Cost of Goods Sold. As a percentage of net sales, cost of goods sold increased from 66.4% in the nine months ended September 30, 2008, to 69.3% in the nine months ended September 30, 2009. This period-over-period percentage increase primarily reflected the Company's inability to leverage fixed overhead costs due to decreased sales resulting from lower light vehicle production levels globally. The impact of annual customer price reductions was offset by purchasing cost reductions.
Operating Expenses. For the nine months ended September 30, 2009, engineering, research and development expenses decreased 12% and approximately $4,678,000, when compared with the same period last year, primarily due to reduced employee compensation expense. Selling, general and administrative expenses decreased 12% and approximately $3,618,000 for the nine months ended September 30, 2009, when compared with the same period last year, primarily due to reduced employee compensation expense and foreign exchange rates. Foreign exchange rates accounted for approximately one third of the decrease in selling, general and administrative expenses.
Total Other Income (expense). Investment income for the nine months ended September 30, 2009, decreased by approximately $7,622,000, when compared with the same period last year, primarily due to lower investment income due to lower interest rates.
A non-cash charge for other-than-temporary impairment losses on available-for-sale securities of approximately $1,291,000 was recognized in the first quarter of 2009 due to unrealized losses on equity investments (refer to investment footnote for additional details).
Other-net for the nine months ended September 30, 2009, decreased approximately $110,000 when compared with the same period last year, primarily due to realized losses on the sale of equity investments.
Taxes. The provision for income taxes varied from the statutory rate during the nine months ended September 30, 2009, primarily due to the domestic manufacturing deduction.
Net Income. Net income decreased by approximately $37,864,000, or 52% for the nine months ended September 30, 2009, when compared with the same period last year, primarily due to reduced operating margin.
FINANCIAL CONDITION:
Cash flow from operating activities for the nine months ended September 30, 2009, decreased approximately $7,383,000 to approximately $83,624,000, compared with approximately $91,007,000, for the same period last year, primarily due to the decrease in net income, partially offset by a decrease in inventory and an increase in accrued liabilities. Capital expenditures for the nine months ended September 30, 2009, were $16,453,000, compared with $38,206,000 for the same period last year, primarily due to reduced production equipment purchases. Cash and cash equivalents as of September 30, 2009, increased approximately $41,523,000 compared with December 31, 2008. The increase was primarily due to cash flow from operations, partially offset by dividends paid. Accounts receivable as of September 30, 2009, increased approximately $29,808,000 compared with December 31, 2008, primarily due to the higher sales level as well as monthly sales within each quarter.
Inventories as of September 30, 2009, decreased approximately $8,315,000 compared with December 31, 2008. The decrease was primarily the result of a reduction in long lead time electronic component raw materials inventory. Prepaid expenses and other current assets as of September 30, 2009, decreased approximately $10,162,000 compared to December 31, 2008. The decrease was primarily due to a reduction in the Company's refundable income taxes. Long-term investments as of September 30, 2009, increased approximately $11,496,000 compared to December 31, 2008. The increase was primarily due to an increase in unrealized gains in equity investments, partially offset by the sale of equity securities not re-invested as of September 30, 2009.

Accounts payable as of September 30, 2009, increased $12,515,000 compared to December 31, 2008, primarily due to increased production levels. Management considers the Company's working capital and long-term investments totaling approximately $514,436,000 as of September 30, 2009, together with internally generated cash flow and an unsecured $5,000,000 line of credit from a bank, to be sufficient to cover anticipated cash needs for the next year and for the foreseeable future.
On October 8, 2002, the Company announced a share repurchase plan, under which it may purchase up to 8,000,000 shares (post-split) based on a number of factors, including market conditions, the market price of the Company's common stock, anti-dilutive effect on earnings, available cash and other factors that the Company deems appropriate. On July 20, 2005, the Company announced that it had raised the price at which the Company may repurchase shares under the existing plan. On May 16, 2006, the Company announced that the Company's Board of Directors had authorized the repurchase of an additional 8,000,000 shares under the plan. On August 14, 2006, the Company announced that the Company's Board of Directors had authorized the repurchase of an additional 8,000,000 shares under the plan. And, on February 26, 2008, the Company announced that the Company's Board of Directors had authorized the repurchase of an additional 4,000,000 shares under the plan.
The following is a summary of quarterly share repurchase activity under the plan to date:

                                  Total Number of
                                 Shares Purchased           Cost of
            Quarter Ended          (Post-Split)         Shares Purchased
            March 31, 2003                 830,000     $       10,246,810
            September 30, 2005           1,496,059             25,214,573
            March 31, 2006               2,803,548             47,145,310
            June 30, 2006                7,201,081            104,604,414
            September 30, 2006           3,968,171             55,614,102
            December 31, 2006            1,232,884             19,487,427
            March 31, 2007                 447,710              7,328,015
            March 31, 2008               2,200,752             34,619,490
            June 30, 2008                1,203,560             19,043,775
            September 30, 2008           2,519,153             39,689,410
            December 31, 2008            2,125,253             17,907,128

            Total                       26,028,171     $      380,900,454

1,971,829 shares remain authorized to be repurchased under the plan as of September 30, 2009.
CRITICAL ACCOUNTING POLICIES:
The preparation of the Company's consolidated condensed financial statements contained in this report, which have been prepared in accordance with accounting principles generally accepted in the Unites States, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Historically, actual results have not been materially different from the Company's estimates. However, actual results may differ from these estimates under different assumptions or conditions.
The Company has identified the critical accounting policies used in determining estimates and assumptions in the amounts reported in its Management's Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Management believes there have been no significant changes in those critical accounting policies.

TRENDS AND DEVELOPMENTS:
The Company previously announced a number of OEM and dealer or port-installed programs for its Rear Camera Display (RCD) Mirror that consists of a liquid crystal display (LCD) that shows a panoramic video of objects behind the vehicle in real time. The Company recently announced that its RCD Mirror is offered on the 2010 Kia Sorento, Opirus, Forte and Morning in the Korean market. The Company also announced that its RCD Mirror is offered on the new Daithatsu Mira Cocoa mini-passenger vehicle in Japan. The Company started shipping RCD Mirrors to Acura/Honda, who does not allow suppliers to announce vehicle programs in a news release. The Company is currently shipping auto-dimming mirrors with RCD for 55 vehicle models.
On February 28, 2008, the President signed into law the "Kids Transportation Safety Act of 2007". The National Highway Traffic Safety Administration (NHTSA) had one year to initiate rulemaking to revise the federal standard to expand the field of view so that drivers can detect objects directly behind vehicles. NHTSA then has two years to determine how automakers must meet the rules, which may include the use of additional mirrors, sensors, rear back-up cameras (which could be in a mirror, navigation systems or other LCD display). Once NHTSA publishes the new rules, automakers will have 48 months to comply with those rules for vehicles in the United States. The Company's RCD Mirror is a cost competitive product that is relatively easy to implement and may be among the technologies that NHTSA will include as a means to meet the requirements of the legislation.
The Company previously announced it is shipping auto-dimming mirrors with SmartBeam®, its proprietary intelligent high-beam headlamp assist feature, to General Motors, Chrysler, BMW, Audi, Opel/Vauxhall, Toyota, Tata/Land Rover and Rolls Royce. During the current quarter, the Company announced that SmartBeam is offered on the 2010 BMW X1 Series and the Opel/Vauxhall Astra. The Company is currently shipping auto-dimming mirrors with SmartBeam for 32 vehicle models. During 2005, the Company reached an agreement with PPG Aerospace to work together to provide the variably dimmable windows for the passenger compartment on the new Boeing 787 Dreamliner series of aircraft. The Company will ship about 100 windows for the passenger compartment of each 787. The Company believes that the commercially viable market for variably dimmable windows is currently limited to the aerospace industry. The Company began shipping parts for test planes in mid-2007. Boeing, based on the latest information available, now expects the first delivery of the 787 Dreamliner series of aircraft to occur in late 2010. Delays were due to the impact of the machinists' strike, fastener replacement work and production issues due to complexity, which did not relate to the Company's product. The Company anticipates that it will begin to deliver our windows to the production line in the first half of 2010. During 2008, the Company and PPG Aerospace announced that they will work together to supply dimmable windows to Hawker Beechcraft Corporation for the passenger-cabin windows of the 2010 Beechcraft King Air 350i airplane. The Company began shipping parts for the King Air 350i airplane in mid-2009 in low volume. On May 14, 2009, the Company announced the development of its first carbon monoxide (CO) alarm designed primarily for applications such as hotels, motels, hospitals, college dormitories and nursing homes. The new product introduction comes at a time when over twenty states are currently mandating carbon monoxide detection. The new carbon monoxide alarm utilizes established sensing technology to deliver reliable performance whenever CO detection is required. The product is in compliance with Underwriters Laboratories 2034 and National Fire Protection Association 720, and is being shipped to leading electrical wholesalers, security product distributors and engineered systems distributors. The Company currently estimates that top line revenue will increase approximately 30-35% in the fourth quarter of 2009 compared with the same period in 2008, based on the current forecast for light vehicle production levels and the Company's anticipated product mix. These estimates are based on current light vehicle production forecasts for the fourth quarter of 2009 in the regions to which the Company ships product, as well as the estimated option rates for its mirrors on prospective vehicle models and anticipated product mix. Uncertainties, including light vehicle production levels, extended automotive plant shutdowns, sales rates in North America, Europe and Asia, customer inventory management, and the impact of potential automotive customer (including their Tier 1 suppliers) bankruptcies, work stoppages, strikes, etc., which could disrupt our shipments to these customers, making forecasting difficult. The Company also estimates that engineering, research and development expenses are currently expected to be flat in the fourth quarter of 2009 compared with the same period in 2008, primarily due to increased variable employee compensation expense, offset by reduced headcount. Selling, general and administrative expenses are currently expected to increase approximately 10% the fourth quarter of 2009 compared with the same period in 2008, primarily due to increased variable employee compensation expense and foreign exchange rates.

The Company utilizes the light vehicle production forecasting services of CSM Worldwide, and CSM's end-of-September forecast for light vehicle production for the fourth quarter of 2009 are approximately 2.7 million units for North America, 4.3 million for Europe and 2.9 million for Japan and Korea. CSM's end-of-September forecast for light vehicle production for calendar year 2009 are approximately 8.6 million for North America, 16.1 million for Europe and 10.4 million for Japan and Korea.
The global governmental vehicle stimulus programs, such as the "Cash for Clunkers" program in the United States, did not have a significant direct effect on the Company's production levels in the third quarter of 2009, since the smaller vehicles that people were mostly purchasing were those that typically did not contain significant Gentex content. However, there may have been some indirect effect due to the increased showroom traffic that those programs created. While the governmental stimulus programs were in effect, automotive vehicle sales were temporarily higher than automotive production levels. Now that sales have decreased and the scenario has reversed, automakers, at some point, will need to adjust their production plans for the lower sales levels. The Company is subject to increased market risk exposures of varying correlations and volatilities due to the turmoil in the financial markets, including foreign exchange rate risk, interest rate risk and equity price risk. Uncertain equity markets could negatively impact the Company's financial performance due to an increase in realized losses on the sale of equity investments and/or recognized losses due to an other-than-temporary impairment adjustment on available-for-sale securities (mark-to-market adjustments). During the quarter ended September 30, 2009, there were no material changes in the risk factors previously disclosed in the Company's report on Form 10-K for the fiscal year ended December 31, 2008, although certain risks have increased as noted above.
The Company has some assets, liabilities and operations outside the United States, which currently are not significant. Because the Company sells its automotive mirrors throughout the world, the Company is significantly affected by weak economic conditions in worldwide markets that are reducing demand for its products.
Automakers, now more than ever before, have been experiencing increased volatility and uncertainty in executing planned new programs which have, in some cases, resulted in cancellations or delays of new vehicle platforms, package reconfigurations and inaccurate volume forecasts. This increased volatility and uncertainty has made it more difficult for the Company to forecast future sales, effectively manage costs and utilize capital, engineering, research and development, and human resource investments.
The Company continues to experience significant pricing pressures from its automotive customers, which have affected, and which will continue to affect, its margins to the extent that the Company is unable to offset the price reductions with productivity and manufacturing yield improvements, engineering and purchasing cost reductions, and increases in unit sales volume, all of which pose increasing challenges in the current automotive production environment. In addition, financial pressures at certain automakers are resulting in increased cost reduction efforts by them, including requests for additional price reductions, decontenting certain features from vehicles, customer market testing of future business, dual sourcing initiatives and warranty cost-sharing programs, which could adversely impact the Company's sales growth, margins, profitability and, as a result, its share price. The Company also continues to experience pressure for select raw material cost increases.
While the automotive industry has always been cyclical and highly impacted by levels of economic activity, the current environment (global recession, credit crisis, decline in consumer confidence, government loans to certain OEM's that require certain conditions to be met) is unprecedented and is causing increased financial and production stresses evidenced by volatile production levels, supplier part shortages, customer and supplier bankruptcies, automotive plant shutdowns, consumer preference shift to smaller vehicles where the Company has a lower penetration rate and lower content per vehicle due to fuel costs, overcapacity and commodity material cost increases. If additional automotive customers (including their Tier 1 suppliers) experience bankruptcies, work stoppages, strikes, part shortages, etc., it could disrupt the Company's shipments to these customers, which could adversely affect the Company's sales, margins, profitability and, as a result, its share price.

In light of the well-publicized financial stresses within the worldwide automotive industry, certain automakers have filed for bankruptcy and other automakers and tier one mirror customers are considering bankruptcy and/or the sale of certain business segments. Should one or more of the Company's larger customers (including sales through their Tier 1 suppliers) declare bankruptcy or sell their business, it could adversely affect the collection of receivables, sales, margins, profitability and, as a result, its share price. The current uncertain economic environment continues to cause increased financial pressures and production stresses on the Company's customers, which could impact timely customer payments and ultimately the collectibility of receivables.
The Company increased its allowance for doubtful accounts by $3.8 million in the fourth quarter of 2008 related to financially distressed Tier 1 automotive customers. While the Company has made progress in collecting a portion of the significantly past due account balances from certain customers, the overall allowance for doubtful accounts related to all financially distressed Tier 1 automotive customers remains unchanged as of the end of the current quarter. As of June 30, 2009, the Company has been paid for all pre-petition bankruptcy receivables relating to Chrysler who filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on April 30, 2009. As of September 30, 2009, the Company received payment for all pre-petition bankruptcy receivables relating to General Motors who filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on June 1, 2009.
The Company implemented the first phase of a new Enterprise Resource Planning (ERP) System effective July 1, 2009, which covered key core business areas at its Zeeland, Michigan locations. To date, the Company has not experienced any significant issues during the implementation process. However, there is no guarantee that all system components will function as intended in the future. In addition, the Company is planning to implement the second phase of its new ERP System by the end of calendar year 2009, which will include one overseas office and additional lean manufacturing production line scheduling and business reporting capabilities. While we believe that all necessary system development processes, testing procedures and user training that is planned for phase two will be adequate and completed prior to final implementation, there is no guarantee that all system components will function as intended at the time of the phase two implementation. Unanticipated failure(s) could cause delays in the Company's ability to produce or ship its products, process transactions, or otherwise conduct business in its markets, resulting in material financial risk. The Company does not have any significant off-balance sheet arrangements or commitments that have not been recorded in its consolidated financial statements.
Item 3. Quantitative And Qualitative Disclosures About Market Risk. The information called for by this item is provided under the caption "Trends and Developments" under Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 4. Controls And Procedures.
The Company's management, with the participation of its principal executive officer and principal financial officer, has evaluated the effectiveness, as of September 30, 2009, of the Company's "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon that evaluation, the Company's management, including the principal executive officer and principal financial officer, concluded that the Company's disclosure controls and procedures, as of September 30, 2009, were adequate and effective such that the information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and information required to be disclosed by the Company in such reports is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

In the ordinary course of business, the Company may routinely modify, upgrade, and enhance its internal controls and procedures over financial reporting. However, there was no change in the Company's "internal control over financial reporting" [as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act] that occurred during the quarter ended September 30, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
SAFE HARBOR STATEMENT: . . .