THRM 8-K
Gentherm Inc (THRM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
GENTHERM INCORPORATED
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
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Registrant’s telephone number, including area code:
Former name or former address, if changed since last report: N/A
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Item 2.02 |
Results of Operations and Financial Condition. |
On October 29, 2020, Gentherm Incorporated (the “Company”) publicly announced its financial results for the third quarter of 2020. A copy of the Company’s news release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. On October 29, 2020 at 8:00 a.m. Eastern Time, the Company will host a conference call to discuss the third quarter of 2020 financial results. A copy of the supplemental materials that will be used during the conference call is attached hereto as Exhibit 99.2 and is incorporated herein by reference. The information in this Item 2.02 and the attached exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as shall be expressly stated by specific reference in such filing.
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Item 9.01 |
Financial Statements and Exhibits. |
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(d) |
Exhibits |
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Exhibit 99.1 |
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Company news release dated October 29, 2020 concerning financial results |
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Exhibit 99.2 |
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Exhibit 104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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GENTHERM INCORPORATED |
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By: |
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/s/ Wayne Kauffman |
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Wayne Kauffman |
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Vice President and General Counsel |
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Date: October 29, 2020 |
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Exhibit 99.1
Gentherm Reports 2020 Third Quarter Results
Record Quarterly Automotive Revenue
Achieved Highest Quarterly Gross Margin and Gross Margin Rate in Three Years
Strong Quarterly Net Income Growth and Record Quarterly Adjusted EBITDA
NORTHVILLE, Michigan, October 29, 2020 /Global Newswire/ - Gentherm (NASDAQ:THRM), a global market leader of innovative thermal management technologies, today announced its financial results for the third quarter ended September 30, 2020.
Third Quarter Highlights
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Product revenues of $259.5 million increased 8.1% from $240.1 million in the 2019 third quarter |
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Excluding the impact of foreign currency translation and divested assets, product revenues increased 8.1% year over year |
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GAAP diluted earnings per share was $0.73 as compared to $0.48 in the prior-year period |
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Adjusted earnings per share (see table herein) was $0.91 as compared to $0.68 in the prior-year period |
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Secured automotive new business awards totaling $80 million |
Phil Eyler, the Company's President and CEO, said “I am pleased that the continued strong execution of our Focused Growth strategy has generated the highest quarterly revenue in two years and record quarterly operating income. In Automotive, we had a record revenue quarter and outperformed actual light vehicle production in our key markets by approximately 800 basis points. In Medical, we continued to deliver double-digit revenue growth.”
“The momentum on the topline along with our ongoing disciplined approach to managing expenses also enabled us to achieve the highest gross margin and gross margin rate in three years and record Adjusted EBITDA in the quarter. While there is still near-term uncertainty in the macroeconomic environment, I am proud of our global team for the fast response to OEM demand increases, our improving operating performance and expanding technology leadership. This, along with our strong balance sheet, gives us confidence in delivering long-term shareholder value,” continued Eyler.
2020 Third Quarter Financial Review
Product revenues of $259.5 million increased $19.5 million, or 8.1%, in the third quarter of 2020 as compared to the prior-year period. Excluding the impact of foreign currency translation, divested assets and assets held for sale, product revenues similarly increased 8.1% year over year.
Automotive revenues increased 9.4% year over year, as decreases in Automotive Cables and Other Automotive were more than offset by revenue increases in all other product categories. Adjusting for foreign currency translation, organic Automotive revenues increased 7.9% year over year. According to IHS Markit, actual light vehicle production was flat when compared to the third quarter of 2019 in the Company’s key markets of North America, Europe, China, Japan and Korea.
The $2.0 million, or 17.2% revenue decrease in Industrial resulted from the divestiture of Global Power Technologies (“GPT”), which was sold on October 1, 2019. The decrease was partially offset by year-over-
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year growth of 17.3% in Gentherm Medical, primarily due to increased demand for Stihler resistive blood warming products, Hemotherm® cardiovascular heater / cooler systems and the Blanketrol® solutions.
See the “Revenue by Product Category” table included below for additional detail.
The gross margin rate increased to 31.8% in the current-year period versus 31.1% in the prior-year period, primarily as a result of higher labor productivity, fixed cost leverage from higher unit volume, supplier cost reductions and Fit-for-Growth cost reduction initiatives. These were partially offset by annual customer price reductions as well as wage inflation.
Net research and development expenses of $18.1 million in the third quarter of 2020 decreased $0.8 million, or 4.2%, year over year as a direct result of cost reduction initiatives partially offset by incentive compensation adjustments.
Selling, general and administrative expenses of $25.8 million in the third quarter of 2020 decreased $1.1 million, or 4.1%, versus the prior-year period. The year-over-year improvement was primarily driven by the impact of cost reduction initiatives and the divestiture of the GPT business, partially offset by incentive compensation adjustments.
Restructuring expenses for the third quarter of 2020 were $0.3 million, as compared to $8.7 million incurred in the prior-year period as a result of the restructuring plan to improve the Company’s manufacturing productivity and rationalize its footprint.
As described more fully in the table included below, “Reconciliation of Net Income to Adjusted EBITDA,” the Company recorded Adjusted EBITDA of $50.1 million during the third quarter of 2020 compared to $40.7 million in the prior year, a year-over-year increase of $9.4 million or 23.1%.
Income tax expense in the 2020 third quarter was $9.6 million, as compared with $6.8 million in the prior-year period. The effective tax rate of 28.5% for the quarter differs from the U.S. Federal statutory rate of 21%, primarily due to higher tax rates in foreign tax jurisdictions.
GAAP diluted earnings per share for the third quarter of 2020 was $0.73 compared with $0.48 for the prior-year period. Adjusted diluted earnings per share, excluding restructuring expenses, impairment charges, unrealized currency gain, and other impacts (see table herein), was $0.91. Adjusted diluted earnings per share in the prior-year period was $0.68.
Guidance
As a result of the unprecedented uncertainty facing the automotive industry and global economy, Gentherm withdrew its 2020 full financial guidance on March 25, 2020 and has not been providing updates with the exception of commentary on revenue trends. The Company expects product revenues in the fourth quarter of 2020 to be in the range of $240 to $260 million.
Conference Call
As previously announced, Gentherm will conduct a conference call today at 8:00 am Eastern Time to review these results. The dial-in number for the call is 1-877-407-4018 (callers in the U.S.) or +1-201-689-8471 (callers outside this U.S.). The passcode for the live call is 13711413.
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A live webcast and one-year archived replay of the call can be accessed on the Events page of the Investor section of Gentherm's website at www.gentherm.com.
A telephonic replay will be available approximately two hours after the call until 11:59 pm Eastern Time on November 12, 2020. The replay can be accessed by dialing 1-844-512-2921 (callers in the U.S.), or +1-412-317-6671 (callers outside the U.S.). The passcode for the replay is 13711413.
Investor Relations Contact
Yijing Brentano
[email protected]
(248) 308-1702
Media Contact
Melissa Fischer
248.289.9702
About Gentherm
Gentherm (NASDAQ: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 variable temperature Climate Control Seats, heated automotive interior systems (including heated seats, steering wheels, armrests and other components), battery thermal management systems, cable systems and other electronic devices. Medical products include patient temperature management systems. The Company is also developing a number of new technologies and products that will help enable improvements to existing products and to create new product applications for existing and new markets. Gentherm has more than 11,000 employees in facilities in the United States, Germany, Canada, China, Hungary, Japan, Korea, North Macedonia, Malta, Mexico, United Kingdom, Ukraine, and Vietnam. For more information, go to www.gentherm.com.
Forward-Looking Statements
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 release are made as of the date hereof or as of the date specified herein and are based on management's reasonable expectations and beliefs. Such statements are subject to a number of important assumptions, risks, uncertainties and other factors that may cause actual results or performance to differ materially from that described in or indicated by the forward-looking statements, including that: the COVID-19 pandemic and its direct and indirect adverse impacts on the automobile and medical industries and global economy has, and will continue to have, an adverse effect on, among other things, the Company’s results of operations, financial condition, cash flows, liquidity, business operations and stock price; future borrowing availability under the Company’s revolving credit facility is subject to compliance with covenants thereunder, and the deterioration of the Company’s financial performance during 2020 (including consolidated EBITDA) due to COVID-19 has caused the borrowing availability to be, and it may continue to be, substantially less than the full amount of
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revolving credit facility; the Company’s failure to be in compliance with covenants under its debt agreements due to COVID-19 or otherwise could result in an event of default thereunder, and if the lenders thereunder do not agree to amend or waive, the amounts outstanding under its debt agreements may be accelerated and may become immediately due and payable; additional financing by accessing the capital markets may not be available on acceptable terms, if at all, and additional indebtedness may harm the Company’s financial position and impact the Company’s ability to comply with covenants under its debt agreements; the Company may not realize the expected benefits from any restructuring initiatives it may pursue as a result of the effects of COVID-19 or otherwise; declines in automobile production may have an adverse impact; sales may not increase and the projected future sales volumes on which the Company manages its business may be inaccurate; new business awards may be limited due to COVID-19 and related uncertainties, may not be converted into product revenues and our projections thereof are not updated after the date initially communicated to us by customers, including for the impact of COVID-19 on future business; new or improved competing products may be developed by competitors with greater resources; customer preferences may shift, including due to the evolving use of automobiles and technology; the Company may lose suppliers or customers; market acceptance of the Company’s existing or new products may decrease; currency exchange rates may change unfavorably; pricing pressures from customers may increase; the macroeconomic environment may present adverse conditions; new products may not be feasible; work stoppages impacting the Company, its suppliers or customers, due to labor matters, civil or political unrest, infectious diseases and epidemics or other reasons, could harm the Company’s operations; free trade agreements have recently been, and may in the future be, altered or additional tariffs may be implemented; customers may not accept pass-through of tariff costs; the Company may be unable to protect its intellectual property in certain jurisdictions; there may be manufacturing or design defects or other quality issues with the Company’s products; the Company may be unable to effectively implement ongoing restructuring and other cost-savings measures or realize the full amount of estimated savings; the Company’s business may be harmed by security breaches and other disruptions to its IT systems; the Company may be unable to comply with or may incur increased costs associated with complying with domestic and international regulations, which could change in an unfavorable manner; and other adverse conditions in the industries in which the Company operates may negatively affect its results.
The foregoing risks should be read in conjunction with the Company's filings with the Securities and Exchange Commission (the “SEC”), including “Risk Factors”, in its most recent Annual Report on Form 10-K and subsequent SEC filings, for a discussion of these and other risks and uncertainties. In addition, the business outlook discussed in this release does not include the potential impact of any business combinations, acquisitions, divestitures, strategic investments and other significant transactions that may be completed after the date hereof, each of which may present material risks to the Company’s business and financial results.
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.
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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Product revenues |
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$ |
259,540 |
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$ |
240,056 |
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$ |
624,214 |
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$ |
741,303 |
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Cost of sales |
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176,935 |
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165,364 |
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448,807 |
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518,590 |
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Gross margin |
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82,605 |
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74,692 |
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175,407 |
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222,713 |
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Operating expenses: |
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Net research and development expenses |
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18,070 |
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18,838 |
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51,171 |
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56,990 |
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Selling, general and administrative expenses |
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25,745 |
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26,861 |
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73,474 |
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91,683 |
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Restructuring expenses |
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284 |
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8,664 |
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3,452 |
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11,809 |
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Total operating expenses |
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44,099 |
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54,363 |
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128,097 |
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160,482 |
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Operating income |
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38,506 |
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20,329 |
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47,310 |
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62,231 |
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Interest expense, net |
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(1,259 |
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(1,148 |
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(3,368 |
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(3,756 |
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Foreign currency (loss) gain |
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(2,883 |
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4,083 |
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(5,562 |
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3,482 |
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Gain on sale of business |
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— |
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— |
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— |
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4,970 |
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Impairment loss |
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— |
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(837 |
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— |
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(21,206 |
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Other (loss) income |
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(615 |
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231 |
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2,531 |
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545 |
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Earnings before income tax |
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33,749 |
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22,658 |
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40,911 |
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46,266 |
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Income tax expense |
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9,603 |
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6,771 |
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15,214 |
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19,214 |
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Net income |
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$ |
24,146 |
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$ |
15,887 |
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$ |
25,697 |
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$ |
27,052 |
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Basic earnings per share |
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$ |
0.74 |
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$ |
0.48 |
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$ |
0.79 |
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$ |
0.81 |
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Diluted earnings per share |
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$ |
0.73 |
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$ |
0.48 |
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$ |
0.78 |
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$ |
0.81 |
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Weighted average number of shares – basic |
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32,624 |
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32,839 |
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32,631 |
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33,283 |
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Weighted average number of shares – diluted |
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32,958 |
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32,933 |
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32,924 |
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33,419 |
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REVENUE BY PRODUCT CATEGORY
(Unaudited, in thousands)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2020 |
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2019 |
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% Change |
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2020 |
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2019 |
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% Change |
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Climate Control Seats (CCS) |
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$ |
97,058 |
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$ |
88,133 |
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10.1 |
% |
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$ |
229,465 |
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$ |
270,924 |
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(15.3 |
)% |
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Seat Heaters |
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73,471 |
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71,030 |
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3.4 |
% |
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171,345 |
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218,578 |
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(21.6 |
)% |
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Steering Wheel Heaters |
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22,506 |
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16,621 |
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35.4 |
% |
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49,721 |
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49,620 |
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0.2 |
% |
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Automotive Cables |
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18,917 |
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20,361 |
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(7.1 |
)% |
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50,890 |
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66,316 |
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(23.3 |
)% |
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Battery Thermal Management (BTM) |
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15,956 |
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11,890 |
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34.2 |
% |
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33,818 |
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31,531 |
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7.3 |
% |
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Electronics |
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14,463 |
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11,729 |
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23.3 |
% |
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38,327 |
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36,035 |
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6.4 |
% |
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Other Automotive |
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7,393 |
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8,479 |
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(12.8 |
)% |
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17,056 |
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27,296 |
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(37.5 |
)% |
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Subtotal Automotive |
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249,764 |
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228,243 |
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9.4 |
% |
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590,622 |
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700,300 |
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(15.7 |
)% |
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Medical |
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9,776 |
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8,336 |
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17.3 |
% |
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33,592 |
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26,404 |
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27.2 |
% |
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GPT |
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— |
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3,477 |
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(100.0 |
)% |
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— |
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11,181 |
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(100.0 |
)% |
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CSZ-IC |
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— |
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— |
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— |
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— |
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3,418 |
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(100.0 |
)% |
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Subtotal Industrial |
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9,776 |
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11,813 |
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(17.2 |
)% |
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33,592 |
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41,003 |
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(18.1 |
)% |
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Total Company |
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259,540 |
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240,056 |
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8.1 |
% |
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624,214 |
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741,303 |
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(15.8 |
)% |
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Total Core Businesses (Automotive and Medical) |
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$ |
259,540 |
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$ |
236,579 |
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9.7 |
% |
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$ |
624,214 |
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$ |
726,704 |
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(14.1 |
)% |
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RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(In thousands)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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Net income |
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$ |
24,146 |
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$ |
15,887 |
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$ |
25,697 |
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$ |
27,052 |
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Add back: |
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Income tax expense |
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9,603 |
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6,771 |
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15,214 |
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19,214 |
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Interest expense |
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1,259 |
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1,148 |
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3,368 |
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3,756 |
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Depreciation and amortization |
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10,129 |
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10,974 |
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30,129 |
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33,048 |
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Adjustments: |
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Restructuring expense |
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284 |
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8,664 |
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3,452 |
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11,809 |
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Impairment loss |
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— |
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837 |
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— |
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21,206 |
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Gain on sale of business |
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— |
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— |
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— |
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(4,970 |
) |
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Acquisition and divestiture expenses |
|
|
608 |
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19 |
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|
608 |
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|
399 |
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Unrealized currency loss (gain) |
|
|
4,117 |
|
|
|
(3,564 |
) |
|
|
6,491 |
|
|
|
(4,487 |
) |
|
Gain on sale of patents |
|
|
— |
|
|
|
— |
|
|
|
(1,978 |
) |
|
|
— |
|
|
CFO transition expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,065 |
|
|
Adjusted EBITDA |
|
$ |
50,146 |
|
|
$ |
40,736 |
|
|
$ |
82,981 |
|
|
$ |
108,092 |
|
Use of Non-GAAP Financial Measures
In addition to the results reported in accordance with GAAP throughout this release, the Company has provided information regarding adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and adjusted earnings per share (“Adjusted earnings per share” or “Adjusted EPS”), each, a non-GAAP financial measure. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, deferred financing cost amortization, and other gains and losses not reflective of the Company’s ongoing operations and related tax effects including transaction expenses, debt retirement expenses, impairment of assets held for sale, gain or loss on sale of business, restructuring expense, unrealized currency gain or loss and unrealized revaluation of derivatives. The Company defines Adjusted EPS as earnings adjusted by gains and losses not reflective of the Company’s ongoing operations and related tax effects including transaction expenses, debt retirement expenses, impairment of assets held for sale, gain or loss on sale of business, restructuring expense, unrealized currency gain or loss and unrealized revaluation of derivatives. The Company’s reconciliation of net income to Adjusted EBITDA is provided in this release. The Company’s Reconciliation of Adjusted EPS can be found in the supplemental materials furnished as Exhibit 99.2 to the Company’s Form 8-K dated October 29, 2020 and also is included in the presentation entitled “Q3 2020 Gentherm Incorporated Earnings Conference Presentation,” which can be found on the Events page of the Investor section of Gentherm's website at www.gentherm.com.
In evaluating its business, the Company considers and uses Adjusted EBITDA and Adjusted EPS as supplemental measures of its operating performance. Management provides Adjusted EBITDA and Adjusted EPS measures 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. Other companies in our industry may define and calculate these non-GAAP financial measures differently than we do and those calculations may not be comparable to our metrics. These non-GAAP measures have limitations as analytical tools, and when assessing the Company's operating performance, investors should not consider Adjusted EBITDA or Adjusted EPS in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP.
Non-GAAP measures referenced in this release may include estimates of future Adjusted EBITDA and Adjusted EPS. Such forward-looking non-GAAP measures may differ significantly from the corresponding GAAP measures, due to
|
|
|
depreciation and amortization, tax expense, and/or interest expense, some or all of which management has not quantified for the future periods.
|
|
|
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
(In thousands, except per share data)
(Unaudited)
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
Sept 30, |
|
|
Sept 30, |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Net income |
|
$ |
24,146 |
|
|
$ |
15,887 |
|
|
$ |
25,697 |
|
|
$ |
27,052 |
|
|
Restructuring expenses |
|
|
284 |
|
|
|
8,664 |
|
|
|
3,452 |
|
|
|
11,809 |
|
|
Gain on sale of business |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,970 |
) |
|
Gain on sale of patents |
|
|
— |
|
|
|
— |
|
|
|
(1,978 |
) |
|
|
— |
|
|
Impairment loss |
|
|
— |
|
|
|
837 |
|
|
|
— |
|
|
|
21,206 |
|
|
Unrealized currency loss (gain) |
|
|
4,117 |
|
|
|
(3,564 |
) |
|
|
6,491 |
|
|
|
(4,487 |
) |
|
CFO transition |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,065 |
|
|
Acquisition and divestiture expenses |
|
|
608 |
|
|
|
19 |
|
|
|
608 |
|
|
|
399 |
|
|
Non-cash purchase accounting impact |
|
|
2,259 |
|
|
|
2,556 |
|
|
|
6,543 |
|
|
|
7,456 |
|
|
Tax effect of above |
|
|
(1,435 |
) |
|
|
(2,059 |
) |
|
|
(3,764 |
) |
|
|
(2,964 |
) |
|
Adjusted net income |
|
$ |
29,979 |
|
|
$ |
22,340 |
|
|
$ |
37,049 |
|
|
$ |
56,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
32,623,532 |
|
|
|
32,838,636 |
|
|
|
32,631,423 |
|
|
|
33,282,584 |
|
|
Diluted |
|
|
32,958,439 |
|
|
|
32,932,679 |
|
|
|
32,924,013 |
|
|
|
33,418,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, as reported: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.74 |
|
|
$ |
0.48 |
|
|
$ |
0.79 |
|
|
$ |
0.81 |
|
|
Diluted |
|
$ |
0.73 |
|
|
$ |
0.48 |
|
|
$ |
0.78 |
|
|
$ |
0.81 |
|
|
Adjusted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.92 |
|
|
$ |
0.68 |
|
|
$ |
1.14 |
|
|
$ |
1.70 |
|
|
Diluted |
|
$ |
0.91 |
|
|
$ |
0.68 |
|
|
$ |
1.13 |
|
|
$ |
1.69 |
|
|
|
|
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
|
|
|
September 30, 2020 |
|
|
December 31, 2019 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
226,533 |
|
|
$ |
50,443 |
|
|
Restricted cash |
|
|
2,506 |
|
|
|
2,505 |
|
|
Accounts receivable, net |
|
|
193,249 |
|
|
|
159,710 |
|
|
Inventory: |
|
|
|
|
|
|
|
|
|
Raw materials |
|
|
62,970 |
|
|
|
61,323 |
|
|
Work in process |
|
|
7,708 |
|
|
|
7,444 |
|
|
Finished goods |
|
|
43,958 |
|
|
|
49,712 |
|
|
Inventory, net |
|
|
114,636 |
|
|
|
118,479 |
|
|
Other current assets |
|
|
37,988 |
|
|
|
42,726 |
|
|
Total current assets |
|
|
574,912 |
|
|
|
373,863 |
|
|
Property and equipment, net |
|
|
150,801 |
|
|
|
160,605 |
|
|
Goodwill |
|
|
66,266 |
|
|
|
64,572 |
|
|
Other intangible assets, net |
|
|
47,429 |
|
|
|
49,783 |
|
|
Operating lease right-of-use assets |
|
|
18,844 |
|
|
|
11,587 |
|
|
Deferred income tax assets |
|
|
55,641 |
|
|
|
57,650 |
|
|
Other non-current assets |
|
|
7,554 |
|
|
|
9,326 |
|
|
Total assets |
|
$ |
921,447 |
|
|
$ |
727,386 |
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
108,452 |
|
|
$ |
83,035 |
|
|
Current lease liabilities |
|
|
5,206 |
|
|
|
4,586 |
|
|
Current maturities of long-term debt |
|
|
2,500 |
|
|
|
2,500 |
|
|
Other current liabilities |
|
|
74,443 |
|
|
|
66,583 |
|
|
Total current liabilities |
|
|
190,601 |
|
|
|
156,704 |
|
|
Long-term debt, less current maturities |
|
|
193,061 |
|
|
|
78,124 |
|
|
Non-current lease liabilities |
|
|
15,046 |
|
|
|
6,751 |
|
|
Pension benefit obligation |
|
|
7,864 |
|
|
|
8,057 |
|
|
Other non-current liabilities |
|
|
3,079 |
|
|
|
5,100 |
|
|
Total liabilities |
|
$ |
409,651 |
|
|
$ |
254,736 |
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
Common Stock: |
|
|
|
|
|
|
|
|
|
No par value; 55,000,000 shares authorized 32,680,013 and 32,674,354 issued and outstanding at September 30, 2020 and December 31, 2019, respectively |
|
|
107,055 |
|
|
|
102,507 |
|
|
Paid-in capital |
|
|
9,798 |
|
|
|
10,852 |
|
|
Accumulated other comprehensive loss |
|
|
(32,486 |
) |
|
|
(42,441 |
) |
|
Accumulated earnings |
|
|
427,429 |
|
|
|
401,732 |
|
|
Total shareholders’ equity |
|
|
511,796 |
|
|
|
472,650 |
|
|
Total liabilities and shareholders’ equity |
|
$ |
921,447 |
|
|
$ |
727,386 |
|
|
|
|
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2020 |
|
|
2019 |
|
||
|
Operating Activities: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
25,697 |
|
|
$ |
27,052 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
30,777 |
|
|
|
33,281 |
|
|
Deferred income taxes |
|
|
3,583 |
|
|
|
5,072 |
|
|
Non-cash stock based compensation |
|
|
6,569 |
|
|
|
5,268 |
|
|
Defined benefit plan income |
|
|
(433 |
) |
|
|
(754 |
) |
|
Loss on sale of property and equipment |
|
|
562 |
|
|
|
319 |
|
|
Operating lease expense |
|
|
5,156 |
|
|
|
4,477 |
|
|
Gain on sale of patents |
|
|
(1,978 |
) |
|
|
— |
|
|
Impairment loss |
|
|
— |
|
|
|
21,206 |
|
|
Gain on sale of business |
|
|
— |
|
|
|
(4,970 |
) |
|
Other |
|
|
— |
|
|
|
189 |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(33,250 |
) |
|
|
(5,961 |
) |
|
Inventory |
|
|
4,645 |
|
|
|
(5,512 |
) |
|
Other assets |
|
|
(4,655 |
) |
|
|
9,594 |
|
|
Accounts payable |
|
|
24,272 |
|
|
|
(3,097 |
) |
|
Other liabilities |
|
|
12,356 |
|
|
|
(2,172 |
) |
|
Net cash provided by operating activities |
|
|
73,301 |
|
|
|
83,992 |
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(11,613 |
) |
|
|
(18,340 |
) |
|
Acquisition of intangible assets |
|
|
(3,141 |
) |
|
|
— |
|
|
Proceeds from the sale of patents and property and equipment |
|
|
1,068 |
|
|
|
137 |
|
|
Proceeds from divestiture of business |
|
|
— |
|
|
|
47,500 |
|
|
Acquisition of subsidiary, net of cash acquired |
|
|
— |
|
|
|
(14,823 |
) |
|
Net cash (used in) provided by investing activities |
|
|
(13,686 |
) |
|
|
14,474 |
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
Borrowing of debt |
|
|
201,193 |
|
|
|
29,470 |
|
|
Repayments of debt |
|
|
(87,688 |
) |
|
|
(69,049 |
) |
|
Cash paid for the repurchase of Common Stock |
|
|
(9,092 |
) |
|
|
(58,040 |
) |
|
Proceeds from the exercise of Common Stock options |
|
|
6,828 |
|
|
|
13,879 |
|
|
Cash paid for the cancellation of restricted stock |
|
|
(811 |
) |
|
|
(1,213 |
) |
|
Acquisition contingent consideration payment |
|
|
(618 |
) |
|
|
— |
|
|
Cash paid for financing costs |
|
|
— |
|
|
|
(1,278 |
) |
|
Net cash provided by (used in) financing activities |
|
|
109,812 |
|
|
|
(86,231 |
) |
|
Foreign currency effect |
|
|
6,664 |
|
|
|
(4,151 |
) |
|
Net increase in cash, cash equivalents and restricted cash |
|
|
176,091 |
|
|
|
8,084 |
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
52,948 |
|
|
|
39,620 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
229,039 |
|
|
$ |
47,704 |
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash (refund) paid for taxes |
|
$ |
(252 |
) |
|
$ |
6,676 |
|
|
Cash paid for interest |
|
$ |
3,006 |
|
|
$ |
3,437 |
|
|
|
|
2020 Third Quarter Results Gentherm, Inc. October 29, 2020 Exhibit 99.2
Forward-Looking Statement Except for historical information contained herein, statements in this presentation 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 presentation are made as of the date hereof or as of the date specified herein and are based on management's reasonable expectations and beliefs. Such statements are subject to a number of important assumptions, risks, uncertainties and other factors that may cause actual results or 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: the COVID-19 pandemic and its direct and indirect adverse impacts on the automobile and medical industries and the global economy has, and will continue to have, an adverse effect on, among other things, the Company’s results of operations, financial condition, cash flows, liquidity, business operations and stock price; future borrowing availability under the revolving credit facility is subject to compliance with covenants, and the deterioration of the Company’s financial performance (including consolidated EBITDA) due to COVID-19 has caused the Company’s borrowing availability to be, and may continue to be substantially less than the full amount of the facility; the Company’s failure to be in compliance with covenants under its debt agreements due to COVID-19 or otherwise could result in an event of default thereunder, and if the lenders do not agree to amend or waive, the amounts outstanding may be accelerated and become immediately due and payable; additional financing by accessing the capital markets may not be available on acceptable terms, if at all, and additional indebtedness may harm the Company’s financial position and impact the Company’s ability to comply with covenants under its debt agreements; the Company may not realize the expected benefits from any restructuring initiatives it may pursue as a result of the effects of COVID-19; declines in automobile production may have an adverse impact; sales may not increase and the projected future sales volumes on which the Company manages its business may be inaccurate; new business awards may be limited dur to COVID-19 and related uncertainties, may not be converted into product revenues and our projections thereof are not updated after the date initially communicated to us by customers, including for the impact of COVID-19 on future business; new or improved competing products may be developed by competitors with greater resources; customer preferences may shift, including due to the evolving use of automobiles and technology; the Company may lose suppliers or customers; market acceptance of the Company’s existing or new products may decrease; currency exchange rates may change unfavorably; pricing pressures from customers may increase; the macroeconomic environment may present adverse conditions; new products may not be feasible; work stoppages impacting the Company, its suppliers or customers, due to labor matters, civil or political unrest, infectious diseases and epidemics or other reasons, could harm the Company’s operations; free trade agreements have recently been, and may in the future be altered or additional tariffs may be implemented; customers may not accept pass-through of tariff costs; the Company may be unable to protect its intellectual property in certain jurisdictions; there may be manufacturing or design defects or other quality issues with the Company’s products; the Company may be unable to effectively implement ongoing restructuring and other cost-savings measures or realize the full amount of estimated savings; the Company’s business may be harmed by security breaches and other disruptions to its IT systems; the Company may be unable to comply with or may incur increased costs associated with complying with domestic and international regulations, which could change in an unfavorable manner; and other adverse conditions in the industries in which the Company operates may negatively affect its results. The foregoing risks should be read in conjunction with the Company's filings with the Securities and Exchange Commission (the “SEC”), including “Risk Factors,” in its most recent Annual Report on Form 10-K and subsequent SEC filings, for a discussion of these and other risks and uncertainties. In addition, the business outlook discussed in this release does not include the potential impact of any business combinations, acquisitions, divestitures, strategic investments and other significant transactions that may be completed after the date hereof, each of which may present material risks to the Company’s business and financial results. 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.
Use of Non-GAAP Financial Measures* In addition to the results reported in accordance with GAAP throughout this presentation, the Company has provided information regarding Adjusted EBITDA and Adjusted EPS, each a non-GAAP financial measure. The Company defines Adjusted EBITDA as earnings (loss) before interest, taxes, depreciation and amortization, deferred financing cost amortization, and other gains and losses that the Company believes are not reflective of its ongoing operations and related tax effects including transaction expenses, CFO transition expenses, impairment of assets held for sale, gain or loss on sale of business, gain on sale of patents, restructuring expenses and unrealized currency gain or loss. The Company defines Adjusted EPS as earnings (loss) per share on a diluted basis, adjusted by gains and losses that the Company believes are not reflective of its ongoing operations and related tax effects including transaction expenses, non-cash purchase accounting impacts, impairment of assets held for sale, gain or loss on sale of business, restructuring expenses, gain on sale of patents, unrealized currency gain or loss, and CFO transition expenses. In evaluating its business, the Company considers and uses Adjusted EBITDA and Adjusted EPS as supplemental measures of its operating performance. Management provides these non-GAAP measures 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 and liquidity, respectively, on a period-over-period basis. Other companies in our industry may calculate these non-GAAP financial measures differently than we do and those calculations may not be comparable to our metrics. These non-GAAP measures have limitations as analytical tools, and when assessing the Company's operating performance and liquidity, respectively, investors should not consider these non-GAAP measures in isolation, or as a substitute for net income (loss), earnings (loss) per share or other consolidated income statement data prepared in accordance with GAAP. * See Appendix for certain reconciliations of GAAP to non-GAAP historical financial measures
3Q 2020 Highlights Continued strong execution delivered record performance Highest total company revenue in 2 years Record Automotive revenue in company history Double digit revenue growth in Medical year over year Highest gross margin and gross margin rate in 3 years Record operating income in company history $80M in Automotive new business awards Strong balance sheet with total liquidity of approximately $450 million at quarter end
Automotive 3Q 2020 Highlights Continued momentum in Automotive 29 Vehicle launches with 14 OEMs Multiple CCS® product launches Buick Envision Jeep Compass Kia Sorento Mercedes S-Class Grew innovative, combined steering wheel heat and hands-on-detection sensor with VW Began phase three advanced ClimateSense™ development project with General Motors Recognized by Honda as a Top North American Supplier
Automotive Awards Continued widespread adoption of Gentherm technologies $80M in awards in 3Q across 6 OEMs CCS®, Seat Heaters and Thermal Cup awards with BMW First CCS® award with PSA in China Steering Wheel Heat awards with FCA and one of the largest EV manufacturers Air-cooling battery thermal management awards with both Hyundai and Kia Significant take rate increases across multiple customers
Medical 3Q 2020 Highlights Continued strong growth in the Medical business Revenue up 17% year over year Strong growth in Stihler products reflecting acquisition synergy Continued growth in Blanketrol® and Hemotherm® equipment driven by international markets U.S. FDA 510(k) clearance of ASTOPAD® patient warming system
Focused Growth Introduce Innovative Microclimate Solution - ClimateSenseTM Drive Battery Thermal Management Expand Patient Thermal Solutions Accelerate Core Automotive Climate and Comfort Growth Enabled by Electronics and Software Systems
Summary Well positioned to deliver long-term shareholder returns 3Q results demonstrate continued successful execution of our strategic plan Focused growth Realigned cost structure Bringing innovative solutions to market Strong balance sheet and financial resources
Selected Income Statement Data 2020 2019 2020 2019 Product Revenues $259,540 $240,056 $624,214 $741,303 Gross Margin 82,605 74,692 175,407 222,713 Gross Margin % 31.8% 31.1% 28.1% 30.0% Operating Expenses 44,099 54,363 128,097 160,482 Operating Income 38,506 20,329 47,310 62,231 Adjusted EBITDA 50,146 40,736 82,981 108,092 Diluted EPS - As Adjusted $0.91 $0.68 $1.13 $1.69 Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands, except per share data)
Selected Balance Sheet Data September 30, 2020 December 31, 2019 Cash and Cash Equivalents $226,533 $50,443 Restricted Cash 2,506 2,505 Total Assets 921,447 727,386 Debt 195,561 80,624 Current 2,500 2,500 Non-Current 193,061 78,124 Revolving LOC Availability 221,489 392,325 Total Liquidity 448,022 442,768 (Dollars in thousands)
Appendix
Reconciliation of Net Income to Adjusted EBITDA 2020 2019 2020 2019 Net Income $24,146 $15,887 $25,697 $27,052 Add Back: Income Tax Expense 9,603 6,771 15,214 19,214 Interest Expense 1,259 1,148 3,368 3,756 Depreciation and Amortization 10,129 10,974 30,129 33,048 Adjustments: Restructuring Expenses 284 8,664 3,452 11,809 Impairment Loss — 837 — 21,206 Gain on Sale of Business — — — (4,970) Acquisition Transaction Expense 608 19 608 399 Unrealized Currency Loss (Gain) 4,117 (3,564) 6,491 (4,487) Gain on Sale of Patents — — (1,978) — CFO Transition Expense — — — 1,065 Adjusted EBITDA $50,146 $40,736 $82,981 $108,092 Three Months Ended September 30, Nine Months Ended September 30,
Reconciliation of Adjusted EPS 2020 2019 2020 2019 Diluted EPS - As Reported $0.73 $0.48 $0.78 $0.81 Acquisition Transaction Expenses 0.02 — 0.02 0.01 Non-Cash Purchase Accounting Impacts 0.07 0.08 0.20 0.22 Unrealized Currency Loss (Gain) 0.12 (0.11) 0.20 (0.13) Restructuring Expenses 0.01 0.26 0.10 0.35 Gain on Sale of Patents — — (0.06) — Impairment Loss and Gain on Sale of Business — 0.03 — 0.49 CFO Transition Expenses — — — 0.03 Tax Effect of Above (0.04) (0.06) (0.11) (0.09) Diluted EPS - As Adjusted $0.91 $0.68 $1.13 $1.69 Three Months Ended September 30, Nine Months Ended September 30,
