GENTEX CORP 10-K

Item 9A. Controls and Procedures. Disclosure Controls and Procedures Under the supervision of and with the participation of the Company’s management, the Company's principal executive officer and principal financial officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures ([as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)]) as of December 31, 2022, and have concluded that the Company’s disclosure controls and procedures are adequate and effective. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework)(the COSO criteria). Based on this assessment, management asserts that the Company has maintained effective internal control over financial reporting as of December 31, 2022. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 28 The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Part IV of this Form 10K. During the period covered by this annual report, there have been no changes in the Company’s internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting. In addition, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2022. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. 29 PART III Item 10. Directors, Executive Officers and Corporate Governance. Information about Our Executive Officers The following table lists the names, ages, and positions of all of the Company’s executive officers at the time of this report. Officers are generally elected at the meeting of the Board of Directors following the annual meeting of shareholders. NAME AGE POSITION CURRENT POSITION HELD SINCE Steve Downing 45 President and Chief Executive Officer January 2018 Neil Boehm 51 Chief Technology Officer and Vice President, Engineering February 2018 Kevin Nash 48 Vice President, Finance, Chief Financial Officer and Treasurer February 2018 Matthew Chiodo 58 Chief Sales Officer and Senior Vice President, Sales January 2022 Scott Ryan 42 Vice President, General Counsel and Corporate Secretary August 2018 There are no family relationships among the officers listed in the preceding table. Steve Downing was elected Chief Executive Officer effective as of January 1, 2018. Mr. Downing has been employed by the Company since 2002. Prior to being elected Chief Executive Officer, he served as President and Chief Operating Officer from August 2017 to December 2017, as Senior Vice President and Chief Financial Officer from June 2015 to August 2017, and as Vice President of Finance and Chief Financial Officer from May 2013 to June 2015. He served in a variety of roles before that time. Certain terms of Mr. Downing's employment arrangement are contained herein in Part III, Item 11 to this Form 10‑K. Neil Boehm was appointed as the Company's Vice President, Engineering and Chief Technology Officer as of February 15, 2018 and was also appointed an executive officer. Mr. Boehm has been employed by the Company since 2001. Prior to his current position, he served as the Company's Vice President of Engineering, beginning in 2015 and before that served as Senior Director of Engineering. Certain terms of Mr. Boehm's employment arrangement are contained herein in Part III, Item 11 to this Form 10-K. Kevin Nash was appointed as the Company's Vice President, Finance, Chief Financial Officer, and Treasurer, effective as of February 15, 2018. He is also the Company's Chief Accounting Officer. Mr. Nash has been employed by the Company since 1999. Prior to his current position, he served as the Company's Vice President of Accounting and Chief Accounting Officer, beginning in 2014 and before that served as Director of Accounting and Chief Accounting Officer. Certain terms of Mr. Nash's employment arrangement are contained herein in Part III, Item 11 to this Form 10-K. 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. Mr. Chiodo has been employed by the Company since 2001. 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. Chiodo's employment arrangement are contained herein in Part III, Item 11 to this Form 10-K. Scott Ryan was appointed as the Company's Vice President, General Counsel and Corporate Secretary on August 16, 2018. Mr. Ryan has been employed by the Company since 2010. Prior to his current position, he served as Assistant General Counsel and Corporate Secretary from June 2015 to August 2018. Prior to that he served as Patent Counsel from November 2013 to June 2015. Certain terms of Mr. Ryan's employment arrangement are contained herein in Part III, Item 11 to this Form 10-K. Information relating to directors appearing under the caption “Election of Directors” in the definitive Proxy Statement for 2023 Annual Meeting of Shareholders and filed with the Commission within 120 days after the Company’s fiscal year end, December 31, 2022 (the “Proxy Statement”), is hereby incorporated herein by reference. No changes were made to the procedures by which shareholders may recommend nominees for the Board of Directors. 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 30 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. A copy of the Code of Ethics for Certain Senior Officers is available without charge, upon written request, from the Corporate Secretary of the Company, 600 N. Centennial Street, Zeeland, Michigan 49464 and on the Company's website. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of Ethics by posting such information on its website. Information contained in the Company’s website, whether currently posted or posted in the future, is not part of this document or the documents incorporated by reference in this document. 31 Item 11. Executive Compensation. The information contained under the caption "Compensation Committee Report," "Compensation Discussion and Analysis," "Executive Compensation," "Director Compensation," and "Compensation Committee Interlocks and Insider Participation" contained in the definitive Proxy Statement is hereby incorporated herein by reference. 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 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. The Board, therefore, on February 16, 2023, approved the following base salaries for the CEO and named executive officers for 2023: Executive Officer Position 2023 Base Salary 2022 Base Salary Steve Downing President and CEO $ 850,000 $ 800,000 Neil Boehm VP, Engineering and CTO $ 515,000 $ 475,000 Kevin Nash VP, Finance, CFO and Treasurer $ 515,000 $ 475,000 Matt Chiodo Senior VP, Sales and CSO $ 455,000 $ 415,000 Scott Ryan VP, General Counsel and Corporate Secretary $ 415,000 $ 375,000 Amended and Restated Annual Incentive Performance-Based Bonus Plan The Board of Directors previously approved the Amended and Restated Annual Incentive Performance-Based Bonus Plan (the "Annual Plan") to further emphasize performance-based compensation. In lieu of participating in the profit-sharing bonus paid to all employees, the Annual Plan provides potential cash-based bonuses for officers based on the achievement of three key performance metrics: Revenue (33.33% weighting); Operating Income (33.33% weighting); and Earnings per Diluted Share (33.33% weighting). The Annual Plan covers certain officers, including named executive officers. At the beginning of each year, the Compensation Committee reviews and approves a cash bonus target for each officer, as a percentage of base salary for the year. The CEO may earn from 0% - 200% of base salary. The non-CEO named executive officers may earn from 0% to 150% of their base salaries. All performance-related targets are set by, and achievement of targets are approved by , the Compensation Committee and/or the Board of Directors. For our executive officers, the 2023 Annual Plan payout opportunities as a percentage of base salary applicable to each performance metric are shown in the table below: Executive Officer Annual Plan Threshold Annual Plan Target Annual Plan Maximum Steve Downing 50.0 % 100.0 % 200.0 % Neil Boehm 37.5 % 75.0 % 150.0 % Kevin Nash 37.5 % 75.0 % 150.0 % Matt Chiodo 37.5 % 75.0 % 150.0 % Scott Ryan 37.5 % 75.0 % 150.0 % 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 32 multiplied by the weighting factor of a particular performance metric to determine the amounts of cash bonuses payable to officers to the extent the threshold, target, or maximum for a performance metric is met or exceeded. To the extent performance exceeds the established threshold or target, as applicable, for any performance metric, but does not meet or exceed the established target or maximum, as applicable, linear interpolation is used to determine the pro rata portion of the performance bonus. The Compensation Committee also has discretion to increase (or decrease) such performance-based bonuses using its judgment, provided that bonuses are not in any event to exceed 250% of the applicable base salary. Since its inception in 2019, the Annual Plan uses the same three key performance metrics and weighting: Revenue (weighted 33.33%), Operating Income (weighted 33.33%) and Earnings per Diluted Share (33.33%) since such metrics are not only appropriate measures of performance, but also align with the Company's overall business strategy. In determining whether annual cash bonuses are paid under the Annual Plan, actual performance for the year is measured against specified target levels for each performance metric. Generally, the target for the three performance metrics reflects a level of performance, which at the time set would be anticipated to be challenging but achievable. The threshold level is set to be reflective of performance at which the Compensation Committee believed a portion of the award opportunity should be earned. The maximum level was set well above the target, requiring significant achievements and reflecting performance at which the Compensation Committee believed an additional 100% of the target award was warranted. For 2022, target performance and actual results for the performance metrics are as follows: Performance Metric Weight Threshold* Target* Maximum* Actual Performance* Revenue 33.33 % $1,457,429 $1,943,238 $2,429,048 $1,918,958 Operating Income 33.33 % $341,138 $454,850 $568,563 $370,006 Earnings per Diluted Share 33.33 % $1.22 $1.63 $2.04 $1.36 * Amounts in thousands (000) except for per share amounts. 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 Steve Downing $604,720 $0 Neil Boehm $269,289 $0 Kevin Nash $269,289 $0 Matt Chiodo $235,274 $0 Scott Ryan $212,597 $0 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. 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 The Company's 2019 Omnibus Incentive Plan ("OIP") has been approved by shareholders. Pursuant to the 2019 OIP, the Company implemented the Long-Term Incentive Plan (the "Long-Term Plan"). The Long-Term Plan 33 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. Under the Long-Term Plan, the Board of Directors and/or the Compensation Committee determines the amount of the long-term incentive awards. Each officer's award opportunity is based on a target dollar value (determined toward the very beginning of the performance period) as a percentage of base salary assigned to his or her position based on market comparisons for similar positions, using both a peer group and general industry market data. The following target opportunities apply for the 2023-2025 performance period under the Long-Term Incentive Plan: Executive Officer Long-Term Plan Target Opportunity Percentage of Base Salary for 2023-2025 Steve Downing 365 % Neil Boehm 155 % Kevin Nash 185 % Matt Chiodo 155 % Scott Ryan 155 % 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. To the extent performance exceeds the established threshold or target, as applicable, for an applicable performance objective, but does not meet or exceed the established target or maximum, as applicable, linear interpolation is used to determine the pro rata portion of such award. Seventy percent (70%) of the total value of the target long-term incentive opportunity is delivered through performance share awards ("PSAs") and the other thirty percent (30%) through restricted stock ("RS"). Both PSAs and RS are forms of performance-based incentive compensation because PSAs involve performance objectives that provide direct alignment with shareholder interests and the value of RS fluctuates based on stock price performance. 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 for 2023-2025 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 and calculated as determined by the Compensation Committee. 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. It also drives profitable sales growth and optimizes the Company's cost structure. 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 34 shareholders. The target opportunities of PSAs awarded in 2023 for the named executive officers are shown in the table below: Executive Officer Number of PSAs Awarded in 2023 (Target) for 2023-2025 Steve Downing 75,018 Neil Boehm 19,302 Kevin Nash 23,038 Matt Chiodo 17,053 Scott Ryan 15,554 Restricted Stock Awards for 2023-2025 Performance Period The other 30% of the total value of the long-term incentive opportunity consists of RS awards. RS incentivizes and rewards executives for improving long-term stock value and serves as a retention tool. 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 2023, 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 2023-2025 Steve Downing 32,151 Neil Boehm 8,273 Kevin Nash 9,874 Matt Chiodo 7,309 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: 35 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) December 31, 2022, marked the end of the three-year performance period for PSA and RS Long-Term Plan awards made in February 2020. 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 2020. 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 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 EBITDA 50 % $1,512,514 $1,890,643 $2,268,772 $1,535,931 53.10 % 26.55 % ROIC 50 % 36.80 % 46.00 % 55.20 % 37.12 % 51.74 % 25.87 % *amounts in thousands (000) percentages. 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. Executive Officer Number of PSAs Awarded in 2020 (Target) for 2020-2022 2020-2022 PSAs Payout Steve Downing 41,516 22,912 Neil Boehm 14,081 7,772 Kevin Nash 12,916 7,129 Matt Chiodo 11,394 6,289 Scott Ryan 10,091 5,570 Restricted Stock The RS awarded in February 2020, based on target opportunities, along with the actual payment of RS to executive officers, awarded for the 2020-2022 period are reflected in the table below: 36 Executive Officer Number of RS Awarded in 2020 (Target) for 2020-2022 2020-2022 RS Payout/Vesting Steve Downing 17,792 17,792 Neil Boehm 6,035 6,035 Kevin Nash 5,535 5,535 Matt Chiodo 4,883 4,883 Scott Ryan 4,325 4,325 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. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information contained under the captions “Common Stock Ownership of Management,” “Common Stock Ownership of Certain Beneficial Owners,” and “Equity Compensation Plan Information” contained in the definitive Proxy Statement is hereby incorporated herein by reference. There are no arrangements known to the registrant, the operation of which may at a subsequent date result in a change in control. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information contained under the caption “Certain Transactions” contained in the definitive Proxy Statement is hereby incorporated herein by reference. The information contained under the caption “Election of Directors” contained in the definitive Proxy Statement is hereby incorporated herein by reference. Item 14. Principal Accounting Fee and Services. Information regarding principal accounting fees and services set forth under the caption “Ratification of Appointment of Independent Auditors – Principal Accounting Fees and Services” in the definitive Proxy Statement is hereby incorporated herein by reference. Information concerning the policy adopted by the Audit Committee regarding the pre-approval of audit and non-audit services provided by the Company’s independent auditors set forth under the caption “Corporate Governance – Audit Committee” in the definitive Proxy Statement is hereby incorporated herein by reference. 37 PART IV Item 15. Exhibits, Financial Statement Schedules. (a) 1. Financial Statements. See Part II, Item 8. 2. Financial Statements Schedules. None required or not applicable. 3. Exhibits. See Exhibit Index on Page 75 . (b) See (a) above. (c) See (a) above. Item 16. Form 10-K Summary. None. 38 SIGNATURES Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GENTEX CORPORATION By: /s/ Steven R. Downing Steven R. Downing, President and Chief Executive Officer Date: February 22, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 22 nd day of February, 2023, by the following persons on behalf of the registrant and in the capacities indicated. By: /s/ Steven R. Downing Steven R. Downing, President and Chief Executive Officer (Principal Executive Officer) on behalf of Gentex Corporation By: /s/ Kevin C. Nash Kevin C. Nash, Vice President, Finance, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) on behalf of Gentex Corporation 39 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 Leslie Brown /s/ Steven Downing Director Steven Downing /s/ Gary Goode Director Gary Goode /s/ James Hollars Director James Hollars /s/ Richard Schaum Director Richard Schaum /s/ Kathleen Starkoff Director Kathleen Starkoff /s/ Brian Walker Director Brian Walker /s/ Ling Zang Director Ling Zang 40 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Gentex Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Gentex Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2023 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter 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. 41 Revenue - Estimate of Variable Consideration Description of the Matter As discussed in Notes 1 and 11 to the Company’s consolidated financial statements, the Company occasionally enters into sales contracts with its customers that provide for annual price reductions over the production life of a particular part. Prices may also be adjusted on an ongoing basis to reflect changes in product content, product cost and other commercial factors. Auditing the accounting for and the completeness of the amount of revenue that the Company expects to be entitled to in exchange for its products (for arrangements containing annual price reductions) is judgmental due to the unique facts and circumstances involved with each revenue arrangement, as well as on-going commercial negotiations with customers. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over annual price reductions. This included testing controls over the Company’s process to identify and evaluate customer contracts that contain matters that impact revenue recognition, as well as testing controls relating to the completeness and measurement of revenue related to those sales contracts. Our audit procedures included, among others, testing the completeness and valuation of the Company’s price reductions, including interviews of executive and commercial management personnel responsible for negotiations with customers, inspecting communications between the Company and its customers related to the price reductions, and testing manual price reduction entries recorded using lower materiality thresholds for our testing purposes. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1999. Grand Rapids, Michigan February 22, 2023 42 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Gentex Corporation Opinion on Internal Control Over Financial Reporting We have audited Gentex Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Gentex Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Gentex Corporation and subsidiaries as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders' investment and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 22, 2023 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Grand Rapids, Michigan February 22, 2023 43 GENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 2022 2021 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 214,754,638 $ 262,311,670 Restricted cash 4,000,000 — Short-term investments 23,007,385 5,423,612 Accounts receivable, net 276,493,752 249,794,906 Inventories, net 404,360,270 316,267,442 Prepaid expenses and other 26,036,331 39,178,119 Total current assets 948,652,376 872,975,749 PLANT AND EQUIPMENT: Land, buildings and improvements 376,934,354 363,646,380 Machinery and equipment 935,848,288 883,240,100 Construction-in-process 165,574,867 77,592,152 Total Plant and Equipment 1,478,357,509 1,324,478,632 Less- Accumulated depreciation ( 928,324,473 ) ( 860,356,956 ) Net Plant and Equipment 550,033,036 464,121,676 OTHER ASSETS: Goodwill 313,807,494 313,960,209 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 Total Other Assets 828,544,512 794,293,741 TOTAL ASSETS $ 2,327,229,924 $ 2,131,391,166 LIABILITIES AND SHAREHOLDERS’ INVESTMENT CURRENT LIABILITIES: Accounts payable $ 151,740,046 $ 98,342,928 Accrued liabilities: Salaries, wages and vacation 17,517,580 14,019,643 Income taxes 18,726,857 196,863 Royalties 19,208,411 19,140,907 Dividends payable 28,100,320 28,372,901 Other 15,259,538 21,582,858 Total current liabilities 250,552,752 181,656,100 OTHER NON-CURRENT LIABILITIES 10,884,351 11,746,599 TOTAL LIABILITIES 261,437,103 193,402,699 SHAREHOLDERS’ INVESTMENT: Common stock, par value 0.06 per share; 400,000,000 shares authorized; 234,169,335 and 236,440,840 shares issued and outstanding in 2022 and 2021 respectively. 14,050,160 14,186,450 Additional paid-in capital 917,499,323 879,413,385 Retained earnings 1,148,386,272 1,042,461,388 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 Total shareholders’ investment 2,065,792,821 1,937,988,467 TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 2,327,229,924 $ 2,131,391,166 The accompanying notes are an integral part of these consolidated financial statements. 44 GENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 2022 2021 2020 NET SALES $ 1,918,958,043 $ 1,731,169,929 $ 1,688,189,405 COST OF GOODS SOLD 1,309,143,858 1,111,462,082 1,082,745,885 Gross profit 609,814,185 619,707,847 605,443,520 OPERATING EXPENSES: Engineering, research and development 133,308,804 117,763,676 115,935,047 Selling, general and administrative 106,499,255 92,162,193 89,952,381 Total operating expenses 239,808,059 209,925,869 205,887,428 Income from operations 370,006,126 409,781,978 399,556,092 OTHER INCOME: Investment income 4,795,823 3,589,798 6,986,303 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 PROVISION FOR INCOME TAXES 50,965,724 55,554,504 64,249,308 NET INCOME $ 318,757,352 $ 360,797,232 $ 347,563,621 EARNINGS PER SHARE (1) : Basic $ 1.36 $ 1.51 $ 1.41 Diluted $ 1.36 $ 1.50 $ 1.41 Cash Dividends Declared per Share $ 0.480 $ 0.480 $ 0.480 (1) Earnings Per Share has been adjusted to exclude the portion of net income allocated to participating securities as a result of share-based payment awards The accompanying notes are an integral part of these consolidated financial statements. 45 GENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 2022 2021 2020 Net income $ 318,757,352 $ 360,797,232 $ 347,563,621 Other comprehensive (loss) income before tax: Foreign currency translation adjustments ( 4,952,828 ) 151,544 3,153,634 Unrealized (losses) gains on available-for-sale securities, net ( 14,072,595 ) ( 6,424,496 ) 6,312,051 Other comprehensive (loss) income, before tax ( 19,025,423 ) ( 6,272,952 ) 9,465,685 (Benefit) expense for income taxes related to components of other comprehensive (loss) income ( 2,955,245 ) ( 1,349,144 ) 1,325,530 Other comprehensive (loss) income, net of tax ( 16,070,178 ) ( 4,923,808 ) 8,140,155 Comprehensive income $ 302,687,174 $ 355,873,424 $ 355,703,776 The accompanying notes are an integral part of these consolidated financial statements. 46 GENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ INVESTMENT FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 and 2020 Common Stock Shares Common Stock Amount Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Investment BALANCE AS OF JANUARY 1, 2020 251,277,515 $ 15,076,651 $ 807,928,139 $ 1,116,372,133 $ ( 1,289,103 ) $ 1,938,087,820 Issuance of common stock from stock plan transactions 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, restricted stock, and performance share awards — — 30,797,327 — — 30,797,327 Dividends declared ($ 0.48 per share) — — — ( 117,528,158 ) — ( 117,528,158 ) Net income — — — 347,563,621 — 347,563,621 Other comprehensive income — — — — 8,140,155 8,140,155 BALANCE AS OF DECEMBER 31, 2020 243,692,869 $ 14,621,572 $ 852,771,508 $ 1,089,698,996 $ 6,851,052 $ 1,963,943,128 Issuance of common stock from stock plan transactions 2,343,169 140,590 29,668,197 — — 29,808,787 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, restricted stock, and performance share awards — — 27,421,645 — — 27,421,645 Dividends declared ($ 0.48 per share) — — — ( 114,415,382 ) — ( 114,415,382 ) Net income — — — 360,797,232 — 360,797,232 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, restricted stock, and performance share awards — — 30,228,606 — — 30,228,606 Dividends declared ($ 0.48 per share) — — — ( 112,819,342 ) — ( 112,819,342 ) Net income — — — 318,757,352 — 318,757,352 Other comprehensive loss — — — — ( 16,070,178 ) ( 16,070,178 ) BALANCE AS OF DECEMBER 31, 2022 234,169,335 $ 14,050,160 $ 917,499,323 $ 1,148,386,272 $ ( 14,142,934 ) $ 2,065,792,821 The accompanying notes are an integral part of these consolidated financial statements. There may be some differences due to rounding. 47 GENTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 48 2022 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 318,757,352 $ 360,797,232 $ 347,563,621 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 96,568,443 99,112,019 104,739,900 Gain on disposal of assets ( 70,736 ) ( 488,750 ) ( 311,510 ) Loss on disposal of assets 28,424 230,933 162,553 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 ) Stock based compensation expense related to employee stock options, employee stock purchases and restricted stock 30,228,606 27,421,645 30,797,327 Change in operating assets and liabilities: Accounts receivable ( 26,698,846 ) 35,135,429 ( 49,290,457 ) Inventories ( 88,092,828 ) ( 89,975,599 ) 22,725,798 Prepaid expenses and other ( 28,788,331 ) ( 20,241,994 ) 10,493,993 Accounts payable 37,423,488 7,266,309 ( 12,854,038 ) Accrued liabilities 14,909,867 ( 14,322,863 ) 27,982,962 Net cash flows from operating activities 338,200,529 362,167,562 464,491,771 CASH FLOWS USED FOR INVESTING ACTIVITIES: Activity in available-for-sale securities: Sales proceeds 37,429,595 56,237,427 24,455,695 Maturities and calls 3,500,000 27,690,000 142,547,368 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 ) Proceeds from sale of plant and equipment 313,917 2,577,855 383,429 Acquisition of businesses, net of cash acquired — ( 12,071,546 ) ( 11,216,927 ) Increase in other assets ( 3,611,244 ) ( 5,501,445 ) ( 4,327,398 ) Net cash (used for) from investing activities ( 172,738,508 ) ( 113,106,955 ) 26,416,437 CASH FLOWS USED FOR FINANCING ACTIVITIES: Proceeds from borrowings on Credit Agreement — — 75,000,000 Repayment of borrowings on Credit Agreement — — ( 75,000,000 ) Issuance of common stock from stock plan transactions 16,602,274 29,808,787 41,803,640 Cash dividends paid ( 113,091,921 ) ( 115,285,625 ) ( 117,181,928 ) Repurchases of common stock ( 112,529,406 ) ( 324,643,135 ) ( 288,480,506 ) Net cash used for financing activities ( 209,019,053 ) ( 410,119,973 ) ( 363,858,794 ) 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. 49 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES The Company Gentex Corporation, including its wholly-owned subsidiaries (the "Company"), is a leading supplier of digital vision, connected car, dimmable glass, and fire protection products. The Company’s largest business segment involves designing, developing, manufacturing, marketing, and supplying automatic-dimming rearview and non-dimming mirrors and various electronic modules for the automotive industry. The Company ships its product to all of the major automotive producing regions worldwide, which it supports with numerous sales, engineering and distribution locations worldwide. A substantial portion of the Company’s net sales and accounts receivable result from transactions with domestic and foreign automotive manufacturers and Tier 1 suppliers. The Company also designs, develops, manufactures, markets, and supplies dimmable aircraft windows for the aviation industry and commercial smoke alarms and signaling devices for the fire protection products industry. The Company does not require collateral or other security for trade accounts receivable. Significant accounting policies of the Company not described elsewhere are as follows: Consolidation The consolidated financial statements include the accounts of Gentex Corporation and all of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Cash Equivalents Cash equivalents consist of funds invested in bank accounts and money market funds that have daily liquidity. Allowance For Doubtful Accounts 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 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. The following table presents the activity in the Company’s allowance for doubtful accounts: Beginning Balance Net Additions/ (Reductions) to Costs and Expenses Net Additions/Deductions and Other Adjustments Ending Balance Year Ended December 31, 2022: Allowance for Doubtful Accounts $ 3,176,205 $ — $ ( 209,110 ) $ 2,967,095 Year Ended December 31, 2021: Allowance for Doubtful Accounts $ 3,464,747 $ — $ ( 288,542 ) $ 3,176,205 Year Ended December 31, 2020: Allowance for Doubtful Accounts $ 2,451,293 $ 1,000,000 $ 13,454 $ 3,464,747 50 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued The Company’s allowance for doubtful accounts primarily relates to financially distressed automotive customers. The Company continues to work with these financially distressed customers in collecting past due balances. Investments The Company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, and for its non-financial assets and liabilities subject to fair value measurements. ASC 820 provides a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases, require estimates of fair-market value. This standard also expanded financial statement disclosure requirements about a company’s use of fair-value measurements, including the effect of such measurement on earnings. The cost of securities sold is based on the specific identification method. The Company determines the fair value of its government securities, asset-backed securities, 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 amortized cost, which approximates fair value. The Company also periodically makes technology investments in certain non-consolidated third parties. These equity investments are accounted for in accordance with ASC 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. 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: 51 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued Fair Value Measurements at Reporting Date Using Total as of Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Description December 31, 2022 (Level I) (Level 2) (Level 3) Cash & Cash Equivalents $ 214,754,638 $ 214,754,638 $ — $ — Restricted Cash 4,000,000 $ 4,000,000 — — Short-Term Investments: Certificate of Deposit 1,736,163 $ 1,736,163 — — 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 — Long-Term Investments: Asset-backed Securities 18,829,696 — 18,829,696 — Certificate of Deposit 238,925 238,925 — — Corporate Bonds 36,310,477 — 36,310,477 — Government Securities 36,532,634 — 36,532,634 — Municipal Bonds 48,430,166 — 48,430,166 Common Stock 293,300 293,300 — — Total $ 378,544,756 $ 222,116,628 $ 156,428,128 $ — Fair Value Measurements at Reporting Date Using Total as of Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Description December 31, 2021 (Level I) (Level 2) (Level 3) Cash & Cash Equivalents $ 262,311,670 $ 262,311,670 $ — $ — Short-Term Investments: Certificate of Deposit 1,507,770 1,507,770 — — Corporate Bonds 2,018,440 — 2,018,440 — Other 1,897,402 1,897,402 — — Long-Term Investments: Asset-backed Securities 25,799,513 — 25,799,513 — Certificate of Deposit 2,056,710 2,056,710 — Corporate Bonds 40,354,929 — 40,354,929 — Government Securities 47,944,036 — 47,944,036 — Municipal Bonds 74,720,480 — 74,720,480 — Total $ 458,610,950 $ 267,773,552 $ 190,837,398 $ — The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of December 31, 2022 and 2021: 52 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued Unrealized 2022 Cost Gains Losses Market Value Short-Term Investments: Certificate of Deposit $ 1,750,256 $ — $ ( 14,093 ) $ 1,736,163 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 Long-Term Investments: Asset-backed Securities 19,151,229 — ( 321,533 ) 18,829,696 Certificate of Deposit 250,000 — ( 11,075 ) 238,925 Corporate Bonds 40,410,206 — ( 4,099,729 ) 36,310,477 Government Securities 39,637,461 — ( 3,104,827 ) 36,532,634 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 Unrealized 2021 Cost Gains Losses Market Value Short-Term Investments: Certificate of Deposit $ 1,500,543 $ 7,227 $ — $ 1,507,770 Corporate Bonds 1,994,639 23,801 — 2,018,440 Other 1,897,402 — — 1,897,402 Long-Term Investments: Asset-backed Securities 26,352,630 34,771 ( 587,888 ) 25,799,513 Certificate of Deposit 2,001,714 54,996 — 2,056,710 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 Total $ 195,025,034 $ 3,093,114 $ ( 1,818,868 ) $ 196,299,280 Unrealized losses on investments as of December 31, 2022 are as follows: Aggregate Unrealized Losses Aggregate Fair Value Less than one year $ 4,816,103 $ 77,701,146 Greater than one year 8,217,959 76,643,586 Total $ 13,034,062 $ 154,344,732 Unrealized losses on investments as of December 31, 2021 are as follows: Aggregate Unrealized Losses Aggregate Fair Value Less than one year $ 1,244,053 $ 94,417,123 Greater than one year 574,815 6,875,230 Total $ 1,818,868 $ 101,292,353 53 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued 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. No investments were considered to be impaired during the years presented. The Company has the intention and current ability to hold its debt investments until the amortized cost basis has been recovered. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. No investments were considered to be other-than-temporarily impaired in 2022 and 2021. Fixed income securities as of December 31, 2022, have contractual maturities as follows: Due within one year $ 16,807,318 Due between one and five years 103,712,406 Due over five years 36,629,492 $ 157,149,216 Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, investments, accounts receivable, accounts payable, and short and long-term debt. The Company’s estimate of the fair values of these financial instruments approximates their carrying amounts at December 31, 2022 and 2021. Inventories Inventories include material, direct labor and manufacturing overhead and are valued at the lower of first-in, first-out (FIFO) cost or net realizable value. Inventories consisted of the following as of December 31, 2022 and 2021: 2022 2021 Raw materials $ 304,184,004 $ 235,014,277 Work-in-process 45,512,275 34,032,164 Finished goods 54,663,991 47,221,001 Total Inventory $ 404,360,270 $ 316,267,442 Estimated inventory allowances for slow-moving and obsolete inventories are based on current assessments of future demands, market conditions, evaluation of longer lead times for certain electronic components and related management initiatives. If market conditions or customer requirements change and are less favorable than those projected by management, inventory allowances are adjusted accordingly. Allowances for slow-moving and obsolete inventories (which are included, net, in the above inventory values) were $ 10.0 million and $ 10.9 million at December 31, 2022 and 2021, respectively. Plant and Equipment Plant and equipment is stated at cost. Depreciation and amortization are computed for financial reporting purposes using the straight-line method, with estimated useful lives of 7 to 30 years for buildings and improvements, and 3 to 10 years for machinery and equipment. Depreciation expense was approximately $ 74.9 million, $ 76.8 million and $ 82.4 million in 2022, 2021 and 2020, respectively. As of December 31, 2022 , 2021 and 2020 , capital expenditures recorded in accounts payable totaled $ 14.6 million, $ 9.8 million and $ 4.8 million, respectively. 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 54 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued 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. Patents The Company’s policy is to capitalize costs incurred to obtain patents. The cost of patents is amortized over their useful lives. The cost of patents in process is not amortized until issuance. The Company periodically obtains intellectual property rights, in the ordinary course of business, and the cost of the rights are amortized over their useful lives. Goodwill and Intangible Assets Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. The Company reviews goodwill for impairment during the fourth quarter on an annual basis or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company performs an impairment review for its automotive reporting unit, which has been determined to be one of the Company’s reportable segments, using either a qualitative approach or quantitative approach which utilizes a fair value method that incorporates certain assumptions and judgments. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. The Company performs a qualitative assessment (step 0) to determine whether it is more likely than not that a reporting unit's fair value is less than its carrying amount. If not, no further goodwill impairment testing is performed. 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 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. For the qualitative assessment performed, management considers factors such as macro-economic conditions, industry and market considerations, overall financial performance, and other company-specific events, amongst other factors, in making the determination as to whether it is more likely than not that a reporting unit's fair value is less than its carrying amount. Other than management's internal projections of future cash flows, the primary assumptions used in the step 1 impairment test is the weighted-average cost of capital and long-term growth rates. Although the Company's cash flow forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying business, there are significant judgments in determining the expected future cash flows attributable to a reporting unit. There have been no impairment charges recorded currently or in prior periods in which goodwill existed. Indefinite lived intangible assets are also subject to annual impairment testing or more frequently if indicators of impairment are identified. 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 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. The 55 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued 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. Should the project be determined to be abandoned, and if the asset developed has no alternative use, the full value of the asset will be charged to expense. Refer to Note 10, "Goodwill and Intangible Assets" for information regarding the impairment testing performed in calendar year 2022. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers . Accordingly, revenue is recognized in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services when it transfers those goods or services to customers. Sales are shown net of returns, which have not historically been significant. The Company does not generate sales from arrangements with multiple deliverables. 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 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. Such amounts are subject to estimate and are accrued as a reduction of revenue as products are shipped to those customers. For any shipments of product that may be subject to retroactive price adjustments that are then being negotiated, the Company records revenue based on the Company’s best estimate of the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods to the customer. The Company's best estimate requires significant judgment based on historical results and expected outcomes of ongoing negotiations with customers. 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 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. Advertising and Promotional Materials All advertising and promotional costs are expensed as incurred and amounted to approximately $ 3.3 million, $ 1.8 million and $ 2.0 million, in 2022, 2021 and 2020, respectively. Repairs and Maintenance Major renewals and improvements of property and equipment are capitalized, and repairs and maintenance are expensed as incurred. The Company incurred expenses relating to the repair and maintenance of plant and equipment of approximately $ 27.9 million, $ 24.2 million and $ 22.6 million, in 2022, 2021 and 2020, respectively. Self-Insurance The Company is self-insured for a portion of its risk on workers’ compensation and employee medical costs. The arrangements provide for stop loss insurance to manage the Company’s risk. Such costs are accrued based on known claims and an estimate of incurred, but not reported ("IBNR") claims. IBNR claims are estimated using historical lag information and other data provided by claims administrators. This estimation 56 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (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 The Company periodically incurs product warranty costs. Any liabilities associated with product warranty are estimated based on known facts and circumstances and are not significant at December 31, 2022, 2021 and 2020. The Company does not offer extended warranties on its products. Income Taxes The provision for income taxes is based on the earnings reported in the consolidated financial statements. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in deductible or taxable amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates. The Company applies the provisions of ASC 740, Income Taxes , as it relates to uncertainty in income taxes recognized in the Company’s consolidated financial statements. A threshold of more likely than not to be sustained upon examination is applied to uncertain tax positions. 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. Leases 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 are as follows: Year ending December 31, 2023 $ 1,429,526 2024 547,870 2025 184,470 2026 37,375 Thereafter 978 Total future minimum lease payments $ 2,200,219 Less imputed interest ( 50,718 ) Total $ 2,149,501 Earnings Per Share The Company has unvested share-based payment awards with a right to receive non-forfeitable dividends, which are considered participating securities under ASC 260, Earnings Per Share . The Company allocates earnings to participating securities and computes earnings per share using the two-class method. Under the two-class method, net income per share is computed by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, net income is allocated to both common shares and participating securities based on their respective weighted average shares outstanding for the period. The following table sets forth the computation of basic and diluted net income per common share under the two-class method for each of the last three years: 57 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued 2022 2021 2020 Basic Earnings Per Share Net Income $ 318,757,352 $ 360,797,232 $ 347,563,621 Less: Allocated to participating securities 4,875,057 5,591,992 4,964,928 Net Income available to common shareholders $ 313,882,295 $ 355,205,240 $ 342,598,693 Basic weighted average shares outstanding 230,825,293 235,526,911 242,599,923 Net Income per share - Basic $ 1.36 $ 1.51 $ 1.41 Diluted Earnings Per Share Allocation of Net Income used in basic computation $ 313,882,295 $ 355,205,240 $ 342,598,693 Reallocation of undistributed earnings 5,299 17,014 14,232 Net Income available to common shareholders — Diluted $ 313,887,594 $ 355,222,254 $ 342,612,925 Number of shares used in basic computation 230,825,293 235,526,911 242,599,923 Additional weighted average dilutive common stock equivalents 394,196 1,077,103 1,082,069 Diluted weighted average shares outstanding 231,219,489 236,604,014 243,681,992 Net income per share — Diluted $ 1.36 $ 1.50 $ 1.41 For the years ended December 31, 2022, 2021 and 2020, 1,842,602 shares, 200,037 shares, and 403,071 shares, respectively, related to stock option plans were not included in diluted average common shares outstanding because they were anti-dilutive. 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 and foreign currency translation adjustments that are further detailed in Note 9 , "Comprehensive Income", for more information. Foreign Currency Translation The financial position and results of operations of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at year-end. Income statement accounts are translated at the average rate of exchange in effect during the year. The resulting translation adjustment is recorded as a separate component of shareholders’ investment. Gains and losses arising from re-measuring foreign currency transactions into the appropriate currency are included in the determination of net income. Stock-Based Compensation Plans 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 , "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. 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 58 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES, continued affect the estimate of fair value of stock-based compensation and consequently, the related amounts recognized on the consolidated statements of operations. Estimates 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. (2) DEBT AND FINANCING ARRANGEMENTS On October 15, 2018, the Company entered into a Credit Agreement ("Credit Agreement") with PNC as the administrative agent and sole lender. Pursuant to this Credit Agreement, the Company has access to a $ 150 million senior revolving credit facility (“Revolver”). Under the terms of the Credit Agreement, the Company is entitled to further request an additional aggregate principal amount of up to $ 100 million, subject to the satisfaction of certain conditions. In addition, the Company is entitled to the benefit of Swing Loans from amounts otherwise available under the Revolver in the aggregate principal amount of up to $ 20 million and to request Letters of Credit from amounts otherwise available under the Revolver in the aggregate principle amount up to $ 20 million, both subject to certain conditions. The obligations of the Company under the Credit Agreement are not secured, but are subject to certain covenants. As of December 31, 2022 and 2021, there were no outstanding balances on the Revolver. The Revolver expires on October 15, 2023. The Credit Agreement contains customary representations and warranties and certain covenants that place certain limitations on the Company. 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 The provision for income taxes is based on the earnings reported in the accompanying consolidated financial statements. 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 59 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (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. The components of the provision for income taxes are as follows: 2022 2021 2020 Currently payable: Federal $ 62,670,986 $ 89,507,896 $ 67,606,617 State 4,310,783 5,642,926 10,180,218 Foreign 1,761,732 2,098,433 1,882,195 Total 68,743,501 97,249,255 79,669,030 Deferred income tax benefit: Primarily federal ( 17,777,777 ) ( 41,694,751 ) ( 15,419,722 ) Provision for income taxes $ 50,965,724 $ 55,554,504 $ 64,249,308 The effective income tax rates are different from the statutory federal income tax rates for the following reasons: 2022 2021 2020 Statutory federal income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal income tax benefit 0.9 0.7 2.1 Research tax credit ( 1.8 ) ( 1.0 ) ( 1.4 ) (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 ) Foreign derived intangible income deduction ( 6.2 ) ( 6.3 ) ( 5.2 ) Stock compensation ( 0.6 ) ( 1.3 ) ( 1.0 ) Other 0.4 0.2 0.2 Effective income tax rate 13.8 % 13.3 % 15.6 % 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: 60 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (3) INCOME TAXES, continued December 31, 2022 2021 Assets: Accruals not currently deductible $ 9,778,184 $ 12,823,493 Research and development costs 58,501,232 49,099,538 Stock based compensation 14,670,250 13,707,737 Other 4,722,513 2,118,484 Total deferred income tax assets $ 87,672,179 $ 77,749,252 Liabilities: Excess tax over book depreciation $ ( 3,460,485 ) $ ( 20,728,577 ) Goodwill ( 42,580,026 ) ( 37,999,022 ) Intangible assets ( 13,268,772 ) ( 11,718,904 ) Other ( 2,834,196 ) ( 2,507,071 ) Total deferred income tax liabilities $ ( 62,143,479 ) $ ( 72,953,574 ) Net deferred income taxes $ 25,528,700 $ 4,795,678 Net operating loss carryforwards with no expiration totaling $ 7.7 million are available to reduce future taxable earnings of certain domestic and foreign subsidiaries. Income taxes paid in cash were approximately $ 35.2 million, $ 105.8 million and $ 61.9 million in 2022, 2021 and 2020, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2022 2021 2020 Beginning of year $ 5,275,000 $ 4,864,000 $ 6,392,000 Additions based on tax positions related to the current year 951,000 1,023,000 918,000 Additions for tax positions in prior years 353,000 364,000 770,000 Reductions for tax positions in prior years ( 26,000 ) ( 51,000 ) ( 2,907,000 ) Reductions as a result of a lapse of the applicable statute of limitations ( 1,923,000 ) ( 925,000 ) ( 309,000 ) End of year $ 4,630,000 $ 5,275,000 $ 4,864,000 If recognized, unrecognized tax benefits would affect the effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits through the provision for income taxes. The Company has accrued approximately $ 379,000 , $ 605,000 , and $ 577,000 for interest as of December 31, 2022, 2021, and 2020, respectively. 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. 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. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2018. 61 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (4) EMPLOYEE BENEFIT PLANS The Company has a 401(k) retirement savings plan in which substantially all of its employees may participate. The plan includes a provision for the Company to match a percentage of the employee’s contributions at a rate determined by the Company’s Board of Directors. In 2022, 2021 and 2020 the Company’s contributions were approximately $ 12.9 million, $ 9.0 million and $ 8.9 million, respectively. 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. The Gentex Corporation Non-Qualified Deferred Compensation Plan (the "Deferred Compensation Plan") is intended to enhance retirement savings among a select group of management or highly compensated employees who contribute significantly to the success of the Company. It is also intended to constitute an unfunded non-qualified deferred compensation plan described in Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Only select management and highly compensated employees, including executive officers, are eligible to participate. The Deferred Compensation Plan is administered by a committee who shall approve designation of any participants and may also remove participants. 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. The Company may, but is not required, to match participant deferrals. Participants are generally vested in any such matching contributions 50 % after two years , but before three years , of service and 100 % after three years of service. A participant's vested credit balance under the Deferred Compensation Plan will generally be paid on the earliest to occur of: a separation from service; a fixed date or event; a change of control; or a plan termination. 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 At December 31, 2022, the Company had two equity incentive plans under which awards are made, which include the Gentex Corporation 2019 Omnibus Incentive Plan ("2019 Omnibus Plan"), and an employee stock purchase plan. Those plans and any material amendments thereto have previously been approved by shareholders. The 2019 Omnibus Plan provides for the potential awards to: i) employees; and ii) non-employee directors of the Company or its subsidiaries, which potential awards may be stock options, both incentive stock options and non-qualified stock options, appreciation rights, restricted stock, 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 62 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) "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. 2019 Omnibus Incentive Plan The 2019 Omnibus Plan covers 45,000,000 shares of common stock. The purpose of the 2019 Omnibus Plan is to attract and retain employees, officers, and directors of the Company and its subsidiaries and to motivate and provide such persons incentives and rewards for performance. As of December 31, 2022, 20,214,522 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 4,355,326 1.00 4,355,326 Restricted Stock 3,345,868 4.06 13,584,224 Performance Shares 560,338 4.06 2,274,972 Total 8,261,532 20,214,522 Employee Stock Options The Employee Stock Option Plan allowed the Company to grant up to 24,000,000 shares of common stock under the plan, prior to its replacement by the 2019 Omnibus Plan. The Company has granted options on 4,355,326 shares (net of shares from canceled/expired options) under the 2019 Omnibus Plan and 12,689,869 shares (net of shares from canceled/expired options) under the prior plan (prior to its replacement) through December 31, 2022. Under each of such plans, the option exercise price equals the stock’s market price on date of grant. The options vest after one to five years , and expire after five to ten years . 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: 2022 2021 2020 Dividend yield (1) 1.8 % 1.8 % 2.0 % Expected volatility (2) 28.8 % 27.6 % 27.5 % Risk-free interest rate (3) 3.4 % 1.3 % 0.3 % Expected term of options (in years) (4) 4.2 4.1 4.2 Weighted-average grant-date fair value $ 6.42 $ 6.59 $ 4.83 (1) Represents the Company's estimated cash dividend yield over the expected term of option grant. (2) Amount is determined based on analysis of historical price volatility of the Company's common stock. The expected volatility is based on the daily percentage change in the price of the stock over a period equal to the expected term of the option grant. (3) Represents the U.S. Treasury yield over the expected term of the option grant. (4) Represents the period of time that options granted are expected to be outstanding. Based on analysis of historical option exercise activity, the Company has determined that all employee groups exhibit similar exercise and post-vesting termination behavior. As of December 31, 2022, there was $ 9,148,306 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 2.03 years. Stock option expense for the years ended December 31, 2022, 2021 and 2020 was $ 6,302,581 , $ 5,780,959 , and $ 4,935,527 respectively. 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. 63 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2022 Shares (000) Wtd. Avg. Ex. Price Wtd. Avg. Remaining Contract Life Aggregate Intrinsic Value (000) Outstanding at Beginning of Year 4,535 $ 27 Granted 1,219 27 Exercised ( 530 ) 21 $ 4,065 Forfeited ( 352 ) 28 Outstanding at End of Year 4,872 28 3.1 years $ 8,928 Exercisable at End of Year 1,960 $ 26 2.4 years $ 5,864 2021 Shares (000) Wtd. Avg. Ex. Price Wtd. Avg. Remaining Contract Life Aggregate Intrinsic Value (000) Outstanding at Beginning of Year 4,533 $ 23 Granted 1,434 34 Exercised ( 1,184 ) 20 $ 17,289 Forfeited ( 248 ) 27 Outstanding at End of Year 4,535 27 3.4 years $ 35,283 Exercisable at End of Year 1,380 $ 23 2.5 years $ 16,433 2020 Shares (000) Wtd. Avg. Ex. Price Wtd. Avg. Remaining Contract Life Aggregate Intrinsic Value (000) Outstanding at Beginning of Year 5,435 $ 20 Granted 1,571 26 Exercised ( 2,077 ) 18 $ 23,861 Forfeited ( 396 ) 22 Outstanding at End of Year 4,533 23 3.4 years $ 48,501 Exercisable at End of Year 1,358 $ 20 2.3 years $ 18,334 A summary of the status of the Company’s non-vested employee stock option activity for the years ended December 31, 2022, 2021, and 2020, are presented in the table below: 2022 2021 2020 Shares (000) Wtd. Avg Grant Date Fair Value Shares (000) Wtd. Avg Grant Date Fair Value Shares (000) Wtd. Avg Grant Date Fair Value Nonvested Stock Options at Beginning of Year 3,156 $ 5 3,175 $ 5 3,575 $ 4 Granted 1,219 6 1,434 7 1,571 5 Vested ( 1,153 ) 4 ( 1,212 ) 4 ( 1,585 ) 4 Forfeited ( 309 ) 6 ( 241 ) 5 ( 386 ) 4 Nonvested Stock Options at End of Year 2,913 $ 6 3,156 $ 5 3,175 $ 5 64 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Restricted Shares The Company’s Second Restricted Stock Plan provided for a maximum number of shares that may be subject to awards of 9,000,000 shares, prior to its replacement by the 2019 Omnibus Plan. Restricted shares awarded under either that plan or the 2019 Omnibus Plan entitle the shareholder to all rights of common stock ownership, except that the shares may not be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction period. The restriction period is determined by a committee, appointed by the Board of Directors, but may not exceed ten years . The Company has issued 3,345,868 shares under the 2019 Omnibus Plan and 5,630,019 shares under the prior plan (prior to its replacement) as of December 31, 2022, and has 3,774,093 shares outstanding under such plans. 2022 2021 2020 Vesting Period (1) Shares Granted Market Price at Grant Date Shares Granted Market Price at Grant Date Shares Granted Market Price at Grant Date 1 Year 119,849 23.84 - 29.89 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 - 29.17 309,955 32.98 - 35.67 479,346 20.68 - 28.98 5 Years 225,060 23.84 - 29.17 157,169 32.98 - 35.67 170,355 20.68 - 28.98 949,089 $ 23.84 - 30.85 1,098,611 $ 32.98 - 35.67 832,948 $ 20.68 - 31.08 (1) Each of these awards cliff vest after the restriction period with no additional restrictions. A summary of restricted share award activity, including award grants, vesting, and forfeitures for the years ended December 31, 2022, 2021, and 2020, are presented in the table below: 2022 2021 2020 Shares (000) Shares (000) Shares (000) Nonvested, Beginning of Year 3,760 3,599 3,315 Granted 949 1,099 833 Vested ( 935 ) ( 759 ) ( 303 ) Forfeited ( 221 ) ( 179 ) ( 246 ) Nonvested, End of Year 3,553 3,760 3,599 As of December 31, 2022, there was unearned stock-based compensation of $ 43,947,853 associated with these restricted stock grants. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable restriction periods. Compensation expense related to restricted stock for the years ended December 31, 2022, 2021 and 2020 was $ 21,773,179 , $ 19,304,013 , and $ 20,675,447 respectively. Performance Shares Performance shares awarded under the 2019 Omnibus Plan are considered performance condition awards as attainment is based on the Company's performance relative to pre-established metrics. The fair value of such performance share awards was determined using the Company's closing stock price on the date of grant. The expected attainment of the metrics for these awards is then analyzed each reporting period, and the related expense is adjusted based on expected attainment, if the then expected attainment differs from previous expectations. The cumulative effect on current and prior periods of a change in expected attainment is recognized in the period of change. As of December 31, 2022, the Company had unearned stock-based compensation of $ 5,113,300 associated with these performance share grants. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable performance periods. 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. 65 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Employee Stock Purchase Plan 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 Prior Employee Stock Purchase Plan 126,101 143,892 208,273 1,624,122 $ 28.71 (6) CONTINGENCIES The Company is periodically involved in legal proceedings, legal actions and claims arising in the normal course of business, including proceedings relating to product liability, intellectual property, safety and health, employment and other matters. Such matters are subject to many uncertainties and outcomes are not predictable. The Company does not believe, however, that at the current time 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 ASC 280, Segment Reporting, requires that a public enterprise report financial and descriptive information about its reportable operating segments subject to certain aggregation criteria and quantitative thresholds. 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. 66 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (7) SEGMENT REPORTING, continued 2022 2021 2020 Revenue: Automotive Products United States $ 579,531,611 $ 542,690,346 $ 519,337,271 Germany 266,498,398 234,994,551 228,652,827 Japan 234,888,653 211,417,475 216,100,530 Mexico 121,553,711 111,761,245 127,157,684 Other Countries 672,270,085 596,324,417 556,949,831 Other 44,215,585 33,981,895 39,991,262 Total $ 1,918,958,043 $ 1,731,169,929 $ 1,688,189,405 Income (Loss) from Operations: Automotive Products $ 372,490,748 $ 414,185,075 $ 393,979,860 Other ( 2,484,622 ) ( 4,403,097 ) 5,576,232 Total $ 370,006,126 $ 409,781,978 $ 399,556,092 Assets: Automotive Products $ 1,670,634,277 $ 1,495,298,453 $ 1,436,374,596 Other 43,025,905 34,760,744 33,317,668 Corporate 613,569,742 601,331,969 728,248,906 Total $ 2,327,229,924 $ 2,131,391,166 $ 2,197,941,170 Depreciation & Amortization: Automotive Products $ 90,030,087 $ 92,516,347 $ 97,530,191 Other 1,056,510 913,451 689,894 Corporate 5,481,846 5,682,221 6,519,815 Total $ 96,568,443 $ 99,112,019 $ 104,739,900 Capital Expenditures: Automotive Products $ 141,166,506 $ 58,415,887 $ 34,926,686 Other 2,356,910 1,467,962 1,470,705 Corporate 2,909,707 8,951,198 15,309,150 Total $ 146,433,123 $ 68,835,047 $ 51,706,541 Other includes Dimmable Aircraft Windows, Fire Protection Products, and Nanofiber. Major product line revenues included within the Automotive Products segment are as follows: 2022 2021 2020 Automotive Products Automotive Mirrors $ 1,742,196,401 $ 1,563,424,443 $ 1,520,628,604 HomeLink ® Modules* 132,546,057 133,763,591 127,569,539 Total Automotive Products $ 1,874,742,458 $ 1,697,188,034 $ 1,648,198,143 Other Products Revenue $ 44,215,585 $ 33,981,895 $ 39,991,262 Total Revenue $ 1,918,958,043 $ 1,731,169,929 $ 1,688,189,405 *Excludes HomeLink ® revenue integrated into automotive mirrors. Corporate assets are principally cash and cash equivalents, investments, deferred income taxes and corporate fixed assets. Depreciation & Amortization on corporate fixed assets are allocated as appropriate to the Automotive and Other segments when reviewing operating results. Substantially all long-lived assets are located in the U.S. 67 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (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. Most of the Company’s non-U.S. sales are invoiced and paid in U.S. dollars. 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 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 2022 16 % 13 % 10 % 2021 15 % 13 % 11 % 2020 14 % 14 % 12 % . (8) QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table sets forth selected financial information for all of the quarters during the years ended December 31, 2022 and 2021 (in thousands, except per share data): First Second Third Fourth 2022 2021 2022 2021 2022 2021 2022 2021 Net Sales $ 468,251 $ 483,725 $ 463,423 $ 428,005 $ 493,637 $ 399,599 $ 493,648 $ 419,841 Gross Profit 160,412 183,300 148,367 151,597 147,201 140,900 153,834 143,911 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 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 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. (9) COMPREHENSIVE INCOME Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on certain investments and foreign currency translation adjustments. 68 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Years ended December 31, 2022 2021 2020 Foreign currency translation adjustments: Balance at beginning of period $ 920,589 $ 769,045 $ ( 2,384,589 ) Other comprehensive income (loss) before reclassifications ( 4,952,828 ) 151,544 3,153,634 Net current-period change ( 4,952,828 ) 151,544 3,153,634 Balance at end of period ( 4,032,239 ) 920,589 769,045 Unrealized gains (losses) on available-for-sale securities: Balance at beginning of period 1,006,655 6,082,007 1,095,486 Other comprehensive income before reclassifications ( 12,470,515 ) ( 4,228,434 ) 6,644,459 Amounts reclassified from accumulated other comprehensive income 1,353,165 ( 846,918 ) ( 1,657,938 ) Net current-period change ( 11,117,350 ) ( 5,075,352 ) 4,986,521 Balance at end of period ( 10,110,695 ) 1,006,655 6,082,007 Accumulated other comprehensive (loss) income, end of period $ ( 14,142,934 ) $ 1,927,244 $ 6,851,052 All amounts are shown net of tax. Amounts in parentheses indicate debits. 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 For the Years ended December 31, 2022 2021 2020 Unrealized gains on available-for-sale debt securities Realized gain on sale of securities $ ( 1,712,867 ) $ 1,072,048 $ 2,098,656 Other income, net Provision for income taxes 359,702 ( 225,130 ) ( 440,718 ) Provision for Income Taxes Total reclassifications for the period $ ( 1,353,165 ) $ 846,918 $ 1,657,938 Net of tax 69 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (10) GOODWILL AND INTANGIBLE ASSETS 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; $ 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. Carrying Amount Balance as of December 31, 2021 $ 313,960,209 Acquisitions — Divestitures — 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 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. As of December 31, 2022: Other Intangible Assets Gross Accumulated Amortization Net Assumed Useful Life HomeLink ® Trade Names and Trademarks $ 52,000,000 $ — $ 52,000,000 Indefinite HomeLink ® Technology 180,000,000 ( 138,750,000 ) 41,250,000 12 years Existing Customer Platforms 43,000,000 ( 39,775,000 ) 3,225,000 10 years Exclusive Licensing Agreement 96,000,000 — 96,000,000 Indefinite Vaporsens In-Process R&D 11,000,000 — 11,000,000 Indefinite Argil In-Process R&D 6,278,132 — 6,278,132 Indefinite Air-Craftglass In-Process R&D 1,507,778 — 1,507,778 Indefinite Guardian Trade Names 1,300,000 — 1,300,000 Indefinite Guardian In-Process R&D 6,800,000 — 6,800,000 Indefinite Total other identifiable intangible assets $ 397,885,910 $ ( 178,525,000 ) $ 219,360,910 70 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2021: Other Intangible Assets Gross Accumulated Amortization Net Assumed Useful Life HomeLink ® Trade Names and Trademarks $ 52,000,000 $ — $ 52,000,000 Indefinite HomeLink ® Technology 180,000,000 ( 123,750,000 ) 56,250,000 12 years Existing Customer Platforms 43,000,000 ( 35,475,000 ) 7,525,000 10 years Exclusive Licensing Agreement 96,000,000 — 96,000,000 Indefinite Vaporsens In-Process R&D 11,000,000 — 11,000,000 Indefinite Argil In-Process R&D 6,278,132 — 6,278,132 Indefinite Air-Craftglass In-Process R&D 1,507,778 — 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 Accumulated amortization on patents and intangible assets was approximately $ 206.3 million and $ 185.7 million at December 31, 2022 and 2021, respectively. Amortization expense on patents and other intangible assets was approximately $ 21.7 million, $ 22.2 million, and $ 22.4 million in calendar years 2022, 2021 and 2019, respectively. 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: $ 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. 71 GENTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (11) REVENUE 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: For the Years ended December 31, Revenue 2022 2021 2020 Automotive Products U.S. $ 579,531,611 $ 542,690,346 $ 519,337,271 Germany 266,498,398 234,994,551 228,652,827 Japan 234,888,653 211,417,475 216,100,530 Mexico 121,553,711 111,761,245 127,157,684 Other 672,270,085 596,324,417 556,949,831 Total Automotive Products $ 1,874,742,458 $ 1,697,188,034 $ 1,648,198,143 Other Products (U.S.) 44,215,585 33,981,895 39,991,262 Total Revenue $ 1,918,958,043 $ 1,731,169,929 $ 1,688,189,405 Revenue by geographic area may fluctuate based on many factors, including: exposure to local economic, political and labor conditions; unexpected changes in laws, regulations, trade or monetary or fiscal policy, including interest rates, foreign currency exchange rates and changes in the rate of inflation in the U.S. and other foreign countries; and tariffs, quotas, customs and other import or export restrictions and other trade barriers. The following table disaggregates the Company’s Automotive and Other revenue by major source for the years ended December 31, 2022, 2021, and 2020: For the Years Ended December 31, Revenue 2022 2021 2020 Automotive Segment Automotive Mirrors & Electronics $ 1,742,196,401 $ 1,563,424,443 $ 1,520,628,604 HomeLink Modules* 132,546,057 133,763,591 127,569,539 Total Automotive Products $ 1,874,742,458 $ 1,697,188,034 $ 1,648,198,143 Other Segment Fire Protection Products $ 38,238,092 $ 25,048,697 $ 22,716,985 Windows Products 5,977,493 8,914,798 17,274,277 Nanofiber Products — 18,400 — Total Other $ 44,215,585 $ 33,981,895 $ 39,991,262 *Excludes HomeLink revenue related to HomeLink modules integrated into automotive mirrors. Revenue is recognized when obligations under the terms of a contract with the customer are satisfied. 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 72 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. The Company does not generate revenue from arrangements with multiple deliverables. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods excluding revenue amounts that are transferred to third parties, such as sales, value add, and other taxes the Company collects concurrently with revenue-producing activities. The Company does not incur any incremental cost to obtain contracts. Costs are incurred to fulfill contracts with the OEM. However, such costs are accounted for under ASC 340-10, and are not treated as fulfillment costs under ASC 340-40. Automotive Products Segment Automotive Rearview Mirrors and Electronics The Company manufactures interior electrochromic automatic-dimming rearview mirrors that darken to reduce glare and improve visibility for the driver. These electronic interior mirrors can also include additional electronic features such as compass, microphones, HomeLink ® , lighting assist and driver assist forward safety camera systems, various lighting systems, various telematics systems, ITM ® systems, and a wide variety of displays. The Company also ships interior non-automatic-dimming rearview mirrors with features. The Company’s interior electrochromic automatic-dimming rearview mirrors also power the application of the Company’s exterior electrochromic automatic-dimming rearview mirrors that darken to reduce glare and improve visibility for the driver. These electronic exterior mirrors typically range in size and shape per automaker specification, but also include additional features such as turn signal indicators, side blind zone indicators, and courtesy lighting. The Company also ships exterior non-automatic-dimming rearview mirrors with similar electronic features as what is available in its automatic-dimming applications. 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. 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. The Company generally receives payment equal to the price that applies at the time of invoice for most automotive product sales. For any shipments of product that may be subject to retroactive price adjustments that are then being negotiated, the Company records revenue based on the Company’s best estimate of the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods to the customer. The Company's best estimate requires significant judgment based on historical results and expected outcomes of ongoing negotiations with customers. 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. Payment terms on automotive part sales to customers range from 15 days to 90 days. Estimated revenue is adjusted at the earlier of when the most likely amount of consideration expected to be received changes or when the consideration becomes fixed. HomeLink ® Modules The Company manufactures and sells HomeLink® Modules individually, as well as in combination with the automotive mirrors and other advanced features, as described above. 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. Other Segment Dimmable Aircraft Windows 73 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. For dimmable aircraft windows, transfer of control and revenue recognition occurs when the Company ships the product from the manufacturing facility to the customer. Payment terms on dimmable aircraft window sales range from 30 days to 45 days. Fire Protection Products The Company manufactures photoelectric smoke detectors and alarms, visual signaling alarms, electrochemical carbon monoxide detectors and alarms, audible and visual signaling alarms, and bells and speakers for use in fire detection systems in office buildings, hotels, and other commercial and residential buildings. For fire protection parts, transfer of control and revenue recognition occurs when the Company ships the product from the manufacturing facility to the customer. Payment terms on fire protection part sales to customers range from 30 days to 75 days. Nanofiber The Company acquired Vaporsens in early 2020, which specializes in nanofiber chemical sensing research and development. Vaporsens is primarily involved with research and development of technology related to nanofibers sensing a variety of chemicals and/or compounds. Refer to Note 12, "Acquisitions" , for further information. (12) ACQUISITIONS 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 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 . (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. 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. 74 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3.1 Registrant's Restated Articles of Incorporation, adopted on August 20, 2004, were filed as Exhibit 3(a) to Registrant's Report on Form 10-Q dated November 2, 2004, and an Amendment to the Registrant's Restated Articles of Incorporation, adopted as of May 18, 2012, was filed as Exhibit 3.1(i) to the Registrant's Form 8-K dated May 22, 2012, and the same are hereby incorporated by reference, together with an Amendment to the Registrant's Restated Articles of Incorporation adopted as of May 15, 2014 which was included in the Registrant's Proxy statement which was filed with the Commission March 31, 2014 and the same is hereby incorporated by reference. 3.2 Registrant’s Bylaws as amended and restated February 27, 2003, was filed as Exhibit 3(b)(1) to Registrant’s report on Form 10-Q dated May 5, 2003, and an Amendment to Registrant’s Bylaws adopted as of February 16, 2012 was filed as Exhibit 3(b)(ii) to Registrant’s Form 8-K dated February 21, 2012 and the same is hereby incorporated herein by reference. 4.1 A specimen form of certificate for the Registrant’s common stock, par value $.06 per share, was filed as part of a Registration Statement (Registration Number 2-74226C) as Exhibit 3(a), as amended by Amendment No. 3 to such Registration Statement, and the same is hereby incorporated herein by reference. 4.2 Description of Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, was filed as Exhibit 4.2 of the Registrant's Form 10-K for the year ended December 31, 2019 with the Commission on February 26, 2020 and the same is incorporated herein by reference. *10.1 Gentex Corporation Second Restricted Stock Plan was filed as Exhibit 10(b)(2) to Registrant’s Report on Form 10-Q dated April 27, 2001, and the same is hereby incorporated herein by reference. *10.2 First Amendment to the Gentex Corporation Second Restricted Stock Plan was filed as Exhibit 10(b)(5) to the Registrant’s Report on Form 10-Q dated August 4, 2008, and the same is hereby incorporated herein by reference. *10.3 Gentex Corporation 2012 Amended and Restated Non-Employee Director Stock Option Plan (effective February 16, 2012 and approved by the shareholders on May 17, 2012), was filed as Exhibit 10(b)(10) to Registrant's Report on Form 10-Q dated August 2, 2012, and the same is incorporated herein by reference. *10.4 Specimen form of Grant Agreement for the Gentex Corporation 2012 Amended and Restated Non-Employee Director Stock Option Plan, was filed as Exhibit 10(b)(11) to Registrant's Report on Form 10-Q dated August 2, 2012, and the same is incorporated herein by reference. 10.5 2013 Gentex Corporation Employee Stock Purchase Plan was included in Registrant's Proxy Statement filed with the Commission on April 5, 2013, and is incorporated herein by reference. 10.6 The form of Indemnity Agreement between Registrant and each of the Registrant’s directors and certain officers was filed as Exhibit 10(e) to Registrant’s Report on Form 10-Q dated October 31, 2002, and the same is hereby incorporated herein by reference. *10.7 Gentex Corporation Employee Stock Option Plan (as amended and restated, effective February 20, 2014) was included in Registrant's Proxy Statement filed with the Commission on March 31, 2014, and the same is hereby incorporated herein by reference. *10.8 Specimen form of Grant Agreement for the Gentex Corporation Employee Stock Option Plan (as amended and restated, effective February 10, 2014 was filed as exhibit 10.3 to Registrant's Report on Form 10-Q filed August 7, 2014, and the same is hereby incorporated herein by reference. *10.9 Amendment to the Gentex Corporation 2012 Amended and Restated Non-Employee Director Stock Option Plan (effective February 16, 2012) was included in the Registrant's Proxy Statement filed with the Commission on March 31, 2014, and the same is hereby incorporated herein by reference. *10.10 Specimen form of Grant Agreement for the Gentex Corporation 2012 Amended and Restated Non-Employee Director Stock Option Plan, as amended was filed as exhibit 10.5 to Registrant's Report on Form 10-Q filed August 7, 2014, and the same is hereby incorporated herein by reference. *10.11 Second amendment to the Gentex Corporation Second Restricted Stock Plan (as amended on February 8, 2008) was included in the Registrant's proxy Statement filed with the Commission on April 2, 2015, and the same is hereby incorporated herein by reference. 75 *10.12 Amendment to the Gentex Corporation 2013 Employee Stock Purchase Plan (effective February 14, 2013) was included in the Registrant's Proxy Statement filed with the Commission on April 2, 2015, and is hereby incorporated herein by reference. *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 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 *10.16 Israeli Appendix to the Gentex Corporation 2019 Omnibus Incentive Plan filed as an exhibit to Registrant's Form 10-K dated February 22, 2021 *10.17 Gentex Corporation Long-Term Incentive Plan filed as exhibit to Registrant's Report on Form 10-K dated February 22, 2019 *10.18 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 22, 2019. *10.19 Specimen form of Restricted Share Award Agreement for the Gentex Corporation Long-Term Incentive Plan filed as exhibit to Registrant's Report on Form 10-K filed February 22,2019 . *10.20 Gentex Corporation Executive Deferred Compensation Plan 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. *10.21 Rabbi Trust Agreement between Wells Fargo Bank, N.A. 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. *10.22 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. *10.23 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 23.1 Consent of Independent Registered Public Accounting Firm 31.1 Certificate of the Chief Executive Officer of Gentex Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). 31.2 Certificate of the Chief Financial Officer of Gentex Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). 32 Certificate of the Chief Executive Officer and Chief Financial Officer of Gentex Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350). 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase *Indicates a compensatory plan or arrangement. 76