What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-23 compared with 2021-02-22 · 192 added, 197 removed, 1161 unchanged (25% of the section changed)

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Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors, Executive Officers and Corporate Governance.

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Kevin Nash 47 Vice President, Finance, Chief Financial Officer and Treasurer February 2018

Matthew Chiodo 56 Vice President, Sales February 2018

Matthew Chiodo 57 Chief Sales Officer and Senior Vice President, Sales January 2022

Scott Ryan 41 Vice President, General Counsel and Corporate Secretary August 2018

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Nash's employment arrangement are contained herein in Part III, Item 11 to this Form 10-K.

Matthew Chiodo, the Company's Vice President of Sales, was appointed an executive officer effective February 15, 2018.

Matthew Chiodo's title changed to Chief Sales Officer and Senior Vice President of Sales on January 17, 2022, though he was already and continues to be a named executive officer.

Chiodo has been employed by the Company since 2001.

Chiodo has been in his current role since January 2017 and previously served as Director of Sales for several years.

Prior to his current title, his title was the Company's Vice President of Sales, beginning in 2017 and before that served as Director of Sales for several years.

Certain terms of Mr.

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Any information concerning compliance with Section 16(a) of the Securities and Exchange Act of 1934 that may appear under the caption “Delinquent Section 16 Reports” in the definitive Proxy Statement is hereby incorporated herein by reference.

Information relating to the Company’s Audit Committee and concerning whether at least one member of the Audit Committee is an “audit committee financial expert” as that term is defined under Item 407(d)(5) of Regulation S-K appearing under the caption “Corporate Governance – Audit Committee” in the definitive Proxy Statement is hereby incorporated herein by reference.

Regulation S-K appearing under the caption “Corporate Governance – Audit Committee” in the definitive Proxy Statement is hereby incorporated herein by reference.

The Company has adopted a Code of Ethics for Certain Senior Officers that applies to its principal executive officer, principal financial officer, and principal accounting officer.

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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

Notwithstanding that intention, in 2020 and 2021, at the request of the CEO and the other named executive officers, the Compensation Committee and Board of Directors did not increase named executive officer base salaries.

The initial 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 2021, the request and decision not to change executive officer base salaries related to the overall negative business environment caused by the COVID-19 pandemic and its fallout.

Later in 2021 and in early 2022, the Compensation Committee undertook an extensive review of base salaries, including where officers rank compared to the Company's established peer group.

It was determined by the Compensation Committee that certain officer base salaries continue to trail the announced goal of base salaries at market median, in some instances base salaries significantly trailed the stated goal.

As such, in light of an improving outlook for the Company the ever-increasing competition for talent, the need to attract and retain management to fulfil the Company's strategic goals, desire for base salaries to approach market median, and the high level individual performances of officers, the Compensation Committee recommended to the Board and the Board approved certain changes in base salaries for 2022.

Reinstatement of merit raises for salaried and hourly team members across the Company, as well as other relevant factors, were also considered by the Compensation Committee and the Board.

The Board, therefore, on February 17, 2022, approved the following base salaries for the CEO and named executive officers for 2022:

Executive Officer Position 2022 Base Salary 2021 Base Salary

Steve Downing President and CEO $ 800,000 $ 750,000

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Kevin Nash VP, Finance, CFO and Treasurer $ 475,000 $ 400,000

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

Matt Chiodo Senior VP, Sales and CSO $ 415,000 $ 380,000

Scott Ryan VP, General Counsel and Corporate Secretary $ 375,000 $ 350,000

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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 2022 Annual Plan payout opportunities as a percentage of base salary applicable to each performance metric are shown in the table below:

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Scott Ryan 37.5 % 75.0 % 150.0 %

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.

No changes were made to the Annual Plan target opportunities for executive officers in 2022, as it is believed the threshold, 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.

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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.

Revenue (weighted 33.33%), Operating Income (weighted 33.33%) and Earnings per Diluted Share (33.33%), adjusted for tariffs as appropriate, 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.

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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.

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.

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 and supply chain related stresses of 2021, including unpredicted electronics components shortages, having a greater negative impact on light vehicle production than IHS and others forecasted.

The significant negative impact on the macroeconomic environment and, in particular, on the Company's industries were not known when targets were set in February 2021, which targets took into account forecasted light vehicle production levels.

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

Had the very significant impact of the supply chain constraints from raw materials and electronics components shortages 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.

After performance targets had been set, the impact of the COVID-19 pandemic fallout worsened, especially supply chain issues and electronics components shortages, which negatively impacted light vehicle production more than forecasted.

As a result, the Compensation Committee met later in 2021 and in early 2022 to consider not only the macroeconomic environment and industry conditions, (especially decreased global light vehicle production), but also management's response thereto.

Given the negative changes that occurred in 2021, including supply chain constraints and electronics component shortages, were outside of the control of officers and directly impacted the Company's ability to meet customer demand (even in a declining light vehicle production environment), 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 2022 after due consideration, the Compensation Committee recommended to the Board of Directors, who subsequently approved (on February 17, 2022) a revision to pre-established targets under the Annual Plan for calendar year 2021, 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.

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 fallout and supply chain issues since those were unknown at that time), 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:

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Total 76.41 84.68 (8.27) (9.8) %

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:

Based on the 9.8% reduction from the IHS Markit mid-January 2021 global light vehicle production forecast for calendar year 2021 (which was used to help set targets in February of 2021) to actual global light vehicle production for calendar year 2021, the Compensation Committee and the Board adjusted the performance metrics for the Annual Plan as follows:

Annual Plan Performance Metrics:

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Percentage Change (10.2) % (9.7) % (9.7) %

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:

For 2021, target performance and actual results for the COVID-19 and supply chain constraints adjusted performance metrics are as follows:

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

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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 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:

Based on actual Revenue, Operating Income, and Earnings per Diluted Share results compared to the adjusted targets and performance of the named executive officers, the payments for 2021 under the Annual Plan are shown in the table below:

Executive Officer 2021 Annual Plan Performance Bonus 2021 Annual Plan Discretionary Bonus

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Scott Ryan $177,293 $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.

These Annual Plan results appropriately reflect management's excellent work in addressing the ongoing impacts of the COVID-19 pandemic supply chain shortages, especially electronics components, labor disruptions, and align with comparable year-over-year bonuses paid generally to employees under the Company's profit-sharing plan (which were paid at a level of approximately 94% of the prior year).

Were it not for management's leadership in redesigning products to allow more customer demand to be met notwithstanding the parts shortages and labor market constraints, more revenue would have been lost in 2021.

Management also saw to the health and safety of team members during a period when it was not easy to do so.

For 2022, the Compensation Committee has established targets for Revenue, Operating Income, and Earnings per Diluted Share as the Annual Plan performance metrics as it has done in the past, but is using ± 25% of target (versus ± 20%) in 2022 for determining thresholds and maximums and is not making any adjustments for tariffs.

2019 Omnibus Incentive Plan and Long-Term Incentive Program

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Scott Ryan 155 %

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.

These Long-Term Plan Target Opportunity Percentages of Base Salary for 2022 - 2024 have changed from those applicable for 2021 - 2023 (which were 285% for Mr.

Downing, and 185% for the other named executive officers).

There have been no adjustments 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 and its fallout, including supply chain disruptions, 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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In addition to requiring achievement of performance objectives in respect of PSAs, PSAs and RS require the executive officers to remain employed with the Company for three years from the grant date (unless the executive officer attains retirement age, departs for good reason, dies, or becomes disabled or a change in control occurs whereby an award may be paid or partially paid).

Performance Shares

Performance Shares for 2022-2024 Performance Period

The Long-Term Plan is designed to provide PSAs for officers, including our named executive officers.

PSAs are tied to the achievement of two performance objectives, each weighted equally:

earnings before interest, taxes, depreciation and amortization (EBITDA) and return on invested capital (ROIC), in each case adjusted as determined by the Compensation Committee.

Each performance objective is based on a three-year performance period (2021-2023) with a performance range that can result in PSAs of 0% for failure to achieve threshold, 50% of target for achieving threshold, to 200% of the target opportunity for achieving maximum.

earnings before interest, taxes, depreciation and amortization (EBITDA) and return on invested capital (ROIC), in each case adjusted and calculated as determined by the Compensation Committee.

Each performance objective is based on a three-year performance period (2022-2024) with a performance range that can result in PSAs of 0% for failure to achieve threshold, 50% of target for achieving threshold, to 200% of the target opportunity for achieving maximum.The targets for EBITDA and ROIC for 2022-2024 were established by the Compensation Committee as it has done in the past.

For the 2022-2024 performance period, ± 25% of target (versus ± 20%) is being used for determining thresholds and maximums.

EBITDA drives the ability to commit resources to continued growth, but is also a measure of ability to provide shareholder return.

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Scott Ryan 12,942

Restricted Stock Awards

Restricted Stock Awards for 2022-2024 Performance Period

The other 30% of the total value of the long-term incentive opportunity consists of RS awards.

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Under the Long-Term Plan, RS will generally be granted in February to officers, including our named executive officers, and cliff vest on the third anniversary of the grant.

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

The RS awarded in 2022, based on the target opportunities, for the named executive officers are shown in the table below:

Executive Officer Number of RS Awarded in 2022 for 2022-2024

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Scott Ryan 5,547

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.

2019-2021 Long-Term Plan Performance (three-year performance period ending December 31, 2021)

December 31, 2021, marked the end of the three-year performance period for PSA and RS Long-Term Plan awards made in February 2019.

Performance Share Awards

The performance metrics, targets and performance payout ranges for these awards were set and approved by the Compensation Committee and the Board in February 2019.

Consistent with the Long-Term Plan, incentive could be earned by the officers based on performance associated with two equally weighted metrics, EBITDA and ROIC, in each case adjusted as determined by the Compensation Committee, both measured cumulatively over the three-year performance period.

The target levels of achievement for the EBITDA and the ROIC were established to align with financial goals set at the beginning of the three-year performance period for the years 2019 through 2021 and were not adjusted notwithstanding the unforeseen negative impacts of the COVID-19 pandemic and its fallout.

The table below summarizes the results of the 2019-2021 performance period relative to target and the achievement level of the 2019-2021 PSAs:.

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

EBITDA 50 % $1,533,397 $1,916,746 $2,300,095 $1,648,757 65.05 % 32.52 %

ROIC 50 % 36.80 % 46.00 % 55.20 % 42.51 % 81.05 % 40.53 %

* amounts in thousands (000) percentages.

Threshold, Target, and Maximum for EBITDA were adjusted to address the estimated impact of tariffs and the Actual Performance was similarly adjusted with respect to the actual impact of tariffs.

The PSAs awarded in February 2019, based on target opportunity, along with the actual payout of PSAs to the executive officers, for the 2019-2021 performance period are reflected in the table below and include dividend equivalents assuming reinvestment of dividends.

Executive Officer Number of PSAs Awarded in 2019 (Target) for 2019-2021 2019-2021 PSAs Payout

Steve Downing 49,575 37,691

Neil Boehm 13,451 10,227

Kevin Nash 13,220 10,052

Matt Chiodo 12,559 9,549

Scott Ryan 11,568 8,796

Restricted Stock

The RS awarded in February 2019, based on target opportunities, along with the actual payment of RS to executive officers, awarded for the 2019-2021 period are reflected in the table below:

Executive Officer Number of RS Awarded in 2019 (Target) for 2019-2021 2019-2021 RS Payout/Vesting

Steve Downing 21,246 21,246

Neil Boehm 5,765 5,765

Kevin Nash 5,666 5,666

Matt Chiodo 5,382 5,382

Scott Ryan 4,958 4,958

Since each executive officer awarded restricted stock in 2019 remained employed by the Company for three years from the grant date, each restricted stock awarded vested with such executive officers.

The Board also approved the RS awarded annually to each director who is not an employee of the Company from $100,000 to $130,000 and approved the Chair of the Board annual retainer from $75,000 to $100,000.

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

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James Hollars

/s/ John Mulder Director

/s/ Richard Schaum Director

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James Wallace

/s/ Ling Zang Director

Report of Independent Registered Public Accounting Firm

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Net income $ 360,797,232 $ 347,563,621 $ 424,683,939

Other comprehensive income (loss) before tax:

Other comprehensive (loss) income before tax:

Foreign currency translation adjustments 151,544 3,153,634 ( 709,702 )

Unrealized gains on derivatives — — 98,767

Unrealized gains on available-for-sale securities, net 6,312,051 1,292,325 115,059

Other comprehensive income (loss), before tax 9,465,685 582,623 ( 2,106,091 )

Expense for income taxes related to components of other comprehensive income (loss) 1,325,530 271,388 44,903

Other comprehensive income (loss), net of tax 8,140,155 311,235 ( 2,150,994 )

Unrealized (losses) gains on available-for-sale securities, net ( 6,424,496 ) 6,312,051 1,292,325

Other comprehensive (loss) income, before tax ( 6,272,952 ) 9,465,685 582,623

(Benefit) Expense for income taxes related to components of other comprehensive (loss) income ( 1,349,144 ) 1,325,530 271,388

Other comprehensive (loss) income, net of tax ( 4,923,808 ) 8,140,155 311,235

Comprehensive income $ 355,873,424 $ 355,703,776 $ 424,995,174

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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

6,642,727 ( 6,642,727 ) —

Dividends declared ($ 0.46 per share)

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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 )

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

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

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

Issuance of common stock from stock plan transactions 2,343,169 140,590 29,668,197 — — 29,808,787

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

Repurchases of common stock ( 9,595,198 ) ( 575,712 ) ( 30,447,965 ) ( 293,619,458 ) — ( 324,643,135 )

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Net income — — — 360,797,232 — 360,797,232

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

Other comprehensive loss — — — — ( 4,923,808 ) ( 4,923,808 )

BALANCE AS OF DECEMBER 31, 2021 236,440,840 $ 14,186,450 $ 879,413,385 $ 1,042,461,388 $ 1,927,244 $ 1,937,988,467

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Increase in other assets ( 5,501,445 ) ( 4,327,398 ) ( 3,027,263 )

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

Net cash (used for) from investing activities ( 113,106,955 ) 26,416,437 ( 56,711,082 )

CASH FLOWS USED FOR FINANCING ACTIVITIES:

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Net cash used for financing activities ( 410,119,973 ) ( 363,858,794 ) ( 369,959,438 )

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

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 161,059,366 ) 127,049,414 79,296,344

CASH AND CASH EQUIVALENTS, Beginning of year 423,371,036 296,321,622 217,025,278

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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 and impact the COVID-19 pandemic has had on specific customers.

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

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The cost of securities sold is based on the specific identification method.

The Company determines the fair value of its government securities, asset-backed securities, corporate bonds, and certain mutual funds by utilizing monthly valuation statements that are provided by its broker.

The Company determines the fair value of its government securities, asset-backed securities, corporate bonds, and certain municipal bonds by utilizing monthly valuation statements that are provided by its broker.

The broker determines the investment valuation by utilizing the bid price in the market and also refers to third party sources to validate valuations, and as such are classified as Level 2 assets.

The Company's certificates of deposit are classified as available for sale, and are considered as Level 1 assets.

These investments are carried at cost, which approximates fair value.

These investments are carried at amortized cost, which approximates fair value.

The Company will also periodically make technology investments in certain non-consolidated third-parties.

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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.

The $ 12.8 million increase in the balance of these technology investments are a result of additional investments with third-parties for potential automotive and medical devices use-cases.

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

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Corporate Bonds 2,018,440 — 2,018,440 —

Government Securities 6,678,450 — 6,678,450 —

Municipal Bonds 10,284,765 — 10,284,765 —

Other 1,897,402 1,897,402 — —

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Corporate Bonds 40,354,929 — 40,354,929 —

Government Securities 47,944,036 — 47,944,036 —

Municipal Bonds 74,720,480 — 74,720,480 —

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Government Securities 6,678,450 — 6,678,450 —

Municipal Bonds 10,284,765 — 10,284,765 —

Other 1,528,861 1,528,861 — —

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

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

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

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Corporate Bonds 1,994,639 23,801 — 2,018,440

Government Securities 6,635,132 43,318 — 6,678,450

Municipal Bonds 10,160,376 124,389 — 10,284,765

Other 1,897,402 — — 1,897,402

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Corporate Bonds 40,716,866 168,416 ( 530,353 ) 40,354,929

Government Securities 48,385,672 55,939 ( 497,575 ) 47,944,036

Municipal Bonds 72,175,568 2,747,964 ( 203,052 ) 74,720,480

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Governmental 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

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

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

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

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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 .

The guidance modifies the impairment model for available-for-sale debt securities and provides a simplified

GENTEX CORPORATION AND SUBSIDIARIES

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(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.

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.

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Depreciation expense was approximately $ 76.8 million, $ 82.4 million and $ 82.3 million in 2021, 2020 and 2019, respectively.

As of December 31, 2021, 2020 and 2019, capital expenditures recorded in accounts payable totaled $ 9.8 million, $ 4.8 million and $ 3.8 million, respectively.

Impairment or Disposal of Long-Lived Assets

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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

ASC 360-10-15

GENTEX CORPORATION AND SUBSIDIARIES

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(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.

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.

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.

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If not, no further goodwill impairment testing is performed.

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 so, the Company performs 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.

However, if the fair value of the reporting unit is less than its carrying amount, an impairment change is recorded as the excess of the reporting units carrying value over its fair value.

However, if the fair value of the reporting unit is less than its carrying amount, an impairment change is recorded as the excess of the reporting unit's carrying value over its fair value.

The assumptions included in the impairment tests require judgment and changes to these inputs could impact the results of the calculations which could result in an impairment charge in future periods if the carrying amount of the reporting unit exceeds its calculated fair value.

4 unchanged sentences

Indefinite lived intangible assets are also subject to annual impairment testing or more frequently if indicators of impairment are identified.

Management judgment and assumptions are required in determining the underlying fair value of the indefinite lived intangible assets.

Management's judgment and assumptions are required in determining the underlying fair value of the indefinite lived intangible assets.

While the Company believes the judgments and assumptions used in determining fair value are reasonable, different assumptions could change the estimated fair values and, therefore, impairment charges could be required, which could be material to the consolidated financial statements.

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

As part of recent acquisitions, 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

GENTEX CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(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.

associated research and development efforts.

Upon completion of the projects, the 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.

47 unchanged sentences

2022 $ 1,352,855

2022 1,086,084

Thereafter 457

15 unchanged sentences

Allocated to participating securities 5,591,992 4,964,928 5,028,813

4,964,928 5,028,813 —

Net Income available to common shareholders $ 355,205,240 $ 342,598,693 $ 419,655,126

9 unchanged sentences

Net income per share — Diluted $ 1.50 $ 1.41 $ 1.66

(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, 2021, 2020 and 2019, 200,037 shares, 403,071 shares, and 247,855 shares, respectively, related to stock option plans were not included in diluted average common shares outstanding because they were anti-dilutive.

Other Comprehensive Income (Loss)

Comprehensive Income (Loss)

Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on certain investments, derivatives, and foreign currency translation adjustments that are further detailed in Note 9 to the Consolidated Financial Statements.

For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on certain investments and foreign currency translation adjustments that are further detailed in Note 9 to the Consolidated Financial Statements.

Foreign Currency Translation

6 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 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.

As described more fully in Note 5 to the Consolidated Financial Statements, the Company provides, or has provided, 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

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 assumptions can materially

GENTEX CORPORATION AND SUBSIDIARIES

1 unchanged sentence

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

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.

affect the estimate of fair value of stock-based compensation and consequently, the related amounts recognized on the consolidated 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, 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 a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis.

The standard requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast that affects the collectability of the related financial asset.

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

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

(2) DEBT AND FINANCING ARRANGEMENTS

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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.

5 unchanged sentences

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

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 years ended December 31, 2021, 2020 and 2019.

14 unchanged sentences

Research tax credit ( 1.0 ) ( 1.4 ) ( 1.1 )

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

Change in tax rate on deferred taxes — — 0.5

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

Foreign tax credit ( 0.2 ) ( 0.1 ) ( 0.1 )

4 unchanged sentences

The tax effect of temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2021 and 2020, are as follows:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES, continued

Accruals not currently deductible $ 12,823,493 $ 13,135,048

Research and development costs 49,099,538 13,371,625

Stock based compensation 13,707,737 11,983,900

5 unchanged sentences

Other ( 2,507,071 ) ( 3,971,338 )

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

Total deferred income tax liabilities $ ( 72,953,574 ) $ ( 78,614,520 )

Net deferred income taxes $ 4,795,678 $ ( 38,960,743 )

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES, continued

Net operating loss carryforwards with no expiration totaling $ 8.5 million are available to reduce future taxable earnings of certain domestic and foreign subsidiaries.

Income taxes paid in cash were approximately $ 105.8 million, $ 61.9 million and $ 74.9 million in 2021, 2020 and 2019, respectively.

5 unchanged sentences

Reductions for tax positions in prior years ( 51,000 ) ( 2,907,000 ) ( 38,000 )

Reductions as a result of completed audit examinations — — ( 1,554,000 )

Reductions as a result of a lapse of the applicable statute of limitations ( 925,000 ) ( 309,000 ) ( 600,000 )

12 unchanged sentences

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 2020, 2019 and 2018 the

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

In 2021, 2020 and 2019 the Company’s contributions were approximately $ 9.0 million, $ 8.9 million and $ 8.7 million, respectively.

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

5 unchanged sentences

Participants may elect, on a pre-tax basis, to defer receipt of compensation by making an election in accordance with the terms of the Deferred Compensation Plan.

Participants are immediately vested in their own deferrals and related earnings.

Participants are immediately vested in their

own deferrals and related earnings.

The Company may, but is not required, to match participant deferrals.

6 unchanged sentences

A participant can elect whether to receive his or her vested credit balance in a lump sum on the relevant payment date or in installments thereafter.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) STOCK-BASED COMPENSATION PLANS

10 unchanged sentences

As of December 31, 2021, 15,634,656 shares (net of shares from canceled/expired options) have been issued under the 2019 Omnibus Plan, which includes stock options (at a set conversion rate), restricted shares, and performance share awards.

Shares Granted Conversion Rate Total Shares Under 2019 Omnibus Plan

Non-Qualified Stock Options 3,443,588 1.00 3,443,588

Restricted Stock 2,582,553 4.06 10,485,165

Performance Shares 420,173 4.06 1,705,903

Total 6,446,314 15,634,656

Employee Stock Options

4 unchanged sentences

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:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2021 2020 2019

14 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, 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

period of 2.05 years.

As of December 31, 2021, there was $ 9,324,372 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 2.08 years.

Stock option expense for the years ended December 31, 2021, 2020 and 2019 was $ 5,780,959 , $ 4,935,527 , and $ 6,345,147 respectively.

14 unchanged sentences

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Life Aggregate

6 unchanged sentences

A summary of the status of the Company’s non-vested employee stock option activity for the years ended December 31, 2021, 2020, and 2019, are presented in the table below:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2021 2020 2019

30 unchanged sentences

A summary of restricted share award activity, including award grants, vesting, and forfeitures for the years ended December 31, 2021, 2020, and 2019, are presented in the table below:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2021 2020 2019

6 unchanged sentences

The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable restriction periods.

Amortization expense of restricted stock for the years ended December 31, 2020, 2019 and 2018 was $ 20,675,447 , $ 13,770,917 , and $ 8,841,985 respectively.

Compensation expense related to restricted stock for the years ended December 31, 2021, 2020 and 2019 was $ 19,304,013 , $ 20,675,447 , and $ 13,770,917 respectively.

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 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.

Compensation expense related to performance share grants for the years ended December 31, 2021, 2020, and 2019 was $ 1,573,831 , $ 4,424,678 , and $ 897,136 , respectively.

Employee Stock Purchase Plan

2 unchanged sentences

Under ASC 718, the 15 % discounted value is recognized as compensation expense.

Compensation expense related to the employee stock purchase plan for the years ended December 31, 2021, 2020, and 2019 was $ 713,912 , $ 810,605 , and $ 647,988 , respectively.

The following table summarizes shares sold to employees under the 2013 Plan in the years ended December 31, 2021, 2020 and 2019:

1 unchanged sentence

2013 Employee Stock Purchase Plan 143,892 208,273 173,013 1,498,021 $ 29.08

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

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In 2021, 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

Toyota Motor Company Volkswagen Group General Motors

2021 15 % 13 % 11 %

1 unchanged sentence

2019 13 % 14 % 11 %

# - Less than 10 percent.

(8) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

16 unchanged sentences

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on certain investments, foreign currency translation adjustments, and unrealized movement in derivative financial instruments designated as hedges.

For the Twelve Months ended December 31,

For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on certain investments and foreign currency translation adjustments.

For the Years ended December 31,

2021 2020 2019

6 unchanged sentences

Balance at beginning of period 6,082,007 1,095,486 74,549

ASU 2016-01 adoption impact — — ( 6,642,727 )

Other comprehensive income before reclassifications ( 4,228,434 ) 6,644,459 1,403,521

2 unchanged sentences

Balance at end of period 1,006,655 6,082,007 1,095,486

Unrealized gains (losses) on derivatives:

Balance at beginning of period — — ( 78,026 )

Other comprehensive income before reclassifications — — 175,308

Amounts reclassified from accumulated other comprehensive income — — ( 97,282 )

Net current-period change — — 78,026

Balance at end of period — — —

Accumulated other comprehensive (loss) income, end of period $ 1,927,244 $ 6,851,052 $ ( 1,289,103 )

1 unchanged sentence

Amounts in parentheses indicate debits.

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, 2021, 2020 and 2019:

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

For the Twelve Months ended December 31,

For the Years ended December 31,

2021 2020 2019

3 unchanged sentences

Total reclassifications for the period $ 846,918 $ 1,657,938 $ 382,584 Net of tax

Unrealized gains (losses) on derivatives

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

1 unchanged sentence

(10) GOODWILL AND INTANGIBLE ASSETS

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

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.

The Company recorded Goodwill of:

$ 307.4 million related to the HomeLink ® acquisition in 2013;

$ 3.7 million as part of the acquisition of Vaporsens, Inc.

("Vaporsens") in the second quarter of 2020;

and $ 0.9 million 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.

During the third quarter of 2021, the Company made adjustments as part of the open measurement periods for Argil and for Air-Craftglass Production BV ("Air-Craftglass"), which was acquired in the third quarter of 2020.

The Company reduced Goodwill recorded for Argil by $ 0.1 million and recorded an additional $ 0.2 million for Air-Craftglass during the third quarter of 2021.

The Company also recorded $ 2.0 million in Goodwill as part of the acquisition of Guardian Optical Technologies ("Guardian") in the first quarter of 2021.

The carrying value of Goodwill as of December 31, 2021 and December 31, 2020 was $ 314.0 million and $ 311.9 million, respectively, as set forth in the table below.

5 unchanged sentences

Balance as of December 31, 2021 $ 313,960,209

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 has not recognized any impairment of goodwill in the current or prior periods.

The Company reviews goodwill and IPR&D 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 has not recognized any impairment of goodwill or IPR&D in the current or prior periods.

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, 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.

No such events or circumstances, including the COVID-19 pandemic or electronics components shortage, that might negatively impact the key assumptions were observed in 2021 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, 2021 and December 31, 2020.

10 unchanged sentences

Air-Craftglass In-Process R&D 1,507,778 — 1,507,778 Indefinite

Guardian Trade Names 1,384,856 — 1,384,856 Indefinite

Guardian In-Process R&D 7,243,860 — 7,243,860 Indefinite

Total other identifiable intangible assets $ 398,414,626 $ ( 159,225,000 ) $ 239,189,626

As of December 31, 2019:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020:

Other Intangible Assets Gross Accumulated Amortization Net Assumed Useful Life

5 unchanged sentences

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

2 unchanged sentences

At December 31, 2021, patents had a weighted average amortized life of 10 years.

Excluding the impact of any future acquisitions, the Company anticipates amortization expense including patents and other intangible assets for each of the years ended December 31, 2021 and 2022 to be approximately $ 22 million annually, approximately $ 19 million for the year ended December 31, 2023, approximately $ 16 million for the year ended December 31, 2024, and approximately $ 12 million for the year ended December 31, 2025.

The following table shows the Company’s Automotive and Other Products revenue disaggregated by geographical location for Automotive Products for the twelve month periods ended December 31, 2020, 2019, and 2018:

For the Twelve Months ended December 31,

Excluding the impact of any future acquisitions, the Company anticipates amortization expense including patents and other intangible assets to be approximately $ 22 million for the year ended December 31, 2022, approximately $ 20 million for the year ended December 31, 2023, approximately $ 16 million for the year ended December 31, 2024, and approximately $ 12 million for the year ended December 31, 2025.

The following table shows the Company’s Automotive and Other Products revenue disaggregated by geographical location for Automotive Products for the years ended December 31, 2021, 2020, and 2019:

For the Years ended December 31,

Revenue 2021 2020 2019

15 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table disaggregates the Company’s Automotive and Other revenue by major source for the twelve month periods ended December 31, 2020 and 2019:

For the Twelve Months Ended December 31,

The following table disaggregates the Company’s Automotive and Other revenue by major source for the years ended December 31, 2021 and 2020:

For the Years Ended December 31,

Revenue 2021 2020

6 unchanged sentences

Windows Products 8,914,798 17,274,277

Nanofiber Products 18,400 $ —

Total Other $ 33,981,895 $ 39,991,262

41 unchanged sentences

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 Company funded the acquisition with 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 valuation process was completed during the third quarter of 2021.

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

The assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business Combinations .

1 unchanged sentence

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.

The Company funded the acquisition with 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.

The valuation process was completed during the fourth 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 .

The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business 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, 2021.

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.

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

Guardian is an Israeli research and development company that specializes in in-cabin sensing technologies for the automotive industry.

The 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.

The Company funded the acquisition with cash on hand.

The valuation process was completed during the fourth quarter of 2021.

Guardian is now a 100 % owned subsidiary of the Company as Gentex Technologies (Israel), LTD, and is classified within the Automotive segment.

The Company accounted for the acquisition under the provisions of FASB ASC Topic 805, Business Combinations .

There were no revenues of the business of Guardian which were included in the Company’s consolidated statement of income and comprehensive income in 2021.

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

Current Assets $ 32,378

Personal Property 15,000

In-Process R&D 6,800,000

Trade Names and Trademarks 1,300,000

Deferred Tax Asset 1,942,623

Goodwill 1,951,439

Total Net Assets Acquired $ 12,041,440

Through December 31, 2021, the Company has incurred acquisition-related costs of approximately $ 375,000 , which has been expensed as incurred in the "Selling, general & administrative" section of its Consolidated Statements of Income.

EXHIBIT INDEX

28 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.

*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.

*10.24 Specimen 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.

*10.25 Specimen form of Performance Share Award Agreement for the Gentex Corporation Long-Term Incentive Plan filed as exhibit to Registrant's Report on Form 10-K filed February 23, 2022 .

21 List of Company Subsidiaries

11 unchanged sentences

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