NORTHVILLE, Mich., Oct. 27, 2016 /PRNewswire/ -- Gentherm
(NASDAQ-GS:THRM), the global market leader and developer of
innovative thermal management technologies, today announced its
financial results for the third quarter ended September 30, 2016.
Third Quarter 2016 Highlights
- Total revenue growth of 4% to $232.6
million
- Revenue impacted by softening growth in Climate Control Seat
(CCS) and a significant decline in Global Power Technology (GPT)
against a difficult prior year comparison
- Cincinnati Sub-Zero (CSZ) acquisition contributed $14.9 million, 8% pro-forma growth from the prior
year
- Revenue growth of 18% in Steering Wheel Heater and 10% in Seat
Heater
- Increased operating expenses driven by investments of
$12 million in attractive growth
opportunities
"In the third quarter, we generated top line growth for the
total company and the automotive business of 4% and 5%,
respectively. The automotive market growth was achieved
despite vehicle production growth of less than 2% in North America where we generate more than 50%
of our automotive revenue. We were also encouraged by the
performance of other business lines that displayed particular
strength, including double-digit growth in our Seat Heater and
Steering Wheel Heater businesses," President and CEO Daniel R. Coker commented.
"Our automotive business continues to deliver strong margins and
cash flow despite slower growth. We remain excited about our
Cincinnati Sub-Zero acquisition which contributed strongly to our
revenue in the third quarter and represents a large and attractive
market opportunity to leverage our expertise in thermal
management. We are investing for the future as we see a
number of attractive opportunities such as battery thermal
management and electronics that we expect to drive our growth in
the coming years. Our investments also include critical
infrastructure projects in leading edge systems to support our
growing organization."
"Our CCS business segment experienced year over year softening
in growth. CCS continues to be impacted by customer driven timing
decisions on incorporating our products into certain automotive
production lines. While we expect the timing issues to
normalize and remain encouraged by the long-term market penetration
opportunity for CCS, we anticipate a rebalancing at some of our
customers between higher-end heated and cooled seat systems and
heated and ventilated seat systems."
"Revenue growth in the automotive segment and the acquisition of
CSZ were partially offset by lower revenue from GPT which was
$5.1 million for the quarter, down
$16.0 million from the prior
year. This decline was magnified by an unusually difficult
comparison as nearly 50% of last year's revenue for this project
driven business occurred in the third quarter. GPT's products
continue to encounter end market weakness which is attributable to
continued natural gas pipeline construction project deferments.
However, we remain positive on this business over the longer term
and are focused on investing in new technologies that will expand
GPT's opportunity in new markets."
GENTHERM
INCORPORATED
|
|
|
|
REVENUE BY PRODUCT
CATEGORY
|
|
|
|
(Unaudited, in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
Ended
|
|
|
|
|
|
September
30
|
|
|
|
|
|
2016
|
2015
|
|
Y/YChange
|
Climate Controlled
Seat (CCS)
|
|
$
101,028
|
$
99,084
|
|
2%
|
|
Seat
Heaters
|
|
75,442
|
68,365
|
|
10%
|
|
Steering Wheel
Heaters
|
|
12,914
|
10,937
|
|
18%
|
|
Automotive
Cables
|
|
21,768
|
21,143
|
|
3%
|
|
Other
Automotive
|
|
1,414
|
3,205
|
|
-56%
|
|
Subtotal
Automotive
|
|
$
212,566
|
$
202,734
|
|
5%
|
|
Remote Power
Generation (GPT)
|
|
5,112
|
21,084
|
|
-76%
|
|
Cincinnati Sub-Zero
Products (CSZ)
|
|
14,947
|
-
|
|
NM
|
|
Total
Company
|
|
$
232,625
|
$
223,818
|
|
4%
|
|
Third Quarter 2016 Financial Review
The 4% increase in
product revenues during the third quarter was driven by strong
results in our Steering Wheel Heater and Seat Heater business lines
as well as continued benefit from the CSZ acquisition, which was
partially offset again this quarter by lower product revenues from
GPT. Revenues for CSZ during the third quarter were strong
once again, driven by sales of medical and industrial products.
Automotive product revenues grew 5% in the third quarter 2016
including modestly higher sales for CCS, with 10% and 18% growth in
automotive seat heaters and in steering wheel heaters,
respectively.
Product revenues from GPT declined year over year reflecting
timing issues and customer project deferments. GPT continues to be
impacted by the market weakness in the oil and gas industry that
has reduced capital investments made by GPT's principal customers
that build and operate natural gas pipelines. During prior
quarters, this weakness had been offset by higher sales of products
that are sold into geographical markets outside of GPT's home
market of North America. However, these are typically larger
custom products which are impacted by the timing of shipments and
fewer of these custom systems were shipped during third quarter
2016.
Gross margin as a percentage of revenue for the quarter was
33.0% compared with 33.5% in the third quarter of 2015. The lower
gross margin was due to the lower GPT revenue, which has a higher
gross margin percentage, offset partially by a favorable foreign
currency impact on production expenses.
Operating expenses of $49.3
million increased $11.8
million or 31% during the third quarter of 2016 compared
with 2015. Nearly half of this increase is due to the acquisition
of CSZ, which had operating costs of $5.4
million during the quarter. The remaining increase is
attributable to our continued development of new products and
improvements to our business systems. In fact, a significant
amount of our operating expenses, totaling about $12 million for the quarter, are attributable to
these activities and will benefit our revenue in the future.
Net research and development expenses (R&D) of $19.7 million increased by $4.8 million or 32% during the third quarter of
2016 compared with 2015 as a result of new production programs and
new product development. Two of those initiatives, battery
thermal management and electronic control modules, incurred
expenses of $1.5 million in the third
quarter of 2016 and are expected to add $50
million in annual revenue by 2019.
Selling, general and administrative expenses (SG&A) of
$29.5 million increased by
$7.0 million or 31% during the third
quarter of 2016 compared with 2015. SG&A included
$4.7 million attributable to CSZ and
$1.3 million for two important
business software application implementation projects that are
essential to support our future growth in our core product lines
and new products currently in development.
Adjusted EBITDA decreased for the quarter to $37.1 million compared with Adjusted EBITDA of
$45.6 million for the third quarter
of 2015, a decrease of $8.5 million,
or 19%, due to the higher operating expenses offset partially by
higher revenues. A reconciliation of Adjusted EBITDA, a
non-GAAP measure, to net income is provided in a table accompanying
this news release.
Total cash as of September 30,
2016 was $132.8 million when
compared with total cash of $144.5
million at December 31,
2015. Total cash combined with borrowing availability under
the Company's credit agreements, provides available liquidity
totaling $258.2 million as of
September 30, 2016.
Guidance
We expect our full year 2016 revenue growth
rate in the range of 7 to 8%. Our guidance reflects continued
end market weakness for GPT, the impact of launch timing and
product mix shifts within our CCS business, and recently announced
production cuts by certain customers. Our preliminary outlook
for 2017 calls for revenue growth in the range of 5 to 10%.
Conference Call
As previously announced, Gentherm is
conducting a conference call today to webcast at 8:00 AM Eastern Time to review these financial
results. The dial-in number for the call is 1-877-407-4018 or
201-689-8471. The live webcast and archived replay of the
call can be accessed on 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), battery thermal management systems, cable
systems and other electronic devices. Non-automotive products
include remote power generation systems, heated and cooled
furniture, patient temperature management systems, industrial
environmental test chambers and related product testing services
and other consumer and industrial temperature control
applications. The Company's advanced technology team is
developing more efficient materials for thermoelectrics and new
systems for waste heat recovery and electrical power
generation. Gentherm has more than 11,500 employees in
facilities in the U.S., Germany,
Canada, China, Hungary, Japan, Korea, Macedonia, Malta, Mexico, Ukraine and Vietnam. 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 forward-looking statements
represent Gentherm Incorporated's goals, beliefs, plans and
expectations about its prospects for the future and other future
events. The forward-looking statements included in this press
release are made as of the date hereof or as of the date specified
and are based on management's current expectations and
beliefs. Such statements are subject to a number of important
assumptions, risks, uncertainties and other factors that may cause
the Company's actual performance to differ materially from that
described in or indicated by the forward looking statements. Those
risks include, but are not limited to, risks that new products may
not be feasible, sales may not increase, additional financing
requirements may not be available, new competitors may arise,
currency exchange rates may change, and adverse conditions in the
industry in which the Company operates may negatively affect its
results. The foregoing risks should be read in conjunction with
other cautionary statements included herein, as well as in the
Company's annual report on Form 10-K for the year ended
December 31, 2015 and subsequent
reports filed with the Securities and Exchange Commission. Except
as required by law, the Company expressly disclaims any obligation
or undertaking to update any forward-looking statements to reflect
any change in its expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
GENTHERM
INCORPORATED
CONSOLIDATED
CONDENSED STATEMENTS OF INCOME (In thousands, except per
share data) (Unaudited)
|
|
|
|
Three Months Ended
September 30,
|
|
|
2016
|
|
|
2015
|
Product
revenues
|
|
$
|
232,625
|
|
|
$
|
223,818
|
Cost of
sales
|
|
|
155,931
|
|
|
|
148,892
|
Gross
margin
|
|
|
76,694
|
|
|
|
74,926
|
Operating
expenses:
|
|
|
|
|
|
|
|
Net research and
development expenses
|
|
|
19,745
|
|
|
|
14,934
|
Acquisition
transaction expenses
|
|
|
22
|
|
|
|
—
|
Selling, general and
administrative expenses
|
|
|
29,512
|
|
|
|
22,543
|
Total operating
expenses
|
|
|
49,279
|
|
|
|
37,477
|
Operating
income
|
|
|
27,415
|
|
|
|
37,449
|
Interest
expense
|
|
|
(660)
|
|
|
|
(759)
|
Revaluation of
derivatives
|
|
|
—
|
|
|
|
(134)
|
Foreign currency
(loss) gain
|
|
|
(873)
|
|
|
|
420
|
Other
income
|
|
|
359
|
|
|
|
487
|
Earnings before
income tax
|
|
|
26,241
|
|
|
|
37,463
|
Income tax
expense
|
|
|
6,018
|
|
|
|
9,798
|
Net income
|
|
$
|
20,223
|
|
|
$
|
27,665
|
Basic earnings per
share
|
|
$
|
0.55
|
|
|
$
|
0.77
|
Diluted earnings per
share
|
|
$
|
0.55
|
|
|
$
|
0.76
|
Weighted average
number of shares – basic
|
|
|
36,477
|
|
|
|
36,110
|
Weighted average
number of shares – diluted
|
|
|
36,595
|
|
|
|
36,482
|
GENTHERM
INCORPORATED CONSOLIDATED CONDENSED BALANCE
SHEETS (In thousands,
except share data) (Unaudited)
|
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
132,813
|
|
|
$
|
144,479
|
Accounts receivable,
less allowance of $1,698 and $955, respectively
|
|
178,965
|
|
|
|
142,610
|
Inventory:
|
|
|
|
|
|
|
Raw
materials
|
|
64,185
|
|
|
|
50,371
|
Work in
process
|
|
12,909
|
|
|
|
4,150
|
Finished
goods
|
|
30,110
|
|
|
|
29,662
|
Inventory,
net
|
|
107,204
|
|
|
|
84,183
|
Deferred income tax
assets
|
|
7,335
|
|
|
|
6,716
|
Prepaid expenses and
other assets
|
|
38,679
|
|
|
|
42,620
|
Total current
assets
|
|
464,996
|
|
|
|
420,608
|
Property and
equipment, net
|
|
167,336
|
|
|
|
119,157
|
Goodwill
|
|
52,935
|
|
|
|
27,765
|
Other intangible
assets, net
|
|
62,947
|
|
|
|
48,461
|
Deferred financing
costs
|
|
849
|
|
|
|
310
|
Deferred income tax
assets
|
|
21,882
|
|
|
|
22,094
|
Other non-current
assets
|
|
38,608
|
|
|
|
8,403
|
Total
assets
|
$
|
809,553
|
|
|
$
|
646,798
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
88,814
|
|
|
$
|
77,115
|
Accrued
liabilities
|
|
111,355
|
|
|
|
60,823
|
Current maturities of
long-term debt
|
|
899
|
|
|
|
4,909
|
Deferred tax
liabilities
|
|
229
|
|
|
|
211
|
Derivative financial
instruments
|
|
806
|
|
|
|
725
|
Total current
liabilities
|
|
202,103
|
|
|
|
143,783
|
Pension benefit
obligation
|
|
6,933
|
|
|
|
6,545
|
Other
liabilities
|
|
3,107
|
|
|
|
5,026
|
Long-term debt, less
current maturities
|
|
140,673
|
|
|
|
92,832
|
Deferred income tax
liabilities
|
|
11,623
|
|
|
|
14,321
|
Total
liabilities
|
|
364,439
|
|
|
|
262,507
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common
Stock:
|
|
|
|
|
|
|
No par value;
55,000,000 shares authorized, 36,495,338 and 36,321,775 issued and
outstanding at September 30, 2016 and December 31, 2015,
respectively
|
|
260,598
|
|
|
|
256,919
|
Paid-in
capital
|
|
1,460
|
|
|
|
(1,282)
|
Accumulated other
comprehensive loss
|
|
(47,830)
|
|
|
|
(51,670)
|
Accumulated
earnings
|
|
230,886
|
|
|
|
180,324
|
Total shareholders'
equity
|
|
445,114
|
|
|
|
384,291
|
Total liabilities and
shareholders' equity
|
$
|
809,553
|
|
|
$
|
646,798
|
GENTHERM
INCORPORATED CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS (In thousands)
(Unaudited)
|
|
|
Nine Months Ended September 30,
|
|
2016
|
|
|
2015
|
Operating
Activities:
|
|
|
|
|
|
|
Net income
|
$
|
50,562
|
|
|
$
|
66,979
|
Adjustments to
reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
27,724
|
|
|
|
23,123
|
Deferred income tax
benefit
|
|
(1,933)
|
|
|
|
(4,262)
|
Stock
compensation
|
|
6,856
|
|
|
|
4,687
|
Defined benefit plan
expense
|
|
151
|
|
|
|
284
|
Provision of doubtful
accounts
|
|
385
|
|
|
|
309
|
Gain on revaluation of
financial derivatives
|
|
—
|
|
|
|
(951)
|
Loss on write-off or
intangible assets
|
|
—
|
|
|
|
358
|
Loss (gain) on sale of
property and equipment
|
|
291
|
|
|
|
(41)
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
(22,835)
|
|
|
|
(24,442)
|
Inventory
|
|
(5,647)
|
|
|
|
(3,829)
|
Prepaid expenses and
other assets
|
|
2,826
|
|
|
|
(1,313)
|
Accounts
payable
|
|
6,508
|
|
|
|
1,722
|
Accrued
liabilities
|
|
6,123
|
|
|
|
3,712
|
Net cash provided by
operating activities
|
|
71,011
|
|
|
|
66,336
|
Investing
Activities:
|
|
|
|
|
|
|
Proceeds from the sale
of property and equipment
|
|
45
|
|
|
|
226
|
Acquisition of
subsidiary, net of cash acquired
|
|
(73,593)
|
|
|
|
(47)
|
Purchases of property
and equipment
|
|
(50,742)
|
|
|
|
(35,728)
|
Net cash used in
investing activities
|
|
(124,290)
|
|
|
|
(35,549)
|
Financing
Activities:
|
|
|
|
|
|
|
Borrowing of
debt
|
|
75,000
|
|
|
|
15,000
|
Repayments of
debt
|
|
(32,368)
|
|
|
|
(4,156)
|
Excess tax (expense)
benefit from equity awards
|
|
(277)
|
|
|
|
1,220
|
Cash paid for
financing costs
|
|
(650)
|
|
|
|
—
|
Cash paid for the
cancellation of restricted stock
|
|
(1,196)
|
|
|
|
(1,475)
|
Proceeds from the
exercise of Common Stock options
|
|
1,038
|
|
|
|
6,468
|
Net cash provided by
financing activities
|
|
41,547
|
|
|
|
17,057
|
Foreign currency
effect
|
|
66
|
|
|
|
(4,372)
|
Net (decrease)
increase in cash and cash equivalents
|
|
(11,666)
|
|
|
|
43,472
|
Cash and cash
equivalents at beginning of period
|
|
144,479
|
|
|
|
85,700
|
Cash and cash
equivalents at end of period
|
$
|
132,813
|
|
|
$
|
129,172
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Cash paid for
taxes
|
$
|
18,183
|
|
|
$
|
23,870
|
Cash paid for
interest
|
$
|
1,963
|
|
|
$
|
1,420
|
Supplemental
disclosure of non-cash transactions:
|
|
|
|
|
|
|
Common Stock issued to
Board of Directors and employees
|
$
|
3,507
|
|
|
$
|
2,287
|
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
RECONCILIATION OF
ADJUSTED EBITDA TO NET INCOME
(Unaudited, in
thousands)
|
|
Three Months Ended
September
30,
|
|
2016
|
2015
|
Net income
|
$
20,223
|
$
27,665
|
Add Back:
|
|
|
Income tax expense
|
6,018
|
9,798
|
Interest expense
|
660
|
759
|
Depreciation and amortization
|
10,129
|
7,777
|
Adjustments:
|
|
|
Acquisition transaction expense
|
22
|
—
|
Unrealized currency (gain) loss
|
24
|
(513)
|
Unrealized revaluation of derivatives
|
—
|
134
|
Adjusted
EBITDA
|
$
37,076
|
$
45,620
|
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To view the original version on PR Newswire,
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SOURCE Gentherm