Gentherm Reports Record Results For The 2014 First Quarter - Tucson News Now

Gentherm Reports Record Results For The 2014 First Quarter

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SOURCE Gentherm

Revenues Up Year-Over-Year 31 Percent

NORTHVILLE, Mich., May 1, 2014 /PRNewswire/ -- Gentherm (NASDAQ-GS:THRM), the global market leader and developer of innovative thermal management technologies, today announced record financial results for the first quarter ended March 31, 2014.

"We had an extraordinary first quarter," said President and CEO Daniel R. Coker.  "We achieved record revenues with every part of our business contributing to growth, led by a significant year-over-year increase in sales of our Climate Control Seats (CCS™), which for the first time since the acquisition in 2011, represents the largest portion of our revenues.  Gross margins, which fluctuate from quarter to quarter, came in on the high end of the expected range, and we achieved record profits for the quarter." 

Coker continued, "While we achieved a 31 percent increase in revenues over last year's first quarter, for comparison purposes, revenue in the first and second quarters of 2013 was not as strong as in the second half of last year.  Consequently, looking forward to the second half of 2014, our quarterly results will be compared to the much stronger results achieved in the second half of 2013.  As a result, our year-over-year quarterly increases may not be as large as those in the first half of this year.  With that said, however, I believe we remain on track to achieve another year of record results."

For the 2014 first quarter, revenues were up 31 percent to $193.9 million from $148.1 million in the prior year period.  Revenue increases resulted from continued strong shipments of the Company's Climate Control Seats (CCS™) which grew 46 percent year over year to approximately $81.9 million.  This increase was driven by new program launches since the 2013 first quarter and strong production volumes and sales of the vehicles equipped with CCS systems, particularly vehicles in the luxury segment of the automotive market.  Additionally, certain vehicles that have been redesigned since the first quarter of the prior year are experiencing very strong production and sales levels, including the General Motors full size SUV platform and the Jeep Grand Cherokee.  Improved sales to Japan-based customers, which had recovered from weaker sales during the year-earlier period, also contributed to the increase. 

Seat heater revenue grew 25 percent year over year to approximately $80.9 million.  This reflected market penetration on certain vehicle programs and also strong production volumes on General Motors' K2XX platform, its new line of full-size trucks and large sport utility vehicles.  The Company also had significant growth in the sales of heated steering wheels during the quarter which increased 58 percent year over year to approximately $8.8 million.  European-based sales were significantly higher than the prior year as local economies and car sales in that region continue to improve, said Coker. 

Foreign currency translation of the Company's Euro denominated revenue for this year's first quarter, which was approximately €39.1 million compared with €34.9 million for the first quarter of last year, increased the US Dollar-reported revenue by approximately $2.3 million.  The average US Dollar/Euro exchange rate for the 2014 first quarter was 1.3790 compared with 1.3207 for the prior year period.

Net income attributable to common shareholders for the 2014 first quarter was $16.6 million, or $0.47 per basic share and $0.47 per diluted share, which included $1.1 million in fees and expenses associated with the acquisition of Global Thermoelectric Inc. (GTE), which was completed on April 1, 2014.  Net income attributable to common shareholders for the first quarter of 2013 was $7.7 million, or $0.24 per basic and diluted share, which included $1.2 million in fees, legal and other expenses associated with the acquisition of W.E.T. shares.

Further non-cash purchase accounting impacts associated with the Company's recent acquisitions are detailed in the Acquisition Transaction Expenses, Purchase Accounting Impacts and Other Effects table accompanying the release.

Gross margin as a percentage of revenue for this year's first quarter increased to 29.4 percent, up from 26.4 percent for the 2013 first quarter.  This increase was due to a favorable change in product mix, greater coverage of fixed manufacturing costs at the higher volume levels, favorable contribution from the Company's new electronics manufacturing facility in China and foreign currency impact on production expenses in the Mexican Peso and Ukraine Hryvna.

Adjusted EBITDA for the 2014 first quarter was $32.4 million, up $14.3 million or 79 percent, compared with Adjusted EBITDA of $18.1 million for the prior year period reflecting the charges discussed previously.  Adjusted EBITDA (which is a non-GAAP measure) is provided to help shareholders understand Gentherm's results of operations due to the significant amount of acquisition-related amortization recorded against the Company's earnings.  This non-GAAP financial measure should be viewed in addition to, and not as an alternative for, Gentherm's reported results prepared in accordance with GAAP.

The Company's balance sheet as of March 31, 2014, had total cash and cash equivalents of $57.7 million, total assets of $513.3 million, shareholders' equity of $251.5 million and total debt of $90.3 million.

Revaluation of Derivatives and Foreign Currency Gains and Losses
For the 2014 first quarter, the Company recorded a foreign currency loss of $1.5 million compared with a gain of $987,000 for the prior year period.  A loss of $247,000 related to the revaluation of derivative financial instruments was recorded for this year's first quarter compared with a gain of $346,000 for the prior year period.

Research and Development, Selling, General and Administrative (SG&A) Expenses
Net research and development expenses for this year's first quarter were up $1.2 million to $13.0 million, reflecting additional resources, including personnel, focused on application engineering for new production programs on existing products, development of new products and a program to develop the next generation of seat comfort products.  New product development includes automotive heated and cooled storage devices, automotive interior thermal management devices, medical thermal management devices, battery thermal management devices and other potential products.

SG&A expenses for the 2014 first quarter increased $1.8 million to $18.0 million when compared to the prior year period.  Included are higher legal, audit and travel costs, as well as wages and benefits costs resulting from new employee hiring and merit increases.  The additional employees are primarily related to establishing a new electronics production facility in Shenzhen, China, and increasing sales and marketing efforts aimed at supporting the Company's current product development strategy. 

Guidance
Barring unforeseen economic turbulence, including worsening geopolitical tensions or unfavorable fluctuations of the Euro exchange rate, the 2014 revenue growth outlook remains strong.  Due to higher than expected first quarter product revenue results and the incorporation of the product revenues of Global Thermoelectric Inc., the Company is now expecting revenue for 2014 to increase by at least 15 percent over 2013 revenue, which was $662 million.

Conference Call
As previously announced, Gentherm is conducting a conference call today to be broadcast live over the Internet at 11:30 AM Eastern Time to review these financial results.  The dial-in number for the call is 1-877-407-4018 (or 1-201-689-8471).  The live webcast and archived replay of the call can be accessed in the Events page of the Investor section of Gentherm's website at www.gentherm.com.

About Gentherm
Gentherm (NASDAQ-GS:THRM) is a global developer and marketer of innovative thermal management technologies for a broad range of heating and cooling and temperature control applications. Automotive products include actively heated and cooled seat systems and cup holders, heated and ventilated seat systems, thermal storage bins, heated automotive interior systems (including heated seats, steering wheels, armrests and other components), cable systems and other electronic devices.  The Company's advanced technology team is developing more efficient materials for thermoelectric and systems for waste heat recovery and electrical power generation for the automotive market that may have far-reaching applications for consumer products as well as industrial and technology markets.  Gentherm has nearly 7,500 employees in facilities in the U.S., Germany, Mexico, China, Canada, Japan, England, Korea, Malta, Hungary and the Ukraine.  For more information, go to www.gentherm.com.

Except for historical information contained herein, statements in this release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding future sales, products, opportunities, markets, expenses and profits.Forward-looking statements involve known and unknown risks and uncertainties which may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks that sales may not increase, additional financing requirements may not be available, new competitors may arise and adverse conditions in the industry in which the Company operates may negatively affect its results.Those and other risks are described in the Company's annual report on Form 10-K for the year ended December 31, 2013 and subsequent reports filed with the Securities and Exchange Commission (SEC), copies of which are available from the SEC or may be obtained from the Company. Except as required by law, the Company assumes no obligation to update the forward-looking statements, which are made as of the date hereof, even if new information becomes available in the future.

Contact:

Allen & Caron Inc


Jill Bertotti (investors)


jill@allencaron.com


Len Hall (media)


len@allencaron.com


(949) 474-4300

 

TABLES FOLLOW

 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)



Three Months Ended

March 31,



2014



2013


Product revenues

$

193,938



$

148,090


Cost of sales


136,913




109,039


Gross margin


57,025




39,051


Operating expenses:








Net research and development expenses


13,045




11,841


Acquisition transaction expenses


1,075




1,163


Selling, general and administrative


18,089




16,256


Total operating expenses


32,209




29,260


Operating income


24,816




9,791


Interest expense


(931)




(981)


Revaluation of derivatives


(247)




346


Foreign currency (loss) gain


(1,523)




987


Gain realized form step acquisition of subsidiary


785




-


Income from equity investment


-




225


Other income (expense)


(19)




336


Earnings before income tax


22,881




10,704


Income tax expense


6,302




795


Net income


16,579




9,909


Income attributable to non-controlling interest


-




(1,258)


Net income attributable to Gentherm Incorporated


16,579




8,651


Convertible preferred stock dividends


-




(923)


Net income attributable to common shareholders

$

16,579



$

7,728


Basic earnings per share

$

0.47



$

0.24


Diluted earnings per share

$

0.47



$

0.24


Weighted average number of shares – basic


35,064




31,607


Weighted average number of shares – diluted


35,592




32,084


 

 

GENTHERM INCORPORATED

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

(Unaudited, in thousands)




     Three Months Ended

               March 31,               




2014

2013

Net income



$       16,579

$         9,909

Add Back:





   Income tax expense



6,302

795

   Interest expense



931

981

   Depreciation and amortization



7,318

7,679

Adjustments:





   Acquisition transaction expense



1,075

1,163

   Unrealized currency (gain) loss



1,266

(913)

   Unrealized revaluation of derivatives



(1,025)

(1,502)

Adjusted EBITDA



$       32,446

$       18,112

Use of Non-GAAP Financial Measures

In evaluating its business, Gentherm considers and uses Adjusted EBITDA as a supplemental measure of its operating performance.  The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, deferred financing cost amortization, transaction expenses, debt retirement expenses, unrealized currency gain or loss and unrealized revaluation of derivatives.  Management believes that Adjusted EBITDA is a meaningful measure of liquidity and the Company's ability to service debt because it provides a measure of cash available for such purposes. Management provides an Adjusted EBITDA measure so that investors will have the same financial information that management uses with the belief that it will assist investors in properly assessing the Company's performance on a period-over-period basis.

The term Adjusted EBITDA is not defined under GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP.  Adjusted EBITDA has limitations as an analytical tool, and when assessing the Company's operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP.  Gentherm compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only supplementally.

 

GENTHERM INCORPORATED

ACQUISITION TRANSACTION EXPENSES, PURCHASE ACCOUNTING IMPACTS AND OTHER EFFECTS

(Unaudited and in thousands, except per share data)








   Three Months Ended

             March 31,             

                      Future  Full Year Periods (estimated)                   



2014

2013

2014

2015

2016

Thereafter










Transaction related current expenses








Acquisition transaction expenses

$  1,075

$  1,163

$  –

$  –

$  –

$  –


Non-cash purchase accounting impacts








Customer relationships amortization

$  2,056

$  1,981

$  8,274

$  8,274

$  8,274

$  34,439


Technology amortization

862

831

3,470

3,470

3,470

3,061


Product development costs amortization

569

548

2,291

1,298

52



$  3,487

$  3,360

$  14,035

$  13,042

$  11,796

$  37,500










Tax effect

(1,195)

(1,230)

(3,251)

(3,021)

(2,732)

(8,685)


Net income effect

3,367

3,293






Non-controlling interest effect

(336)


Net income available to shareholders effect

$  3,367

$  2,957

$  10,784

$  10,021

$  9,064

$  28,815










Earnings per share - difference








Basic

$  0.10

$  0.09






Diluted

$  0.09

$  0.09














Series C Preferred Stock dividend

$  –

$  923

$  –

$  –

$  –

$  –










Earnings per share - difference








Basic

$  –

$  0.03






Diluted

$  –

$  0.03
















 

 

GENTHERM INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



March 31,

2014



December 31,

2013



(unaudited)





ASSETS








Current Assets:








Cash & cash equivalents

$

57,651



$

54,885


Accounts receivable, less allowance of $1,833 and $1,807, respectively


139,083




118,283


Inventory:








Raw Materials


43,243




33,783


Work in process


2,870




2,864


Finished goods


19,478




27,570


Inventory, net


65,591




64,217


Derivative financial instruments


345




67


Deferred income tax assets


10,448




10,616


Prepaid expenses and other assets


27,923




21,864


Total current assets


301,041




269,932


Property and equipment, net


78,901




79,234


Goodwill


25,830




25,809


Other intangible assets


81,637




83,431


Deferred financing costs


1,059




1,072


Deferred income tax assets


11,686




7,103


Derivative financial instruments


1,704




1,969


Other non-current assets


11,479




13,373


Total assets

$

513,337



$

481,923


LIABILITIES AND SHAREHOLDERS' EQUITY








Current Liabilities:








Accounts payable

$

66,198



$

61,662


Accrued liabilities


65,996




66,783


Current maturities of long-term debt


20,566




21,439


Derivative financial instruments


2,814




2,552


Deferred income tax liabilities


710




710


Total current liabilities


156,284




153,146


Pension benefit obligation


7,036




6,868


Other liabilities


2,770




1,601


Long-term debt, less current maturities


69,762




60,881


Derivative financial instruments


8,455




9,358


Deferred income tax liabilities


17,480




17,975


Total liabilities


261,787




249,829


Shareholders' equity:








Common Stock:








No par value; 55,000,000 shares authorized, 35,260,144 and 34,929,334 issued and outstanding at March 31, 2014 and December 31, 2013, respectively


234,991




232,067


Paid-in capital


(7,678)




(9,582)


Accumulated other comprehensive loss


(7,154)




(5,203)


Accumulated earnings


31,391




14,812


Total shareholders' equity


251,550




232,094


Total liabilities and shareholders' equity

$

513,337



$

481,923


 

 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)




Three Months Ended March 31,


2014


2013

Operating Activities:




Net income

$         16,579


$           9,909

Adjustments to reconcile net income to cash provided by operating activities:




Depreciation and amortization

7,473


7,934

Deferred tax provision

(1,804)


(740 )

Stock compensation

870


491

Defined benefit plan expense

1


(53 )

Provision of doubtful accounts

(4)


434

Gain on revaluation of financial derivatives

(557)


(1,244 )

Gain on equity investment

-


(176 )

Loss (gain) on sale of property, plant and equipment

24


3

Excess tax benefit from equity awards

(2,173)


-

Changes in operating assets and liabilities:




Accounts receivable

(21,153)


(7,765 )

Inventory

457


427

Prepaid expenses and other assets

(5,786)


(1,511 )

Accounts payable

2,798


(160 )

Accrued liabilities

904


2,490





Net cash provided by (used in) operating activities

(2,371)


10,039

Investing Activities:




Purchase of non-controlling interest

-


(40,302 )

Investment in subsidiary, net of cash acquired

(1,413)


-

Proceeds from the sale of property, plant and equipment

44


1

Purchase of property and equipment

(6,769)


(6,116 )





Net cash used in investing activities

(8,138 )


(46,417 )

Financing Activities:




Borrowing of debt

13,455


40,441

Repayments of debt

(6,965)


(5,182 )

Excess tax benefit from equity awards

2,173


-

Cash paid to Series C Preferred Stock Holders

-


(8,268 )

Proceeds from the exercise of common stock options

1,634


1,487





Net cash provided by (used in) financing activities

10,297


28,478





Foreign currency effect

2,978


(2,275 )





Net increase (decrease) in cash and cash equivalents

2,766


(10,175 )

 Cash and cash equivalents at beginning of period

54,885


58,152





                      Cash and cash equivalents at end of period

$         57,651


$         47,977





 

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