SEC Filing | GENTHERM INCORPORATED

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 0-21810

GENTHERM INCORPORATED

(Exact name of registrant as specified in its charter)


Michigan		95-4318554
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
21680 Haggerty Road, Northville, MI		48167
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (248) 504-0500

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	THRM	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At July 26, 2023, there were 32,990,546 issued and outstanding shares of Common Stock of the registrant.

GENTHERM INCORPORATED

TABLE OF CONTENTS




Part I. Financial Information			3
	Item 1.	Financial Statements (Unaudited)	3
		Consolidated Condensed Balance Sheets	3
		Consolidated Condensed Statements of (Loss) Income	4
		Consolidated Condensed Statements of Comprehensive (Loss) Income	5
		Consolidated Condensed Statements of Cash Flows	6
		Consolidated Condensed Statements of Changes in Shareholders’ Equity	7
		Notes to Unaudited Consolidated Condensed Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
	Item 4.	Controls and Procedures	41
Part II. Other Information			42
	Item 1.	Legal Proceedings	42
	Item 1A.	Risk Factors	42
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
	Item 5.	Other Information	42
	Item 6.	Exhibits	43
Signatures			44

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	June 30, 2023			December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	168,671		$	153,891
Accounts receivable, net		258,157			247,131
Inventory:
Raw materials		129,972			136,217
Work in process		15,673			17,695
Finished goods		62,295			64,336
Inventory, net		207,940			218,248
Other current assets		74,781			64,597
Total current assets		709,549			683,867
Property and equipment, net		239,920			244,480
Goodwill		100,885			119,774
Other intangible assets, net		69,096			73,933
Operating lease right-of-use assets		29,925			29,945
Deferred income tax assets		74,537			69,840
Other non-current assets		20,135			17,461
Total assets	$	1,244,047		$	1,239,300
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	207,655		$	182,225
Current lease liabilities		8,005			7,143
Current maturities of long-term debt		684			2,443
Other current liabilities		91,278			93,814
Total current liabilities		307,622			285,625
Long-term debt, less current maturities		217,441			232,653
Non-current lease liabilities		18,095			20,538
Pension benefit obligation		3,229			3,638
Other non-current liabilities		27,100			24,573
Total liabilities	$	573,487		$	567,027
Shareholders’ equity:
Common Stock:
No par value; 55,000,000 shares authorized 32,987,809 and 33,202,082 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		105,525			122,658
Paid-in capital		5,379			5,447
Accumulated other comprehensive loss		(37,413	)		(46,489	)
Accumulated earnings		597,069			590,657
Total shareholders’ equity		670,560			672,273
Total liabilities and shareholders’ equity	$	1,244,047		$	1,239,300

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF (LOSS) INCOME

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Product revenues	$	372,323		$	260,715		$	735,948		$	528,372
Cost of sales		284,335			201,338			566,830			404,882
Gross margin		87,988			59,377			169,118			123,490
Operating expenses:
Net research and development expenses		24,696			19,325			49,841			39,759
Selling, general and administrative expenses		38,418			31,943			75,460			61,251
Impairment of goodwill		19,509			—			19,509			—
Restructuring expenses		1,044			374			2,313			555
Total operating expenses		83,667			51,642			147,123			101,565
Operating income		4,321			7,735			21,995			21,925
Interest expense, net		(1,932	)		(1,430	)		(6,076	)		(1,999	)
Foreign currency gain (loss)		346			4,552			(1,723	)		6,769
Other income		556			134			786			338
Earnings before income tax		3,291			10,991			14,982			27,033
Income tax expense		4,842			3,919			8,570			8,214
Net (loss) income	$	(1,551	)	$	7,072		$	6,412		$	18,819
Basic (loss) earnings per share	$	(0.05	)	$	0.21		$	0.19		$	0.57
Diluted (loss) earnings per share	$	(0.05	)	$	0.21		$	0.19		$	0.56
Weighted average number of shares – basic		33,019			33,119			33,100			33,077
Weighted average number of shares – diluted		33,019			33,426			33,328			33,422

See accompanying notes to the consolidated condensed financial statements.

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023		2022
Net (loss) income	$	(1,551	)	$	7,072		$	6,412	$	18,819
Other comprehensive (loss) income:
Pension benefit obligations		4			27			8		56
Foreign currency translation adjustments		(3,588	)		(22,700	)		4,667		(31,994	)
Unrealized gain (loss) on foreign currency derivative securities, net of tax		2,272			(247	)		4,401		217
Unrealized loss on commodity derivative securities, net of tax		—			—			—		(5	)
Other comprehensive (loss) income, net of tax		(1,312	)		(22,920	)		9,076		(31,726	)
Comprehensive (loss) income	$	(2,863	)	$	(15,848	)	$	15,488	$	(12,907	)

See accompanying notes to the consolidated condensed financial statements.

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2023			2022
Operating Activities:
Net income	$	6,412		$	18,819
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		26,077			18,635
Deferred income taxes		(2,812	)		(997	)
Stock based compensation		5,053			5,263
Loss on disposition of property and equipment		828			518
Provisions for inventory		1,930			1,807
Impairment of goodwill		19,509			—
Other		(259	)		708
Changes in assets and liabilities:
Accounts receivable, net		(11,624	)		(31,762	)
Inventory		9,417			(35,444	)
Other assets		(12,241	)		(10,443	)
Accounts payable		24,518			27,768
Other liabilities		(8,196	)		1,442
Net cash provided by (used in) operating activities		58,612			(3,686	)
Investing Activities:
Purchases of property and equipment		(13,667	)		(15,448	)
Proceeds from the sale of property and equipment		40			81
Proceeds from deferred purchase price of factored receivables		7,351			—
Cost of technology investments		(500	)		(350	)
Net cash used in investing activities		(6,776	)		(15,717	)
Financing Activities:
Repayments of debt		(16,982	)		(1,250	)
Proceeds from the exercise of Common Stock options		263			569
Taxes withheld and paid on employees' share-based payment awards		(2,644	)		(4,464	)
Cash paid for the repurchase of Common Stock		(19,993	)		—
Net cash used in financing activities		(39,356	)		(5,145	)
Foreign currency effect		2,300			(8,800	)
Net increase (decrease) in cash and cash equivalents		14,780			(33,348	)
Cash and cash equivalents at beginning of period		153,891			190,606
Cash and cash equivalents at end of period	$	168,671		$	157,258
Supplemental disclosure of cash flow information:
Cash paid for taxes	$	11,619		$	8,642
Cash paid for interest		6,640			909
Non-Cash Investing Activities:
Period-end balance of accounts payable for property and equipment	$	4,085		$	1,747
Deferred purchase price of receivables factored in the period		6,522			—

See accompanying notes to the consolidated condensed financial statements.

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


										Accumulated
										Other
	Common Stock						Paid-in			Comprehensive			Accumulated
	Shares			Amount			Capital			Loss			Earnings			Total
Balance at December 31, 2022		33,202		$	122,658		$	5,447		$	(46,489	)	$	590,657		$	672,273
Net income		—			—			—			—			7,963			7,963
Other comprehensive income		—			—			—			10,388			—			10,388
Stock compensation, net		94			(241	)		(68	)		—			—			(309	)
Stock repurchase		(169	)		(9,997	)		—			—			—			(9,997	)
Balance at March 31, 2023		33,127		$	112,420		$	5,379		$	(36,101	)	$	598,620		$	680,318
Net loss		—			—			—			—			(1,551	)		(1,551	)
Other comprehensive loss		—