What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-22 compared with 2020-02-26 · 488 added, 325 removed, 870 unchanged (48% of the section changed)

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Officers are generally elected at the meeting of the Board of Directors following the annual meeting of shareholders.

CURRENT POSITION HELD SINCE

Steve Downing

President and Chief Executive Officer

Chief Technology Officer and Vice President, Engineering

February 2018

Vice President, Finance, Chief Financial Officer and Treasurer

February 2018

Matthew Chiodo

Vice President, Sales

February 2018

Vice President, General Counsel and Corporate Secretary

NAME AGE POSITION CURRENT POSITION HELD SINCE

Steve Downing 43 President and Chief Executive Officer January 2018

Neil Boehm 49 Chief Technology Officer and Vice President, Engineering February 2018

Kevin Nash 46 Vice President, Finance, Chief Financial Officer and Treasurer February 2018

Matthew Chiodo 56 Vice President, Sales February 2018

Scott Ryan 40 Vice President, General Counsel and Corporate Secretary August 2018

There are no family relationships among the officers listed in the preceding table.

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The “Compensation Committee Report” shall not be deemed to be soliciting material or to be filed with the commission.

As previously disclosed, the Compensation Committee intended to move base salaries for officers, including named executive officers, toward the market median of the Company's established peer group over a three-year period.

At the request of the CEO and named executive officers, the Compensation Committee and the Board of Directors have decided not to increase named executive officer base salaries at this time.

In lieu thereof, the Board of Directors, based on a recommendation of the Compensation Committee, has provided the named executive officers additional upside under the Long-Term Plan as discussed below.

As such, 2020 Base Salary as approved by the Board of Directors is set forth below:

Executive Officer

2019 Base Salary

2020 Base Salary

Steve Downing

President and CEO

VP, Engineering and CTO

VP, Finance, CFO and Treasurer

VP, General Counsel and Corporate Secretary

As previously disclosed, the Compensation Committee starting in 2018 intended to move base salaries for officers, including named executive officers, toward the market median of the Company's established peer group over a three-year period.

Notwithstanding that intention, for the second straight year, at the request of the CEO and named executive officers, the Compensation Committee and Board of Directors did not increase named executive officer base salaries.

In February of 2020, the request and decision not to change executive officer base salaries was made based on market conditions (including declining light vehicle production) even prior to the material negative impacts of the COVID-19 pandemic and related shutdowns.

In February of 2021, the request and decision not to change executive officer base salaries relates to the overall negative business environment caused by the COVID-19 pandemic.

In light of the cost structure changes management made to deal with the same, the executive officers and the Board of Directors believe delaying base salary increases at this time is appropriate.

In lieu thereof, the Board of Directors, based on a recommendation of the Compensation Committee, has provided the named executive officers additional potential upside under the Long-Term Plan as discussed below.

As such, 2021 Base Salary for executive officers as approved by the Board of Directors is set forth below:

Executive Officer Position 2019 Base Salary 2020 Base Salary 2021 Base Salary

Steve Downing President and CEO $ 750,000 $ 750,000 $ 750,000

Neil Boehm VP, Engineering and CTO $ 407,000 $ 407,000 $ 407,000

Kevin Nash VP, Finance, CFO and Treasurer $ 400,000 $ 400,000 $ 400,000

Matt Chiodo VP, Sales $ 380,000 $ 380,000 $ 380,000

Scott Ryan VP, General Counsel and Corporate Secretary $ 350,000 $ 350,000 $ 350,000

Amended and Restated Annual Incentive Performance-Based Bonus Plan

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and Earnings per Diluted Share (33.33% weighting).

The Annual Plan covers all officers, including named executive officers.

The Annual Plan covers certain officers, including named executive officers.

At the beginning of each year, the Compensation Committee reviews and approves a cash bonus target for each officer, as a percentage of base salary for the year.

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All performance-related targets are set by, and achievement of targets are approved by , the Compensation Committee and/or the Board of Directors.

Since Annual Plan bonuses are based on a percentage of base salary, each executive officers' potential for bonuses reflects the fact that there have been no base salary increases for three years.

For our executive officers, the 2021 Annual Plan payout opportunities as a percentage of base salary applicable to each performance metric are shown in the table below:

Executive Officer

Annual Plan Threshold

Annual Plan Target

Annual Plan Maximum

Executive Officer Annual Plan Threshold Annual Plan Target Annual Plan Maximum

Steve Downing 50.0 % 100.0 % 200.0 %

No changes were made to the Annual Plan target opportunities for executive officers in 2020, as the target and maximum opportunity levels were appropriate based on the competitive pay range for each position.

Neil Boehm 37.5 % 75 % 150 %

Kevin Nash 37.5 % 75 % 150 %

Matt Chiodo 37.5 % 75 % 150 %

Scott Ryan 37.5 % 75 % 150 %

No changes were made to the Annual Plan target opportunities for executive officers in 2021, as it is believed the target and maximum opportunity levels remain appropriate.

The foregoing payout opportunities are multiplied by the weighting factor of a particular performance metric to determine the amounts of cash bonuses payable to officers to the extent the threshold, target, or maximum for a performance metric is met or exceeded.

To the extent performance exceeds the established threshold or target, as applicable, for any performance metric, but does not meet or exceed the established target or maximum, as applicable, linear interpolation is used to determine the pro rata portion of the performance bonus.

The Compensation Committee also has discretion to increase

(or decrease) such performance-based bonuses using its judgment, provided that bonuses are not in any event to exceed 250% of the applicable base salary.

In 2019 and 2020, the Annual Plan uses the same three key performance metrics and weighting:

The Compensation Committee also has discretion to increase (or decrease) such performance-based bonuses using its judgment, provided that bonuses are not in any event to exceed 250% of the applicable base salary.

Since its inception in 2019, the Annual Plan uses the same three key performance metrics and weighting:

Revenue (weighted 33.33%), Operating Income (weighted 33.33%) and Earnings per Diluted Share (33.33%), since such metrics are not only appropriate measures of performance, but also align with the Company's overall business strategy.

In determining whether annual cash bonuses are paid under the Annual Plan, actual performance for the year is measured against specified target levels for each performance metric.

The target for the three performance metrics reflects a level of performance, which at the time set was anticipated to be challenging but achievable.

Generally, the target for the three performance metrics reflects a level of performance, which at the time set would be anticipated to be challenging but achievable.

The threshold level is set to be reflective of performance at which the Compensation Committee believed a portion of the award opportunity should be earned.

The maximum level was set well above the target, requiring significant achievements and reflecting performance at which the Compensation Committee believed an additional 100% of the target award was warranted.

For 2019, pre-established target performance (along with pre-established thresholds and maximums) and actual results for the performance metrics are as follows:

Performance Metric

Actual Performance*

The above goals for setting target levels for each performance metric were affected because such target levels were established prior to the COVID-19 pandemic, which has had a significant negative impact on the macroeconomic environment and, in particular, on the Company's industries.

The macroeconomic impact, including the impact on global light vehicle production, of the COVID-19 pandemic was entirely outside of the control of the officers of the Company.

Had the very significant impact of the COVID-19 pandemic been known when targets for performance metrics were set under the Annual Plan, that knowledge would have directly informed such target setting.

Revenue, Operating Income, and Earnings per Diluted Share are intended to measure performance and align with overall business strategy in normal times.

After performance targets had been set and then the impact of the COVID-19 pandemic became widespread, the Compensation Committee met later in 2020 and 2021 to consider not only the macroeconomic environment and industry conditions, (especially decreased global light vehicle production), but also management's response thereto.

That response included initiating and executing structural cost reductions of approximately $35 million on an annualized basis, all implemented in 2020 so the full impact of the same will be fully realized in 2021 and beyond.

The benefits of those actions have already been seen through the Company's entire income statement in the second half of 2021.

Given the changes that occurred in 2020 were outside of the control of officers, the performance metrics meant to incentivize operational performance did not necessarily appropriately reflect this performance as intended by the Compensation Committee and the Board of Directors.

As such, in February of 2021, the Compensation Committee recommended to the Board of Directors, who subsequently approved (on February 18, 2021) a revision to pre-established targets under the Annual Plan for calendar year 2020, to ensure officers are properly acknowledged, recognized, rewarded, and, incentivized for operational performance and aligning the business with current realities and strategies for the benefit of all stakeholders.

With that said, the Compensation Committee still desires performance-based compensation to be as objective as possible.

As such, instead of using discretion with respect to adjusting targets for performance metrics under the Annual Plan, the Compensation Committee took into account the IHS Markit light vehicle production forecast estimates at the time the performance targets were set (which did not incorporate the full impact of the COVID-19 pandemic since that was unknown), versus the actual global light vehicle production for the same time period.

This percentage of change was then applied against the original targets for performance metrics as disclosed below for the Annual Plan:

IHS Markit Light Vehicle Production Forecast:

Region Actual 2020 Mid-January 2020 Forecast Unit Change % Change

North America 13.0 16.7 (3.7) (22.2) %

Europe 16.6 20.7 (4.1) (19.8) %

Japan/Korea 11.2 12.9 (1.7) (13.2) %

China 23.6 24.5 (0.9) (3.7) %

Other 10.1 13.8 (3.7) (26.8) %

Total 74.5 88.6 (14.1) (15.9) %

The Compensation Committee, before making any adjustments to targets for performance metrics, confirmed that threshold performance was in fact achieved for all performance metrics under the Annual Plan, notwithstanding relevant factors outside of management's control.

Then, based on the 15.9% reduction from the IHS Markit mid-January 2020 global light vehicle production forecast for calendar year 2020 to actual global light vehicle production for calendar year 2020, the Compensation Committee and the Board adjusted the performance metrics for the Annual Plan as follows:

Annual Plan Performance Metrics:

Revenue Threshold Target Maximum

Original $ 1,554,207 $ 1,942,759 $ 2,331,311

COVID-19 related adjustment $ (247,176) $ (308,970) $ (370,765)

As Adjusted $ 1,307,031 $ 1,633,789 $ 1,960,546

Percentage Change (15.9) % (15.9) % (15.9) %

Operating Income Threshold Target Maximum

Original $ 409,970 $ 512,463 $ 614,956

COVID-19 related adjustment $ (65,200) $ (81,500) $ (97,801)

As Adjusted $ 344,770 $ 430,963 $ 517,155

Percentage Change (15.9) % (15.9) % (15.9) %

Earnings per Diluted Share Threshold Target Maximum

Original $ 1.44 $ 1.80 $ 2.16

COVID-19 related adjustment $ (0.23) $ (0.29) $ (0.35)

As Adjusted $ 1.21 $ 1.51 $ 1.81

Percentage Change (16.0) % (16.1) % (16.2) %

For 2020, target performance (along with thresholds, adjusted only for purposes of linear interpolation since all were exceeded in any event, and maximums) and actual results for the COVID-19 adjusted performance metrics are as follows:

Performance Metric Weight Threshold* Target* Maximum* Actual Performance*

Revenue 33.33 % $1,307,031 $1,633,789 $1,960,547 $1,677,861

Operating Income 33.33 % $344,770 $430,963 $517,156 $411,995

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* amounts in thousands (000) except for per share amounts.

Amounts may be modified in the discretion of the Compensation Committee as appropriate to ensure the performance metrics are not unsuitable.

Threshold, Target, and Maximum for Operating Income and Earnings per Diluted Share were adjusted to address the estimated impact of tariffs and the Actual Performance was similarly adjusted with respect to the actual impact of tariffs.

Based on actual Revenue, Operating Income, and Earnings per Diluted Share results compared to the pre-established targets (adjusted for the impact of tariffs) and performance of the named executive officers, the payments for 2019 under the Annual Plan are shown in the table below:

Executive Officer

2019 Annual Plan Performance Bonus

2019 Annual Plan Discretionary Bonus

Based on actual Revenue, Operating Income, and Earnings per Diluted Share results compared to the COVID-19 adjustments to targets and performance of the named executive officers, the payments for 2020 under the Annual Plan are shown in the table below:

Executive Officer 2020 Annual Plan Performance Bonus 2020 Annual Plan Discretionary Bonus

Steve Downing $748,370 $0

Neil Boehm $304,587 $0

Kevin Nash $299,348 $0

Matt Chiodo $284,381 $0

Scott Ryan $261,930 $0

These Annual Plan results appropriately reflect management's excellent work in addressing the COVID-19 pandemic, yet still align with comparable year-over-year bonuses paid generally to employees under the Company's profit-sharing plan.

For 2021, the Compensation Committee has established thresholds, targets , and maximums for Revenue, Operating Income, and Earnings per Diluted Share (adjusted for the impact of tariffs) as the Annual Plan performance metrics.

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Under the Long-Term Plan, the Board of Directors and/or the Compensation Committee determines the amount of the long-term incentive awards.

Each officer's award opportunity is based on a target dollar value (determined toward the very beginning of the performance period) as a percentage of base salary assigned to his or her position based on market comparisons for similar positions,

using both a peer group and general industry market data.

The following target opportunities apply for the 2021-2023 performance period under the Long-Term Incentive Plan:

Executive Officer

Long-Term Plan Target Opportunity Percentage of Base Salary for 2020-2022

Executive Officer Long-Term Plan Target Opportunity Percentage of Base Salary for 2021-2023

Steve Downing 285 %

These Long-Term Plan Target Opportunity Percentage of Base Salary for 2020 - 2022 have increased from those applicable for 2019 - 2021 (which were 200% for Mr.

Downing and 100% for other named executive officers) in lieu of base salary increases as discussed above.

Neil Boehm 185 %

Kevin Nash 185 %

Matt Chiodo 185 %

Scott Ryan 185 %

These Long-Term Plan Target Opportunity Percentages of Base Salary for 2021 - 2023 have increased from those applicable for 2020 - 2022 (which were 240% for Mr.

Downing, 150% for Mr.

Boehm, 140% for Mr.

Nash, 130% for Mr.

Chiodo and 125% for Mr.

Ryan) in lieu of base salary increases as discussed above.

Such changes are also appropriate in light of there being no changes to outstanding Long-Term Plan awards, though the Compensation Committee believes adjustments could be justified as a result of the impact of the COVID-19 pandemic in order to achieve the aims of the Long-Term Plan.

Achievement at threshold performance yields 50% of the target award and achievement of the maximum performance yields another 100% of the target award.

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Since the value of PSAs is tied to the Company's actual performance in financial objectives, it aligns the officers' interests with those of shareholders.

The target opportunities of PSAs for the named executive officers are shown in the table below:

Executive Officer

Number of PSAs Awarded in 2020 (Target) for 2020-2022

The target opportunities of PSAs awarded in 2021 for the named executive officers are shown in the table below:

Executive Officer Number of PSAs Awarded in 2021 (Target) for 2021-2023

Steve Downing 42,762

Neil Boehm 15,063

Kevin Nash 14,804

Matt Chiodo 14,064

Scott Ryan 12,954

Restricted Stock Awards

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The RS awarded in 2021, based on the target opportunities, for the executive officers are shown in the table below:

Executive Officer

Number of RS Awarded in 2020 for 2020-2022

Executive Officer Number of RS Awarded in 2021 for 2021-2023

Steve Downing 18,327

Neil Boehm 6,456

Kevin Nash 6,345

Matt Chiodo 6,027

Scott Ryan 5,552

The Board of Directors approved and adopted the Israeli Appendix to the Company's shareholder approved 2019 Omnibus Incentive Plan on February 18, 2021 and the same is included as an exhibit hereto.

The Israeli Appendix allows for effective and efficient granting of Awards (as defined in the 2019 Omnibus Incentive Plan) to Participants (as also defined in the 2019 Omnibus Incentive Plan) who are subject to taxation by the state of Israel.

The Israeli Appendix does not expand the group of individuals eligible for Awards, but rather is intended to make Awards to those employed with the Company's wholly-owned subsidiary in Israel in a more tax efficient manner.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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See Exhibit Index on Page 74 .

See (a) above.

(b) See (a) above.

Form 10-K Summary.

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February 22, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 26 th day of February, 2020, by the following persons on behalf of the registrant and in the capacities indicated.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 22 nd day of February, 2021, by the following persons on behalf of the registrant and in the capacities indicated.

/s/ Steven R.

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Each Director of the registrant whose signature appears below hereby appoints Steve Downing or Kevin Nash, as his or her attorney-in-fact to sign in his or her name and on his or her behalf, and to file with the Commission any and all amendments to this report on Form 10-K to the same extent and with the same effect as if done personally.

/s/ Leslie Brown

/s/ Gary Goode

/s/ James Hollars

/s/ Leslie Brown Director

/s/ Steven Downing Director

Steven Downing

/s/ Gary Goode Director

/s/ James Hollars Director

James Hollars

/s/ John Mulder

/s/ Richard Schaum

/s/ John Mulder Director

/s/ Richard Schaum Director

Richard Schaum

/s/ Fred Sotok

/s/ Kathleen Starkoff

/s/ Kathleen Starkoff Director

Kathleen Starkoff

/s/ Brian Walker

/s/ James Wallace

/s/ Brian Walker Director

/s/ James Wallace Director

James Wallace

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Revenue - Estimate of Variable Consideration

Description of the Matter

As discussed in Notes 1 and 11 to the Company’s consolidated financial statements, the Company occasionally enters into sales contracts with its customers that provide for annual price reductions over the production life of a particular part.

Description of the Matter As discussed in Notes 1 and 11 to the Company’s consolidated financial statements , the Company occasionally enters into sales contracts with its customers that provide for annual price reductions over the production life of a particular part.

Prices may also be adjusted on an ongoing basis to reflect changes in product content, product cost and other commercial factors.

Auditing the accounting for and the completeness of the amount of revenue that the Company expects to be entitled to in exchange for its products (for arrangements containing annual price reductions) is judgmental due to the unique facts and circumstances involved with each revenue arrangement, as well as on-going commercial negotiations with customers.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over annual price reductions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over annual price reductions.

This included testing controls over the Company’s process to identify and evaluate customer contracts that contain matters that impact revenue recognition, as well as testing controls relating to the completeness and measurement of revenue related to those sales contracts.

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Total Plant and Equipment 1,257,206,445 1,227,127,361

1,227,127,361

1,197,953,787

Less- Accumulated depreciation ( 789,071,310 ) ( 728,811,261 )

( 728,811,261

( 699,480,021

Net Plant and Equipment 468,135,135 498,316,100

OTHER ASSETS:

Goodwill 311,922,787 307,365,845

Long-term investments 162,028,068 139,909,323

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Total Other Assets 750,475,471 720,110,201

2,168,803,193

2,085,434,068

TOTAL ASSETS $ 2,197,941,170 $ 2,168,803,193

LIABILITIES AND SHAREHOLDERS’ INVESTMENT

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Salaries, wages and vacation 18,557,799 16,385,833

Income taxes 3,790,219 24,952

Royalties 21,056,412 17,371,829

Dividends payable 29,243,144 28,896,914

Other 20,304,860 11,613,355

Total current liabilities 177,736,857 171,846,800

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243,692,869 and 251,277,515 shares issued and outstanding in 2020 and 2019 respectively.

14,621,572 15,076,651

Additional paid-in capital 852,771,508 807,928,139

Retained earnings 1,089,698,996 1,116,372,133

1,116,372,133

1,102,468,137

Accumulated other comprehensive income:

Unrealized gain on investments

Unrealized gain on investments, net 6,082,007 1,095,486

Cumulative translation adjustment 769,045 ( 2,384,589 )

Total shareholders’ investment 1,963,943,128 1,938,087,820

1,938,087,820

1,861,751,660

TOTAL LIABILITES AND SHAREHOLDERS' INVESTMENT

2,168,803,193

2,085,434,068

TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 2,197,941,170 $ 2,168,803,193

The accompanying notes are an integral part of these consolidated financial statements.

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2020 2019 2018

1,834,063,697

1,794,872,578

NET SALES $ 1,688,189,405 $ 1,858,897,406 $ 1,834,063,697

COST OF GOODS SOLD 1,082,745,885 1,170,589,437 1,143,597,005

1,170,589,437

1,143,597,005

1,100,344,312

Gross profit 605,443,520 688,307,969 690,466,692

OPERATING EXPENSES:

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Investment income 6,986,303 11,230,696 11,262,385

Other income (expense), net

Other income, net 5,270,534 647,034 2,659,015

Total other income 12,256,837 11,877,730 13,921,400

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PROVISION FOR INCOME TAXES 64,249,308 75,731,395 84,163,850

NET INCOME $ 347,563,621 $ 424,683,939 $ 437,883,097

EARNINGS PER SHARE (1) :

Basic $ 1.41 $ 1.67 $ 1.64

Diluted $ 1.41 $ 1.66 $ 1.62

Cash Dividends Declared per Share $ 0.480 $ 0.460 $ 0.440

(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

The accompanying notes are an integral part of these consolidated financial statements.

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FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

2020 2019 2018

Net income $ 347,563,621 $ 424,683,939 $ 437,883,097

Other comprehensive income (loss) before tax:

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FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 and 2018

Shares Common

Amount Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Income (Loss) Total

Shareholders’

BALANCE AS OF JANUARY 1, 2018 280,281,321 $ 16,816,879 $ 723,510,672 $ 1,301,997,327 $ 7,193,383 $ 2,049,518,261

1,210,984,825

1,910,424,234

Issuance of common stock

Issuance of common stock from stock plan transactions 5,496,659 329,801 66,508,019 — — 66,837,820

Repurchases of common stock ( 26,449,367 ) ( 1,586,963 ) ( 63,000,528 ) ( 526,990,360 ) — ( 591,577,851 )

( 204,832,621

( 231,363,216

Stock-based compensation expense related to stock options, employee stock purchases and restricted stock — — 18,305,981 — — 18,305,981

Dividends declared ($.39 per share)

Impact of ASU 2016-01 adoption

6,642,727 ( 6,642,727 ) —

Dividends declared ($ 0.44 per share)

— — — ( 117,064,654 ) — ( 117,064,654 )

Net income — — — 437,883,097 — 437,883,097

Other comprehensive income — — — — ( 2,150,994 ) ( 2,150,994 )

BALANCE AS OF DECEMBER 31, 2018 259,328,613 $ 15,559,717 $ 745,324,144 $ 1,102,468,137 $ ( 1,600,338 ) $ 1,861,751,660

1,301,997,327

2,049,518,261

Issuance of common stock

Issuance of common stock from stock plan transactions 5,724,840 343,490 77,477,661 — — 77,821,151

Repurchases of common stock ( 13,775,938 ) ( 826,556 ) ( 36,544,858 ) ( 294,099,978 ) — ( 331,471,392 )

( 526,990,360

( 591,577,851

Stock-based compensation expense related to stock options, employee stock purchases and restricted stock — — 21,671,192 — — 21,671,192

Impact of ASU 2016-01 adoption

Dividends declared ($ 0.46 per share)

— — — ( 116,679,965 ) — ( 116,679,965 )

( 117,064,654

Net income — — — 424,683,939 — 424,683,939

Other comprehensive (loss) — — — — 311,235 311,235

BALANCE AS OF DECEMBER 31, 2019 251,277,515 $ 15,076,651 $ 807,928,139 $ 1,116,372,133 $ ( 1,289,103 ) $ 1,938,087,820

1,102,468,137

1,861,751,660

Issuance of common stock

Issuance of common stock from stock plan transactions 2,897,689 173,861 41,629,779 — — 41,803,640

Issuance of common stock related to acquisitions 163,718 9,823 3,549,406 — — 3,559,229

Repurchases of common stock ( 10,646,053 ) ( 638,763 ) ( 31,133,143 ) ( 256,708,600 ) — ( 288,480,506 )

( 294,099,978

( 331,471,392

Stock-based compensation expense related to stock options, employee stock purchases and restricted stock — — 30,797,327 — — 30,797,327

1 unchanged sentence

— — — ( 117,528,158 ) — ( 117,528,158 )

( 116,679,965

Net income — — — 347,563,621 — 347,563,621

Other comprehensive income — — — — 8,140,155 8,140,155

BALANCE AS OF DECEMBER 31, 2020 243,692,869 $ 14,621,572 $ 852,771,508 $ 1,089,698,996 $ 6,851,052 $ 1,963,943,128

1,116,372,133

1,938,087,820

The accompanying notes are an integral part of these consolidated financial statements.

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FOR THE YEARS ENDED DECEMBER 31, 2020, 2019 AND 2018

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 347,563,621 $ 424,683,939 $ 437,883,097

Adjustments to reconcile net income to net cash provided by operating activities:

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Accounts receivable ( 49,290,457 ) ( 21,872,527 ) 17,583,989

Inventories 22,725,798 ( 23,660,256 ) ( 8,516,016 )

Prepaid expenses and other 10,493,993 ( 3,646,457 ) ( 11,268,677 )

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Maturities and calls 142,547,368 125,013,589 181,892,136

( 153,257,603

( 332,106,362

Purchases ( 73,719,189 ) ( 153,257,603 ) ( 332,106,362 )

Plant and equipment additions ( 51,706,541 ) ( 84,580,255 ) ( 85,990,570 )

( 104,040,919

Proceeds from sale of plant and equipment 383,429 2,001,315 738,093

(Increase) Decrease in other assets

Net cash used for investing activities

( 185,821,194

Acquisition of businesses, net of cash acquired ( 11,216,927 ) — —

Increase in other assets ( 4,327,398 ) ( 3,027,263 ) ( 5,603,042 )

Net cash from (used for) investing activities 26,416,437 ( 56,711,082 ) ( 185,821,194 )

CASH FLOWS USED FOR FINANCING ACTIVITIES:

Repayment of long-term debt

( 107,625,000

Proceeds from borrowings on Credit Agreement 75,000,000 — —

Repayment of borrowings on Credit Agreement ( 75,000,000 ) — ( 78,000,000 )

Issuance of common stock from stock plan transactions 41,803,640 77,821,151 66,837,820

Cash dividends paid ( 117,181,928 ) ( 116,309,197 ) ( 116,566,639 )

( 116,309,197

( 116,566,639

( 108,815,040

Repurchases of common stock ( 288,480,506 ) ( 331,471,392 ) ( 591,577,851 )

( 331,471,392

( 591,577,851

( 231,363,216

Net cash used for financing activities ( 363,858,794 ) ( 369,959,438 ) ( 719,306,670 )

( 369,959,438

( 719,306,670

( 400,032,789

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 127,049,414 79,296,344 ( 352,709,218 )

( 352,709,218

CASH AND CASH EQUIVALENTS, Beginning of year 296,321,622 217,025,278 569,734,496

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In addition, the Company monitors information about its customers through a variety of sources including the media, and information obtained through on-going interaction between Company personnel and the customer.

Based on the evaluation of the above information, the Company estimates its allowances related to customer receivables on historical credit and collections experience, customers current financial condition and the specific identification of other potential problems, including the economic climate.

Actual collections can differ, requiring adjustments to the allowances, but historically such adjustments have not been material .

The following table presents the activity in the Company’s allowance for doubtful accounts:

Expenses Net Additions/Deductions

Adjustments Ending

Year Ended December 31, 2020:

4 unchanged sentences

Allowance for Doubtful Accounts $ 2,714,533 $ — $ 32,114 $ 2,746,647

The Company’s allowance for doubtful accounts primarily relates to financially distressed automotive customers.

The Company continues to work with these financially distressed customers in collecting past due balances.

GENTEX CORPORATION AND SUBSIDIARIES

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(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

The Company’s allowance for doubtful accounts primarily relates to financially distressed automotive customers.

The Company continues to work with these financially distressed customers in collecting past due balances.

The Company follows the provisions of 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.

12 unchanged sentences

These investments are classified within Long-Term Investments in the consolidated balance sheet and are not included within the tables below.

The $ 5.0 million decrease in the balance of these technology investments are a result of the acquisitions of the remaining equity of Vaporsens and Argil during the year.

Refer to Note 12, "Acquisitions" , for further information.

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

Fair Value Measurements at Reporting Date Using

Quoted Prices in

Total as of Quoted Prices in

Active Markets

for Identical

Significant Other

December 31, 2019

Assets Significant Other

Inputs Significant

Description December 31, 2020 (Level I) (Level 2) (Level 3)

Cash & Cash Equivalents $ 423,371,036 $ 423,371,036 $ — $ —

3 unchanged sentences

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:

2 unchanged sentences

Corporate Bonds 9,024,035 — 9,024,035 —

Government Securities

Municipal Bonds 107,407,831 — 107,407,831 —

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

Total $ 608,537,328 $ 430,062,110 $ 178,475,218 $ —

Fair Value Measurements at Reporting Date Using

Quoted Prices in

Total as of Quoted Prices in

Active Markets

for Identical

Significant Other

December 31, 2018

Assets Significant Other

Inputs Significant

Description December 31, 2019 (Level I) (Level 2) (Level 3)

Cash & Cash Equivalents 296,321,622 $ 296,321,622 $ — $ —

3 unchanged sentences

Government Securities 58,432,823 — 58,432,823 —

Other 2,631,750 2,631,750 — —

Long-Term Investments:

Asset-backed Securities 25,791,029 — 25,791,029 —

Certificate of Deposit 3,557,798 3,557,798 — —

Corporate Bonds 22,815,998 — 22,815,998 —

Municipal Bonds

Government Securities 6,088,190 — 6,088,190 —

Municipal Bonds 72,638,690 — 72,638,690 —

Total $ 567,597,380 $ 352,610,965 $ 214,986,415 $ —

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

2020 Cost Gains Losses Market Value

Short-Term Investments:

2 unchanged sentences

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:

2 unchanged sentences

Corporate Bonds 8,595,020 429,015 — 9,024,035

Government Securities

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

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

2019 Cost Gains Losses Market Value

Short-Term Investments:

Certificate of Deposit $ 50,099,795 $ — $ — $ 50,099,795

Government Securities

Corporate Bonds 29,025,624 194,061 — 29,219,685

Governmental Securities 58,343,911 99,917 ( 11,005 ) 58,432,823

Other 2,631,750 — — 2,631,750

Long-Term Investments:

Asset-backed Securities 25,971,156 — ( 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 — 22,815,998

Common Stocks

Governmental Securities 6,012,705 — 75,485 — 6,088,190

Municipal Bonds 71,997,996 1,036,116 ( 395,422 ) 72,638,690

Government Securities

Total $ 269,889,067 $ 1,974,255 $ ( 587,564 ) $ 271,275,758

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

Aggregate Unrealized Losses

Aggregate Fair Value

Aggregate Unrealized Losses Aggregate Fair Value

Less than one year $ 561,300 $ 12,317,187

Greater than one year — —

Total $ 561,300 $ 12,317,187

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

Aggregate Unrealized Losses

Aggregate Fair Value

Aggregate Unrealized Losses Aggregate Fair Value

Less than one year $ 587,564 $ 90,721,081

Greater than one year — —

ASC 320, Accounting for Certain Investments in Debt and Equity Securities , as amended and interpreted, provides guidance on determining when an investment is other-than-temporarily impaired.

The Company reviews its fixed income investments for any unrealized losses that would be deemed other-than-temporary and require the recognition of an impairment loss in income.

If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold the investments.

Management also considers the type of security, related-industry and sector performance, as well as published investment ratings and analyst reports, to evaluate its portfolio.

Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and new cost basis in the investment is established.

Total $ 587,564 $ 90,721,081

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 Instruments .

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

guidance modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination.

The Company utilized the guidance provided by ASC 326 to determine whether any of the available-for-sale debt securities held by the Company were impaired.

No investments were considered to be impaired during the years presented.

The Company has the intention and current ability to hold its debt investments until the amortized cost basis has been recovered.

If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments.

4 unchanged sentences

Due over five years 107,129,749

$ 183,637,430

Fair Value of Financial Instruments

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

The Company’s financial instruments consist of cash and cash equivalents, investments, accounts receivable, accounts payable, and short and long-term debt.

16 unchanged sentences

The Company conducts its long-lived asset impairment analysis in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets .

ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows.

ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows.

If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.

6 unchanged sentences

The Company reviews goodwill for impairment during the fourth quarter on an annual basis or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

The Company performs an impairment review for its automotive reporting unit, which has been determined to be one of the Company’s reportable segments, using either a qualitative approach or quantitative approach which utilizes

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

a fair value method that incorporates certain assumptions and judgments.

The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.

1 unchanged sentence

If not, no further goodwill impairment testing is performed.

If so, we determine the fair value of the reporting unit using step 1 and step 2 tests.

If so, we perform a step 1 test to determine the fair value of the reporting unit using an income approach to estimate the fair value of each of its reporting units and a market valuation approach to further support this analysis.

If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered to be impaired.

2 unchanged sentences

For the qualitative assessment performed, management considers factors such as macro-economic conditions, industry and market considerations, overall financial performance, and other company-specific events, amongst other factors, in making the determination as to whether it is more likely than not that a reporting unit's fair value is less than its carrying amount.

Other than management's internal projections of future cash flows, the primary assumptions used in the step 1 and step 2 impairment tests are the weighted-average cost of capital and long-term growth rates.

Other than management's internal projections of future cash flows, the primary assumptions used in the step 1 impairment test is the weighted-average cost of capital and long-term growth rates.

Although the Company's cash flow forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying business, there are significant judgments in determining the expected future cash flows attributable to a reporting unit.

4 unchanged sentences

The indefinite lived intangible assets were not impaired as a result of the annual test prepared by management for either period presented.

During the current year, the Company acquired Indefinite lived in-process research and development ("IPR&D") intangible assets.

These IPR&D assets are not amortized, but are tested for impairment annually, or more frequently when indicators of potential impairment exist, until the completion or abandonment of the associated research and development efforts.

Upon completion of the projects, the

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

assets will be amortized over the expected economic life of the asset, which will be determined on that date.

Should the project be determined to be abandoned, and if the asset developed has no alternative use, the full value of the asset will be charged to expense.

Refer to Note 10, "Goodwill and Intangible Assets" for information regarding the impairment testing performed in calendar year 2020.

13 unchanged sentences

The Company's approach is to consider these adjustments to the contract price as variable consideration which is estimated based on the then most likely price amount.

In addition, the Company has ongoing adjustments to our pricing arrangements with customers based on the related content, the cost of our products and other commercial

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

In addition, the Company has ongoing adjustments to our pricing arrangements with customers based on the related content, the cost of our products and other commercial factors.

Such pricing accruals are adjusted as they are settled with our customers.

15 unchanged sentences

The Company does not offer extended warranties on its products.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

The provision for income taxes is based on the earnings reported in the consolidated financial statements.

8 unchanged sentences

Future minimum lease payments for operating leases as of December 31, 2020 were as follows:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

Year ending December 31,

2021 $ 1,666,680

2022 1,086,084

Thereafter 6,173

Total future minimum lease payments $ 3,245,766

Less imputed interest ( 25,303 )

Total $ 3,220,463

Earnings Per Share

4 unchanged sentences

The following table sets forth the computation of basic and diluted net income per common share under the two-class method for each of the last three years:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

2020 2019 2018

Basic Earnings Per Share

Net Income $ 347,563,621 $ 424,683,939 $ 437,883,097

Allocated to participating securities (1)

4,964,928 5,028,813 —

Net Income available to common shareholders $ 342,598,693 $ 419,655,126 $ 437,883,097

9 unchanged sentences

Net income per share - Diluted $ 1.41 $ 1.66 $ 1.62

(1) While there were participating securities in 2018 and 2017, they did not have a material impact on the two-class EPS calculation.

Net income allocated to participating securities in 2018 and 2017 was $ 3,836,536 and $ 2,562,473 , respectively.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

(1) While there were participating securities in 2018, they did not have a material impact on the two-class EPS calculation.

Net income allocated to participating securities in 2018 was $ 3,836,536 .

For the years ended December 31, 2020, 2019 and 2018, 403,071 shares, 247,855 shares, and 698,019 shares, respectively, related to stock option plans were not included in diluted average common shares outstanding because they were anti-dilutive.

10 unchanged sentences

The Company accounts for stock-based compensation using the fair value recognition provisions of ASC 718, Compensation - Stock Compensation .

As described more fully in Note 5, the Company provides compensation benefits under an omnibus incentive plan, two other stock option plans, another restricted stock plan, and an employee stock purchase plan.

The Company utilizes the Black-Scholes model, which requires the input of subjective assumptions.

These assumptions include estimating (a) the length of time employees will retain their vested stock options before exercising them (“expected term”), (b) the volatility of the Company’s common stock price over the expected term, (c) the number of options that will ultimately not complete their vesting requirements (“forfeitures”) and (d) expected dividends.

Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amounts recognized on the consolidated condensed statements of operations.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Recent Accounting Standards

Effective January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2016-02, Leases , which provides guidance for lease accounting.

The new guidance contained in the ASU stipulates that lessees will need to recognize a right-of-use ("ROU") asset and a lease liability for substantially all leases (other than leases that meet the definition of a short-term lease).

The liability will be equal to the present value of lease payments.

Treatment in the consolidated statements of income will be similar to the historical treatment of operating and capital leases.

The adoption of this standard did not have a material impact on the Company's consolidated balance sheet or consolidated income statement.

Disclosures are now required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

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

As described more fully in Note 5 to the Consolidated Fina ncial Statements , the Company provides compensation benefits under an omnibus incentive plan, two other stock option plans, another restricted stock plan, and an employee stock purchase plan.

The Company utilizes the Black-Scholes model to estimate the value of the stock options, which requires the input of assumptions.

These assumptions include estimating (a) the length of time employees will retain their vested

GENTEX CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued

considered probable to impact the valuation of a financial asset measured on an amortized cost basis.

stock options before exercising them (“expected term”), (b) the volatility of the Company’s common stock price over the expected term, (c) the number of options that will ultimately not complete their vesting requirements (“forfeitures”) and (d) expected dividends.

Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amounts recognized on the consolidated condensed statements of operations.

Actual results could differ from those estimates.

Recent Accounting Standards

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 Instruments .

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 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 will not have a material impact on the Company's consolidated balance sheet or consolidated income statement.

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.

(2) DEBT AND FINANCING ARRANGEMENTS

3 unchanged sentences

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.

During the first quarter of 2020, the Company had a draw-down of $ 75 million on the Company's Revolver, of which $ 50 million was paid off during the third quarter and the remaining $ 25 million was paid off during the fourth quarter.

During the year ended December 31, 2020, interest expense was $ 0.6 million, which was recorded with the "Other income, net" section of the Consolidated Statements of Income .

The obligations of the Company under the Credit Agreement are not secured, but are subject to certain covenants.

1 unchanged sentence

The Revolver expires on October 15, 2023.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 31, 2020, the Company was in compliance with its covenants under the Credit Agreement.

(3) INCOME TAXES

The provision for income taxes is based on the earnings reported in the accompanying consolidated financial statements.

2 unchanged sentences

Deferred income tax expense is measured by the net change in deferred income tax assets and liabilities during the year.

The Tax Cuts and Jobs Act (the “Act”), a tax reform bill signed into law in 2017, reduced the current federal income tax rate for corporations to 21% from 35%, among other things.

The rate reduction was effective as of January 1, 2018, and as written is permanent.

The Act caused the Company’s deferred income taxes to be revalued during calendar year 2017, resulting in a reduction to income tax expense of $ 38.4 million in that period.

As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense.

The one time transition tax calculation, a separate provision of the Act, was also competed and was not material.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES, continued

The foreign components of income before the provision for income taxes were not material for the year ended December 31, 2019 , 2018 and 2017 .

The foreign components of income before the provision for income taxes were not material for the years ended December 31, 2020, 2019 and 2018.

The components of the provision for income taxes are as follows:

2020 2019 2018

Currently payable:

Deferred income tax (benefit) expense:

Federal $ 67,606,617 $ 73,563,685 $ 83,010,387

State 10,180,218 3,765,929 3,743,781

Foreign 1,882,195 1,468,018 1,776,837

Total 79,669,030 78,797,632 88,531,005

Deferred income tax benefit:

Primarily federal ( 15,419,722 ) ( 3,066,237 ) ( 4,367,155 )

1 unchanged sentence

The effective income tax rates are different from the statutory federal income tax rates for the following reasons:

2020 2019 2018

Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

State income taxes, net of federal income tax benefit 2.1 0.6 0.6

Domestic production exclusion

Research tax credit ( 1.4 ) ( 1.1 ) ( 0.8 )

Increase in reserve for uncertain tax provisions

(Decrease) Increase in reserve for uncertain tax provisions ( 0.1 ) 0.3 0.1

Change in tax rate on deferred taxes — — 0.5

2 unchanged sentences

Stock compensation ( 1.0 ) ( 1.1 ) ( 1.0 )

Other 0.3 0.3 0.4

Effective income tax rate 15.6 % 15.1 % 16.1 %

The tax effect of temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2020 and 2019, are as follows:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES, continued

Accruals not currently deductible $ 13,135,048 $ 6,478,146

Stock based compensation 11,983,900 9,100,745

Other 1,163,204 66,830

Total deferred income tax assets $ 26,282,152 $ 15,645,721

Excess tax over book depreciation $ ( 16,606,068 ) $ ( 30,725,471 )

Goodwill ( 33,427,901 ) ( 27,799,640 )

Intangible assets ( 11,237,588 ) ( 6,171,628 )

Other ( 3,971,338 ) ( 2,403,131 )

Total deferred income tax liability $ ( 65,242,895 ) $ ( 67,099,870 )

1 unchanged sentence

Income taxes paid in cash were approximately $ 61.9 million, $ 74.9 million and $ 86.9 million in 2020, 2019 and 2018, respectively.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES, continued

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

2020 2019 2018

Beginning of year $ 6,392,000 $ 4,678,000 $ 4,435,000

4 unchanged sentences

Reductions as a result of a lapse of the applicable statute of limitations ( 309,000 ) ( 600,000 ) —

End of year $ 4,864,000 $ 6,392,000 $ 4,678,000

If recognized, unrecognized tax benefits would affect the effective tax rate.

1 unchanged sentence

The Company has accrued approximately $ 577,000 , $ 574,000 , and $ 315,000 for interest as of December 31, 2020, 2019, and 2018, respectively.

Interest recorded during 2019 , 2018 and 2017 was not considered significant.

Interest expensed during 2020, 2019 and 2018 was not considered significant.

The Company is also subject to periodic and routine audits in both domestic and foreign tax jurisdictions, and it is reasonably possible that the amounts of unrecognized tax benefits could change as a result of an audit.

3 unchanged sentences

income tax examinations by tax authorities for years before 2016.

EMPLOYEE BENEFIT PLAN

(4) EMPLOYEE BENEFIT PLANS

The Company has a 401(k) retirement savings plan in which substantially all of its employees may participate.

The plan includes a provision for the Company to match a percentage of the employee’s contributions at a rate determined by the Company’s Board of Directors.

In 2019 , 2018 and 2017 the Company’s contributions were approximately $ 8.7 million , $ 8.2 million and $ 7.7 million , respectively.

In 2020, 2019 and 2018 the

Company’s contributions were approximately $ 8.9 million, $ 8.7 million and $ 8.2 million, respectively.

The increase in each of the years was due to increased employee participation in the plan.

30 unchanged sentences

The Employee Stock Option Plan allowed the Company to grant up to 24,000,000 shares of common stock under the plan, prior to its replacement by the 2019 Omnibus Plan.

The Company has granted options on 796,635 shares (net of shares from canceled/expired options) under the 2019 Omnibus Plan and 12,903,592 shares (net of shares from canceled/expired options) under the prior plan through December 31, 2019 .

The Company has granted options on 2,212,301 shares (net of shares from canceled/expired options) under the 2019 Omnibus Plan and 12,778,967 shares (net of shares from canceled/expired options) under the prior plan (prior to its replacement) through December 31, 2020.

Under each of such plans, the option exercise price equals the stock’s market price on date of grant.

1 unchanged sentence

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:

2020 2019 2018

Dividend yield (1)

2.0 % 2.0 % 2.1 %

Expected volatility (2)

27.5 % 23.9 % 26.0 %

Risk-free interest rate (3)

0.3 % 1.8 % 2.7 %

Expected term of options (in years) (4)

7 unchanged sentences

Based on analysis of historical option exercise activity, the Company has determined that all employee groups exhibit similar exercise and post-vesting termination behavior.

As of December 31, 2019 , there was $ 6,316,567 of unrecognized compensation cost related to stock option awards which is expected to be recognized over the remaining vesting periods, with a weighted-average period of 1.90 years.

A summary of the status of the Company’s employee stock option plan at December 31, 2019 , 2018 and 2017 , and changes during the same periods are presented in the tables below.

As of December 31, 2020, there was $ 7,220,109 of unrecognized compensation cost related to stock option awards which is expected to be recognized over the remaining vesting periods, with a weighted-average

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Life

period of 2.05 years.

Stock option expense for the years ended December 31, 2020, 2019 and 2018 was $ 4,935,527 , $ 6,345,147 , and $ 8,582,489 respectively.

A summary of the status of the Company’s stock option plans at December 31, 2020, 2019 and 2018, and changes during the same periods are presented in the tables below.

Contract Life Aggregate

Outstanding at Beginning of Year 5,435 $ 20

Outstanding at End of Year

Exercisable at End of Year

Contract Life

Granted 1,571 26

Exercised ( 2,077 ) 18 $ 23,861

Forfeited ( 396 ) 22

Outstanding at End of Year 4,533 23 3.4 years $ 48,501

Exercisable at End of Year 1,358 $ 20 2.3 years $ 18,334

Contract Life Aggregate

Outstanding at Beginning of Year 8,944 $ 18

Outstanding at End of Year

Exercisable at End of Year

Contract Life

Granted 1,049 25

Exercised ( 4,402 ) 16 $ 36,294

Forfeited ( 156 ) 20

Outstanding at End of Year 5,435 20 3.1 years $ 47,170

Exercisable at End of Year 1,859 $ 18 2.2 years $ 20,484

Contract Life Aggregate

Outstanding at Beginning of Year 11,837 $ 16

Outstanding at End of Year

Exercisable at End of Year

Granted 1,613 22

Exercised ( 4,278 ) 15 $ 38,097

Forfeited ( 228 ) 18

Outstanding at End of Year 8,944 18 2.8 years $ 24,881

Exercisable at End of Year 4,101 $ 16 1.7 years $ 16,162

A summary of the status of the Company’s non-vested employee stock option activity for the years ended December 31, 2020, 2019, and 2018, are presented in the table below:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2020 2019 2018

Fair Value Shares

Nonvested Stock Options at Beginning of Year 3,575 $ 4 4,842 $ 4 6,540 $ 4

Granted 1,571 5 1,049 4 1,613 5

Vested ( 1,585 ) 4 ( 2,165 ) 4 ( 3,089 ) 4

Forfeited ( 386 ) 4 ( 151 ) 4 ( 222 ) 4

Nonvested Stock Options at End of Year 3,175 $ 5 3,575 $ 4 4,842 $ 4

Restricted Shares

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s Second Restricted Stock Plan provided for a maximum number of shares that may be subject to awards of 9,000,000 shares, prior to its replacement by the 2019 Omnibus Plan.

1 unchanged sentence

The restriction period is determined by a committee, appointed by the Board of Directors, but may not exceed ten years .

The Company has issued 854,633 shares under the 2019 Omnibus Plan and 5,762,672 shares under the prior plan as of December 31, 2019 , and has 3,315,482 shares outstanding under such plans.

The Company has issued 1,603,118 shares under the 2019 Omnibus Plan and 5,688,309 shares under the prior plan (prior to its replacement) as of December 31, 2020, and has 3,598,778 shares outstanding under such plans.

2020 2019 2018

Vesting Period (1)

Shares Granted

Market Price at Vesting Date

Shares Granted

Market Price at Vesting Date

Shares Granted

Market Price at Vesting Date

Shares Granted Market Price at Grant Date Shares Granted Market Price at Grant Date Shares Granted Market Price at Grant Date

1 Year 42,074 22.16 - 26.94

39,627 $ 22.19 — $ —

2 Year 21,669 23.88 - 26.94

3 Years 119,504 23.88 - 31.08

64,718 20.40 — —

4 Years 479,346 20.68 - 28.98

773,698 20.68 - 28.98

762,749 20.21 - 23.14

5 Years 170,355 20.68 - 28.98

254,988 20.68 - 28.98

4 unchanged sentences

(1) Each of these awards cliff vest after the restriction period with no additional restrictions.

A summary of restricted share award activity, including award grants, vesting, and forfeitures for the years ended December 31, 2020, 2019, and 2018, are presented in the table below:

2020 2019 2018

Nonvested, Beginning of Year 3,315 2,638 2,019

Granted 833 1,133 1,042

Vested ( 303 ) ( 361 ) ( 321 )

Forfeited ( 246 ) ( 95 ) ( 102 )

Nonvested, End of Year 3,599 3,315 2,638

As of December 31, 2020, there was unearned stock-based compensation of $ 39,291,347 associated with these restricted stock grants.

2 unchanged sentences

Performance Shares

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

4 unchanged sentences

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 for the year ended December 31, 2019 was $ 897,136 .

No amortization expense for performance share grants was incurred in 2018 or 2017, as no such awards were issued or outstanding.

Amortization expense from performance share grants for the years ended December 31, 2020 and 2019 was $ 4,424,678 , and $ 897,136 , respectively.

No amortization expense for performance share grants was incurred in 2018, as no such awards were issued or outstanding.

Employee Stock Purchase Plan

3 unchanged sentences

The following table summarizes shares sold to employees under the 2013 Plan in the years ended December 31, 2020, 2019 and 2018:

Cumulative Shares Issued in 2019

Weighted Average Fair Value 2019

Plan 2020 2019 2018 Cumulative Shares Issued Weighted Average Fair Value 2020

2013 Employee Stock Purchase Plan 208,273 173,013 177,846 1,354,129 $ 21.38

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) CONTINGENCIES

2 unchanged sentences

The Company does not believe, however, that at the current time there are matters that constitute material pending legal proceedings that will have a material adverse effect on the financial position, future results of operations, or cash flows of the Company.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) SEGMENT REPORTING

1 unchanged sentence

Operating segments are defined by ASC 280 as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-makers in deciding how to allocate resources and in assessing performance.

2020 2019 2018

Automotive Products

United States $ 519,337,271 $ 569,939,756 $ 583,672,971

Germany 228,652,827 296,276,971 333,002,878

Japan 216,100,530 225,577,146 209,311,790

Mexico 127,157,684 160,967,900 106,111,515

Other Countries 556,949,831 557,775,114 559,099,142

1,858,897,406

1,834,063,697

1,794,872,578

Other 39,991,262 48,360,519 42,865,401

Total $ 1,688,189,405 $ 1,858,897,406 $ 1,834,063,697

Income (Loss) from Operations:

Automotive Products $ 393,979,860 $ 473,546,112 $ 495,471,799

Other 5,576,232 14,991,492 12,653,748

Total $ 399,556,092 $ 488,537,604 $ 508,125,547

Automotive Products $ 1,436,374,596 $ 1,463,030,286 $ 1,449,910,935

1,463,030,286

1,449,910,935

1,472,061,650

2,168,803,193

2,085,434,068

2,352,053,912

Other 33,317,668 16,000,669 14,333,098

Corporate 728,248,906 689,772,238 621,190,035

Total $ 2,197,941,170 $ 2,168,803,193 $ 2,085,434,068

Depreciation & Amortization:

Automotive Products $ 97,530,191 $ 97,520,972 $ 97,279,052

Other 689,894 481,861 422,844

Corporate 6,519,815 6,700,141 4,484,918

Total $ 104,739,900 $ 104,702,974 $ 102,186,814

Capital Expenditures:

Automotive Products $ 34,926,686 $ 63,537,512 $ 84,337,455

Other includes Dimmable Aircraft Windows and Fire Protection Products.

Major product line revenues included within these segments are as follows:

Other 1,470,705 1,704,045 1,447,494

Corporate 15,309,150 19,338,698 205,621

Total $ 51,706,541 $ 84,580,255 $ 85,990,570

Other includes Dimmable Aircraft Windows, Fire Protection Products, and Nanofiber.

Major product line revenues included within the Automotive Products segment are as follows:

GENTEX CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(7) SEGMENT REPORTING, continued

2020 2019 2018

Automotive Products

Automotive Mirrors $ 1,520,628,604 $ 1,638,600,272 $ 1,598,589,777

1,638,600,272

1,598,589,777

1,573,222,820

HomeLink ® Modules*

Total Automotive Products

127,569,539 171,936,615 192,608,519

1,791,198,296

1,758,127,468

Total Automotive Products $ 1,648,198,143 $ 1,810,536,887 $ 1,791,198,296

Other Products Revenue $ 39,991,262 $ 48,360,519 $ 42,865,401

Total Revenue $ 1,688,189,405 $ 1,858,897,406 $ 1,834,063,697

1,858,897,406

1,834,063,697

1,794,872,578

*Excludes HomeLink ® revenue integrated into automotive mirrors.

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Substantially all long-lived assets are located in the U.S.

Automotive Products revenues in the “Other countries” category are sales to customer automotive manufacturing plants in Korea, Mexico, Canada, Hungary, China, and the United Kingdom as well as other foreign automotive customers.

Automotive Products revenues in the “Other countries” category are sales to customer automotive manufacturing plants in Korea, Canada, Hungary, China, and the United Kingdom as well as other foreign automotive customers.

Most of the Company’s non-U.S.

2 unchanged sentences

In 2020, the Company had three automotive customers (including direct sales to OEM customers and sales through their Tier 1 suppliers), which individually accounted for 10% or more of net sales as follows:

Toyota Motor Company

Volkswagen Group

General Motors

Daimler Group

Ford Motor Company

Toyota Motor Company Volkswagen Group General Motors Daimler Group

2020 14 % 14 % 12 % #

2019 13 % 14 % 11 % #

2018 13 % 15 % # 10 %

# - Less than 10 percent.

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The following table sets forth selected financial information for all of the quarters during the years ended December 31, 2020 and 2019 (in thousands, except per share data):

Operating Income

Earnings Per Share (Basic) (1)

Earnings Per Share (Diluted) (1)

(1) Basic and diluted earnings per share are computed independently for each quarter presented.

First Second Third Fourth

2020 2019 2020 2019 2020 2019 2020 2019

Net Sales $ 453,762 $ 468,589 $ 229,926 $ 468,711 $ 474,639 $ 477,761 $ 529,864 $ 443,836

Gross Profit 156,587 169,645 43,945 176,538 188,237 180,321 216,675 161,805

Operating Income (Loss) 105,027 121,596 ( 6,738 ) 127,905 138,853 128,136 162,414 110,901

Net Income (Loss) 89,506 104,280 ( 2,374 ) 108,959 117,093 111,898 143,339 99,547

Earnings (Loss) Per Share (Basic) (1)

$ 0.36 $ 0.40 $ ( 0.01 ) $ 0.42 $ 0.48 $ 0.44 $ 0.59 $ 0.39

Earnings (Loss) Per Share (Diluted) (1)

$ 0.36 $ 0.40 $ ( 0.01 ) $ 0.42 $ 0.48 $ 0.44 $ 0.58 $ 0.39

(1) Basic and diluted earnings (loss) per share are computed independently for each quarter presented.

Therefore the sum of quarterly basic and diluted per share information may not equal annual basis and diluted earnings per share.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT REPORTING, continued

(9) COMPREHENSIVE INCOME

2 unchanged sentences

For the Twelve Months ended December 31,

2020 2019 2018

Foreign currency translation adjustments:

Balance at beginning of period $ ( 2,384,589 ) $ ( 1,674,887 ) $ 645,030

Other comprehensive (loss) income before reclassifications

Other comprehensive income (loss) before reclassifications 3,153,634 ( 709,702 ) ( 2,319,917 )

Net current-period change 3,153,634 ( 709,702 ) ( 2,319,917 )

16 unchanged sentences

Amounts in parentheses indicate debits.

The following table presents details of reclassifications out of other comprehensive income for the twelve months ended December 31, 2019 , 2018 and 2017 .

Details about Accumulated Other Comprehensive Income Components

Affected Line item in the Statement of Consolidated Income

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents details of reclassifications out of accumulated other comprehensive income for the twelve months ended December 31, 2020, 2019 and 2018:

Details about Accumulated Other Comprehensive Income Components Affected Line item in the Statement of Consolidated Income

For the Twelve Months ended December 31,

2020 2019 2018

Unrealized gains on available-for-sale debt securities

Realized gain on sale of securities

Other income (expense), net

Provision for income taxes

Provision for Income Taxes

Total reclassifications for the period

Realized gain on sale of securities $ 2,098,656 $ 484,283 $ 2,006,235 Other income, net

Provision for income taxes ( 440,718 ) ( 101,699 ) ( 421,309 ) Provision for Income Taxes

Total reclassifications for the period $ 1,657,938 $ 382,584 $ 1,584,926 Net of tax

Unrealized gains (losses) on derivatives

Realized loss on interest rate swap

Other income (expense), net

Provision for income taxes

Provision for Income Taxes

Total reclassifications for the period

Realized loss on interest rate swap $ — $ — $ 123,142 Other income, net

Provision for income taxes — — ( 25,860 ) Provision for Income Taxes

$ — $ — $ 97,282 Net of tax

Total reclassifications for the period $ 1,657,938 $ 382,584 $ 1,682,208 Net of tax

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT REPORTING, continued

(10) GOODWILL AND INTANGIBLE ASSETS

The Company recorded Goodwill of $ 307.4 million related to the HomeLink ® acquisition, which occurred in September 2013.

The carrying value of Goodwill as of both December 31, 2019 and December 31, 2018 was $ 307.4 million as set forth in the table below.

The Company also recorded an additional $ 3.7 million in Goodwill as part of the acquisition of Vaporsens, Inc.

("Vaporsens") in the second quarter of 2020, and an additional $ 0.9 million in Goodwill as part of the acquisition of Argil, Inc.

("Argil") during the fourth quarter of 2020.

Refer to Note 12, "Acquisitions" , for further information on these acquisitions.

The carrying value of Goodwill as of December 31, 2020 and December 31, 2019 was $ 311.9 million and $ 307.4 million, respectively, as set forth in the table below.

Carrying Amount

Balance as of December 31, 2019 $ 307,365,845

Acquisitions 4,556,942

Divestitures —

Impairments —

Balance as of December 31, 2020 $ 311,922,787

2 unchanged sentences

The Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value thus resulting in the need for interim 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 macro-economic conditions.

No such events or circumstances that negatively impacted the key assumptions were noted in 2019.

No such events or circumstances, including the COVID-19 pandemic, that might negatively impact the key assumptions were observed in 2020 and, as such, nothing indicated the need for interim impairment testing.

The Intangible Assets and related change in carrying values are set forth in the table below as of December 31, 2020 and December 31, 2019.

As of December 31, 2020:

Other Intangible Assets

Accumulated Amortization

Assumed Useful Life

Other Intangible Assets Gross Accumulated Amortization Net Assumed Useful Life

HomeLink ® Trade Names and Trademarks

$ 52,000,000 $ — $ 52,000,000 Indefinite

HomeLink ® Technology

Existing Customer Platforms

Exclusive Licensing Agreement

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 identifiable intangible assets $ 389,673,127 $ ( 139,925,000 ) $ 249,748,127

( 120,625,000

As of December 31, 2019:

Other Intangible Assets

Accumulated Amortization

Assumed Useful Life

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Intangible Assets Gross Accumulated Amortization Net Assumed Useful Life

HomeLink ® Trade Names and Trademarks

$ 52,000,000 $ — $ 52,000,000 Indefinite

HomeLink ® Technology

Existing Customer Platforms

Exclusive Licensing Agreement

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 identifiable intangible assets 371,000,000 ( 120,625,000 ) 250,375,000

( 101,325,000

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT REPORTING, continued

Accumulated amortization on patents and intangible assets was approximately $ 164.5 million and $ 143.1 million at December 31, 2020 and 2019, respectively.

4 unchanged sentences

For the Twelve Months ended December 31,

Revenue 2020 2019 2018

Automotive Products

Total Automotive Products

$ 519,337,271 $ 569,939,756 $ 583,672,971

1,791,198,296

1,758,127,468

Germany 228,652,827 296,276,971 333,002,878

Japan 216,100,530 225,577,146 209,311,790

Mexico 127,157,684 160,967,900 106,111,515

Other 556,949,831 557,775,114 559,099,142

Total Automotive Products $ 1,648,198,143 $ 1,810,536,887 $ 1,791,198,296

Other Products (U.S.) 39,991,262 48,360,519 42,865,401

Total Revenue $ 1,688,189,405 $ 1,858,897,406 $ 1,834,063,697

1,858,897,406

1,834,063,697

1,794,872,578

Revenue by geographic area may fluctuate based on many factors, including:

7 unchanged sentences

For the Twelve Months Ended December 31,

Revenue 2020 2019

Automotive Segment

Automotive Mirrors & Electronics $ 1,520,628,604 $ 1,638,600,272

1,638,600,272

1,598,589,777

HomeLink Modules* 127,569,539 171,936,615

Total Automotive Products $ 1,648,198,143 $ 1,810,536,887

1,810,536,887

1,791,198,296

Other Segment

1 unchanged sentence

Windows Products 17,274,277 24,620,258

Total Other $ 39,991,262 $ 48,360,519

*Excludes HomeLink revenue related to HomeLink modules integrated into automotive mirrors.

38 unchanged sentences

Payment terms on fire protection part sales to customers range from 30 days to 75 days.

The Company acquired Vaporsens in early 2020, which specializes in nanofiber chemical sensing research and development.

Vaporsens is primarily involved with research and development of technology related to nanofibers sensing a variety of chemicals and/or compounds.

No revenue was recognized related to Nanofiber during 2020.

Refer to Note 12, "Acquisitions" , for further information.

(12) ACQUISITIONS

On April 3, 2020, the Company acquired Vaporsens 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.

The Company funded the acquisition with $ 7.1 million in cash payments, with the remaining $ 3.5 million 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.

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Vaporsens which were included in the Company’s consolidated statement of income and comprehensive income for the year ended December 31, 2020.

The valuation process was completed during the fourth quarter of 2020.

The following table summarizes the fair values of the assets acquired, and the liabilities assumed, as of the acquisition date of April 3, 2020:

Current Assets $ 435,722

Personal Property 562,840

Technology Licenses 245,335

In-Process R&D 11,000,000

Goodwill 3,664,704

Total Assets Acquired 15,908,601

Current Liabilities 255,522

Deferred Tax Liability 2,034,079

Total Liabilities Assumed 2,289,601

Net Assets Acquired $ 13,619,000

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 second quarter of 2021.

Air-Craftglass is now a 100 % owned subsidiary of the Company, and will be classified within the “Other” 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 Air-Craftglass which were included in the Company’s consolidated statement of income and comprehensive income for the year ended December 31, 2020.

On December 14, 2020, the Company acquired Argil for $ 3.7 million in a stock purchase deal, which was in addition to the previous $ 4.2 million equity investment by the Company in Argil.

The Company funded the 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 expects to finalize these matters within the measurement period, which is currently expected to remain open through the third quarter of 2021.

Argil is now a 100 % owned subsidiary of the Company, and has been classified within the “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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Combinations .

There were no revenues of the business of Argil which were included in the Company’s consolidated statement of income and comprehensive income for the year ended December 31, 2020.

Through December 31, 2020, the Company has incurred acquisition-related costs of approximately $ 650,000 , which has been expensed as incurred in the "Selling, general & administrative" section of its Condensed Consolidated Income Statement.

(13) SUBSEQUENT EVENT

On January 6, 2021, the Company entered into an agreement and plan of merger to acquire Guardian Optical Technologies ("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 proposed transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, including regulatory approval of the Israeli government.

The Company is in the process of gathering relevant information needed to complete the initial accounting of the acquisition and is currently evaluating the financial statement impacts of the transaction.

EXHIBIT INDEX

3 unchanged sentences

3 to such Registration Statement, and the same is hereby incorporated herein by reference.

Description of Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

4.2 Description of Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, was filed as Exhibit 4.2 of the Registrant's Form 10-K for the year ended December 31, 2019 with the Commission on February 26, 2020 and the same is incorporated herein by reference.

*10.1 Gentex Corporation Second Restricted Stock Plan was filed as Exhibit 10(b)(2) to Registrant’s Report on Form 10-Q dated April 27, 2001, and the same is hereby incorporated herein by reference.

13 unchanged sentences

*10.15 Employment Agreement between Gentex Corporation and Fred Bauer filed as exhibit to Registrant's Report on Form 10-K dated February 21, 2018.

Stock Redemption Agreement between Gentex Corporation and Fred Bauer filed as exhibit to Registrant's Report on Form 10-K dated February 21, 2018.

*10.16 Credit Agreement by Gentex Corporation as the Borrower, the Guarantors from Time to Time Party Hereto, and the Lenders Party Hereto, and PNC, National Association as Administrative Agent, dated as of October 15, 2018, filed as Exhibit 10.1 to Registrants report on Form 8-K filed October 18, 2018, and the same is incorporated herein by reference.

*10.17 Gentex Corporation 2019 Omnibus Incentive Plan filed as exhibit to Registrant's Report on Form 10-K dated February 22, 2019

*10.18 Israeli Appendix to the Gentex Corporation 2019 Omnibus Incentive Plan filed as an exhibit to Registrant's Form 10-K dated February 22, 2021

*10.19 Gentex Corporation Long-Term Incentive Plan filed as exhibit to Registrant's Report on Form 10-K dated February 22, 2019

4 unchanged sentences

and Gentex Corporation dated as of May 1, 2019 was filed as an exhibit to Registrant's Report on Form 10-Q dated May 3, 2019, and is hereby incorporated herein by reference.

Speciman Form of Gentex Corporation Non-Employee Director Restricted Stock Agreement was filed as an exhibit to Registrant's Report on Form 10-Q dated November 1, 2019, and is hereby incorporated herein by reference.

*10.24 Specim e n Form of Gentex Corporation Non-Employee Director Restricted Stock Agreement was filed as an exhibit to Registrant's Report on Form 10-Q dated November 1, 2019, and is hereby incorporated herein by reference.

21 List of Company Subsidiaries

3 unchanged sentences

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.

XBRL Instance Document

XBRL Taxonomy Extension Schema

XBRL Taxonomy Extension Calculation Linkbase

XBRL Taxonomy Extension Definition Linkbase

XBRL Taxonomy Extension Label Linkbase

XBRL Taxonomy Extension Presentation Linkbase

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase

*Indicates a compensatory plan or arrangement.

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 9A. Controls and Procedures