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STOCK-BASED COMPENSATION PLANS | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION PLANS | STOCK-BASED COMPENSATION PLANS At December 31, 2023, 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 "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, 2023, 25,611,657 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 |  | 4,908,950 |  |  | 1.00 |  | 4,908,950 |
Restricted Stock |  | 4,231,194 |  |  | 4.06 |  | 17,178,648 |
Performance Shares |  | 867,995 |  |  | 4.06 |  | 3,524,059 |
Total |  | 10,008,139 |  |  |  |  | 25,611,657 |
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 4,908,950 shares (net of shares from canceled/expired options) under the 2019 Omnibus Plan and 12,674,639 shares (net of shares from canceled/expired options) under the prior plan (prior to its replacement) through December 31, 2023. 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:
| 2023 |  | 2022 |  | 2021
Dividend yield (1) | 1.7 | % |  | 1.8 | % |  | 1.8 | %
Expected volatility (2) | 28.8 | % |  | 28.8 | % |  | 27.6 | %
Risk-free interest rate (3) | 4.0 | % |  | 3.4 | % |  | 1.3 | %
Expected term of options (in years) (4) | 4.2 |  | 4.2 |  | 4.1
Weighted-average grant-date fair value | $ | 7.66 |  |  | $ | 6.42 |  |  | $ | 6.59 |
(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, 2023, there was $7,993,783 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 2.09 years. Stock option expense for the years ended December 31, 2023, 2022 and 2021 was $6,095,854, $6,302,581, and $5,780,959 respectively. A summary of the status of the Company’s stock option plans at December 31, 2023, 2022 and 2021, and changes during the same periods are presented in the tables below.
| 2023
| Shares (000) |  | Wtd. Avg. Ex. Price |  | Wtd. Avg. Remaining Contract Life |  | Aggregate Intrinsic Value (000)
Outstanding at Beginning of Year | 4,872 |  |  | $ | 28 |  |  |  |  |
Granted | 768 |  |  | 30 |  |  |  |  |
Exercised | (1,023) |  |  | 31 |  |  |  |  | $ | 7,847 |
Forfeited | (230) |  |  | 29 |  |  |  |  |
Outstanding at End of Year | 4,387 |  |  | 29 |  |  | 2.9 years |  | $ | 17,491 |
Exercisable at End of Year | 1,942 |  |  | $ | 29 |  |  | 2.3 years |  | $ | 8,916 |
| 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 |
A summary of the status of the Company’s non-vested employee stock option activity for the years ended December 31, 2023, 2022, and 2021, are presented in the table below:
| 2023 |  | 2022 |  | 2021
| 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 | 2,913 |  |  | $ | 6 |  |  | 3,156 |  |  | $ | 5 |  |  | 3,175 |  |  | $ | 5 |
Granted | 768 |  |  | 8 |  |  | 1,219 |  |  | 6 |  |  | 1,434 |  |  | 7 |
Vested | (1,056) |  |  | 6 |  |  | (1,153) |  |  | 4 |  |  | (1,212) |  |  | 4 |
Forfeited | (180) |  |  | 6 |  |  | (309) |  |  | 6 |  |  | (241) |  |  | 5 |
Nonvested Stock Options at End of Year | 2,445 |  |  | $ | 7 |  |  | 2,913 |  |  | $ | 6 |  |  | 3,156 |  |  | $ | 5 |
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 4,231,194 shares under the 2019 Omnibus Plan and 5,630,019 shares under the prior plan (prior to its replacement) as of December 31, 2023, and has 3,377,863 shares outstanding under such plans.
| 2023 |  | 2022 |  | 2021
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 | 142,314 |  |  | 28.03 - 32.66 |  | 119,849 |  |  | 23.84 - 29.89 |  | 24,634 |  |  | 32.98 - 34.37
2 Year | 104,562 |  |  | 28.03 - 32.66 |  | 82,538 |  |  | 23.84 - 29.17 |  | — |  |  | -
3 Years | 302,569 |  |  | 28.03 - 32.66 |  | 261,493 |  |  | 23.84 - 30.85 |  | 606,853 |  |  | 32.98 - 35.67
4 Years | 265,719 |  |  | 28.03 - 32.66 |  | 260,149 |  |  | 23.84 - 29.17 |  | 309,955 |  |  | 32.98 - 35.67
5 Years | 184,900 |  |  | 28.03 - 32.66 |  | 225,060 |  |  | 23.84 - 29.17 |  | 157,169 |  |  | 32.98 - 35.67
| 1,000,064 |  |  | $28.03 - 32.66 |  | 949,089 |  |  | $23.84 - 30.85 |  | 1,098,611 |  |  | $32.98 - 35.67
(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, 2023, 2022, and 2021, are presented in the table below:
| 2023 | 2022 | 2021
| Shares (000) |  | Shares (000) |  | Shares (000) |
Nonvested, Beginning of Year | 3,553 |  |  | 3,760 |  |  | 3,599 |  |
Granted | 1,027 |  |  | 949 |  |  | 1,099 |  |
Vested | (1,058) |  |  | (935) |  |  | (759) |  |
Forfeited | (144) |  |  | (221) |  |  | (179) |  |
Nonvested, End of Year | 3,378 |  |  | 3,553 |  |  | 3,760 |  |
As of December 31, 2023, there was unearned stock-based compensation of $45,797,227 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, 2023, 2022 and 2021 was $24,809,834, $21,773,179, and $19,304,013 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, 2023, the Company had unearned stock-based compensation of $16,118,617 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, 2023, 2022, and 2021 was $5,882,458, $1,246,369, and $1,573,831, 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 for the year ended December 31, 2023 was $1,526,983. 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, 2023, 2022, and 2021 was $882,294, $906,478, and $713,912, respectively. The following table summarizes shares sold to employees under the 2022 and prior plan in the years ended December 31, 2023, 2022 and 2021:
Plan | 2023 |  | 2022 |  | 2021 | Cumulative Shares Issued | Weighted Average Fair Value 2023
2022 Employee Stock Purchase Plan | 194,241 |  |  | 94,111 |  |  | — |  | 288,352 |  | $ | 30.29 |
Prior Employee Stock Purchase Plan | — |  |  | 126,101 |  |  | 143,892 |  | 1,624,122 |  | $ | — |

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