Gentherm Reports 2015 Full Year And Fourth Quarter Results

19 Feb, 2016, 06:00 ET from Gentherm

NORTHVILLE, Mich., Feb. 19, 2016 /PRNewswire/ -- Gentherm (NASDAQ-GS:THRM), the global market leader and developer of innovative thermal management technologies, today announced its financial results for the year and fourth quarter ended December 31, 2015.

Gentherm revenues for the 2015 full year and fourth quarter increased year over year to $856.4 million and $212.3 million, respectively, from $811.3 million and $205.2 million for the 2014 full year and fourth quarter.  Net income for the 2015 full year and fourth quarter increased to $95.4 million and $28.4 million, respectively, from net income for the respective prior year periods of $70.1 million and $19.8 million.

President and CEO Daniel R. Coker summarized 2015 by noting that the Company continues to perform very well in all aspects of its business, while continuing to generate solid growth in net income.  Excluding the impacts of the strong U.S. Dollar, year-over-year growth in revenue in 2015 would have been 12 percent, Coker added.

"We had an excellent year in 2015, and we believe this solid performance will continue in 2016," Coker said. "Revenues generated by our flagship Climate Control Seat® (CCS®) systems continued to grow, due in part to new vehicle launches like the newly designed Ford Mustang, which now offers CCS for the first time. Our Global Power Technologies (GPT) business, while still relatively small compared with our automotive business, also grew solidly in a difficult energy market by expanding internationally.

"Overall, we continue to see strong increases in unit volumes in all our products and markets, and we are maintaining our gross margins at, or above, the upper end of our target range," Coker added. "We established a new product category in 2015 with the introduction of our battery thermal management (BTM) systems and strengthened our position in this high-growth market with two important contract wins.  At the same time we are also making important investments in our future through new product development, including engineering advances in the next generation of seat comfort products, cooling storage devices, and medical thermal management devices, to name just a few."

2015 Full Year Financial Highlights

Higher volumes in 2015 were primarily driven by continued strong shipments of CCS, significant growth in heated steering wheel revenue and higher revenue from GPT.  Revenues in 2015 increased to $856.4 million, up 6 percent from $811.3 million in 2014.  CCS revenue in 2015 increased year over year by $33.7 million, or 9 percent, to $400.4 million.  The increase in CCS revenue resulted from new program launches and strong vehicle production volumes of vehicles equipped with CCS systems, particularly vehicles in the luxury segment.  The CCS revenue increase was partially offset by a decrease in seat heater revenue of $25.5 million, or 9 percent, to $273.4 million.  This decrease in seat heater revenue reflected the unfavorable impact of the strong U.S. Dollar.  Seat heater product sales in Europe are denominated in Euros, whereas CCS sales in Europe are primarily denominated in U.S. Dollars.  Consequently, the unfavorable impact of the lower Euro translation rate primarily impacted seat heater revenues.  Adjusted for the decline in the value of the Euro, seat heater sales actually increased, reflecting market penetration on certain vehicle programs and stronger vehicle production volumes, including those in Europe.  The Company had significant growth in its heated steering wheel product revenue in 2015 with a year-over-year increase of $6.0 million, or 17 percent, to $42.2 million.

Gentherm reported a $21.6 million increase in GPT revenue to $45.9 million in 2015, compared with 2014.  The increase was partially due to the fact that the Company acquired GPT on April 1, 2014, and GPT revenue for first quarter 2015 totaled $7.5 million.  The remaining revenue increase for GPT of $14.2 million during the last three quarters is attributable to a greater number of projects in international markets offset partially by lower revenue in GPT's home market of North America which was impacted by weakness in the energy markets.  

The average U.S. Dollar/Euro exchange rate in 2015 was 1.11 compared with 1.33 in 2014.  Consequently, the Company's Euro dominated revenues, which increased by 10 percent in Euros, decreased in U.S. Dollar reported terms.  The strong U.S. Dollar against certain other currencies had similar impacts on the Company's reported revenues.  Had the 2015 average exchange rate been the same as the 2014 average exchange rate for these currencies, product revenues would have been $48.3 million higher than the revenues actually reported for 2015.  Adjusting for these unfavorable currency translation impacts, 2015 product revenues would have been $904.8 million or 12 percent higher than product revenues in 2014, reflecting higher unit volumes in substantially all of the Company's markets and products.

Net income for 2015 was up 36 percent year over year to $95.4 million, or $2.65 per basic share and $2.62 per diluted share, which included a previously disclosed $9.9 million gain, or $0.20 per diluted share, recorded in the 2015 fourth quarter from the settlement of claims related to a currency related swap (CRS) entered into by Gentherm Germany in 2008.  Net income for 2014 was $70.1 million, or $1.98 per basic share and $1.95 per diluted share, which included $1.1 million in fees and expenses associated with the acquisition of GPT.

Gross margin as a percentage of revenue in 2015 was 32.3 percent compared with 29.8 percent in 2014. The increase reflected a favorable change in product mix, greater coverage of fixed costs at the higher volume levels, and the benefits from weaker foreign currencies on production expenses in foreign currencies.  The favorable product mix primarily resulted from the greater sales growth in CCS products and the higher product revenues for GPT, both of which historically have had better margin performance.  

Gentherm continues to increase cash reserves from operations.  Total cash as of December 31, 2015, increased 69 percent to $144.5 million when compared with total cash of $85.7 million at December 31, 2014.  This combined with borrowing availability under the Company's credit agreements provides available liquidity totaling $230.6 million.

Adjusted EBITDA for 2015 was $152.2 million compared with Adjusted EBITDA of $133.9 million for 2014, an increase of $18.3 million, or 14 percent. 

Fourth Quarter Financial Highlights

For the 2015 fourth quarter, revenues increased 3.5 percent to $212.3 million compared with $205.2 million in the comparable prior year quarter.  Higher revenue volumes were primarily driven by higher sales for GPT, and continued strong shipments of CCS. 

Foreign currency translation of the Company's Euro-denominated product revenue for this year's fourth quarter had a significant impact on the Company's product revenues since the average U.S. Dollar/Euro exchange rate in this year's fourth quarter was 1.09 compared to 1.25 in the fourth quarter of 2014.  Consequently, the Company's Euro dominated revenues, which have increased by 10 percent in Euros, have decreased in U.S. Dollar terms.  The strong U.S. Dollar against certain other currencies had similar impacts on the Company's reported revenues.  Had the 2015 average exchange rates been the same as the 2014 average exchange rates for these currencies, Gentherm's revenues would have been $9.4 million higher than revenues actually reported for the fourth quarter of 2015.  Adjusting for these unfavorable currency translation impacts, the fourth quarter 2015 product revenues would have been $221.7 million or 8 percent higher than the fourth quarter 2014, reflecting higher unit volumes in substantially all of the Company's markets and products.

CCS revenue in the 2015 fourth quarter, compared with the 2014 fourth quarter, increased by $4.1 million, or 4 percent, to $101.2 million.  This increase resulted from new program launches, strong sales of vehicles equipped with CCS systems, particularly vehicles in the luxury segment.  GPT revenue in this year's fourth quarter was $4.8 million compared with revenue of $7.5 million in the fourth quarter of 2014 due to a lower number of large customer programs being shipped during the quarter.  The customer program portion of the GPT business generally varies from quarter to quarter due to the timing of customer shipment requirements.

Seat heater revenue in this year's fourth quarter decreased year over year by approximately $2.1 million, or 3 percent, to $67.0 million, reflecting the unfavorable impact of the declining Euro.  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 heated steering wheel product, which increased by $1.8 million, or 19 percent year over year, to $11.2 million.   

Net income for the 2015 fourth quarter was up 43 percent year over year to $28.4 million or $0.78 per basic and diluted share, which included the previously mentioned $9.9 million, or $0.20 per diluted share, gain from the settlement of claims related to the CRS.  Net income for the fourth quarter of 2014 was $19.8 million, or $0.56 per basic share and $0.55 per diluted share.

Gross margin as a percentage of revenue for this year's fourth quarter increased to 32.6 percent, up from 30.4 percent for the 2014 fourth quarter. 

Adjusted EBITDA for the 2015 fourth quarter was $36.2 million compared with Adjusted EBITDA of $35.7 million for the 2014 fourth quarter. 

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

As disclosed on January 5, 2016, subsidiaries of Gentherm completed reorganization transactions related to the eventual closure of the Company's Windsor, Ontario, Canada facility to consolidate the operations of that facility into existing European and North American facilities.  The Windsor facility is expected to close permanently in June 2016.  Consequently, Gentherm expects to pay a withholding tax in Canada and record a one-time tax expense of approximately $6 million, or $0.16 per diluted share, in the first quarter of 2016.  

The Company will also be required to make a one-time income tax payment related to the closure of the Windsor facility of approximately $30 million, which will become due and payable in the first quarter of 2017.  However, Gentherm will record an offsetting deferred charge for approximately the same amount because the one-time income tax payment will result in tax deductions in future periods. Therefore, the income tax payment is not expected to have a material impact on the Company's earnings in any fiscal quarter.  

Guidance

Gentherm believes revenues will continue to be strong in local currencies in 2016 as growth in unit shipments is expected to remain strong.  At current market currency exchange rates for the U.S. Dollar, the Company believes that 2016 revenue will increase by about 10 percent over 2015 revenue, which was $856.4 million.  It is difficult to forecast the future value of the U.S. Dollar against other currencies.  If the U.S. Dollar continues to increase as compared with other currencies, it will continue to have an unfavorable impact on the Company's reported revenues in future periods. 

Conference Call

As previously announced, Gentherm is conducting a conference call today to be broadcast live over the Internet at 8:30 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), battery thermal management systems, cable systems and other electronic devices.  Non-automotive products include remote power generation systems, heated and cooled furniture 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 over ten thousand 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 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 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. 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:

DresnerAllenCaron


Mike Mason (investors)


mmason@dresnerallencaron.com


(212) 691-8087


Rene Caron (investors)


rcaron@dresnerallencaron.com


Len Hall (media)


lhall@dresnerallencaron.com


(949) 474-4300

 

TABLES FOLLOW

 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)



Three Months Ended
December 31,


Twelve Months Ended
December 31,


2015


2014


2015


2014

Product revenues

$

212,277


$

205,168


$

856,445


$

811,300

Cost of sales


143,099



142,853



580,066



569,618

Gross margin


69,178



62,315



276,379



241,682

Operating expenses:












Net research and development expenses


15,145



14,653



59,604



57,526

Acquisition transaction expenses








1,075

Selling, general and administrative


23,910



22,906



95,456



84,647

Total operating expenses


39,055



37,559



155,060



143,248

Operating income


30,123



24,756



121,319



98,434

Interest expense


(743)



(504)



(2,610)



(3,262)

Debt Retirement expense




(640)





(1,370)

Revaluation of derivatives loss


49



(225)



(1,102)



(518)

Gain on settlement of derivative instrument


9,949





9,949



Foreign currency gain (loss)


373



687



1,121



(218)

Gain from equity investment








785

Other (expense) income


(683)



201



261



370

Earnings before income tax


39,068



24,275



128,938



94,221

Income tax expense


10,654



4,446



33,545



24,102

Net income

$

28,414


$

19,829


$

95,393


$

70,119

Basic earnings per share

$

0.78


$

0.56


$

2.65


$

1.98

Diluted earnings per share

$

0.78


$

0.55


$

2.62


$

1.95

Weighted average number of shares – basic


36,270



35,691



36,032



35,412

Weighted average number of shares – diluted


36,583



36,232



36,475



36,049

 

GENTHERM INCORPORATED

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

(Unaudited, in thousands)



     Three Months Ended

            December 31,            

    Twelve Months Ended

            December 31,            


2015

2014

2015

2014

Net income

$       28,414

$       19,829

$       95,393

$       70,119

Add Back:





   Income tax expense

10,654

4,446

33,545

24,102

   Interest expense

743

504

2,610

3,262

   Depreciation and amortization

7,884

10,514

31,295

34,652

Adjustments:





   Debt retirement expense

640

1,370

   Acquisition transaction expense

1,075

   Unrealized currency gain

(1,374)

(491)

(1,787)

(1,168)

   Unrealized revaluation of derivatives

(49)

225

(2,651)

(2,049)

Adjusted EBITDA before CRS adjustment

$       46,272

$       35,667

$     158,405

$     131,363

Realized loss on CRS

3,753

2,563

Gain from settlement of CRS lawsuit

(9,949)

(9,949)

Adjusted EBITDA

$       36,323

$       35,667

$     152,209

$     133,926

 

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.

On December 2, 2015, Gentherm entered into an agreement to settle all legal claims against a financial institution related to a 10 year currency related swap ("CRS").  As a result of the settlement, the CRS and its related liability to Gentherm have been terminated through a significantly reduced payment to the financial institution resulting in a $9.9 million settlement gain.  In prior periods, we made an adjustment in our Adjusted EBITDA to add back unrealized derivative losses resulting from the CRS, leaving the realized losses in Adjusted EBITDA.  Such realized losses were not paid at the time due to the lawsuit.  Since the legal claim has now been settled, we have changed the definition of Adjusted EBITDA to adjust for all CRS related amounts, including the realized losses, unrealized losses and the settlement gain.

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

          December 31,       

Twelve Months Ended

          December 31,       

          Future  Full Year Periods (estimated)        


2015

2014

2015

2014

2016

2017

2018

Thereafter










Transaction related current expenses









Acquisition transaction expenses

$         –

$         –

$        –

$  1,075

$        –

$         –

$         –

$           –

Non-cash purchase accounting impacts









Customer relationships amortization

$  1,735

$  1,985

$  7,069

$  8,205

$  6,852

$  6,852

$  6,852

$  16,626

Technology amortization

744

854

3,042

3,486

2,942

2,104

738

1,156

Product development costs amortization

45

519

1,044

2,207

41

Trade name amortization

42

50

184

104

162

122

Order backlog amortization

832

Inventory fair value adjustment

1,098


$  2,566

$  3,408

$  11,339

$  15,932

$  9,997

$  9,078

$  7,590

$  17,782

Tax effect

(598)

(794)

(2,642)

(4,121)

(2,329)

(2,115)

(1,769)

(4,188)

Net income effect

$  1,968

$  2,614

$  8,697

$  12,886

$  7,668

$  6,963

$  5,821

$  13,594










Earnings per share - difference









Basic

$  0.05

$  0.07

$  0.24

$  0.36





Diluted

$  0.05

$  0.07

$  0.24

$  0.36
















 

GENTHERM INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)




December 31,



2015


2014

ASSETS







Current Assets:







Cash & cash equivalents


$

144,479


$

85,700

Accounts receivable, less allowance of $2,839 and $2,847, respectively



142,610



136,183

Inventory



84,183



77,643

Derivative financial instruments





145

Deferred income tax assets



6,716



6,247

Prepaid expenses and other assets



42,620



29,107

Total current assets



420,608



335,025

Property and equipment, net of accumulated depreciation of $34,107 and $27,221, respectively



119,157



91,727

Goodwill



27,765



30,398

Other intangible assets, net of accumulated amortization of $59,594 and $53,756, respectively



48,461



68,129

Deferred financing costs



310



406

Deferred income tax assets



22,094



18,843

Derivative financial instruments





1,345

Other non-current assets



8,403



8,404

Total assets


$

646,798


$

554,277

LIABILITIES AND SHAREHOLDERS' EQUITY







Current Liabilities:







Accounts payable


$

77,115


$

71,434

Accrued liabilities



60,823



68,387

Current maturities of long-term debt



4,909



5,306

Derivative financial instruments



725



2,466

Deferred income tax liabilities



211



Total current liabilities



143,783



147,593

Pension benefit obligation



6,545



6,706

Other Liabilities



5,026



2,788

Long-term debt, less current maturities



92,832



85,469

Derivative financial instruments





6,698

Deferred tax liabilities



14,321



10,804

Total liabilities



262,507



260,058

Shareholders' equity:







Common Stock:







No par value; 55,000,000 shares authorized, 36,321,775 and 35,696,742 issued and outstanding at December 31, 2015 and 2014, respectively



256,919



243,255

Paid-in capital



(1,282)



(8,224)

Accumulated other comprehensive income



(51,670)



(25,743)

Accumulated earnings



180,324



84,931

Total shareholders' equity



384,291



294,219

Total liabilities and shareholders' equity


$

646,798


$

554,277

 

GENTHERM INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)




Year Ended December 31,



2015


2014


2013

Operating Activities:










Net income


$

95,393


$

70,119


$

35,133

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










Depreciation and amortization



31,029



35,029



31,249

Deferred income taxes



(711)



(11,103)



(2,121)

Gain on CRS settlement



(9,949)





Revaluation of derivatives



(490)



(1,039)



(2,678)

Debt extinguishment expenses





1,370



Stock compensation



6,018



4,652



2,636

Loss on sale of property and equipment



20



131



106

Loss from write-off of intangible assets



358





Provision for doubtful accounts



115



1,017



(705)

Defined benefit pension plan expense



668



820



(659)

Gain from equity investment





(785)



(436)

Changes in operating assets and liabilities:










Accounts receivable



(12,399)



(16,902)



(13,828)

Inventory



(10,954)



(8,367)



(9,600)

Prepaid expenses and other assets



(11,122)



(5,871)



(9,446)

Accounts payable



8,049



6,956



18,255

Accrued liabilities



8,687



4,308



11,888

Net cash provided by operating activities



104,712



80,335



59,794

Investing Activities:










Settlement of derivative financial instruments



(7,593)





Purchase of non-controlling interest







(48,567)

Investment in subsidiary, net of cash acquired



107



(31,474)



Cash invested in corporate owned life insurance







(266)

Purchases of property and equipment



(55,490)



(38,887)



(35,861)

Proceeds from the sale of property and equipment



248



487



11

Net cash used in investing activities



(62,728)



(69,874)



(84,683)

Financing Activities:










Distribution paid to non-controlling interest







(3)

Cash paid for financing costs





(1,139)



Borrowing of Debt



15,000



91,592



45,669

Repayments of Debt



(5,053)



(79,692)



(24,496)

Cash paid for the cancellation of restricted stock



(1,475)



(1,113)



Excess tax benefit from equity awards



6,681



1,831



2,074

Redemption of Series C Preferred Stock







(8,446)

Series C Preferred Stock Holders dividend







(696)

Proceeds from the exercise of Common Stock options



9,273



7,176



4,801

Net cash provided by financing activities



24,426



18,655



18,903

Foreign currency effect on cash and cash equivalents



(7,631)



1,699



2,719

Net increase (decrease) in cash and cash equivalents



58,779



30,815



(3,267)

Cash and cash equivalents at beginning of period



85,700



54,885



58,152

Cash and cash equivalents at end of period


$

144,479


$

85,700


$

54,885

Supplemental disclosure of cash flow information:










Cash paid for interest


$

2,826


$

2,558


$

2,653

Cash paid for taxes


$

32,376


$

21,756


$

11,326

Supplemental disclosure of non-cash transactions:










Issuance of Common Stock to non-controlling interest


$


$


$

42,517

Issuance of Common Stock for Series C Preferred Stock conversion


$


$


$

15,108

Capital Lease







3,254

Common Stock issued to directors and employees


$

3,734


$

2,706


$

1,509

 

SOURCE Gentherm



RELATED LINKS

http://www.gentherm.com