What changed in this filing

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Item 9A. Controls and Procedures

2023-02-22 compared with 2022-02-23 · 210 added, 200 removed, 1153 unchanged (26% of the section changed)

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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, 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, 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.

As previously disclosed, the Compensation Committee has a goal that base salaries for officers, including named executive officers, are at or near the market median for base salaries when compared to the Company's established peer group.

In light of that, the Compensation Committee has periodically reviewed base salaries for officers, 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 2023.

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 16, 2023, approved the following base salaries for the CEO and named executive officers for 2023:

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No changes were made to the Annual Plan target opportunities for executive officers in 2023, 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.

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.

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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%), 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.

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.

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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 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, 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 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:

IHS Markit Light Vehicle Production Forecast:

Region Actual 2021 Mid-January 2021 Forecast Unit Change % Change

North America 13.03 16.29 (3.26) (20.0) %

Europe 15.75 18.95 (3.20) (16.9) %

Japan/Korea 10.83 12.00 (1.17) (9.8) %

China 24.53 25.09 (0.56) (2.2) %

Other 12.27 12.35 (0.08) (0.6) %

Total 76.41 84.68 (8.27) (9.8) %

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:

Revenue Threshold Target Maximum

Original $ 1,586,898 $ 1,983,622 $ 2,380,346

COVID-19 related adjustment $ (154,774) $ (193,467) $ (232,160)

As Adjusted $ 1,432,124 $ 1,790,155 $ 2,148,186

Percentage Change (9.8) % (9.8) % (9.8) %

Operating Income Threshold Target Maximum

Original $ 467,727 $ 584,659 $ 701,591

COVID-19 related adjustment $ (45,619) $ (57,023) $ (68,428)

As Adjusted $ 422,108 $ 527,636 $ 633,163

Percentage Change (9.8) % (9.8) % (9.8) %

Earnings per Diluted Share Threshold Target Maximum

Original $ 1.66 $ 2.07 $ 2.48

COVID-19 related adjustment $ (0.17) $ (0.20) $ (0.24)

As Adjusted $ 1.49 $ 1.87 $ 2.24

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

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

For 2022, target performance and actual results for the performance metrics are as follows:

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

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

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 adjusted targets and performance of the named executive officers, the payments for 2021 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 targets and performance of the named executive officers, the payments for 2022 under the Annual Plan are shown in the table below:

Executive Officer 2022 Annual Plan Performance Bonus 2022 Annual Plan Discretionary Bonus

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Scott Ryan $212,597 $0

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).

These Annual Plan results appropriately reflect management's excellent work in addressing the ongoing impacts stemming from the ongoing pandemic supply chain shortages, especially electronics components, as well as labor disruptions and significant volatility within customer orders.

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 2022.

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.

For 2023, the Compensation Committee has established targets for Revenue, Operating Income, and Earnings per Diluted Share for the Annual Plan performance metrics as it has done in the past, and consistent with 2022 is using ± 25% of target in 2023for 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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Pursuant to the 2019 OIP, the Company implemented the Long-Term Incentive Plan (the "Long-Term Plan").

The Long-Term Plan provides officers, including our named executive officers, with incentive awards that serve an important role by balancing other applicable short-term goals with longer term shareholder value creation , while minimizing risk-taking behaviors that could negatively affect long-term results.

The Long-Term Plan

provides officers, including our named executive officers, with incentive awards that serve an important role by balancing other applicable short-term goals with longer term shareholder value creation , while minimizing risk-taking behaviors that could negatively affect long-term results.

The Long-Term Plan uses three-year performance periods and selected performance objectives to determine equity incentive awards so as to balance short-term goals under the Annual Plan, with performance objectives associated with longer-term shareholder value creation under the Long-Term Plan.

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Scott Ryan 155 %

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.

These Long-Term Plan Target Opportunity Percentages of Base Salary for 2023 - 2025 remain the same as those applicable for 2022 - 2024.

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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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.

Each performance objective is based on a three-year performance period (2023-2025) 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 2023-2025 performance period, ± 25% of target is being used for determining thresholds and maximums, which is consistent with 2022.

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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ROIC ensures management uses the Company's capital in an effective manner that drives shareholder value.

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.

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 awarded in 2023 for the named executive officers are shown in the table below:

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Scott Ryan 6,666

Retention Grant

As part of its objective of attracting and retaining management to fulfil the Company's strategic goals, the Compensation Committee recommended and the Board approved on February 16, 2023, a retention grant of PSAs.

In addition to the retention of management, the PSA's have been granted to further align management goals with those of the Company's shareholders.

For that reason, the PSAs have been granted with performance criteria and will be based upon achievement of the Company's relative total shareholder return (TSR) over a four year period (2023-2026), against a predetermined peer group.

Achievement levels vary from 50% to 200% of granted PSA's, for relative TSR between 0 and the 100th Percentile of relative TSR as disclosed in the below table.

In addition to requiring achievement of performance objectives in respect of PSAs, this grant also requires the executive officers to remain employed with the Company for four 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).

Relative TSR Criteria Achievement Level of Award

0 - 25th percentile 50 %

25 - 50th percentile 100 %

50 - 75th percentile 150 %

Above 75th percentile 200 %

The Retention grant of PSA's for the named officers are shown in the table below:

Executive Officer Retention PSA Awarded in 2023

Steve Downing 29,361

Neil Boehm 17,790

Kevin Nash 17,790

Matt Chiodo 15,717

Scott Ryan 14,336

2020-2022 Long-Term Plan Performance (three-year performance period ending December 31, 2022)

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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:.

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 2020 through 2022, The table below summarizes the results of the 2020-2022 performance period relative to target and the achievement level of the 2020-2022 PSAs:.

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

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*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.

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

Additionally, Actual performance was adjusted by $8.8 million of previously disclosed severance related costs incurred in 2020.

The PSAs awarded in February 2020, based on target opportunity, along with the actual payout of PSAs to the executive officers, for the 2020-2022 performance period are reflected in the table below and include dividend equivalents assuming reinvestment of dividends.

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Since each executive officer awarded restricted stock in 2020 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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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/ Joseph Anderson Director

Joseph Anderson

/s/ Leslie Brown Director

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/s/ Brian Walker Director

/s/ James Wallace Director

James Wallace

/s/ Ling Zang Director

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Cash and cash equivalents $ 214,754,638 $ 262,311,670

Restricted cash 4,000,000 —

Short-term investments 23,007,385 5,423,612

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Long-term investments 153,906,005 207,693,147

Equity method investments 48,425,978 —

Intangible assets, net 219,360,910 239,189,627

Deferred tax asset 25,528,700 4,795,678

Patents and other assets, net 67,515,425 28,655,080

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OTHER NON-CURRENT LIABILITIES 10,884,351 11,746,599

DEFERRED INCOME TAXES — 38,960,743

TOTAL LIABILITIES 261,437,103 193,402,699

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Retained earnings 1,148,386,272 1,042,461,388

Accumulated other comprehensive income:

Unrealized gain on investments, net 1,006,655 6,082,007

Accumulated other comprehensive (loss) income:

Unrealized (loss) gain on investments, net ( 10,110,695 ) 1,006,655

Cumulative translation adjustment ( 4,032,239 ) 920,589

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Investment income 4,795,823 3,589,798 6,986,303

Other income, net 2,979,960 5,270,534 647,034

Total other income 6,569,758 12,256,837 11,877,730

Other (loss) income, net ( 5,078,873 ) 2,979,960 5,270,534

Total other (loss) income ( 283,050 ) 6,569,758 12,256,837

Income before provision for income taxes 369,723,076 416,351,736 411,812,929

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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 )

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

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

Dividends declared ($ 0.48 per share)

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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 )

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

Stock-based compensation expense related to stock options, employee stock purchases, restricted stock, and performance share awards — — 27,421,645 — — 27,421,645

Dividends declared ($ 0.48 per share)

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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

Issuance of common stock from stock plan transactions 1,606,965 96,418 16,505,856 — — 16,602,274

Issuance of common stock related to acquisitions 162,433 9,746 4,990,266 — — 5,000,012

Repurchases of common stock ( 4,040,903 ) ( 242,454 ) ( 13,638,790 ) ( 100,013,126 ) — ( 113,894,370 )

Stock-based compensation expense related to stock options, employee stock purchases and restricted stock — — 27,421,645 — — 27,421,645

Stock-based compensation expense related to stock options, employee stock purchases, restricted stock, and performance share awards — — 30,228,606 — — 30,228,606

Dividends declared ($ 0.48 per share)

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Loss on disposal of assets 28,424 230,933 162,553

Gain on sale of investments ( 1,379,538 ) ( 3,163,164 ) ( 660,643 )

Loss on sale of investments 307,490 1,064,508 176,360

Gain on sale of investments and equity method investment income ( 392,040 ) ( 1,379,538 ) ( 3,163,164 )

Loss on sale of investments and equity method investment losses 2,104,907 307,490 1,064,508

Deferred income taxes ( 17,777,777 ) ( 41,694,751 ) ( 15,419,722 )

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Purchases ( 30,107,379 ) ( 113,204,199 ) ( 73,719,189 )

Purchase of equity method investments ( 33,830,274 ) — —

Plant and equipment additions ( 146,433,123 ) ( 68,835,047 ) ( 51,706,541 )

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Net cash used for financing activities ( 209,019,053 ) ( 410,119,973 ) ( 363,858,794 )

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

CASH AND CASH EQUIVALENTS, End of year $ 262,311,670 $ 423,371,036 $ 296,321,622

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 43,557,032 ) ( 161,059,366 ) 127,049,414

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, Beginning of year 262,311,670 423,371,036 296,321,622

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, End of year $ 218,754,638 $ 262,311,670 $ 423,371,036

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

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The Company reviews a monthly aging report of all accounts receivable balances starting with invoices outstanding over sixty days.

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 and supply chain constraints has had on specific customers.

In addition, the Company monitors information about its customers through a variety of sources including the media, and information obtained through ongoing 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 supply chain constraints 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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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.

These equity investments are accounted for in accordance with ASC 321, Investments - Equity Securities .

Equity investments that do not have readily determinable fair values, and where the Company has not identified any observable events that would cause adjustment of the valuation to date, are held at cost.

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

These equity investments are accounted for in accordance with ASC 323, Investments - Equity Method and Joint Ventures .

The Company's share of the earnings or losses of non-controlled affiliates, over which the Company exercises significant influence (generally a 20 % to 50 % ownership interest), is included within Other Income (Loss) in the Company's consolidated statement of income using the equity method of accounting.

These equity method investments, over which the Company exercises significant influence, totaled approximately $ 48.4 million as of December 31, 2022 (including approximately $ 11.1 million of investments accounted for under ASC 321, Investments - Equity Securities , as of December 31, 2021, for which the Company obtained significant influence during 2022).

On June 3, 2022, the Company obtained an approximate 20 % equity share in GreenMarbles for $ 20.0 million, in addition to an issuance of $ 5.0 million worth of common stock.

GreenMarbles is a leading provider of sustainable solutions for integration into properties.

The Company did no t have equity method investments as of December 31, 2021.

These investments are classified within Equity Method Investments in the consolidated balance sheets as of December 31, 2022.

The Company has made technology investments in certain non-consolidated affiliates for ownership interests of less than 20 % (where the Company does not have the ability to exercise significant influence).

These equity investments are accounted for in accordance with ASC 321.

These equity investments that do not have readily determinable fair values, and where the Company has not identified any observable events that would cause adjustment of the valuation to date, are then held at cost.

These technology investments totaled $ 17.1 million and $ 16.8 million as of December 31, 2022 and December 31, 2021, respectively.

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

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.

As of December 31, 2022, $ 3.8 million of these investments are classified within Short-Term Investments in the consolidated balance sheets.

$ 13.3 million and $ 16.8 million of these investments are classified within Long-Term Investments in the consolidated balance sheets as of December 31, 2022 and December 31, 2021, respectively.

Assets or liabilities that have recurring fair value measurements are shown below as of December 31, 2022 and December 31, 2021:

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Cash & Cash Equivalents $ 214,754,638 $ 214,754,638 $ — $ —

Restricted Cash 4,000,000 $ 4,000,000 — —

Short-Term Investments:

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Corporate Bonds 5,473,341 — 5,473,341 —

Government Securities 4,423,041 — 4,423,041 —

Municipal Bonds 5,174,773 — 5,174,773 —

Other 2,347,602 1,093,602 1,254,000 —

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Municipal Bonds 48,430,166 — 48,430,166

Common Stock 293,300 293,300 — —

Total $ 378,544,756 $ 222,116,628 $ 156,428,128 $ —

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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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Corporate Bonds 5,571,417 — ( 98,076 ) 5,473,341

Government Securities 4,476,613 — ( 53,572 ) 4,423,041

Municipal Bonds 5,223,500 — ( 48,727 ) 5,174,773

Other 2,347,602 — — 2,347,602

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Municipal Bonds 53,476,883 235,713 ( 5,282,430 ) 48,430,166

Common Stock 292,638 662 — 293,300

Total $ 172,587,805 $ 236,375 $ ( 13,034,062 ) $ 159,790,118

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

Governmental 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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Total $ 1,818,868 $ 101,292,353

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

accounting model for purchased financial assets with credit deterioration since their origination.

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 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.

26 unchanged sentences

Impairment or Disposal of Long-Lived Assets

The Company reviews long-lived assets, including property, plant and equipment and other intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable.

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

GENTEX CORPORATION AND SUBSIDIARIES

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

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.

asset’s carrying amount may not be recoverable.

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.

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.

21 unchanged sentences

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.

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

The Company performs a qualitative assessment (step 0) to determine whether it is more likely than not that an intangible asset's fair value is less than its carrying amount.

If not, no further impairment testing over the indefinite lived intangible assets is performed.

GENTEX CORPORATION AND SUBSIDIARIES

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

associated research and development efforts.

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

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 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.

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The Company does not generate sales from arrangements with multiple deliverables.

The Company generally receives purchase orders from customers on an annual basis.

Typically, such purchase order provide the annual terms, including pricing, related to a particular vehicle model.

The Company generally receives purchase orders from customers on an annual basis in the ordinary course of business.

Typically, such purchase orders provide the annual terms, including pricing, related to a particular vehicle model.

Purchase orders generally do not specify quantities.

The Company recognizes revenue based on the pricing terms included in our annual purchase orders.

The Company recognizes revenue based on the pricing terms included in such annual purchase orders.

As part of certain agreements, entered into in the ordinary course of business, the Company is asked to provide customers with annual price reductions.

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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 factors.

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

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

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

Refer to Note 11, "Revenue" , for further information.

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IBNR claims are estimated using historical lag information and other data provided by claims administrators.

This estimation process is subjective, and to the extent that future results differ from original estimates, adjustments to recorded accruals may be necessary.

This estimation

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

process is subjective, and to the extent that future results differ from original estimates, adjustments to recorded accruals may be necessary.

Product Warranty

2 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.

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The Company deems the estimates related to this provision to be reasonable, however, no assurance can be given that the final outcome of these matters will not vary from what is reflected in the historical income tax provisions and accruals.

The Company has operating leases for corporate offices, warehouses, vehicles, and other equipment, which are included within "Plant and Equipment" section of the Consolidated Balance Sheets.

The Company has operating leases for corporate offices, warehouses, vehicles, and other equipment, which are included within " Patents and other assets " section of the Consolidated Balance Sheets.

The leases have remaining lease terms of 1 year to 5 years.

The weighted average remaining lease term for operating leases as of December 31, 2022 was 2 years, with a weighted average discount rate of 5.2 %.

Future minimum lease payments for operating leases as of December 31, 2021 were as follows:

Future minimum lease payments for operating leases are as follows:

Year ending December 31,

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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 and foreign currency translation adjustments that are further detailed in Note 9 to the Consolidated Financial Statements.

Foreign Currency Translation

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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 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.

As described more fully in Note 5 , "Stock- Based Compensation Plans" , the Company provides, or has provided, compensation benefits under an omnibus incentive plan, two other stock option plans, another restricted stock plan, and two employee stock purchase plans.

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

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As of December 31, 2022, the Company was in compliance with its covenants under the Credit Agreement.

On February 21, 2023, the Company entered into an amended and restated credit agreement ("Amended Credit Agreement") that provided for, among other things, a three-year unsecured revolving credit facility with a borrowing capacity of up to $ 250.0 million ("Revolving Credit Facility") that matures on February 21, 2026, replacing in its entirety the Company's prior $ 150.0 million Revolver scheduled to mature on October 15, 2023.

Included in the Revolving Credit Facility is a $ 20.0 million sublimit for standby letters of credit and a $ 35.0 million sublimit for swingline loans, each subject to certain conditions.

Funds are available under the Revolving Credit Facility for working capital, capital expenditures, and other lawful corporate purposes, including, but not limited to, acquisitions and common stock repurchases, subject in each case to compliance with certain financial covenants, as defined in the Amended Credit Agreement.

(3) INCOME TAXES

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The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns.

Under this method, deferred income tax liabilities and assets are determined based on the cumulative temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates expected to be applied to taxable income in years which those temporary differences are expected to be recovered or settled.

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

GENTEX CORPORATION AND SUBSIDIARIES

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(3) INCOME TAXES, continued

differences are expected to be recovered or settled.

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

The foreign components of income before the provision for income taxes were not material for the years ended December 31, 2022, 2021 and 2020.

14 unchanged sentences

Research tax credit ( 1.8 ) ( 1.0 ) ( 1.4 )

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

(Decrease) Increase in reserve for uncertain tax provisions ( 0.2 ) 0.1 ( 0.1 )

Non-deductible executive compensation 0.3 0.1 —

Non-deductible expenses 0.3 — 0.1

Foreign tax credit ( 0.3 ) ( 0.2 ) ( 0.1 )

4 unchanged sentences

The tax effect of temporary differences which give rise to deferred income tax assets and liabilities at December 31, 2022 and 2021, are as follows:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES, continued

Accruals not currently deductible $ 9,778,184 $ 12,823,493

9 unchanged sentences

Net deferred income taxes $ 25,528,700 $ 4,795,678

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES, continued

Net operating loss carryforwards with no expiration totaling $ 7.7 million are available to reduce future taxable earnings of certain domestic and foreign subsidiaries.

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Interest expensed during 2022, 2021 and 2020 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.

Based on the current audits in process, the payment of taxes as a result of audit settlements, and the completion of tax examinations, the Company does not expect these to have a material impact on the Company’s financial position or results of operations.

The Company is also subject to periodic and routine audits in both domestic and foreign tax jurisdictions.

It is reasonably possible that the amounts of unrecognized tax benefits could change as a result of an audit, new positions taken on income tax returns, settlement of tax positions and the closing of statute of limitations.

It is not expected that any change will be material to the Company’s consolidated financial statements.

For the majority of tax jurisdictions, the Company is no longer subject to U.S.

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income tax examinations by tax authorities for years before 2018.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) EMPLOYEE BENEFIT PLANS

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In 2022, 2021 and 2020 the Company’s contributions were approximately $ 12.9 million, $ 9.0 million and $ 8.9 million, respectively.

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

The increase in the Company's matching contributions in 2022 was due to changes, approved by the Company's Board of Directors, to the rate of Company match as well as increased participation in the plan.

The increase in 2021 was due to increased employee participation in the plan.

The Company does not provide health care benefits to retired employees.

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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.

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or a plan termination.

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.

Subject to applicable rules, 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.

The deferrals are held in a separate irrevocable rabbi trust ("the Rabbi Trust"), which has been established pursuant to the Deferred Compensation Plan.

The Rabbi Trust is intended to be used to hold funds, including matching contributions.

The assets of the trust are subject to the claims of the Company's creditors in the event that the Company becomes insolvent.

Consequently, the Rabbi Trust qualifies as a grantor trust for income tax purposes.

The Company also makes periodic payments into company-owned life insurance policies held in this Rabbi Trust to fund the expected obligations arising under this plan.

At December 31, 2022, total assets held by the trustee were $ 5.6 million and recorded in Other Assets and an associated liability of $ 5.3 million and recorded in Other Non-Current Liabilities in the Company's consolidated balance sheets.

The $ 5.6 million of assets held by the trustee is invested in company-owned life insurance policies.

(5) STOCK-BASED COMPENSATION PLANS

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and ii) non-employee directors of the Company or its subsidiaries, which potential awards may be stock options, both incentive stock options and non-qualified stock options, appreciation rights, restricted stock, restricted stock units, performance share awards and performance units, and other awards that are stock-based, cash-based or a combination of both.

The 2019 Omnibus Plan replaced the Company's Employee Stock Option Plan, Second Restricted Stock Plan, and Amended and Restated Non-Employee Director Stock Option Plan (the "Prior Plans"), which were also approved by shareholders.

The 2019 Omnibus Plan replaced the Company's Employee Stock Option Plan, Second Restricted Stock Plan, and Amended and Restated Non-Employee Director Stock Option Plan (the

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

"Prior Plans"), which were also approved by shareholders.

Any existing awards previously granted under the Prior Plans remain outstanding in accordance with their terms and are governed by the Prior Plans as applicable.

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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

2022 2021 2020

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A summary of the status of the Company’s stock option plans at December 31, 2022, 2021 and 2020, and changes during the same periods are presented in the tables below.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Life Aggregate

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Exercisable at End of Year 1,380 $ 23 2.5 years $ 16,433

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Life Aggregate

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Nonvested Stock Options at End of Year 2,913 $ 6 3,156 $ 5 3,175 $ 5

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Shares

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24,634 32.98 - 34.37

42,074 22.16 - 26.94

2 Year 82,538 23.84 - 29.17

21,669 23.88 - 26.94

3 Years 261,493 23.84 - 30.85

606,853 32.98 - 35.67

119,504 23.88 - 31.08

4 Years 260,149 23.84 - 29.17

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A summary of restricted share award activity, including award grants, vesting, and forfeitures for the years ended December 31, 2022, 2021, and 2020, are presented in the table below:

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022 2021 2020

15 unchanged sentences

Compensation expense related to performance share grants for the years ended December 31, 2022, 2021, and 2020 was $ 1,246,369 , $ 1,573,831 , and $ 4,424,678 , respectively.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Stock Purchase Plan

In 2013, the Gentex Corporation Employee Stock Purchase Plan covering 2,000,000 shares of common stock was approved by the shareholders, replacing a prior plan.

Under such plan, the Company sells shares at 85 % of the stock’s market price at the date of purchase.

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:

Prior to July 1, 2022, the Company had in place an employee stock purchase plan covering 2,000,000 shares of common stock, which was approved by shareholders including amendments thereto.

In May 2022, the 2022 Gentex Corporation Employee Stock Purchase Plan covering 2,000,000 shares of common stock was approved by shareholders, replacing the above referenced prior plan effective July 1, 2022.

Under such plans, the Company sold or sells shares at 85 % of the stock’s market price at the date of purchase.

In accordance with ASC 718, the 15% discounted value is recognized as compensation expense.

Compensation expense related to the employee stock purchase plans for the years ended December 31, 2022, 2021, and 2020 was $ 906,478 , $ 713,912 , and $ 810,605 , respectively.

The following table summarizes shares sold to employees under the 2022 and prior plan in the years ended December 31, 2022, 2021 and 2020:

Plan 2022 2021 2020 Cumulative Shares Issued Weighted Average Fair Value 2022

2022 Employee Stock Purchase Plan 94,111 — — 94,111 $ 25.55

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prior Employee Stock Purchase Plan 126,101 143,892 208,273 1,624,122 $ 28.71

(6) CONTINGENCIES

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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.

On February 7, 2023, the SEC announced that it has accepted an Offer of Settlement submitted by the Company and its current Chief Financial Officer Kevin Nash.

Under the settlement, without admitting or denying the SEC’s findings in this matter, the Company and Nash have consented to the entry of an administrative civil cease-and-desist order by the SEC (the “Order”) with respect to certain violations of the federal securities laws in the third quarter of 2015 through the second quarter of 2018 (the “Relevant Period”).

The Company agreed to pay a civil monetary penalty of $ 4.0 million, which was fully accrued by the Company in the second and third quarters of 2022.

Nash agreed to pay a civil monetary penalty of $ 75,000 .

The Company had $ 4.0 million of restricted cash as of December 31, 2022 in escrow, pending the finalization of the settlement agreement with the SEC, which occurred on February 7, 2023.

(7) SEGMENT REPORTING

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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.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) SEGMENT REPORTING, continued

2022 2021 2020

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) SEGMENT REPORTING, continued

2022 2021 2020

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) SEGMENT REPORTING, continued

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.

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During the years ended December 31, 2022, 2021 and 2020, approximately 7 %, 8 % and 7 % of the Company’s net sales were invoiced and paid in foreign currencies, respectively.

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:

In 2022, the Company had three automotive customers (including direct sales to original equipment manufacturer ("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

8 unchanged sentences

Gross Profit 160,412 183,300 148,367 151,597 147,201 140,900 153,834 143,911

Operating Income (Loss) 133,734 105,027 99,925 (6,738) 88,165 138,853 87,959 162,414

Net Income (Loss) 113,451 89,506 86,506 (2,374) 76,661 117,093 84,179 143,339

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

Operating Income 103,306 133,734 85,791 99,925 86,792 88,165 94,118 87,959

Net Income 87,529 113,451 72,404 86,506 72,656 76,661 86,168 84,179

Earnings Per Share (Basic) (1)

$ 0.37 $ 0.47 $ 0.31 $ 0.36 $ 0.31 $ 0.32 $ 0.37 $ 0.36

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

Earnings Per Share (Diluted) (1)

$ 0.37 $ 0.46 $ 0.31 $ 0.36 $ 0.31 $ 0.32 $ 0.37 $ 0.35

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

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

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) COMPREHENSIVE INCOME

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

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years ended December 31,

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Amounts in parentheses indicate debits.

The following table presents details of reclassifications out of accumulated other comprehensive income for the twelve months ended December 31, 2021, 2020 and 2019:

The following table presents details of reclassifications out of accumulated other comprehensive income for the years ended December 31, 2022, 2021 and 2020:

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

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("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.

$ 0.2 million as part of the acquisition of Air-Craftglass Production BV ("Air-Craftglass") in the third quarter of 2020;

$ 1.0 million as part of the acquisition of Argil, Inc.

("Argil") in the fourth quarter of 2020;

and $ 2.0 million as part of the acquisition of Guardian Optical Technologies ("Guardian") in the first quarter of 2021.

Refer to Note 12, "Acquisitions" , for further information on the Guardian acquisition.

The carrying value of Goodwill as of December 31, 2022 and December 31, 2021 was $ 313.8 million and $ 314.0 million, respectively, as set forth in the table below.

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Impairments —

Other ( 152,715 )

Balance as of December 31, 2022 $ 313,807,494

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 performed a qualitative assessment (step 0) to determine whether it is more likely than not that a reporting unit or intangible asset's fair value is less than its carrying amount.

Based on this test, the Company determined they were not and that no additional impairment testing was needed.

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 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.

No such events or circumstances, including supply chain disruptions and electronics components shortage, that might negatively impact the key assumptions were observed in 2022 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, 2022 and December 31, 2021.

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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

2 unchanged sentences

At December 31, 2022, patents had a weighted average amortized life of 11 years.

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.

Excluding the impact of any future acquisitions, the Company anticipates amortization expense including patents and other intangible assets to be approximately:

$ 20 million for the year ended December 31, 2023;

$ 16 million for the year ended December 31, 2024;

$ 13 million for the year ended December 31, 2025;

and $ 12 million for the years ended December 31, 2026 and December 31, 2027.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2022, 2021, and 2020:

15 unchanged sentences

and tariffs, quotas, customs and other import or export restrictions and other trade barriers.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table disaggregates the Company’s Automotive and Other revenue by major source for the years ended December 31, 2022, 2021, and 2020:

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Such recognition generally occurs with the transfer of control of the products at a point in time.

The Company's automotive OEM contracts generally include Long Term Supply Agreements ("LTSA") entered into in the ordinary course of business and Purchase Orders ("PO") whereby the LTSA sometimes stipulates the pricing and delivery terms and is evaluated together with a PO, which identifies the quantity, timing, and the type of product to be transferred.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the pricing and delivery terms and is evaluated together with a PO, which identifies the quantity, timing, and the type of product to be transferred.

Certain customer contracts do not always have an LTSA, in which case, the contracts are governed by the PO from the customer in conjunction with other mutually agreed upon terms and conditions.

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The Company manufactures other automotive electronics products both inside and outside of the rearview mirror through HomeLink ® applications in the vehicle including the rearview mirror, interior visor, overhead console, or center console.

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the majority of automotive products, transfer of control and revenue recognition occurs when the Company ships the product from the manufacturing facility to the customer.

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Dimmable Aircraft Windows

GENTEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company supplies variable dimmable windows for the passenger compartment on the Boeing 787 Dreamliner Series of Aircraft.

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(12) ACQUISITIONS

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 cash on hand.

The transaction also included contingent consideration based on future revenues.

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 .

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, 2021.

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 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 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 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.

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

4 unchanged sentences

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.

(13) SUBSEQUENT EVENTS

On February 21, 2023, the Company entered into the Amended Credit Agreement that provided for, among other things, a three-year unsecured Revolving Credit Facility with a borrowing capacity of up to $ 250.0 million that matures on February 21, 2026, replacing in its entirety the Company's prior $ 150.0 million Revolver scheduled to mature on October 15, 2023.

Included in the Revolving Credit Facility is a $ 20.0 million sublimit for standby letters of credit and a $ 35.0 million sublimit for swingline loans, each subject to certain conditions.

EXHIBIT INDEX

17 unchanged sentences

*10.13 Gentex Corporation Amended and Restated Annual Incentive Performance-Based Bonus Plan (as amended on February 15, 2018) filed as an exhibit to Registrant's Report on Form 10-K dated February 21, 2018.

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

*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.

*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.

*10.14 Amended 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 February 21, 2023, filed as exhibit to Registrant's Report on Form 10-K filed February 22, 2023.

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

7 unchanged sentences

*10.22 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 .

*10.23 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 , and is he reby incorporated herein by reference .

*10.24 2022 Gentex Corporation Employee Stock Purchase Plan was included in Registrant's Proxy Statement filed with the Commission on A ugust 5 , 20 22 , and is incorporated herein by reference.

*10.25 Specimen form of Performance Share Award Agreement for the Gentex Corporation Long-Term Incentive Plan filed as an exhibit to Registrant's Report on Form 10-K filed February 22, 2023.

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