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Stock-Based Compensation Plans | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation Plans | Stock-Based Compensation Plans As of September 30, 2023, the Company had two equity incentive plans, which include the Gentex Corporation 2019 Omnibus Incentive Plan ("2019 Omnibus Plan"), and an employee stock purchase plan. Those plans and any prior 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 awards and restricted stock units, performance share awards and performance units, and other awards that are stock-based, cash-based or a combination of both. The 2019 Omnibus Plan replaced the Company's Employee Stock Option Plan, Second Restricted Stock Plan, and Amended and Restated Non-Employee Director Stock Option Plan (the "Prior Plans"), which were also approved by shareholders. 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. Readers should refer to Note 5 of the consolidated financial statements in the Company's Annual Report on Form 10-K for the calendar year ended December 31, 2022, for additional information related to the Prior Plans. The Company recognized total compensation expense for share-based payments of $10,948,031 and $29,212,236 for the three and nine months ended September 30, 2023, respectively. The Company recognized compensation expense for share-based payments of $7,611,546 and $22,973,113 for the three and nine months ended September 30, 2022, respectively. A portion of the compensation cost for share based payment awards is capitalized as part of inventory. 2019 Omnibus Incentive Plan 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. Pursuant to the terms of the 2019 Omnibus Plan, each type of award counts against the available shares based on a predetermined conversion rate (shown in the table below). As of September 30, 2023, 9,733,895 share awards have been made under the Plan, resulting in 24,797,549 shares granted of the 45,000,000 total shares available to be issued under the Plan. The shares issued are presented net of shares from canceled/expired options and shares.
|  | Shares Granted |  | Conversion Rate |  | Total Shares Under 2019 Omnibus Plan
Non-Qualified Stock Options |  | 4,811,132 |  |  | 1.00 |  | 4,811,132 |
Restricted Stock |  | 4,056,891 |  |  | 4.06 |  | 16,470,977 |
Performance Shares |  | 865,872 |  |  | 4.06 |  | 3,515,440 |
Total |  | 9,733,895 |  |  |  |  | 24,797,549 |
Employee Stock Options Under the 2019 Omnibus Plan and the Employee Stock Option Plan, the option exercise price equals the stock’s market price on the date of grant. The options vest after one to five years and expire after five to ten years. As of September 30, 2023, there was $8,461,373 of unearned compensation cost associated with stock options granted under the 2019 Omnibus Incentive Plan and the Employee Stock Option Plan, which is expected to be recognized over the remaining vesting periods. 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:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Dividend Yield (1) | 1.72 | % |  | 1.78 | % |  | 1.74 | % |  | 1.79 | %
Expected volatility (2) | 28.66 | % |  | 29.02 | % |  | 28.89 | % |  | 28.62 | %
Risk-free interest rate (3) | 4.60 | % |  | 4.06 | % |  | 4.11 | % |  | 3.16 | %
Expected term of options (years) (4) | 4.14 |  | 4.15 |  | 4.15 |  | 4.15
Weighted-avg. grant date fair value | $8.40 |  | $5.97 |  | $7.54 |  | $6.28
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. Restricted Shares Restricted shares awarded under the 2019 Omnibus Plan and the Second Restricted Stock 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 the Compensation Committee, appointed by the Board of Directors, but may not exceed ten years under the terms of such plans. As of September 30, 2023, the Company had unearned stock-based compensation of $46,555,320 associated with the restricted stock grants issued under the 2019 Omnibus Plan and the Second Restricted Stock Plan. The unearned stock-based compensation related to these grants is being amortized to compensation expense over the applicable restriction periods. Compensation expense from restricted stock grants in the three and nine months ended September 30, 2023 was $6,369,348 and $18,178,157, respectively. Compensation expense from restricted stock grants in the three and nine months ended September 30, 2022 was $5,504,462 and $16,130,339, 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 average closing stock price on the twenty days preceding 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 September 30, 2023, the Company had unearned stock-based compensation of $18,288,329 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 these performance share grants in the three and nine months ended September 30, 2023 was $2,463,158 and $4,600,386, respectively. Compensation expense related to these performance share grants in the three and nine months ended September 30, 2022 was $308,812 and $1,431,018, respectively. As part of its objective of attracting and retaining management to fulfill the Company's strategic goals, the Compensation Committee recommended and the Board approved on February 16, 2023, a retention grant of performance share awards ("PSAs"). In addition to the retention of management, the PSAs 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. The grant date fair value of PSAs with TSR targets was determined using a Monte Carlo simulation. Compensation expense related to these retention grants in the three and nine months ended September 30, 2023 was $441,115 and $1,082,333, respectively. 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. Under that plan, the Company sold shares at 85% of the stock’s market price at date of purchase. Under ASC 718, Compensation - Stock Compensation, the 15% discounted value was recognized as compensation expense. As of September 30, 2023, the Company has issued 1,624,122 shares under this prior plan. 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 the plan, the Company sells shares at 85% of the stock's market price at date of purchase. Under ASC 718, the 15% discounted value is recognized as compensation expense. As of September 30, 2023, the Company has issued 250,369 shares under this plan.

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