UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  April 26, 2018

 

GENTHERM INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

 

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

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:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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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On April 26, 2018, Gentherm Incorporated (the “Company”) publicly announced its financial results for the first quarter of 2018. A copy of the Company’s news release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.  On April 26, 2018 at 8:00 a.m. Eastern Time, the Company will host a conference call to discuss the first quarter of 2018 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 (the “Securities Act”), or the Exchange Act except as shall be expressly stated by specific reference in such filing.

On April 26, 2018, the Company publicly announced the launch of a 48-volt lithium-ion battery thermal management product.  A copy of the Company’s news release is attached hereto as Exhibit 99.3 and is incorporated herein by reference.  The information in this Item 7.01 and Exhibit 99.3 shall not be deemed filed for purposes of Section 18 of the Exchange Act, nor shall they be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act except as shall be expressly stated by specific reference in such filing.

 

 

 

 

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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.

 

 

 

 

Gentherm Reports 2018 First Quarter Results

 

Achieved Quarterly Revenue Growth Despite Industry Headwinds

Reaffirms 2018 Guidance

 

NORTHVILLE, Michigan, April 26, 2018 /Global Newswire/ -- Gentherm (NASDAQ:THRM), the global market leader and developer of innovative thermal management technologies, today announced its financial results for the first quarter ended March 31, 2018.

First Quarter Key Takeaways

"Our first quarter results reflect challenging market conditions, especially in the North America automotive market. Nonetheless, I am pleased to see many areas of growth and we are gaining momentum on market launches, including our industry-first solution for the 48-volt lithium-ion battery thermal management with Daimler AG. We continue to lead the industry in innovative thermal management solutions, securing over $375 million of new awards in the quarter from top auto makers around the world," said Phil Eyler, the company's President and CEO.

Continued Eyler, "We are making good progress towards refining our strategy for accelerated revenue and earnings growth through focused investment and strong execution.  In addition, we are taking decisive steps and have kicked off a formal program to identify areas where cost savings can be achieved without impacting our growth plan.  With expected new program and product launches, along with vehicle production forecasted to improve in our most important markets over the balance of 2018, we remain confident in our ability to deliver on our full-year financial guidance."

2018 First Quarter Financial Review

Product revenues for the first quarter of 2018 grew by $12.6 million, or 5.1%, as compared to the prior-year, to $261.9 million.  The year-over-year growth was comprised of an $18.2 million, or 8.2%, increase in the automotive segment and a $5.6 million, or 20%, decrease in the industrial segment.  On a comparable basis, adjusting both periods for acquisitions and foreign currency translation, product revenues decreased 4.1% year over year.  

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Revenue growth in Automotive was driven by a $15.2 million contribution from the acquisition of Etratech and favorable currency translation.  Organically, automotive segment revenue was down 2.2%.  Revenue was higher in all products, on a currency-adjusted basis, except climate controlled seats (“CCS”).  The lower CCS revenue was primarily due to the 2.6% decline in overall North American vehicle production, with even greater declines for two of the Company’s largest customers, which had a disproportionate effect on CCS, as well as the continuing impact of the transition from the higher-priced active cool seat technology to the lower-priced heated and ventilated technology. The Company expects the downward trend in CCS to reverse going forward, resulting in a sequential improvement in the second quarter, as higher volume from new product launches and the anticipated increase in North American vehicle production begin to offset the effect of lower prices on platforms that have switched technologies.

The revenue decline in the Industrial segment, as compared to the prior-year period, resulted from significantly lower custom project revenue in the remote power generation business due to timing of shipments on customer projects, as well as lower year-over-year sales in the Cincinnati Sub-Zero (“CSZ”) blood heater cooler product which had benefitted from a competitor’s shortfall in the year-ago period.  See the “Revenue by Product Category” table enclosed herein for additional detail.

Gross margin rate declined to 30.0% in the current year period, as compared to 34.2% in the prior-year period, primarily as a result of timing differences between annual customer price decreases compared to supplier cost reductions; expenses associated with increased capacity for the new advanced battery thermal management product at the manufacturing facility in Macedonia and labor expense inflation at the Ukraine factory; changes in product mix; and higher expenses resulting from the translation of foreign currencies.

Net research and development expenses of $23.3 million in the first quarter of 2018 rose $3.8 million, or 19.5%, year over year as the Company continued to invest in innovation in automotive interior thermal management devices, automotive cooled storage devices, battery thermal management devices, battery management systems, advanced automotive electronics solutions, medical thermal management devices and other potential products.

Selling, general and administrative expenses of $34.6 million in the first quarter of 2018 increased $3.8 million, or 12.3%, versus the prior-year period.  The 2018 period included $1.0 million in higher expenses related to currency translation and $1.8 million in expenses associated with the acquisition of Etratech.

As described more fully in the table included below, “Reconciliation of Net Income to Adjusted EBITDA,” the Company recorded Adjusted EBITDA of $33.6 million during the first quarter of 2018 compared to $45.2 million in the prior year, a year-over-year decline of $11.6 million.  

Income tax expense in the first quarter of 2018 was $3.0 million, as compared to $7.2 million in the prior-year period.  For the first quarter of 2018, this represents an effective tax rate of 19%, as compared to 22% in the prior-year period. The effective tax rate for the first quarter of 2018 differed from the Federal statutory rate of 21%, primarily due to the impact of lower statutory rates for the Company’s subsidiaries operating in foreign jurisdictions offset by the international provisions from the U.S. tax reform, such as global intangible low-tax income (“GILTI”), enacted in December 2017.  

During the first quarter, the Company incurred a net foreign currency loss of $4.6 million, which included a net realized loss of $0.9 million and a net unrealized loss of $3.6 million.  This unrealized loss was primarily the result of holding significant amounts of U.S. Dollar cash at the Company’s subsidiaries in Europe, as well as certain intercompany relationships between these European subsidiaries and the Company’s U.S.-based companies.  In the prior-year period, the Company recognized a net foreign currency loss of $1.3 million, which primarily represented a net unrealized foreign currency loss also related to the Company’s cash held at its European subsidiaries and intercompany cash balances.

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Earnings per share for the first quarter of 2018 was $0.35 as compared to $0.69 for the prior-year period.  Adjusted earnings per share, excluding unrealized currency loss, acquisition transaction expenses and other items (see table included below), was $0.50.  Adjusted earnings per share in the prior-year period was $0.77 on a diluted basis.

Guidance

The Company reaffirms the guidance initially provided on its year-end 2017 earnings call on February 20, 2018:

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 13678307.  

 

A simultaneous webcast of the call can be accessed on the Events page of the Investor section of Gentherm's website at www.gentherm.com.

 

For those unable to listen to the live broadcast, a webcast replay will also be available on the Company’s website as noted above.

 

A telephonic replay will be available at approximately 11:00 a.m. Eastern Time and will be accessible until 11:59 p.m. Eastern Time on May 10, 2018. 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 13678307.

 

Investor Relations Contact
Yijing Brentano

investors@gentherm.com
(248) 308-1702

 

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 variable temperature Climate Control Seats, TrueTherm^TM cupholder and storage bins, heated automotive interior systems (including heated seats, steering wheels, armrests and other components), battery thermal management systems, cable systems and other electronic devices. Non-automotive products include remote power generation systems, heated and cooled furniture, patient temperature management systems, industrial environmental test chambers and related product testing services and other consumer and industrial temperature control applications. The Company 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 over 13,000 employees in facilities in the United States, Germany, Canada, China, Hungary, Japan, Korea, Macedonia, Malta, Mexico, United Kingdom, Ukraine, and Vietnam.  For more information, go to www.gentherm.com.

 

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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 and are based on management's current expectations and beliefs.  Such statements are subject to a number of important assumptions, risks, uncertainties and other factors that may cause the Company's actual performance to differ materially from that described in or indicated by the forward-looking statements. Those risks include, but are not limited to, risks that new products may not be feasible, sales may not increase, additional financing requirements may not be available, new competitors may arise or customers may develop their own products to replace the Company’s products, currency exchange rates may change unfavorably, pricing pressures from customers may increase, the Company’s workforce and operations could be disrupted by civil or political unrest in the countries in which the Company operates, free trade agreements may be altered in a manner adverse to the Company, medical device regulations could change in an unfavorable manner, oil and gas prices could fluctuate causing adverse consequences, and other adverse conditions in the industries in which the Company operates may negatively affect its results.  In addition, such forward-looking statements do 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.

 

The foregoing risks should be read in conjunction with other cautionary statements included herein, as well as in the Company's annual report on Form 10-K for the year ended December 31, 2017 and subsequent reports filed with the Securities and Exchange Commission. Except as required by law, the Company expressly disclaims any obligation or undertaking to update any forward-looking statements to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

TABLES FOLLOW

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GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MORE-MORE-MORE

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GENTHERM INCORPORATED

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA

(Unaudited, in thousands)

 

 

 

Use of Non-GAAP Financial Measures

In evaluating its business, Gentherm considers and uses Adjusted EBITDA as a supplemental measure of its operating performance.  The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, deferred financing cost amortization, transaction expenses, debt retirement expenses, unrealized currency gain or loss and unrealized revaluation of derivatives.  Management believes that Adjusted EBITDA is a meaningful measure of liquidity and the Company's ability to service debt because it provides a measure of cash available for such purposes. Management provides an Adjusted EBITDA measure so that investors will have the same financial information that management uses with the belief that it will assist investors in properly assessing the Company's performance on a period-over-period basis.

 

The term Adjusted EBITDA is not defined under GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP.  Adjusted EBITDA has limitations as an analytical tool, and when assessing the Company's operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP.  Gentherm compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only supplementally.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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GENTHERM INCORPORATED

ACQUISITION TRANSACTION EXPENSES, PURCHASE ACCOUNTING IMPACTS

AND OTHER EFFECTS

(Unaudited and in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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GENTHERM INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

 

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GENTHERM INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

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Gentherm Inc. 2018 First Quarter Results April 26, 2018 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 and are based on management's current expectations and beliefs.  Such statements are subject to a number of important assumptions, risks, uncertainties and other factors that may cause the Company's actual performance to differ materially from that described in or indicated by the forward looking statements. Those risks include, but are not limited to, risks that new products may not be feasible, sales may not increase, additional financing requirements may not be available, new competitors may arise or customers may develop their own products to replace the Company’s products, currency exchange rates may change unfavorably, pricing pressures from customers may increase, the Company’s workforce and operations could be disrupted by civil or political unrest in the countries in which the Company operates, free trade agreements may be altered in a manner adverse to the Company, medical device regulations could change in an unfavorable manner, oil and gas prices could fluctuate causing adverse consequences, and other adverse conditions in the industries in which the Company operates may negatively affect its results. The business outlook discussed in this presentation 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. The foregoing risks should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 2017 and subsequent reports filed with the Securities and Exchange Commission. Except as required by law, the Company expressly disclaims any obligation or undertaking to update any forward-looking statements to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Use of Non-GAAP Financial Measures In evaluating its business, Gentherm Incorporated considers and uses Adjusted EBITDA as a supplemental measure of its operating performance. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, deferred financing cost amortization, transaction expenses, debt retirement expenses, unrealized currency gain or loss and unrealized revaluation of derivatives. Management believes that Adjusted EBITDA is a meaningful measure of liquidity and the Company's ability to service debt because it provides a measure of cash available for such purposes. Management provides an Adjusted EBITDA measure so that investors will have the same financial information that management uses with the belief that it will assist investors in properly assessing the Company's performance on a period-over-period basis.   The term Adjusted EBITDA is not defined under GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing the Company's operating performance, investors should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP. Gentherm compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA only supplementally.

Revenue and adjusted EBITDA (1) Adjusted EDITDA is a non-GAAP measure, see slide 9. Revenue growth: 5.1% thereof -4.1% organic

Automotive 1Q 2018 Highlights 42 Vehicle launches with 21 OEMs Audi Q5 Kia K9Subaru Tribecca Tesla Model X Toyota Avalon Increased active-cooled CCSTM carbon credits available to OEMs Battery Thermal Management (BTM) Market Introductions Industry First Thermoelectric BTM System 48-Volt Mercedes S-500 EQ-Boost Air Cooling BTM System 48-Volt Audi A8 Geely KC-2

Automotive 1Q 2018 AWARDS Over $375M in new awards across 14 customers Additional seat thermal comfort award from General Motors further strengthening strategic partnership Multiple CCSTM awards Acura RDX Jaguar E-PACE Lincoln MKC Genesis Kia ON Proprietary Intelligent Positioning System (IPSTM) award for Memory Seat Module from Ford Two follow-on awards for Air Cooling Battery Thermal Management applications with Geely

1Q 2018 HIGHLIGHTS Grew sales of ultra-low temperature freezers for DNA Storage to hospitals around the world including the Mayo Clinic Secured multiple specialty freezers for a prominent Airframe manufacturer in the U.S. Delivered a chamber to LivaNova/Tandem Life for testing heart pump controllers Leveraged our dual modality capability, winning Blanketrol III ® award in a 35 Hospital IDN System in the Pittsburgh area Gaining momentum in international markets including increased patient thermal management orders from our Middle Eastern distributor

GPT Completed the largest development project in GPT history for Thermoelectrical Generator model S1100; updating the core TEG system Received official Quad Certification for Classified Areas (IECex, ATEX, UL, CSA); creating a major offshore differentiator Increased opportunity pipeline for TEG based methane reducing systems driven by aggressive regulatory changes Continued to penetrate new markets globally; received the first order in India from ONGC Offshore 1Q 2018 HIGHLIGHTS

Selected Income Statement Data

Selected Balance Sheet Data (1) Does not include cash or current debt.

2018 Guidance Revenue growth 8 – 10% (3 - 5% organic) Gross margin 30 – 32% Adjusted EBITDA(1) approximately 15% of product revenue CAPEX approximately $50M (1) Due to the inherent difficulty of forecasting the timing and amount of certain items that would impact net income, such as foreign currency gains and losses, we are unable to reasonably estimate net income, the GAAP financial measure most directly comparable to Adjusted EBITDA. Accordingly, we are unable to provide a reconciliation of Adjusted EBITDA to net income with respect to the guidance provided.

Reconciliation of Adjusted EBITDA

Adjusted Non-GAAP EPS

 

 

Gentherm Debuts Automotive Industry’s First Thermoelectric Battery Thermal Management Solution

for 48-volt Lithium-Ion Batteries

 

Unique, Innovative Solution Launched with Mercedes-Benz S-Class EQ-Boost

 

NORTHVILLE, Michigan, April 26, 2018 /Global Newswire/ -- Gentherm (NASDAQ:THRM), the global market leader and developer of innovative thermal management technologies, today announced that the industry’s first thermoelectric based solution for 48-volt lithium-ion battery thermal management (BTM) is being launched with the latest model year of the Mercedes S-Class and will soon be followed by other models. The highly-innovative solution, based on thermoelectric technology, is fully integrated as a structural part in the battery housing and is able to heat and cool the sensitive lithium-ion battery cells. This enables better battery performance in extreme conditions and prolongs the life of this high-value component.

 

“We are very pleased that Daimler AG has relied on Gentherm to help solve the difficult thermal challenges of 48-volt lithium-ion battery systems. This industry-first system on the Mercedes S-Class is a testament to Gentherm’s unique expertise in thermal management, our global footprint and our R&D and manufacturing capabilities” said Phil Eyler, President and CEO of Gentherm.  “With the transition to electric vehicles over the coming years and an industry forecast of 14 percent of global new vehicle sales in 2025 being 48-volt mild hybrid systems, we are well positioned to grow our business in BTM and other battery related technologies.”

 

 

 

Investor Relations ContactMedia Contact
investors@gentherm.commedia@gentherm.com

(248) 308-1702

 

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 variable temperature Climate Control Seats, TrueTherm^TM cupholder and storage bins, heated automotive interior systems (including heated seats, steering wheels, armrests and other components), battery thermal management systems, cable systems and other electronic devices. Non-automotive products include remote power generation systems, heated and cooled furniture, patient temperature management systems, industrial environmental test chambers and related product testing services and other consumer and industrial temperature control applications. The Company 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 over thirteen thousand employees in facilities in the United States, Germany, Canada, China, Hungary, Japan, Korea, Macedonia, Malta, Mexico, United Kingdom, Ukraine, and Vietnam.  For more information, go to www.gentherm.com.

 

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Certain 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 and are based on management's current expectations and beliefs.  Such statements are subject to a number of important assumptions, risks, uncertainties and other factors that may cause the Company's actual performance to differ materially from that described in or indicated by the forward looking statements. Those risks include, but are not limited to, risks that the Company’s new products may not be accepted by the market, that new technologies may not be feasible, that industry trends may change and that new competitors may arise or customers may develop their own products to replace the Company’s products.  The foregoing risks should be read in conjunction with other cautionary statements included herein, as well as in the Company's annual report on Form 10-K for the year ended December 31, 2017 and subsequent reports filed with the Securities and Exchange Commission. Except as required by law, the Company expressly disclaims any obligation or undertaking to update any forward-looking statements to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

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