Gentherm Reports 2015 First Quarter Results

NORTHVILLE, Mich., April 30, 2015 /PRNewswire/ -- Gentherm (NASDAQ-GS:THRM), the global market leader and developer of innovative thermal management technologies, today announced its financial results for the first quarter ended March 31, 2015.

For the 2015 first quarter, revenues increased 7 percent year over year to $207.0 million and net income increased 20 percent from the prior year to $19.8 million.

"Once again all of our divisions met or exceeded their operational goals during this year's first quarter, and we are very happy with the strength of our business activity on a global level," said President and CEO Daniel R. Coker. "North America continues to be very strong, Europe is showing very good signs of strength and Asia continues to perform well even though we see opportunities there for even stronger growth in the future.  Our operational expenses remained on plan during the quarter and we expect that trend to continue in future quarters.

"The strong U.S. Dollar versus the local currencies of the countries where we operate has provided a revenue headwind.  Had the 2015 exchange rates been the same as the 2014 rates, our product revenues would have been significantly higher and our growth rate would have been nearly 12 percent over the prior year, which more closely reflects our shipping activity.  Even as our consolidated, Dollar-denominated revenues were impacted, we are very pleased with our bottom-line performance and the year-over-year growth in net income."

Coker added that for the fifth quarter in a row gross margins have also been very strong.

"Our gross margin came in around 32 percent, which we are very happy to report.  However many factors such as product mix, currency exchange rates and production capacity growth can impact our gross margins on a quarter-to-quarter basis.  With that said, we still believe the best gross margin target for Gentherm remains in the 30 percent range," Coker said.

First Quarter Financial Highlights

For the 2015 first quarter, revenues were up 7 percent to $206.9 million from $193.9 million in the prior year period.  The year-over-year revenue increase was driven by continued strong shipments of the Company's CCS systems and $7.5 million in revenue from Gentherm Global Power Technologies (GPT) , which was acquired during the second quarter of 2014. 

Foreign currency translation of the Company's Euro-denominated product revenue for this year's first quarter had an impact on its product revenue results since the average U.S. Dollar/Euro exchange rate in this year's first quarter was 1.13 compared to 1.37 in the first quarter of 2014.  Gentherm product revenues denominated in the Euro were €41.9 million during the first quarter of 2015 versus €39.1 million during the first quarter of 2014.  The translation of these revenues at the lower exchange rate for the Euro resulted in $10.2 million lower US Dollar reported revenues which more than offset the 7 percent growth in volume at the local currency level.  Further strengthening of the U.S. Dollar against the Euro since the end of the 2015 first quarter will continue to have an unfavorable impact on the Company's revenues during future periods.

CCS revenue in the 2015 first quarter, compared to the 2014 first quarter, increased by $12.1 million, or 15 percent, to $94.4 million.  This increase resulted from new program launches since the first quarter 2014, strong production volumes and related sales of vehicles equipped with CCS systems, particularly vehicles in the luxury segment of the automotive market.  New vehicle programs included the newly redesigned Ford Mustang which now offers CCS for the first time.

Seat heater revenue in this year's first quarter decreased year-over-year by approximately $7.7 million, or 9 percent, to $73.7 million, reflecting the unfavorable impact of the declining Euro exchange rate.  The Company's European denominated sales consist primarily of its seat heater products, whereas, its CCS sales in Europe are primarily denominated in U.S. Dollars.  As a result of this, the unfavorable impact of the lower Euro translation rate is focused primarily on its seat heater product sales.  Adjusted for the decline in the value of the Euro, seat heater sales actually increased due to market penetration on certain vehicle programs and stronger vehicle production volumes including those in Europe. Gentherm also had significant sales growth of its steering wheel heater product, which increased $1.0 million, or 11 percent year over year, to $9.8 million

Net income for the 2015 first quarter was $19.8 million or $0.55 per basic share and diluted share.  Net income for the first quarter of 2014 was $16.6 million, or $0.47 per basic and diluted share.

Gross margin as a percentage of revenue for this year's first quarter increased to 32.2 percent, up from 29.4 percent for the 2014 first quarter.  The increase was due to a favorable change in product mix, greater coverage of fixed costs at the higher volume levels, and a benefit from foreign currency impact on production expenses in foreign currencies.  The favorable product mix was primarily attributable to the greater sales growth in CCS products on which we have historically had better margin performance.  The stronger U.S. Dollar during the quarter resulted in lower production costs totaling $3,720,000.

Adjusted EBITDA for the 2015 first quarter was $34.1 million, up $1.7 million or 5 percent, compared with Adjusted EBITDA of $32.4 million for the 2014 first quarter. 

Research and Development, Selling, General and Administrative (SG&A) Expenses

Net research and development expenses for the 2015 first quarter were up year over year $1.5 million, or 12 percent, to $14.5 million when compared to the prior year period.  This increase was primarily driven by additional resources, including personnel, focused on application engineering for new production programs of existing products, development of new products and a program to develop the next generation of seat comfort products.  The increase in net research and development expenses in the 2015 first quarter also includes $289,000 due to the inclusion of GPT.  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.    

Selling, general and administrative expenses for the 2015 first quarter were $24.9 million.  This amount included selling, general and administrative expenses of GPT, which was acquired during the second quarter of 2014, totaling $2.0 million in the 2015 first quarter.  The remaining increase in selling, general and administrative expenses totaled $5.0 million, or 28 percent, for the 2015 first quarter.  This increase in expenses is due to increased management incentive compensation costs, higher general 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 increasing sales and marketing efforts aimed at supporting our current product development strategy.

Guidance

Barring unforeseen economic turbulence, including in the European market or further strengthening of the U.S. Dollar, the 2015 revenue growth outlook remains strong.  The Company is expecting revenue for 2015 to increase 10 to 15 percent over 2014 revenue, which was $811 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 markets that may have far-reaching applications for consumer products as well as industrial and technology markets.  Gentherm more than 9,000 employees in facilities in the U.S., Germany, Mexico, China, Canada, Japan, Korea, Malta, Hungary and 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, 2014 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


Mike Mason (investors)


michaelm@allencaron.com        


(212) 691-8087


Rene Caron (investors)


rene@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,



2015



2014


Product revenues

$

206,909



$

193,938


Cost of sales


140,339




136,913


Gross margin


66,570




57,025


Operating expenses:








Net research and development expenses


14,548




13,045


Acquisition transaction expenses





1,075


Selling, general and administrative


24,945




17,867


Total operating expenses


39,493




31,987


Operating income


27,077




25,038


Interest expense


(564)




(931)


Revaluation of derivatives loss


(964)




(247)


Foreign currency gain (loss)


435




(1,523)


Gain from equity investment





785


Other income (expense)


195




(241)


Earnings before income tax


26,179




22,881


Income tax expense


6,359




6,302


Net income

$

19,820



$

16,579


Basic earnings per share

$

0.55



$

0.47


Diluted earnings per share

$

0.55



$

0.47


Weighted average number of shares – basic


35,769




35,064


Weighted average number of shares – diluted


36,245




35,592


 

GENTHERM INCORPORATED

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

(Unaudited, in thousands)




     Three Months Ended

               March 31,               


2015

2014

Net income

$       19,820

$       16,579

Add Back:



   Income tax expense

6,359

6,302

   Interest expense

564

931

   Depreciation and amortization

7,436

7,318

Adjustments:



   Acquisition transaction expense

1,075

   Unrealized currency loss

873

1,266

   Unrealized revaluation of derivatives

(940)

(1,025)

Adjusted EBITDA

$       34,112

$       32,446

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)          


2015

2014


2015

2016

2017

Thereafter









Transaction related current expenses








Acquisition transaction expenses

$        –

$  1,075


$         –

$          –

$         –

$           –

Non-cash purchase accounting impacts








Customer relationships amortization

$ 1,792

$  2,056


$   6,845

$   6,845

$  6,845

$  23,659

Technology amortization

771

862


2,947

2,947

2,115

2,043

Product development costs amortization

265

569


1,011

41

Trade name amortization

46


180

180

135


$  2,874

$  3,487


$  10,983

$  10,013

$  9,095

$  25,702

Tax effect

(669)

(1,195)


(2,559)

(2,334)

(2,121)

(6,042)

Net income effect

$  2,205

$  3,367


$    8,424

$    7,679

$  6,974

$  19,660









Earnings per share - difference








Basic

$    0.06

$    0.10






Diluted

$    0.06

$    0.09

























 

GENTHERM INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)








March 31,
2015



December 31,
2014


ASSETS








Current Assets:








Cash and cash equivalents

$

79,581



$

85,700


Accounts receivable, less allowance of $2,858 and $2,847, respectively


147,545




136,183


Inventory:








Raw materials


51,404




48,678


Work in process


4,508




4,009


Finished goods


24,233




24,956


Inventory, net


80,145




77,643


Derivative financial instruments


2,362




145


Deferred income tax assets


5,532




6,247


Prepaid expenses and other assets


31,510




29,107


Total current assets


346,675




335,025


Property and equipment, net


92,444




91,727


Goodwill


27,673




30,398


Other intangible assets


58,171




68,129


Deferred financing costs


377




406


Deferred income tax assets


22,007




18,843


Derivative financial instruments


4,821




1,345


Other non-current assets


11,126




12,019


Total assets

$

563,294



$

557,892


LIABILITIES AND SHAREHOLDERS' EQUITY








Current Liabilities:








Accounts payable

$

84,544



$

71,434


Accrued liabilities


55,496




68,387


Current maturities of long-term debt


4,657




5,306


Derivative financial instruments


4,817




2,466


Total current liabilities


149,514




147,593


Pension benefit obligation


9,515




10,321


Other liabilities


5,460




2,788


Long-term debt, less current maturities


81,126




85,469


Derivative financial instruments


9,017




6,698


Deferred income tax liabilities


11,026




10,804


Total liabilities


265,658




263,673


Shareholders' equity:








Common Stock:








No par value; 55,000,000 shares authorized, 35,890,326 and 35,696,334 issued and outstanding at March 31, 2015 and December 31, 2014, respectively


246,133




243,255


Paid-in capital


(8,185)




(8,224)


Accumulated other comprehensive loss


(45,063)




(25,743)


Accumulated earnings


104,751




84,931


Total shareholders' equity


297,636




294,219


Total liabilities and shareholders' equity

$

563,294



$

557,892


GENTHERM INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)





Three Months Ended March 31,



2015



2014


Operating Activities:








Net income

$

19,820



$

16,579


Adjustments to reconcile net income to cash provided by (used in) operating activities:








Depreciation and amortization


7,459




7,473


Deferred income tax benefit


(2,483)




(1,804)


Stock compensation


1,358




870


Defined benefit plan (income) expense


(9)




1


Provision of doubtful accounts


125




(4)


Gain on revaluation of financial derivatives


(324)




(557)


Gain from equity investment





(785)


Excess tax benefit from equity awards





(2,173)


(Gain) loss on sale of property and equipment


(8)




24


Changes in operating assets and liabilities:








Accounts receivable


(15,994)




(21,153)


Inventory


(5,762)




457


Prepaid expenses and other assets


(3,905)




(5,786)


Accounts payable


15,522




2,798


Accrued liabilities


(6,970)




904


Net cash provided by (used in) operating activities


8,829




(3,156)


Investing Activities:








Investment in subsidiary, net of cash acquired


(47)




(628)


Proceeds from the sale of property and equipment


181




44




Purchases of property and equipment


(10,403)




(6,769)


Net cash used in investing activities


(10,269)




(7,353)


Financing Activities:








Borrowing of debt





13,455


Repayments of debt


(1,669)




(6,965)


Excess tax benefit from equity awards





2,173


Cash paid for the cancellation of restricted stock


(467)





Proceeds from the exercise of Common Stock options


2,026




1,634


Net cash provided by (used in) financing activities


(110)




10,297


Foreign currency effect


(4,569)




2,978


Net increase (decrease) in cash and cash equivalents


(6,119)




2,766


Cash and cash equivalents at beginning of period


85,700




54,885


Cash and cash equivalents at end of period

$

79,581



$

57,651


Supplemental disclosure of cash flow information:








Cash paid for taxes

$

14,768



$

4,689


Cash paid for interest

$

515



$

725


Supplemental disclosure of non-cash transactions:








Common Stock issued to Board of Directors and employees

$

673



$

495












 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/gentherm-reports-2015-first-quarter-results-300074880.html

SOURCE Gentherm

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