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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, 2022

OR

 

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 28, 2022, there were 33,164,721 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 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

 

23

 

Item 3.

 

 

Quantitative and Qualitative Disclosures About Market Risk

 

37

 

Item 4.

 

 

Controls and Procedures

 

39

 

Part II. Other Information

 

40

 

 

Item 1.

 

Legal Proceedings

 

40

 

 

Item 1A.

 

Risk Factors

 

40

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

 

 

Item 6.

 

Exhibits

 

41

 

Signatures

 

42

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

157,258

 

 

$

190,606

 

Accounts receivable, net

 

 

207,364

 

 

 

182,987

 

Inventory:

 

 

 

 

 

 

Raw materials

 

 

122,371

 

 

 

96,426

 

Work in process

 

 

8,989

 

 

 

9,495

 

Finished goods

 

 

56,424

 

 

 

53,556

 

Inventory, net

 

 

187,784

 

 

 

159,477

 

Other current assets

 

 

40,320

 

 

 

32,775

 

Total current assets

 

 

592,726

 

 

 

565,845

 

Property and equipment, net

 

 

149,907

 

 

 

155,270

 

Goodwill

 

 

62,935

 

 

 

66,033

 

Other intangible assets, net

 

 

31,968

 

 

 

37,554

 

Operating lease right-of-use assets

 

 

25,924

 

 

 

24,387

 

Deferred income tax assets

 

 

67,112

 

 

 

69,630

 

Other non-current assets

 

 

16,474

 

 

 

16,624

 

Total assets

 

$

947,046

 

 

$

935,343

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

147,136

 

 

$

122,727

 

Current lease liabilities

 

 

5,376

 

 

 

5,669

 

Current maturities of long-term debt

 

 

2,500

 

 

 

2,500

 

Other current liabilities

 

 

84,206

 

 

 

82,193

 

Total current liabilities

 

 

239,218

 

 

 

213,089

 

Long-term debt, less current maturities

 

 

35,000

 

 

 

36,250

 

Non-current lease liabilities

 

 

18,721

 

 

 

19,789

 

Pension benefit obligation

 

 

6,116

 

 

 

6,832

 

Other non-current liabilities

 

 

4,796

 

 

 

5,577

 

Total liabilities

 

$

303,851

 

 

$

281,537

 

Shareholders’ equity:

 

 

 

 

 

 

Common Stock:

 

 

 

 

 

 

No par value; 55,000,000 shares authorized 33,132,691 and 33,008,185 issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

121,088

 

 

 

118,646

 

Paid-in capital

 

 

5,720

 

 

 

5,866

 

Accumulated other comprehensive loss

 

 

(68,648

)

 

 

(36,922

)

Accumulated earnings

 

 

585,035

 

 

 

566,216

 

Total shareholders’ equity

 

 

643,195

 

 

 

653,806

 

Total liabilities and shareholders’ equity

 

$

947,046

 

 

$

935,343

 

 

 

3


 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Product revenues

 

$

260,715

 

 

$

266,005

 

 

$

528,372

 

 

$

554,540

 

Cost of sales

 

 

201,338

 

 

 

186,792

 

 

 

404,882

 

 

 

387,658

 

Gross margin

 

 

59,377

 

 

 

79,213

 

 

 

123,490

 

 

 

166,882

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Net research and development expenses

 

 

19,325

 

 

 

18,227

 

 

 

39,759

 

 

 

35,830

 

Selling, general and administrative expenses

 

 

31,943

 

 

 

27,223

 

 

 

61,251

 

 

 

55,749

 

Restructuring expenses

 

 

374

 

 

 

2,091

 

 

 

555

 

 

 

2,882

 

Total operating expenses

 

 

51,642

 

 

 

47,541

 

 

 

101,565

 

 

 

94,461

 

Operating income

 

 

7,735

 

 

 

31,672

 

 

 

21,925

 

 

 

72,421

 

Interest expense, net

 

 

(1,430

)

 

 

(630

)

 

 

(1,999

)

 

 

(1,669

)

Foreign currency gain (loss)

 

 

4,552

 

 

 

(515

)

 

 

6,769

 

 

 

258

 

Other income

 

 

134

 

 

 

12

 

 

 

338

 

 

 

3

 

Earnings before income tax

 

 

10,991

 

 

 

30,539

 

 

 

27,033

 

 

 

71,013

 

Income tax expense

 

 

3,919

 

 

 

5,748

 

 

 

8,214

 

 

 

13,313

 

Net income

 

$

7,072

 

 

$

24,791

 

 

$

18,819

 

 

$

57,700

 

Basic earnings per share

 

$

0.21

 

 

$

0.75

 

 

$

0.57

 

 

$

1.75

 

Diluted earnings per share

 

$

0.21

 

 

$

0.74

 

 

$

0.56

 

 

$

1.72

 

Weighted average number of shares – basic

 

 

33,119

 

 

 

33,100

 

 

 

33,077

 

 

 

33,025

 

Weighted average number of shares – diluted

 

 

33,426

 

 

 

33,544

 

 

 

33,422

 

 

 

33,469

 

 

See accompanying notes to the consolidated condensed financial statements.

 

4


 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

7,072

 

 

$

24,791

 

 

$

18,819

 

 

$

57,700

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Pension benefit obligations

 

 

27

 

 

 

 

 

 

56

 

 

 

 

Foreign currency translation adjustments

 

 

(22,700

)

 

 

4,528

 

 

 

(31,994

)

 

 

(8,624

)

Unrealized (loss) gain on foreign currency derivative securities, net of tax

 

 

(247

)

 

 

(48

)

 

 

217

 

 

 

(570

)

Unrealized loss on commodity derivative securities, net of tax

 

 

 

 

 

 

 

 

(5

)

 

 

 

Other comprehensive (loss) income, net of tax

 

 

(22,920

)

 

 

4,480

 

 

 

(31,726

)

 

 

(9,194

)

Comprehensive (loss) income

 

$

(15,848

)

 

$

29,271

 

 

$

(12,907

)

 

$

48,506

 

 

See accompanying notes to the consolidated condensed financial statements.

 

5


 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

18,819

 

 

$

57,700

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

18,635

 

 

 

19,571

 

Deferred income taxes

 

 

(997

)

 

 

(225

)

Non-cash stock based compensation

 

 

5,263

 

 

 

7,663

 

Loss on disposition of property and equipment

 

 

518

 

 

 

496

 

Other

 

 

708

 

 

 

(262

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(31,762

)

 

 

11,647

 

Inventory

 

 

(33,637

)

 

 

(17,211

)

Other assets

 

 

(10,443

)

 

 

8,408

 

Accounts payable

 

 

27,768

 

 

 

(289

)

Other liabilities

 

 

1,442

 

 

 

(3,136

)

Net cash (used in) provided by operating activities

 

 

(3,686

)

 

 

84,362

 

Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(15,448

)

 

 

(20,669

)

Proceeds from the sale of property and equipment

 

 

81

 

 

 

10

 

Cost of technology investments

 

 

(350

)

 

 

(5,200

)

Net cash used in investing activities

 

 

(15,717

)

 

 

(25,859

)

Financing Activities:

 

 

 

 

 

 

Repayments of debt

 

 

(1,250

)

 

 

(143,731

)

Proceeds from the exercise of Common Stock options

 

 

569

 

 

 

6,292

 

Taxes withheld and paid on employees' share-based payment awards

 

 

(4,464

)

 

 

(2,117

)

Acquisition contingent consideration payment

 

 

 

 

 

(69

)

Net cash used in financing activities

 

 

(5,145

)

 

 

(139,625

)

Foreign currency effect

 

 

(8,800

)

 

 

(360

)

Net decrease in cash and cash equivalents

 

 

(33,348

)

 

 

(81,482

)

Cash and cash equivalents at beginning of period

 

 

190,606

 

 

 

268,345

 

Cash and cash equivalents at end of period

 

$

157,258

 

 

$

186,863

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

8,642

 

 

$

8,563

 

Cash paid for interest

 

$

909

 

 

$

1,455

 

 

See accompanying notes to the consolidated condensed financial statements.

 

 

6


 

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, 2021

 

 

33,008

 

 

$

118,646

 

 

$

5,866

 

 

$

(36,922

)

 

$

566,216

 

 

$

653,806

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,747

 

 

 

11,747

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(8,806

)

 

 

 

 

 

(8,806

)

Stock compensation, net

 

 

119

 

 

 

(814

)

 

 

(146

)

 

 

 

 

 

 

 

 

(960

)

Balance at March 31, 2022

 

 

33,127

 

 

 

117,832

 

 

 

5,720

 

 

 

(45,728

)

 

 

577,963

 

 

 

655,787

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,072

 

 

 

7,072

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(22,920

)

 

 

 

 

 

(22,920

)

Stock compensation, net

 

 

6

 

 

 

3,256

 

 

 

 

 

 

 

 

 

 

 

 

3,256

 

Balance at June 30, 2022

 

 

33,133

 

 

$

121,088

 

 

$

5,720

 

 

$

(68,648

)

 

$

585,035

 

 

$

643,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Earnings

 

 

Total

 

Balance at December 31, 2020

 

 

32,921

 

 

$

121,073

 

 

$

7,458

 

 

$

(14,982

)

 

$

472,782

 

 

$

586,331

 

Net income