What changed in this filing

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Item 1A. Risk Factors

2021-02-22 compared with 2020-02-26 · 71 added, 47 removed, 171 unchanged (41% of the section changed)

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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”, "poised", “project”, “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 forward-looking statements generally can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “hope,” “intend,” “may,” “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:

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changes in product mix;

raw material and electronic component shortages;

raw material and other supply shortages;

supply chain disruptions;

our dependence on key management;

our dependence on information systems;

higher raw material, fuel, energy and other costs;

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possible adverse results of pending or future litigation or infringement claims;

changes in tax laws and interpretations;

changes in tax laws;

import and export duty and tariff rates in or with the countries with which we conduct business;

and negative impact of any governmental investigations and associated litigations including securities litigations relating to the conduct of our business.

negative impact of any governmental investigations and associated litigation including securities litigation relating to the conduct of our business;

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.

Forward-looking statements include content supplied by IHS Markit Light Vehicle Production Forecast (January 16, 2020) (http://www.gentex.com/ forecast-disclaimer).

Accordingly, any forward-looking statement should be read in conjunction with the additional information about risks and uncertainties identified under the heading “Risk Factors” in the Company’s latest Form 10-K and Form 10-Q filed with the SEC, which risks and uncertainties now include the impacts of COVID-19 (coronavirus) pandemic that has affected, 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 of January 18, 2021 (http://www.gentex.com/forecast-disclaimer).

The following risk factors, together with all other information provided in this Annual Report on Form 10-K should be carefully considered.

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The automotive industry has always been cyclical and highly impacted by levels of economic activity.

The current economic environment, while perhaps relatively stable domestically, continues to be uncertain when considering the global automotive market, and continues to cause increased financial and production stresses evidenced by volatile automotive production levels (including continued decreases in light vehicle production in China), volatility with customer orders, supplier part and material shortages, automotive and Tier 1 supplier plant shutdowns, customer and supplier financial issues, commodity material cost increases and/or supply constraints, tariffs, consumer vehicle preference shifts (where we may have a lower penetration rate and lower content per vehicle), and supply chain stresses, all of which have been exacerbated by the coronavirus.

If automotive customers (including their Tier 1 suppliers) and suppliers experience plant shutdowns, work stoppages, strikes (such as the employee strike at General Motors in the fourth quarter of 2019, which negatively impacted revenue, gross margin, etc.

in the fourth quarter and year ended December 31, 2019), part shortages, etc., it could disrupt our shipments to these customers, which could adversely affect our business, financial condition, and/

or results of operations.

The current economic environment continues to be uncertain, and continues to cause increased financial and production stresses evidenced by volatile automotive production levels (including continued decreases in light vehicle production in China), volatility with customer orders, supplier part and material shortages, automotive and Tier 1 supplier plant shutdowns, customer and supplier financial issues, commodity material cost increases and/or supply constraints, tariffs, consumer vehicle preference shifts (where we may have a lower penetration rate and lower content per vehicle), and supply chain stresses, all of which have been exacerbated by the COVID-19 pandemic.

If automotive customers (including their Tier 1 suppliers) and suppliers experience plant shutdowns, work stoppages, strikes, part shortages, etc., it could disrupt our shipments to these customers, which could adversely affect our business, financial condition, and/or results of operations.

Automakers continue to experience volatility and uncertainty in executing planned new programs on time, due in part to continued vehicle complexity increases, which can result in delays or cancellations of new vehicle platforms, package configurations, and inaccurate volume forecasts.

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Starting in 2018, and throughout calendar year 2019, the United States enacted new tariffs on numerous raw materials that the Company imports from China, and likewise China also enacted retaliatory tariffs on the finished goods that the Company imports into China for distribution and sale in the China market.

Such tariffs increase the Company's input costs, and potentially challenge the Company's competitive position in the China market.

Even though in January 2020, the United States and China came to agreement on the first phase of a trade deal to halt tariff increases, uncertainty remains.

The continuance of these tariffs and/or escalation of disputes in the geopolitical environment will continue to interfere with automotive supply chains and may have a continued negative impact on the Company’s business, financial condition, and/or results of operations.

Such tariffs have increased the Company's input costs, and have the potential to challenge the Company's competitive position in foreign markets.

The continuance of these tariffs and/or escalation of disputes in the geopolitical environment could continue to interfere with automotive supply chains and may have a continued negative impact on the Company’s business, financial condition, and/or results of operations, especially since the Company primarily manufactures and ships from one location.

We cannot predict what further action may be taken with respect to tariffs or trade relations between the U.S.

and other governments, and any further changes in U.S.

or international trade policy could have an adverse impact on our business.

We recognize that Magna Mirrors, our main competitor, may have considerably more resources available to it, and may present a formidable competitive threat.

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On October 18, 2019, a petition for temporary exemption from FMVSS No.

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 No.

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 No.

111 compliant outside mirrors.

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The Company has been in production with the Company's Full Display Mirror ® since 2015 and has been awarded programs with ten (10) OEM customers.

The Company is currently shipping production Full Display Mirrors ® to five automaker customers, which are General Motors, Subaru, Toyota, Nissan, and Jaguar Land Rover.

The Company is currently shipping production Full Display Mirrors ® to eight

automaker customers, which are General Motors, Subaru, Toyota, Nissan, Jaguar Land Rover, Mitsubishi, Aston Martin, and FCA.

The Company's CMS solution uses three cameras to provide a comprehensive view of the sides and rear of the vehicle while still providing the traditional safety of interior and exterior mirrors, that still function when cameras are obstructed, or not functioning.

The Company recently announced the CMS development program with Aston Martin.

The Company announced the CMS development program with Aston Martin.

The Company has also previously announced that the Company continues to develop in the areas of imager performance, camera dynamic range, lens design, image processing from the camera to the display, and camera lens cleaning.

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Intellectual Property.

We believe that our patents and trade secrets provide us with a competitive advantage in automotive rearview mirrors, variable dimmable windows, certain electronics, and fire protection products, although no single patent is necessarily required for the success of our products.

We believe that our patents and trade secrets provide us with a competitive advantage in automotive rearview mirrors, variable dimmable devices, certain electronics, and fire protection products, although no single patent is necessarily required for the success of our products.

The loss of any significant combination of patents and trade secrets regarding our products could adversely affect our business, financial condition, and/or results of operations.

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A successful claim of patent or other intellectual property infringement and damages against us could affect business, financial condition, and/or results of operations.

person or company claims that our products infringed their intellectual property rights, any resulting litigation could be costly, time consuming, and would divert the attention of management and key personnel from other business issues.

If a person or company claims that our products infringed their intellectual property rights, any resulting litigation could be costly, time consuming, and would divert the attention of management and key personnel from other business issues.

The complexity of the technology involved in our business and the uncertainty of intellectual property litigation significantly increases these risks and makes such risk part of our on-going business.

To that end, we periodically obtain intellectual property rights, in the orbdinary course of business, to strengthen our intellectual property portfolio and minimize potential risks of infringement.

To that end, we periodically obtain intellectual property rights, in the ordinary course of business, to strengthen our intellectual property portfolio and minimize potential risks of infringement.

The increasing tendency of patents granted to others on combinations of known technology is a potential threat to our Company.

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Should one or more of our larger customers (including sales through their Tier 1 suppliers) declare bankruptcy or sell their business, it could adversely affect the collection of receivables, our business, financial condition, and/or results of operations.

The current economic environment continues to cause increased financial pressures and production stresses on our customers, which could impact the timeliness of customer payments and ultimately the collectability of receivables.

The current economic environment

continues to cause increased financial pressures and production stresses on our customers, which could impact the timeliness of customer payments and ultimately the collectability of receivables.

Our allowance for doubtful accounts primarily relates to financially distressed automotive mirror and electronics customers.

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Supply Chain Disruptions.

Due to the just-in-time supply chains within our business and the automotive industry, a disruption in a supply chain caused by one or more of our suppliers and/or an unrelated Tier 1 supplier due to part shortages, natural disasters, coronavirus, work stoppages, strikes, bankruptcy, etc.

could disrupt our shipments to one or more automakers or Tier 1 customers, which could adversely affect our business, financial condition, and/or results of operations.

As a result of just-in-time supply chains within our business and the automotive industry, disruptions in our supply chain are occurring due to the COVID-19 pandemic and can also occur due to natural disasters, other pandemics, work stoppages, strikes, bankruptcy, etc.

Such circumstances are disrupting, and may further disrupt, our shipments to one or more automakers or Tier 1 customers, which adversely affects our business, financial condition, and/or results of operations.

Business Disruptions.

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In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Our business success depends on attracting and retaining qualified personnel.

Throughout our Company, our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and diverse management team and workforce.

Failure to ensure that we have the leadership capacity with the necessary skill sets and experience and a skilled workforce could impede our ability to deliver our growth objectives and execute our strategic plan.

Organizational and reporting changes within management could result in, and low unemployment generally has caused, increased turnover.

In addition, any unplanned turnover or inability to attract and retain key

employees, including managers, could have a negative effect on our business, financial condition and/or results of operations.

Government Regulations.

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These new requirements required due diligence efforts in 2013, 2014, 2015, 2016, 2017, 2018, 2019, and 2020, and the Company has disclosed its findings annually to the SEC on Form SD around May 30 each year.

As there may be only a limited number of suppliers offering "conflict free" minerals, the Company cannot be certain that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices.

As there may be only a limited number of suppliers offering "conflict free" minerals necessary for our products, the Company cannot be certain that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices.

Also, the Company may face reputational challenges if we determine that certain of our products contain minerals not determined to be conflict free or if the Company is unable to sufficiently verify the origins for all conflict minerals used in the Company's products through the procedures the Company may implement.

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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.

On January 14, 2021, NHTSA issued a request for comment regarding NCAP with advanced driver assist features, including forward collision, lane keeping, blind spot detection and forward pedestrian impact avoidance technologies.

On October 12, 2018, NHTSA published a Notice of Proposed Rulemaking ("NPRM") for amendments to Federal Motor Vehicle Safety Standard ("FMVSS") No.

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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.

Antitakeover Provisions.

Our articles of incorporation, bylaws, and the laws of the state of Michigan include provisions that may provide our board of directors with adequate time to consider whether a hostile takeover offer is in our best interest and the best interests of our shareholders.

These provisions, however, could discourage potential acquisition proposals and could delay or prevent a change in control.

Fluctuations in Market Price.

The market price for our common stock has fluctuated, ranging from a low closing price of $20.09 to a high closing price of $34.06 during calendar year 2020.

The overall market and the price of our common stock may continue to fluctuate.

There may be a significant impact on the market price for our common stock relating to the issues discussed above or due to any of the following:

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

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

• Intellectual property litigation and infringement claims;

• The size of the public float of our common stock;

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

• General macroeconomic conditions.

General Risk Factors

COVID-19 Pandemic.

The COVID-19 pandemic has already significantly impacted worldwide economic and industry conditions and has had and may continue to have a material adverse effect on our business, financial

condition, and/or results of operations.

The COVID-19 pandemic began to materially impact the Company's operations late 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 distancing protocols, as well as voluntary closures and other restrictions.

Even as restrictions have eased and production has resumed by our customers in large part, production volumes have been, and are expected to continue to be, volatile.

The full extent of the effect of the COVID-19 pandemic on the Company, our customers, our 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 governments to contain or mitigate the spread of the coronavirus.

These actions have already included, and could include more, work stoppages, quarantines, shutdowns, shelter-in-place orders or other limitations, which already have 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 may decrease, which could continue to have a material and adverse effect on the Company's 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.

Income Taxes.

The Company is subject to income taxes in the U.S.

and other foreign jurisdictions.

Changes in tax rates, adoption of new tax laws or other additional tax policies, and other proposals to reform United States and foreign tax laws could adversely affect the Company's operating results, cash flows, and financial condition.

The Company’s domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions.

Our business success depends on attracting and retaining qualified personnel.

Throughout our Company, our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and diverse management team and workforce.

Organizational and reporting changes within management could result in, and low unemployment generally can cause, increased turnover.

In addition, any unplanned turnover, inability to attract and retain key employees, including managers, or government mandated remote work could have a negative effect on our business, financial condition and/or results of operations.

International Operations.

We currently conduct operations in various countries and jurisdictions, including purchasing raw materials and other supplies from many different countries around the world, which subjects us to the legal, political, regulatory and social requirements as well as various economic conditions in these jurisdictions.

Some of these

countries are considered growth markets.

Some of these countries are considered growth markets.

International sales and operations, especially in growth markets, subject us to certain risks inherent in doing business abroad, including:

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

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

• Natural disasters, political crises, and public health crises (such as the COVID-19 pandemic), which have caused and will likely continue to cause downtime and closures at both supplier and customer facilities;

• Brexit, and its impact;

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

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

• Increasing interest rates impact our financial performance due to an increase in realized losses on the sale of fixed income investments and/or recognized losses due to a corresponding impairment adjustment on investment securities;

• General economic conditions continue to be of concern in many of the regions in which we do business, given that our primary industry is greatly impacted by overall general economic conditions.

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

Antitakeover Provisions.

These provisions, however, could discourage potential acquisition proposals and could delay or prevent a change in control.

Fluctuations in Market Price.

The market price for our common stock has fluctuated, ranging from a low closing price of $19.55 to a high closing price of $29.74 during calendar year 2019.

The overall market and the price of our common stock may continue to fluctuate.

There may be a significant impact on the market price for our common stock relating to the issues discussed above or due to any of the following:

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

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

Intellectual property litigation and infringement claims;

The size of the public float of our common stock;

Market conditions, including the industry in which we operate;

General macroeconomic conditions.

Unresolved Staff Comments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors