, in the ordinary course of business, with Fingerprint Cards AB to deploy its ActiveIRIS® ~~iris-scanning biometric technology in automotive applications.~~

In January 2018, the Company also announced that an agreement had been signed, in the ordinary course of business, to participate in a round of financing with Yonomi, the Company's partner in home automation technology. The Company is working with Yonomi as a home automation aggregation partner and the Company has developed an app and cloud infrastructure known as HomeLink Connect®~~. As discussed above, HomeLink Connect~~® ~~is the home automation app that pairs with the vehicle and allows drivers to operate home automation devices from the vehicle. Drivers of HomeLink Connect~~® ~~compatible vehicles will be able to download and configure the app to control many available home automation devices and create entire home automation settings.~~

SmartBeam® is the Company's proprietary high beam control system integrated into its auto-dimming mirror. SmartBeam® Generation 4, which was developed using the fourth generation of the Company's custom designed CMOS imager, has an advanced feature set made possible by the high dynamic range of the imager including: high beam assist; dynamic forward lighting with high beams constantly on; LED matrix beam; and a variety of specific detection applications including tunnel, fog and road type as well as certain lane tracking features to assist with lighting control. The Company has the ability to package the control electronics inside of its interior rearview mirrors with a self-calibrating camera attached to the mirror mount with optimal mechanical packaging which also provides for ease of service. In addition, the Company has long been integrating its camera products to optimize performance by fusing with other systems on the vehicle, including radar, navigation, steering and related modules provided by other suppliers. This enables the Company to provide its customers with a highly customizable solution that meets their unique needs and specifications.

The European New Car Assessment Program ("Euro NCAP") provides an incentive for automobiles sold in Europe to apply safety technologies that include driver assist features such as lane detection, vehicle detection, and pedestrian detection as standard equipment. Euro NCAP compliant driver assist systems are

also capable of including high beam assist as a function. The increased application of Euro NCAP on European vehicles has had the effect of replacing, and could potentially continue replacing, the Company's SmartBeam® application on these vehicles.

On December 8, 2015 NHTSA proposed changes to the NHTSA's 5-Star Safety Ratings for new vehicles (also known as the New Car Assessment Program or NCAP) and initiated a comment period. The proposed changes will, for the first time, encompass assessment of crash-avoidance technologies, which includes lower beam headlamp performance, semi-automatic headlamp switching, and blind spot detection. NHTSA initially intended to implement the enhancements in NCAP in 2018 beginning with model year 2019 vehicles. The NCAP implementation has been delayed. Under these proposed changes, the Company believes that its SmartBeam® technology will qualify with the semi-automatic headlamp NCAP rating system, and that its SmartBeam® technology and exterior mirrors with blind spot alert lighting can be included in a system that qualifies with the lower beam headlamp performance and blind spot detection NCAP rating system, respectively. On October 16, 2019, NHTSA issued a press release comparing NCAP to other regions’ version of NCAP, identified new technologies that are not currently included in NCAP, and suggested Congress legislatively direct actions to improve NCAP. In March 2020, HR 6256 was introduced, which would require NHTSA to update NCAP. There are multiple bills being discussed in both the U.S. House of Representatives and the U.S. Senate that relate to NCAP.

On October 12, 2018, NHTSA published a Notice of Proposed Rulemaking ("NPRM") for amendments to Federal Motor Vehicle Safety Standard ("FMVSS") No. 108: Lamps, reflective devices, and associated equipment, and initiated a comment period. The NPRM proposes amendments that would permit the certification of adaptive driving beam headlighting systems, if the manufacturer chooses to equip vehicles with these systems. NHTSA proposes to establish appropriate performance requirements to ensure the safe introduction of adaptive driving beam headlighting systems if equipped on newly manufactured vehicles. The Company believes that its dynamic SmartBeam® lighting control system (dynamic forward lighting or DFL), which has been sold in markets outside of North America for several years, will meet the requirements of the new FMVSS 108 standards, if amended. The Company's SmartBeam® application has and will continue to be affected by increased competition by suppliers of multi-function driver assist camera products, which are able to achieve some of the same functionality as SmartBeam® but at a lower cost, due to other suppliers leveraging similar hardware costs, but offering products with multiple software features.

Connected Car

The Company's HomeLink® products are the auto industry's most widely used and trusted car-to-home communication system, with an estimated 50 million units on the road. The system consists of two or three in-vehicle buttons that can be programmed to operate garage doors, security gates, home lighting, and other radio-frequency-controlled devices. During the first quarter of 2017, the Company demonstrated the next generation of HomeLink®, commonly referred to as HomeLink Connect® which uses both RF and wireless cloud-based connectivity to deliver complete vehicle-to-home automation. With HomeLink Connect®, a HomeLink® button press communicates with the HomeLink Connect® app on the user’s smartphone. The app contains predefined, user-programmed actions, from single device operations to entire home automation scenes. The app, in turn, communicates to the home’s smart hub over the cloud activates the appropriate devices, including security systems, door locks, thermostats, lighting, and other home automation devices, providing comprehensive vehicle-to-home automation. The ability to prepare the home for arrival or departure can occur with one button press. For the automaker, it allows them to offer a customizable, yet proven solution without the engineering effort or security concerns associated with integrating third party software into the vehicle’s computer network. The Company also continues to work on providing HomeLink® applications for alternative automobile and vehicle types which include but are not limited to motorcycles, mopeds, snowmobiles, tractors, combines, lawn mowers, loaders, bulldozers, road-graders, backhoes and golf carts. In May 2021, the Company announced the Volkswagen as the first automaker to offer Bluetooth® enabled mirror for home automation that works in conjunction with HomeLink Connect®. The Company further continues to work with compatibility partners for HomeLink® applications in newer markets like China. The unique attributes of the China market allow for potential different use cases of these products and offer the potential for additional growth opportunities for the HomeLink® brand and products. In 2017, the Company began its first volume production shipments of HomeLink® units on vehicles for the China market.

In January 2016, the Company announced a partnership with TransCore to provide automobile manufacturers with a vehicle-integrated tolling solution that enables motorists to drive on nearly all U.S. toll roads without a traditional toll tag on the windshield. Currently more than 75 percent of new car registrations are in states with toll roads with over 50 million drivers accessing these roads each year. The Company signed an exclusive agreement, in the ordinary course of business, to integrate TransCore's toll module technology. In January 2017, the Company signed an extension of its agreement, in the ordinary course of business, which enables the Company to offer the Integrated Toll Module system in Canada and Mexico. In September 2019, the Company signed a new agreement with TransCore, in the ordinary course of business, which extended the term of the partnership. The interior mirror is the optimal location for a vehicle-integrated toll transponder and it eliminates the need to affix multiple toll tags to the windshield and helps automakers seamlessly integrate toll collection into the car. Since the Integrated Toll Module® or ITM® enables travel across almost all United States toll roads, and others in North America, motorists would no longer need multiple toll tags for different regions of the country or to manage multiple toll accounts. The Company's vehicle-integrated solution simplifies and expedites local, regional, and national travel. ITM® provides transportation agencies with an interoperability solution without costly infrastructure changes to the thousands of miles of toll lanes throughout North America. The Company believes that this product could potentially represent another growth opportunity over the next several years.

The Company has its first OEM award of ITM® with Audi. Currently, the Company is shipping ITM® on 9 platforms, which are: the A4, A5, A6, A7, Q5, Q7, Q8, e-tron, and the e-tron Sportback. The Company expects further ITM® nameplate launches with Audi throughout 2022 and 2023. During the third quarter of 2021, the Company began shipping ITM® to a second OEM customer, Mercedes, on the EQS model. In April 2020, the Company was honored with an Automotive News PACE Award for its ITM® product, which recognizes automotive suppliers for superior innovation, technological advancement, and business performance.

authentication with HomeLink® and HomeLink Connect®. The biometric system will allow HomeLink® to provide added security and convenience for multiple drivers by activating the unique home automation presets of different authorized users. The Company announced in January 2018 that it completed an exclusive licensing agreement, in the ordinary course of business, with Fingerprint Cards AB to deploy its ActiveIRIS® iris-scanning biometric technology in automotive applications.

In January 2018, the Company also announced that an agreement had been signed with Yonomi Inc., in the ordinary course of business, to access home automation technology. The Company is working with Yonomi as a home automation aggregation partner and the Company has developed an app and cloud infrastructure known as HomeLink Connect®. As discussed above, HomeLink Connect® is the home automation app that pairs with the vehicle and allows drivers to operate home automation devices from the vehicle. Drivers of HomeLink Connect® compatible vehicles will be able to download and configure the app to control many available home automation devices and create entire home automation settings.

In November 2020, the Company announced a partnership, in the ordinary course of business, with PayByCar™, to pursue compatibility between the Company's Integrated Toll Module and PayByCar's innovative payment solution that allows drivers to use their smartphones and toll transponder to fuel up at certain gas stations without using cash or a credit card. Compatibility between these two technologies can help to grow each company's respective consumer base while introducing new users to the benefits of the transactional vehicle.

In January 2021, the Company announced a partnership, in the ordinary course of business, with Simplenight to provide drivers and vehicle occupants with access to enhanced mobile capability for booking personalized entertainment and lifestyle experiences in addition to everyday purchases. Simplenight delivers a customizable and robust platform that enables brands to globally offer real-time book-ability across multiple categories such as dining, accommodations, attractions, events, gas, parking, shopping and more. The platform is unique in that it is designed to seamlessly integrate into automaker infotainment and navigation systems, as well as mobile applications and voice assistants. Simplenight can be integrated into the Company's current and future connected vehicle technologies, including HomeLink®, the automotive industry’s leading car-to-home automation system. HomeLink® consists of vehicle-integrated buttons that can be programmed to operate a myriad of home automation devices. Integration of Simplenight into the Company's HomeLink Connect® app is underway and will allow users to program their HomeLink® buttons and control cloud-based devices from their vehicles.

Dimmable Devices

The Company previously announced that it is providing variably dimmable windows for the Boeing 787 Dreamliner series of aircraft. The Company continues to work with other aircraft manufacturers that have an interest in this technology regarding potential additional programs. In January 2019, the Company announced that its latest generation of dimmable aircraft windows will be offered as optional content on the new Boeing 777X. During the third quarter of 2019, the first production shipments of variably dimmable windows were made to Boeing for the 777X program. In January 2020, the Company announced that Airbus will also be offering the Company's dimmable aircraft windows on ~~its~~an aircraft with production starting in ~~late 2020.~~2021.

Medical

In January 2020 the Company unveiled an innovative lighting technology for medical applications that was co-developed with Mayo Clinic. This new lighting concept represents the collaboration of a global, high-technology electronics company with a world leader in health care. The Company's new intelligent lighting system combines ambient room lighting with camera-controlled, adaptive task lighting to optimize illumination for surgical and patient-care environments. The system was developed over an 18 month period of collaboration between Company engineers and Mayo Clinic surgeons, scientists, and operating room staff. The teams researched, designed, and rapidly iterated multiple prototypes in order to develop unique features intended to address major gaps in current surgical lighting solutions.

~~Throughout 2020~~ In 2021, the Company ~~has been working~~continues to further develop and work on the intelligent medical lighting system ~~in preparation for clinical trials~~ in order to assess system performance and work toward obtaining any necessary approvals. ~~The Company estimates that it could take 18 to 24 months to complete these trials, before a system could be available for commercial applications.~~

OTHER

Automotive revenues represent approximately ~~97%~~98% - ~~98%~~99% of the Company's total revenue, consisting of interior and exterior electrochromic automatic-dimming rearview mirrors and automotive electronics.

The Company ~~does continue~~continues to experience pricing pressure from its automotive customers and competitors, which will continue to cause downward pressure on its sales and profit margins. The Company works continuously to offset these price reductions with engineering and purchasing cost reductions, productivity improvements, and increases in unit sales volume, but there is no assurance the Company will be able to do so in the future.

Because the Company sells its products throughout the world, and automotive manufacturing is highly dependent on economic conditions, the Company can be affected by uncertain economic conditions that can reduce demand for its products. The Company has been likewise affected by the COVID-19 ~~pandemic.~~pandemic and industry-wide parts shortages and global supply constraints.

The Company believes that its patents and trade secrets provide it with a competitive advantage in dimmable devices, electronics and other features that it offers for the automotive, aerospace and medical industry. Claims of patent infringement can be costly and time-consuming to address. To that end, the Company obtains intellectual property rights in the ordinary course of business to strengthen its intellectual property portfolio and to minimize the risk of infringement.

The Company does not have any significant off-balance sheet arrangements or commitments that have not been recorded in its consolidated financial statements.

3331

OUTLOOK

The Company’s most recent forecasts for light vehicle production for the fourth quarter of 2021, and full ~~year 2020~~years 2021 and 2022 are based on the mid-October 2021 IHS ~~Markit's mid-October 2020 forecasts~~Markit light vehicle production forecast for light vehicle production in North America, Europe, ~~China,~~Japan/Korea and ~~Japan/Korea. Based on this information, light vehicle production in the Company's primary markets are expected to be down 2% for the fourth~~China. Fourth quarter of 2020 versus the same quarter last year. For calendar year 2020, light vehicle production in the Company's primary markets is expected to be down 16% when compared to calendar year 2019. Fourth quarter 2020,2021, and calendar years ~~2020~~2021 and ~~2021,~~2022 forecasted light vehicle production volumes are shown below:

Light Vehicle Production (per IHS Markit Automotive mid-October light vehicle production forecast)
(in Millions)
Region Q4 2020 Q4 2019 % Change Calendar Year 2021 Calendar Year 2020 Calendar Year 2019 2021 vs 2020
% Change 2020 vs 2019
% Change
North America 3.82 3.84 (1) % 15.90 13.00 16.32 22 % (20) %
Europe 5.11 5.17 (1) % 18.97 16.37 21.14 16 % (23) %
Japan and Korea 3.13 3.22 (3) % 11.83 11.08 13.11 7 % (15) %
China 7.07 7.36 (4) % 24.18 22.84 24.67 6 % (7) %
Total Light Vehicle Production 19.13 19.59 (2) % 70.88 63.29 75.24 12 % (16) %

Based on this light vehicle production forecast and the structural changes that the Company has made during 2020, the Company is updating previously provided guidance estimates for the second half of 2020. Given the magnitude of changes this year, the Company continues to believe that providing updated second half guidance will provide a more accurate representation of the new cost structure and financial performance for the remainder of 2020. Such guidance for the second half of 2020 reflects the Company's best estimate of the impact of the ongoing COVID-19 pandemic, as well as changes to the IHS Markit's estimates for light vehicle production for the remainder of 2020.


Light Vehicle Production (per IHS Markit Automotive mid-October light vehicle production forecast)
(in Millions)
Region	Q4 2021	Q4 2020	% Change		Calendar Year 2022	Calendar Year 2021	Calendar Year 2020	2022 vs 2021 % Change		2021 vs 2020 % Change
North America	3.20	3.85	(17)	%	15.24	13.00	13.02	17	%	—	%
Europe	4.04	5.24	(23)	%	18.60	16.02	16.57	16	%	(3)	%
Japan and Korea	2.66	3.23	(18)	%	11.29	10.76	11.21	5	%	(4)	%
China	6.28	7.82	(20)	%	24.50	23.28	23.59	5	%	(1)	%
Total Light Vehicle Production	16.18	20.14	(20)	%	69.63	63.06	64.39	10	%	(2)	%

Based on the aforementioned light vehicle production forecast and the results for the first nine months of 2021, the Company ~~currently estimates that top line revenue~~has provided updated guidance for the second half of ~~calendar year 2020~~2021 as shown below, which replaces all previous guidance given. This guidance includes manual adjustments to the Company's forecasts as a result of customer order changes and the Company's estimates of the impact that global supply constraints will have on overall light vehicle production. The Company has also updated its cost and profitability model to include impacts stemming from these expected lower vehicle production levels, elevated raw material prices, freight expenses and labor costs. In addition, over the last several quarters, the Company has been closely monitoring the tariff discussions between the US and the EU with respect to EU Regulation 2018/0886, which was scheduled to go into effect on June 1, 2021. The EU, however, suspended the implementation until November 30, 2021 as part of on-going discussions. The Company remains hopeful that a trade agreement can be reached before this date so that the increased tariffs do not take effect. The guidance for the second half of 2021 is as follows, which does not take into account the aforementioned potential increased tariff costs:

•Revenue is expected to be between ~~$940~~$770 million and ~~$960 million.~~ $840 million

•Gross Margin is expected to be between 35% and 36%

•Operating Expenses are expected to be approximately $105 to $108 million

•Estimated Annual Tax Rate, which assumes no changes to the statutory rate, is expected to be between 15% and 16%

•Capital Expenditures are expected to be between $50 and $60 million

•Depreciation and Amortization is expected to be between $48 and $52 million

Ongoing uncertainties remain around the impact of the COVID-19 pandemic on customer demand and restrictions on operations. COVID-19 has created unprecedented circumstances for the Company's industries, which included massive changes to production levels at its customers ~~which~~that occurred in a very short time period. Beyond the impact of the COVID-19 pandemic, other ongoing uncertainties remain including: light vehicle production levels; industry-wide parts shortages and global supply chain constraints; impacts of already in place and potential additional future tariffs; impacts of regulation changes; automotive plant shutdowns; ~~supplier part shortages;~~ vehicle sales rates in Europe, Asia and North America; OEM strategies and cost pressures; customer inventory management and the impact of potential automotive customer (including their Tier 1 suppliers) and supplier bankruptcies; work stoppages; etc., all of which could disrupt shipments to these customers and make forecasting difficult.

Based on updated net sales guidance for the remainder of calendar year 2020, as well as actual results for the first nine months of 2020 and anticipated product mix, the Company has estimated that the gross margin will be between 39% and 40% for the second half of calendar year 2020.

The Company is updating the guidance range for operating expenses, which include E, R & D expenses and S, G & A expenses. The Company has estimated that its operating expenses are now expected to be approximately $95 - $100 million for the second half of calendar year 2020.

As part of the Company's renewed focus on optimizing its cost structure over the remainder of the year, the Company now anticipates that capital expenditures for the second half of calendar year 2020 will be approximately $25 - $30 million, the majority of which will be equipment purchases. Capital expenditures in calendar year 2020 are currently anticipated to be financed from current cash and cash equivalents on hand and cash flows from operating activities.

Based on actual results for the first nine months of 2020, and expected projects in the remainder of the year, the Company now estimates that depreciation and amortization expense for the second half of calendar year 2020 will be approximately $50 - $55 million.

The Company now estimates its effective annual tax rate for the second half of calendar year 2020 to be in the range of 16% to 17%, which reflects the anticipated lower discrete benefits from stock option exercises of the Company's employees and reduced foreign-derived intangible income tax benefits due to geographical mix changes within its customer base.

In accordance with the previously announced share repurchase plan, ~~and provided that business begins to return to more normalized levels,~~ the Company continue to will consider the appropriateness of any share repurchases for the remainder of ~~2020.~~2021. This determination will take into account macroeconomic issues (including the impact of the COVID-19 ~~pandemic)~~pandemic and industry-wide parts shortages and global supply chain constraints), market trends, and other factors that the Company deems appropriate (including the market price of the stock, anti-dilutive effect of repurchases, tax rates, and

available cash). As previously announced, the Company's Board of Directors authorized the repurchase of an additional 25,000,000 shares under the plan. As of September 30, ~~2020,~~2021, the Company has ~~11.9~~25.4 million shares remaining available for repurchase under the previously announced share repurchase plan.

Additionally, based on the mid-October ~~2020~~2021 light vehicle production estimates for ~~2021,~~2022, the Company is ~~re-introducing~~providing revenue guidance for ~~2021,~~2022, despite the fact that there continues to be significant uncertainty regarding macroeconomic conditions, underlying overall consumer demand for light vehicles worldwide, and the continued impact from the COVID-19 pandemic. The Company ~~currently~~ estimates that revenue for calendar year ~~2021~~2022 will be approximately 1515% - 20% higher than the updated 2021 estimated revenue ~~in calendar year 2020.~~estimates of $1.68 - $1.75 billion.

3533

CRITICAL ACCOUNTING POLICIES:

The preparation of the Company’s consolidated condensed financial statements contained in this report, which have been prepared in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and/or on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Historically, actual results have not been materially different from the Company’s estimates. However, actual results may differ from these estimates under different assumptions or conditions.

The Company has identified critical accounting policies used in determining estimates and assumptions in the amounts reported in its Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended ~~December~~ December��31, ~~2019.~~2020.

Item 3. Quantitative And Qualitative Disclosures About Market Risk.

The Company is subject to market risk exposures of varying correlations and volatilities, including foreign exchange rate risk and interest rate risk. Fluctuating interest rates could negatively impact the Company's financial performance due to ~~outstanding debt and~~ realized losses on the sale of fixed income investments and/or recognized losses due to impairment of available for sale securities (mark-to-market adjustments). ~~As previously disclosed in the Company's report on Form 10-Q for~~During the quarter ended ~~June~~September 30, ~~2020,~~2021, any material changes in risk factors that were disclosed in the Company's report on Form 10-K for the year ended December 31, ~~2019~~2020 are ~~again~~ set forth herein.

The Company has some assets, liabilities and operations outside the United States, including euro-denominated and Chinese Yuan Renminbi accounts, which currently are not significant overall to the Company as a whole. Because the Company sells its automotive mirrors throughout the world, and automotive manufacturing is highly dependent on general economic conditions and the global supply chain, the Company has been and will continue to be affected by uncertain economic conditions in North American and foreign markets that have and ~~will~~could continue to reduce demand for its products.

Item 4. Controls And Procedures.

Evaluation of Disclosure Controls and Procedures.

Under the supervision of, and with the participation of management, the Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, ~~2020,~~2021, and have concluded that as of that date, the Company's disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended September 30, ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

SAFE HARBOR STATEMENT:

This Quarterly Report contains contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements contained in this communication that are not purely historical are forward-looking statements. Forward-looking statements give the Company’s current expectations or forecasts of future events. These forward-looking statements generally can be identified by the use of words such as ~~“anticipate”, “believe”, “could”, “estimate”, “expect”, “forecast”, “goal”, “hope”, “may”, “plan”, “project”, "poised", “will”,~~“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “hope,” “intend,” “may,” “opinion,” “optimistic,” “plan,” “poised,” “predict,” “project,” “should,” “strategy,” “target,” “will,” and variations of such words and similar expressions. Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control, and could cause the Company’s results to differ materially from those described. These risks and uncertainties include, without limitation: changes in general industry or regional market conditions; changes in consumer and customer preferences for our products (such as cameras replacing mirrors and/or

autonomous driving); our ability to be awarded new business; continued uncertainty in pricing negotiations with customers; loss of business from increased competition; changes in strategic relationships; customer bankruptcies or divestiture of customer brands; fluctuation in vehicle production schedules (including the impact of customer employee strikes); changes in product mix; raw material and other supply shortages; supply chain constraints and disruptions; our dependence on information systems; higher raw material, fuel, energy and other costs; unfavorable fluctuations in currencies or interest rates in the regions in which we operate; costs or difficulties related to the integration and/or ability to maximize the value of any new or acquired technologies and businesses; changes in regulatory conditions; warranty and recall claims and other litigation and customer reactions thereto; possible adverse results of pending or future litigation or infringement claims; changes in tax laws; import and export duty and tariff rates in or with the countries with which we conduct business; negative impact of any governmental investigations and associated ~~litigations~~litigation including securities ~~litigations~~litigation relating to the conduct of our business; ~~and~~ the length and severity of the COVID-19 (coronavirus) pandemic, including its impact across our business on demand, operations, and the global supply chain. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made.

The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law or the rules of the NASDAQ Global Select Market. Accordingly, any forward-looking ~~statements~~statement should be read in conjunction with the additional information about risks and uncertainties identified ~~herein and~~ under the heading ~~"Risk Factors"~~“Risk Factors” in the ~~Company's~~Company’s latest Form 10-K and Form 10-Q filed with the SEC, which risks and uncertainties now include the impacts of ~~the~~ COVID-19 (coronavirus) pandemic and supply chain constraints that have affected, are affecting, and will continue to affect, general economic and industry conditions, customers, suppliers, and the regulatory environment in which the Company operates. Includes content supplied by IHS Markit Light Vehicle Production Forecast ~~(October 16, 2020)~~of October 18, 2021 (http://www.gentex.com/forecast-disclaimer).

Other Information

On November ~~4, 2020,~~2, 2021, Steve Downing, President and Chief Executive Officer of the Company, entered into a stock trading plan in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 providing for a third-party broker to sell shares of common stock of the Company that Mr. Downing may acquire upon the vesting ~~of the 6,300 and 6,384~~of: 7,560 restricted shares ofawarded in 2017; 31,000 restricted shares awarded in 2018; 21,246 restricted shares awarded in 2019; and 49,575 performance shares (payable in common ~~stock~~stock) that were awarded in 2019, subject to Mr. Downing in 2016 and 2017, respectively, and in respect to 15,000 and 13,504 shares of common stock issuable upon exercise of stock options awarded to Mr. Downing in 2014 and 2015, respectively. Options will be exercised and/or sharescertain performance conditions. Shares will be sold under the stock trading plan on the open market over the period of time and according to the other parameters set forth under the stock trading plan. The stock trading plan terminates ~~on October 15, 2021.~~upon the earlier of March 1, 2022 or when all of the instructions in the plan have been completed by the third-party broker.

On November ~~4, 2020, Kevin Nash,~~2, 2021, Neil Boehm, Vice President of ~~Finance~~Engineering and Chief ~~Financial~~Technology Officer of the Company, entered into a stock trading plan in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 providing for a third-party broker to sell shares of common stock of the Company that Mr. Nash may acquire upon the vesting of 6,552 restricted shares awarded in 2017; 3,150 restricted shares awarded in 2018; and 5,666 restricted shares in 2019; and 13,220 performance shares (payable in common stock) that were awarded in 2019, subject to certain performance conditions. This plan also provides for a third-party broker to sell 5,864 and 4,836 shares of common stock issuable upon exercise of stock options awarded to Mr. Nash in 2014 and 2015, respectively. Options will be exercised and/or shares will be sold under the stock trading plan on the open market over the period of time and according to the other parameters set forth under the stock trading plan. The stock trading plan terminates on March 15, 2022.

On November 4, 2020, Matt Chiodo, Vice President of Sales of the Company, entered into a stock trading plan in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 providing for a third-party broker to sell shares of common stock of the Company that Mr. Chiodo may acquire upon the vesting of the 5,000 restricted shares of common stock awarded to Mr. Chiodo on March 31, 2016. The shares will be sold under the stock trading plan on the open market over the period of time and according to the other parameters set forth under the stock trading plan. The stock trading plan terminates on April 14, 2021.

~~On November 4, 2020, Neil Boehm, Chief Technology Officer and Vice President of Engineering,~~ entered into a stock trading plan in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 providing for a third-party broker to sell shares of common stock of the Company that Mr. Boehm may acquire upon the vesting ~~of the 2,053~~of: 4,500 restricted shares of common stock awarded in 2017; 8,000 restricted shares awarded in 2018; 5,765 restricted shares awarded in 2019; and 13,451 performance shares (payable in common stock) that were awarded in 2019, subject to Mr. Boehm in 2017, and in respect to 4,968 and 15,000 shares of common stock issuable upon exercise of stock options awarded to Mr. Boehm in 2016 and 2018, respectively. Options will be exercised and/orcertain performance conditions. The shares will be sold under the stock

trading plan on the open market over the period of time and according to the other parameters set forth under the stock trading plan. The stock trading plan terminates onupon the earlier of April 14, ~~2021.~~2022 or when all of the instructions in the plan have been completed by the third-party broker.

Rule 10b5-1 trading plans are permitted under the Company’s insider trading policy and other policies, and, to the extent required, transactions under such trading plans will be disclosed publicly through Form 144 and/or Form 4 filings with the Securities and Exchange Commission. Except as may be required by law, the Company does not undertake any obligation to report Rule 10b5-1 plans by officers or directors of the Company in the future, or to report modifications or terminations of any such plans, whether or not any such plans were publicly announced.

The COVID-19 pandemic has had a significant impact on the macroeconomic environment and, in particular, on the Company's industries. Such impact has resultantly affected the ability of officers of the Company to achieve performance metrics under the Company's Amended and Restated Annual Incentive Performance-Based Bonus Plan ("Annual Incentive Plan") and Long-Term Incentive Plan. The performance metrics under the Annual Incentive Plan are revenue, operating income, and earnings per diluted share and the performance metrics under the Long-Term Incentive Plan are EBITDA and return on invested capital, over the performance period. Such performance metrics under the Annual Incentive Plan are intended to measure performance and align with overall business strategy, while the performance metrics under the Long-Term Incentive Plan are intended to drive profitable sales growth, optimize cost structure, and ensure capital is used in an effective manner, so as to provide shareholder returns.

The Compensation Committee of the Company designed the performance metrics to property incentivize officers to perform well operationally and deliver shareholder returns. The Compensation Committee has met in 2020 to discuss the fact that macroeconomic factors and industry conditions, including significantly decreased light vehicle production, outside of the control of management have so impacted the ability to achieve targets for the performance metrics (set in February of 2020 before the COVID-19 pandemic was widespread), that such performance metrics may not now properly incentivize and award officers of the Company as intended by the Compensation Committee and the Board of Directors. As such, the Compensation Committee has been assessing any potential changes to officer compensation to ensure the proper incentives for performance remain in place, as well as to recognize and reward officers for the benefit of the Company's shareholders and other stakeholders. The Compensation Committee has not yet made any decisions nor has it made any recommendations to the Board of Directors. With that said, the Compensation Committee will continue to discuss and consider whether changes to officer incentives are appropriate and necessary, whether any changes (such as adjustments to targets for performance metrics) can be done in an objective manner (so as to factor in external factors outside of management's control such as the percentage decline in light vehicle production), and how any such changes would be implemented.

3836

PART II—OTHER INFORMATION

Item 1A. Risk Factors.

Information regarding risk factors appears in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I – Item 2 of this Form 10-Q and in Part I – Item 1A – Risk Factors of the Company’s report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020. There have been material changes to the risk factors previously disclosed in the Company’s report on Form 10-K for the year ended December 31, ~~2019,~~2020, as described in Part I – Item 2 and Item 3 of this Form 10-Q, and otherwise herein, as well as the ~~addition of the~~ following revised risk ~~factor.~~

~~Automotive Industry and General Economic Risks~~factor:

~~The COVID-19 pandemic has already significantly impacted worldwide economic and industry conditions and has had and may continue to have~~SUPPLY CHAIN DISRUPTIONS

As a ~~material adverse effect on~~result of just-in-time supply chains within our business ~~financial condition, and/or results of operations. The COVID-19 pandemic began to materially impact~~and the ~~Company's operations late~~automotive industry, disruptions in ~~the first quarter of 2020 and continues to affect~~ our business, financial condition, and/or results of operations, by virtue of governmental authorities imposing mandatory closures, work-from-home orders, and social disntancing protocols, as well as voluntary closures and other restrictions. Even as restrictionssupply chain have ~~eased and production has resumed by our customers in large part, production volumes have been,~~occurred, are occurring, and are expected to continue to ~~be, volatile.~~

~~The full extent of the effect of~~occur due to the COVID-19 pandemic ~~on the Company, our customers, our~~and industry-wide parts shortages and global supply chain and our industries still depends on future developments, which remain highly uncertain, including the duration and severity of the current outbreak, subsequent outbreaks, and resulting actions taken by the Company or the various governmentsconstraints. Disruptions can also occur due to ~~contain or mitigate the spread of the coronavirus. These actions have already included, and could include more,~~natural disasters, other pandemics, work stoppages, ~~quarantines, shutdowns, shelter-in-place orders or other limitations, which already~~strikes, bankruptcy, etc. Such circumstances have disrupted, are disrupting, and could continue to: materially adversely affect the Company's ability to adequately staff and maintain our operations; impair our ability to sustain existing levels of financial liquidity; and impact the Company's business, financial condition, and/or results of operations. Additionally, if the negative global economic effects caused by the COVID-19 pandemic continue, overall customer demand maywill continue to ~~decrease,~~disrupt our shipments to automakers and Tier 1 customers, which ~~could continue to have a material and adverse effect on the Company's~~adversely affects our business, financial condition, and/or results of operations.

While we cannot predict the duration and scope of the COVID-19 pandemic, the overall negative financial impact to the Company's business, financial condition, and/or results of operations has been material, is not fully known, and is expected to last for an extended period of time.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The Company has a previously announced share repurchase plan under which the Board of Directors has authorized the repurchase of shares of the Company's common stock, which remains a part of the broader publicly disclosed capital allocation strategy. During the third quarter of ~~2020,~~2021, the Company repurchased ~~1,175,756~~2,830,850 shares under the share repurchase plan. As previously disclosed, the Company will consider the appropriateness of continuing to repurchase additional shares of common stock in the future in support of the capital allocation strategy, but share repurchases may vary from time to time and will take into account macroeconomic events (including the COVID-19 ~~pandemic)~~pandemic and shutdowns related to the Microchip shortage as well as other supply chain constraints), market trends, and other factors the Company deems appropriate (including the market price of the stock, anti-dilutive effect of repurchases, and available cash). ~~During~~

As previously announced, the ~~nine months ended September 30, 2020,~~Company's Board of Directors recently authorized the repurchase of an additional 25,000,000 shares under the plan. After the Company repurchased ~~8,194,788 shares. The~~8,997,046 shares during the first nine months of 2021, the Company has ~~11.9~~25.4 million shares remaining under the plan as of September 30, ~~2020.~~2021.

The following is a summary of share repurchase activity during each ~~quarter~~month of the ~~nine months~~quarter ended September 30, ~~2020:~~

2021:

Issuer Purchase of Equity Securities
Period Total Number of Shares Purchased

Weighted
Average Price Paid Per Share
Total Number of Shares Purchased As Part of a Publicly Announced Plan or Program Maximum Number of Shares That May Yet Be Purchased Under the Plan or Program
January 2020 — — — 20,065,319
February 2020 1,945,036 29.40 1,945,036 18,120,283
March 2020 5,073,996 23.97 5,073,996 13,046,287
1st Quarter 2020 Total 7,019,032 25.48 7,019,032
2nd Quarter 2020 Total — — 13,046,287
July 2020 125,110 27.07 125,110 12,921,177
August 2020 525,295 27.38 525,295 12,395,882
September 2020 525,351 26.44 525,351 11,870,531
3rd Quarter 2020 Total 1,175,756 26.93 1,175,756
2020 Total 8,194,788 25.68 8,194,788 11,870,531


Issuer Purchase of Equity Securities
Period	Total Number of Shares Purchased	Weighted Average Price Paid Per Share	Total Number of Shares Purchased As Part of a Publicly Announced Plan or Program	Maximum Number of Shares That May Yet Be Purchased Under the Plan or Program
January 2021	—	—	—	9,419,266
February 2021	1,005,009	35.27	1,005,009	8,414,257
March 2021	1,750,056	35.57	1,750,056	6,664,201
1st Quarter 2021 Total	2,755,065	35.46	2,755,065

April 2021	250,000	35.66	250,000	6,414,201
May 2021	1,175,144	34.90	1,175,144	30,239,057
June 2021	1,985,987	33.23	1,985,987	28,253,070
2nd Quarter 2021 Total	3,411,131	33.98	3,411,131

July 2021	290,000	33.16	290,000	27,963,070
August 2021	1,490,462	32.16	1,490,462	26,472,608
September 2021	1,050,388	31.44	1,050,388	25,422,220
3rd Quarter 2021 Total	2,830,850	32.00	2,830,850


2021 Total	8,997,046	33.81	8,997,046	25,422,220

As of September 30, ~~2020~~2021 the Company has repurchased ~~135,129,197~~146,577,508 shares at a total cost of ~~$2,084,067,848~~$2,466,533,664 under its share repurchase plan or as otherwise previously disclosed.

Item 6. Exhibits.


See Exhibit Index on Page 4140

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		GENTEX CORPORATION


Date:	November 5, ~~2020~~2021	/s/ Steven R. Downing
		Steven R. Downing
		President and Chief Executive Officer
		(Principal Executive Officer) on behalf of Gentex Corporation

Date:	November 5, ~~2020~~2021	/s/ Kevin C. Nash
		Kevin C. Nash
		Vice President, Finance, Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer) on behalf of Gentex Corporation

4038

EXHIBIT INDEX


Exhibit No.						Description


























































31.1						Certificate of the Chief Executive Officer of Gentex Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
31.2						Certificate of the Chief Financial Officer of Gentex Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32						Certificate of the Chief Executive Officer and Chief Financial Officer of Gentex Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase

4139


Part I - Financial Information		Page
Item 1.	Unaudited Condensed Consolidated Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Income	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income	5
	Unaudited Condensed Consolidated Statements of Shareholders' Investment	6
	Unaudited Condensed Consolidated Statements of Cash Flows	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2423
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3635
Item 4.	Controls and Procedures	36

Part II - Other Information
Item 1A.	Risk Factors	3938
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3938
Item 6.	Exhibits	4039
	Signatures	4039
	Exhibit Index	4140


	September 30, 2020 (Unaudited)		December 31, 2019 (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	400,499,542	$	296,321,622
Short-term investments	52,578,480		140,384,053
Accounts receivable, net	268,457,875		235,410,326
Inventories	233,358,102		248,941,855
Prepaid expenses and other	20,424,567		29,319,036
Total current assets	975,318,566		950,376,892

PLANT AND EQUIPMENT—NET	474,019,432		498,316,100

OTHER ASSETS
Goodwill	311,216,556		307,365,845
Long-term investments	159,011,362		139,909,323
Intangible assets, net	247,911,399		250,375,000
Patents and other assets, net	24,997,791		22,460,033
Total other assets	743,137,108		720,110,201

Total assets	$	2,192,475,106	$	2,168,803,193

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

CURRENT LIABILITIES
Accounts payable	$	90,246,791	$	97,553,917
Current portion of long-term debt	25,000,000		0
Accrued liabilities	121,242,379		74,292,883
Total current liabilities	236,489,170		171,846,800

OTHER NON-CURRENT LIABILITIES	15,071,701		7,414,424



DEFERRED INCOME TAXES	45,301,936		51,454,149

Total liabilities	296,862,807		230,715,373

SHAREHOLDERS’ INVESTMENT
Common stock	14,703,703		15,076,651
Additional paid-in capital	830,408,683		807,928,139
Retained earnings	1,046,052,853		1,116,372,133
Accumulated other comprehensive income (loss)	4,447,060		(1,289,103)
Total shareholders’ investment	1,895,612,299		1,938,087,820
Total liabilities and shareholders’ investment	$	2,192,475,106	$	2,168,803,193


	Aggregate Unrealized Losses		Aggregate Fair Value
Loss duration of less than one year	$	605,407	$	24,572,356
Loss duration of greater than one year	0		0
Total	$	605,407	$	24,572,356


	September 30, 2020		December 31, 2019
Raw materials	$	160,155,658	$	164,974,553
Work-in-process	30,308,212		33,069,255
Finished goods	42,894,232		50,898,047
Total Inventory	$	233,358,102	$	248,941,855


Year ending December 31,

2020 (excluding the nine months ended September 30, 2020)	$	394,431
2021	1,345,977
2022	825,645
2023	268,705
2024	32,956
Thereafter	5,951
Total future minimum lease payments	2,873,665
Less imputed interest	(24,182)
Total	$	2,849,483