What changed in this filing

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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-22 · 45 added, 67 removed, 187 unchanged (37% of the section changed)

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Forward-looking statements give the Company’s current expectations or forecasts of future events.

These forward-looking statements generally can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “hope,” “intend,” “may,” “opinion,” “optimistic,” “plan,” “poised,” “predict,” “project,” “should,” “strategy,” “target,” “will,” "work to," and variations of such words and similar expressions.

These forward-looking statements generally can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “hope,” “intend,” "likely", “may,” “opinion,” “optimistic,” “plan,” “poised,” “predict,” “project,” “should,” “strategy,” “target,” “will,” "work to," and variations of such words and similar expressions.

Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control, and could cause the Company’s results to differ materially from those described.

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

and the length and severity of the COVID-19 (coronavirus) pandemic, including its impact across our business on demand, operations, and the global supply chain.

and force majeure events.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made.

The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law or the rules of the NASDAQ Global Select Market.

Accordingly, any forward-looking statement should be read in conjunction with the additional information about risks and uncertainties identified under the heading “Risk Factors” in the Company’s latest Form 10-K and Form 10-Q filed with the SEC, which risks and uncertainties now include the impacts of COVID-19 (coronavirus) pandemic and supply chain constraints that have affected, are affecting, and will continue to affect, general economic and industry conditions, customers, suppliers, and the regulatory environment in which the Company operates.

Includes content supplied by S&P Global Mobility / IHS Markit Light Vehicle Production Forecast (http://www.gentex.com/forecast-disclaimer).

Accordingly, any forward-looking statement should be read in conjunction with the additional information about risks and uncertainties identified under the heading “Risk Factors” in the Company’s latest Form 10-K and Form 10-Q filed with the SEC, which risks and uncertainties include supply chain constraints that have affected, are affecting, and will continue to affect, general economic and industry conditions, customers, suppliers, and the regulatory environment in which the Company operates.

Includes content supplied by S&P Global Mobility Light Vehicle Production Forecast of January 16, 2024 (http://www.gentex.com/forecast-disclaimer).

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

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

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

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

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Pricing Pressures.

We continue to experience ongoing pricing pressures from our automotive customers and competitors, which have affected, and which will continue to affect our profit margins to the extent that we are unable to offset the pricing pressures with price adjustments, engineering and purchasing cost reductions, productivity improvements, increases in unit shipments of mirrors and electronics with advanced features, and/or new or advanced technologies, each of which pose ongoing challenges, which could continue to adversely impact our business, financial condition, and/or results of operations.

new or advanced technologies, each of which pose ongoing challenges, which continue to adversely impact our business, financial condition, and/or results of operations.

Raw Materials and Other Product Component Costs.

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The geopolitical environment between the Unites States and other jurisdictions, most significantly China, continues to cause uncertainty on tariffs and trade.

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

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

Previously enacted tariffs have increased the Company's input costs and challenge the Company's competitive position in foreign markets.

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

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

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

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

Additionally, other companies have demonstrated products that are competitive to our Full Display Mirror ® system and other products.

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

Additionally, other companies have demonstrated products that are competitive to our FDM ® system and other products.

We acknowledge that dimming device (e.g., electrochromic) technology is the subject of research and development efforts by numerous third parties.

For example, our SmartBeam ® product is a driver-assist feature for headlamp lighting control that competes with other multiple-function driver-assist features that include headlamp lighting control as one of the multiple functions.

While we believe SmartBeam ® is a low cost solution for a safety feature that makes nighttime driving safer by maximizing a vehicle's high-beam usage, competition from multiple-function driver-assist products has already and could continue to impact the success of SmartBeam ® .

On March 31, 2014 the Alliance of Automobile Manufacturers petitioned the National Highway Traffic Safety Administration ("NHTSA") to allow automakers to use camera monitoring systems ("CMS") as an option to replace conventional rearview mirrors within North America, however, no final rule or legislation was made in response to this petition.

On March 31, 2014 the Alliance of Automobile Manufacturers petitioned the National Highway Traffic Safety Administration ("NHTSA") to allow automakers to use CMS as an option to replace conventional rearview mirrors within North America, however, no final rule or legislation was made in response to this petition.

At the annual SAE Government-Industry Meeting in January 2017, NHTSA requested that SAE develop Recommended Procedures for test protocols and performance criteria for CMS that would replace mirror systems on light vehicles in the U.S.

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Since January 2017, camera monitoring systems are also permitted as an alternative to replace mirrors in the Korean market.

China has now released an updated version of its GB15084, which will be effective later in 2023, and allows for camera

monitoring systems, frameless mirrors and aspheric (free-form) glass surfaces.

In 2023, China released and made effective an updated version of its GB15084, which allows for camera monitoring systems, frameless mirrors and aspheric (free-form) glass surfaces.

Notwithstanding the foregoing, the Company continues to believe rearview mirrors provide a robust, simple and cost effective means to view the surrounding areas of a vehicle and remain the primary safety function for rear vision today.

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The Company believes that combining video displays with mirrors provides a more robust product by addressing all driving conditions in a single solution that can be controlled by the driver.

The Company has been in production with the Company's Full Display Mirror ® since 2015 and has, in the ordinary course of business, been awarded programs with fourteen (14) OEM customers.

The Company is currently shipping production Full Display Mirrors ® to all fourteen of these customers.

In 2022, the Company began shipping Full Display Mirror ® on 18 new nameplates and are currently shipping Full Display Mirror ® on 86 nameplates.

The Company has been in production with the Company's FDM ® since 2015 and has, in the ordinary course of business, been awarded programs with fourteen (14) OEM customers.

The Company is currently shipping production FDM ® to all fourteen of these customers.

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

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

The Company acknowledges that as such technology evolves over time, such as cameras replacing mirrors and/or autonomous driving, there could be increased competition.

The Company has previously announced that the Company continues to

develop in the areas of imager performance, camera dynamic range, lens design, image processing from the camera to the display, and camera lens cleaning.

The Company acknowledges that as such technology evolves over time, such as cameras replacing mirrors and/or autonomous driving, there will be increased competition.

Supply Chain Disruptions.

As a result of just-in-time supply chains within our business and the automotive industry, disruptions in our supply chain have occurred, are occurring, and are expected to continue to occur due to the industry-wide parts shortages, labor shortages, and other global supply chain constraints.

As a result of just-in-time supply chains within our business and the automotive industry, disruptions in our supply chain have occurred, are occurring, and may continue to occur due to the industry-wide parts shortages, labor shortages, and other global supply chain constraints.

We have and continue to take a number of steps to mitigate the current supply chain challenges, which include strategies involving the additional procurement of available raw materials to prepare for assembling finished goods more quickly when supply constraints ease for certain common components.

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As our customers' forecasted demand changes, inventory becomes obsolete and write-offs or write-downs of our inventory are exacerbated.

Disruptions can also occur due to natural disasters, other pandemics, work stoppages, strikes, bankruptcy, etc.

Disruptions can also occur due to natural disasters, pandemics, work stoppages, strikes, bankruptcy, etc.

Such circumstances have disrupted, are disrupting, and will continue to disrupt our shipments to automakers and Tier 1 customers, which adversely affects our business, financial condition, and/or results of operations.

Workforce Disruptions.

We have experienced, and may continue to experience in the future, disruptions to our workforce as a result of a tight labor market, employee illness, quarantines, absenteeism, and restrictions on certain of our employee's ability to work as a result of the COVID-19 pandemic.

We have experienced, and may continue to experience in the future, disruptions to our workforce as a result of a tight labor market, employee illness, quarantines, and absenteeism..

The impacts of continued disruptions to our workforce have affected, are affecting, and are expected to continue to affect our business, financial condition, and/or results of operations.

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As a result of such changes and circumstances impacting our customers, our sales mix can shift, which may have either favorable or unfavorable impact on revenue and would include shifts in regional growth, in OEM sales demand, as well as in consumer demand related to vehicle segment purchases, and content penetration.

A decrease in consumer demand for specific types of vehicles where we have traditionally provided higher value content could have a significant effect on our business, financial condition, and/or results of operations.

A decrease in consumer demand for specific types of vehicles where we have traditionally provided higher value content would have a significant effect on our business, financial condition, and/or results of operations.

Our forward guidance and estimates assume a certain geographic sales mix as well as a product sales mix.

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Business Combinations.

We anticipate that acquisitions of businesses and assets may play a role in our future growth.

Acquisitions of businesses, technologies, and assets play a role in our future growth.

We cannot be certain that we will be able to identify attractive acquisition targets, have resources available for or obtain financing for acquisitions on satisfactory terms, successfully acquire identified targets or manage timing of acquisitions with capital obligations across our businesses.

Additionally, we may not be successful in integrating acquired businesses into our existing operations, achieving projected synergies, and/or maximizing the value of acquired technologies and businesses.

Competition for acquisition opportunities in the various industries in which we operate already exists and may increase, thereby potentially increasing our costs of making acquisitions or causing us to refrain from making further acquisitions.

Competition for acquisition opportunities in the various industries in which we operate already exists and may increase, thereby increasing our costs of making acquisitions or causing us to refrain from making further acquisitions.

We are also subject to applicable antitrust laws and must avoid anticompetitive behavior.

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

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

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

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

The complexity of the technology involved in our business and the uncertainty of intellectual property

litigation significantly increases these risks and makes such risk part of our ongoing business.

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

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IT Infrastructure and Cybersecurity .

A failure of our information technology ("IT") infrastructure could adversely impact our business, financial condition, and/or results of operations.

Any failure of our information technology ("IT") infrastructure adversely impacts our business, financial condition, and/or results of operations.

We rely upon the capacity, reliability and security of our information technology infrastructure and our ability to expand and continually update this infrastructure in response to the changing needs of our business.

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We also face the challenge of supporting our older systems and implementing necessary upgrades.

If we experience a problem with the functioning of an important IT system or a security breach of our IT systems, the resulting disruptions could have an adverse effect on our business, financial condition, and/or results of operations.

When we experience a problem with the functioning of an important IT system or a security breach of our IT systems, the resulting disruptions have an adverse effect on our business, financial condition, and/or results of operations.

We face certain security threats, including threats to the confidentiality, availability and integrity of our data and systems.

We maintain an extensive network of technical security controls, policy enforcement mechanisms, monitoring systems and management oversight in order to address these threats.

We maintain an extensive network of technical security controls, policy enforcement mechanisms, monitoring systems and management and Board oversight in order to address these threats.

While these measures are designed to prevent, detect and respond to unauthorized activity in, or otherwise compromise of, our systems, certain types of attacks, including cyber-attacks, could result in significant financial or information losses and/or reputational harm.

We, and certain of our third-party vendors, receive and store personal information in connection with our human resources operations and other aspects of our business.

Despite our implementation of security measures, our IT systems, like all IT systems, are vulnerable to damages from computer viruses, natural disasters,

unauthorized access, cyber-attack and other similar disruptions.

Any system failure, accident or security breach could result in disruptions to our operations.

Despite our implementation of security measures, our IT systems, like all IT systems, are vulnerable to damages from computer viruses, natural disasters, unauthorized access, cyber-attack and other similar disruptions.

Any such system failure, accident or security breach results in disruptions to our operations.

A material network breach in the security of our IT systems could include the theft of our intellectual property, trade secrets or customer information.

To the extent that any disruptions or security breach results in a loss or damage to our data, or an inappropriate disclosure of confidential or customer information, it could cause significant damage to our reputation, affect our relationships with our customers, lead to claims against the Company and ultimately harm our business, reputation, financial condition, and/or results of operations.

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

In addition, we incur significant costs to protect against damage caused by these disruptions or security breaches.

Government Regulations.

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These requirements necessitate due diligence efforts, and the Company has disclosed its findings annually to the SEC on Form SD around May 30 each year since 2012.

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

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

As there are only a limited number of suppliers offering "conflict free" minerals necessary for our products, the

Company cannot always be absolutely certain that we will be able to obtain necessary conflict minerals from such suppliers in sufficient quantities or at competitive prices.

On December 8, 2015, NHTSA proposed changes to the Administration’s 5-Star Safety Ratings for new vehicles (also known as the New Car Assessment Program or NCAP) and initiated a comment period.

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

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

Lamps, reflective devices, and associated equipment, and initiated a comment period.

The NPRM proposes amendments that would permit the certification of adaptive driving beam head-lighting systems, if the manufacturer chooses to equip vehicles with these systems.

NHTSA proposes to establish appropriate performance requirements to ensure the safe introduction of adaptive driving beam head-lighting systems if equipped on newly manufactured vehicles.

The Company believes that its dynamic SmartBeam ® lighting control system (dynamic forward lighting or DFL), which has been sold in markets outside of North America for several years, will meet the requirements of the new FMVSS No.

108 standards, if amended.

The Company's SmartBeam ® application has and will continue to be affected by increased competition suppliers of multi-function driver assist camera products, which are able to achieve some of the same functionality as SmartBeam ® but at a lower cost, due to other suppliers leveraging similar hardware costs, but offering products with multiple software features.

As noted, on October 10, 2019, an Advanced Notice of Proposed Rulemaking ("ANPRM") was published seeking public comment on permitting camera-based rear visibility systems, as an alternative to inside and outside rearview mirrors required under FMVSS No.

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In November 2022, NHTSA conducted a public meeting and discussed the ongoing research of this technology.

On February 1, 2022, NHTSA signed a Final Rule to allow for adaptive driving beam headlights, and the Final Rule is awaiting publication in the Federal Registrar.

The Company believes its adaptive SmartBeam ® (dynamic lighting system), which has been manufactured and sold for many years in jurisdictions outside the United States, will be permitted under the NHTSA Final Rule.

Antitakeover Provisions.

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

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

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

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General Risk Factors

COVID-19 Pandemic.

The COVID-19 pandemic has already significantly impacted worldwide economic and industry conditions and has had, is having, and is expected to continue to have, a material adverse effect on our business, financial condition, and/or results of operations.

The extent and duration of such possible impacts will depend on numerous factors, including:

• Duration and severity of any outbreaks and resulting actions taken by the Company or the various governments to contain or mitigate the spread of the coronavirus;

• Global governmental, business and individual actions taken in response to COVID-19, such as work stoppages, quarantines, shutdowns, shelter-in-place orders or other limitations, as well as voluntary shutdowns and other restrictions;

• The effect on our suppliers and companies throughout our supply chain, including industry wide part shortages and created labor shortages;

• Our ability to fulfill existing and future sales order backlog;

• Reductions or volatility in demand for our products or services;

• Increasing logistics costs and transportation challenges;

• Costs of any additional preparedness plans or actions to help ensure the health and safety of our employees and continued operations;

• Availability of employees to staff our operations and those of companies in our supply chain;

• Our ability to establish and maintain appropriate estimates and assumptions used to prepare the Consolidated Financial Statements;

• The financial and credit markets and economic activity generally, all of which have harmed and could continue to harm our business, financial condition, and/or results of operations, including impacting the ability to access capital and comply with any financial covenants.

Income Taxes.

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Our business success depends on attracting and retaining qualified personnel.

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

Throughout our Company, our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and

diverse management team and workforce.

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

Organizational and reporting changes within management could result in, and low

unemployment has contributed to, increased turnover.

Turnover, inability to attract and retain key employees, including managers, or government mandated remote work has had, is having, and is expected to continue to have a negative effect on our business, financial condition and/or results of operations.

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

Turnover, inability to attract and retain key employees, including managers, or government mandated remote work have had, and may continue to have a negative effect on our business, financial condition and/or results of operations.

International Operations.

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

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

• Brexit, and its impact;

• Natural disasters, political crises, and public health crises (e.g.

pandemics), which have caused, are causing, and will likely continue to cause downtime and closures at both supplier and customer facilities;

• Expropriation and nationalization;

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Any continued adverse worldwide economic conditions, currency exchange rates, trade war, war or significant terrorist acts, could each affect worldwide automotive sales and production levels, thereby impacting the Company;

• Public health crises (e.g.

pandemics) that can result in part shortages, labor shortages, or other impacts to the supply chain or customers;

• Manufacturing yield issues;

• Obligations and costs associated with addressing quality issues or warranty claims.

Unresolved Staff Comments.

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

What changed 10-K

Item 1A. Risk Factors