Summary Of Significant Accounting And Reporting Policies (Policy)

12 Months Ended

Dec. 31, 2012

The consolidated financial statements include the accounts of Gentex Corporation and all of its wholly-owned subsidiaries (together the “Company”). All significant 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 bases its allowances for doubtful accounts related to receivables on historical credit and collections experience, and the specific identification of other potential problems, including the economic climate. Actual collections can differ, requiring adjustments to the allowances. Individual accounts receivable balances are evaluated on a monthly basis, and those balances considered uncollectible are charged to the allowance. Collections of amounts previously written off are recorded as an increase to the allowance.

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



	Beginning Balance		Net Additions/ (Reductions) to Costs and Expenses			Deductions and Other Adjustments			Ending Balance
Year Ended December 31, 2012:
Allowance for Doubtful Accounts	$	3,400,000	$	(577	)	$	577	**	$	3,400,000
Year Ended December 31, 2011:
Allowance for Doubtful Accounts	$	4,300,000	$	(802,929	)	$	(97,071	)*	$	3,400,000

* Represents excess of accounts written off over recoveries and other adjustments.

** Represents excess recoveries and other adjustments over accounts written off.

The Company’s overall allowance for doubtful accounts primarily relates to financially distressed Tier 1 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 to its non-financial assets and liabilities. 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 measure on earnings. The cost of securities sold is based on the specific identification method.

The Company’s investment securities are classified as available for sale and are stated at fair value based on quoted market prices. Assets or liabilities that have recurring measurements are shown below as of December 31, 2012 and December 31, 2011:



			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, 2012		(Level I)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	389,678,664	$	389,678,664	$	—	$	—
Short-Term Investments:
Certificate of Deposit	510,881		—		510,881		—
Government Securities	38,522,471		—		38,522,471		—
U.S. Treasury Notes	15,020,350		—		15,020,350		—
Corporate Bonds	6,563,228		—		6,563,228		—
Other	185,926		185,926		—		—
Long-Term Investments:
Corporate Bonds	2,180,780		—		2,180,780		—
Common Stocks	53,283,201		53,283,201		—		—
Mutual Funds – Equity	86,109,053		86,109,053		—		—
Other – Equity	261,000		261,000		—		—
Total	$	592,315,554	$	529,517,844	$	62,797,710	$	—



			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, 2011		(Level I)		(Level 2)		(Level 3)
Cash & Cash Equivalents	$	357,986,774	$	357,986,774	$	—	$	—
Short-Term Investments:
Government Securities	35,024,030		—		35,024,030		—
U.S. Treasury Notes	25,044,000		—		25,044,000		—
Corporate Bonds	649,204		—		649,204		—
Other	91,003		91,003		—		—
Long-Term Investments:
Common Stocks	53,554,303		53,554,303		—		—
Mutual Funds – Equity	73,749,772		73,749,772		—		—
Certificate of Deposit	505,390		—		505,390		—
Other – Equity	358,700		358,700		—		—
Total	$	546,963,176	$	485,740,552	$	61,222,624	$	—

The Company determines the fair value of its U.S. Treasury Notes, Government Securities and Corporate 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. The Company also refers to third party sources to validate valuations.

In 2012, the Company determined that the pricing inputs for Government Securities were observable inputs consistent with a Level 2 presentation rather than a Level 1 presentation as disclosed in 2011. As such, the 2011 presentation has been revised to correct this presentation.

The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of December 31, 2012 and 2011:



	Unrealized
2012	Cost		Gains			Losses				Market Value
Short-Term Investments:
Certificate of Deposit	$	510,881	$	—		$	—			$	510,881
Government Securities	38,514,411		9,004			(944)				38,522,471
U.S. Treasury Notes	15,018,810		2,602			(1,062		)		15,020,350
Corporate Bonds	6,529,758		33,470			—				6,563,228
Other	185,926		—			—				185,926
Long-Term Investments:
Corporate Bonds	2,174,948		5,832			—				2,180,780
Common Stocks	40,893,121		12,781,501			(391,421		)		53,283,201
Mutual Funds-Equity	75,321,640		11,082,714			(295,301		)		86,109,053
Other-Equity	238,506		22,494			—				261,000
Total	$	179,388,001	$	23,937,617	—	$	(688,728	)	—	$	202,636,890



	Unrealized
2011	Cost		Gains		Losses			Market Value
Short-Term Investments:
Government Securities	$	35,016,980	$	7,090	$	(40	)	$	35,024,030
U.S. Treasury Notes	25,025,600		18,400		—			25,044,000
Corporate Bonds	648,879		325		—			649,204
Other	91,003		—		—			91,003
Long-Term Investments:
Common Stocks	42,344,526		12,274,640		(1,064,863		)	53,554,303
Mutual Funds-Equity	68,986,676		6,277,183		(1,514,087		)	73,749,772
Certificate of Deposit	505,390		—		—			505,390
Other-Equity	338,506		20,194		—			358,700
Total	$	172,957,560	$	18,597,832	(2,578,990		)	$	188,976,402

Unrealized losses on investments as of December 31, 2012 are as follows:



	Aggregate Unrealized Losses		Aggregate Fair Value
Less than one year	$	688,728	$	22,887,686

Unrealized losses on investments as of December 31, 2011 are as follows:



	Aggregate Unrealized Losses		Aggregate Fair Value
Less than one year	$	2,578,990	$	42,845,635

ASC 320, “Accounting for Certain Investments in Debt and Equity Securities,” as amended and interpreted, provides guidance on determining when an investment is other-than-temporarily impaired. The Company reviews its fixed income and equity investment portfolio for any unrealized losses that would be deemed other-than-temporary and require the recognition of an impairment loss in income. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and the Company’s intent and ability to hold the investments. Management also considers the type of security, related-industry and sector performance, as well as published investments ratings and analyst reports, to evaluate its portfolio. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and new cost basis in the investment is established. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. No investments were considered to be other-than-temporary impaired in 2012 and 2011.

Fixed income securities as of December 31, 2012, have contractual maturities as follows:



Due within one year	$	60,802,856
Due between one and five years	2,180,780
Total	$	62,983,636

Fair Value Of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, investments, accounts receivable and accounts payable. The Company’s estimate of the fair values of these financial instruments approximates their carrying amounts at December 31, 2012 and 2011.

Inventories

Inventories include material, direct labor and manufacturing overhead and are valued at the lower of first-in, first-out (FIFO) cost or market. Inventories consisted of the following as of December 31, 2012 and 2011.



	2012		2011
Raw materials	$	114,750,525	$	129,796,238
Work-in-process	24,588,734		26,367,953
Finished goods	20,591,007		32,589,121
Total Inventory	$	159,930,266	$	188,753,312

Allowances for slow-moving and obsolete inventories were $7,797,000 and $4,893,000 at December 31, 2012 and 2011. The year-over-year increase in the allowance was primarily the result of raw materials inventory.

Plant and Equipment

Plant and equipment are stated at cost. Depreciation and amortization are computed for financial reporting purposes using the straight-line method, with estimated useful lives of 7 to 40 years for buildings and improvements, and 3 to 10 years for machinery and equipment. Depreciation expense was approximately $48,480,000, $41,572,000 and $37,744,000 in 2012, 2011 and 2010, respectively.

Plant And Equipment

Plant and Equipment

Impairment Of Disposal Of Long-Lived Assets

Impairment of Disposal of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

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. Accumulated amortization was approximately $6,112,000 and $4,630,000 at December 31, 2012 and 2011, respectively. At December 31, 2012, patents had a weighted average amortization life of 9 years. Amortization expense was approximately $1,699,000, $1,063,000, and $877,000 in 2012, 2011 and 2010, respectively. For each of the next five years, amortization expense will approximate $3,000,000 annually

Revenue Recognition

The Company’s revenue is generated from sales of its products. Sales are recognized when the product is shipped and legal title has passed to the customer. The Company does not generate sales from arrangements with multiple deliverables.

Advertising And Promotional Materials

Advertising and Promotional Materials

All advertising and promotional costs are expensed as incurred and amounted to approximately $970,000, $1,179,000 and $922,000, in 2012, 2011 and 2010, respectively.

Repairs And Maintenance

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 $13,789,000, $11,520,000 and $8,315,000, in 2012, 2011 and 2010, 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. Operations are charged with the cost of claims reported and an estimate of claims incurred but not reported based upon historical claims lag information and other data.

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, 2012 and 2011. 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 taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates.

Earnings Per Share

The following table reconciles the numerators and denominators used in the calculations of basic and diluted earnings per share (EPS) for each of the last three years:



	2012		2011		2010
Numerators:
Numerator for both basic and diluted EPS, net income	$	168,586,840	$	164,668,228	$	137,733,969
Denominators:
Denominator for basic EPS, weighted-average common shares outstanding	143,097,530		142,492,699		139,356,831
Potentially dilutive shares resulting from stock option plans	870,501		1,784,109		1,378,936
Denominator for diluted EPS	143,968,031		144,276,808		140,735,767

For the years ended December 31, 2012, 2011 and 2010, 3,332,719, 1,253,824 and 279,333 shares, respectively, related to stock option plans were not included in diluted average common shares outstanding because their effect would be antidilutive.

Other Comprehensive Income (Loss)

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. The following table presents the net changes in the Company's accumulated other comprehensive income:



	Foreign Currency		Unrealized Gains(Losses) On Securities			Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2010	$	566,903	$	21,750,000		$	22,316,903
Other comprehensive income (loss)	1,563,054		(11,337,754		)	(9,774,700		)
Balance as of December 31, 2011	2,129,957		10,412,246			12,542,203
Other comprehensive income (loss)	328,976		4,699,532			5,028,508
Balance as of December 31, 2012	$	2,458,933	$	15,111,778		$	17,570,711

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, “Share-Based Payment.” As described more fully in Note 5, the Company provides compensation benefits under two stock option plans, a restricted plan and an employee stock purchase plan.

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.