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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 September 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 October 28, 2022, there were 33,198,067 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

 

25

 

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 6.

 

Exhibits

 

43

 

Signatures

 

44

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

139,163

 

 

$

190,606

 

Accounts receivable, net

 

 

248,570

 

 

 

182,987

 

Inventory:

 

 

 

 

 

 

Raw materials

 

 

154,273

 

 

 

96,426

 

Work in process

 

 

17,157

 

 

 

9,495

 

Finished goods

 

 

62,465

 

 

 

53,556

 

Inventory, net

 

 

233,895

 

 

 

159,477

 

Other current assets

 

 

84,344

 

 

 

32,775

 

Total current assets

 

 

705,972

 

 

 

565,845

 

Property and equipment, net

 

 

228,056

 

 

 

155,270

 

Goodwill

 

 

125,273

 

 

 

66,033

 

Other intangible assets, net

 

 

68,639

 

 

 

37,554

 

Operating lease right-of-use assets

 

 

30,214

 

 

 

24,387

 

Deferred income tax assets

 

 

66,322

 

 

 

69,630

 

Other non-current assets

 

 

16,857

 

 

 

16,624

 

Total assets

 

$

1,241,333

 

 

$

935,343

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

208,338

 

 

$

122,727

 

Current lease liabilities

 

 

7,448

 

 

 

5,669

 

Current maturities of long-term debt

 

 

3,540

 

 

 

2,500

 

Other current liabilities

 

 

100,898

 

 

 

82,193

 

Total current liabilities

 

 

320,224

 

 

 

213,089

 

Long-term debt, less current maturities

 

 

232,000

 

 

 

36,250

 

Non-current lease liabilities

 

 

22,013

 

 

 

19,789

 

Pension benefit obligation

 

 

5,850

 

 

 

6,832

 

Other non-current liabilities

 

 

37,157

 

 

 

5,577

 

Total liabilities

 

$

617,244

 

 

$

281,537

 

Shareholders’ equity:

 

 

 

 

 

 

Common Stock:

 

 

 

 

 

 

No par value; 55,000,000 shares authorized 33,196,404 and 33,008,185 issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

119,801

 

 

 

118,646

 

Paid-in capital

 

 

5,477

 

 

 

5,866

 

Accumulated other comprehensive loss

 

 

(96,051

)

 

 

(36,922

)

Accumulated earnings

 

 

594,862

 

 

 

566,216

 

Total shareholders’ equity

 

 

624,089

 

 

 

653,806

 

Total liabilities and shareholders’ equity

 

$

1,241,333

 

 

$

935,343

 

 

 

3


 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Product revenues

 

$

332,962

 

 

$

243,384

 

 

$

861,334

 

 

$

797,924

 

Cost of sales

 

 

252,610

 

 

 

173,997

 

 

 

657,492

 

 

 

561,655

 

Gross margin

 

 

80,352

 

 

 

69,387

 

 

 

203,842

 

 

 

236,269

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Net research and development expenses

 

 

22,666

 

 

 

20,590

 

 

 

62,425

 

 

 

56,420

 

Selling, general and administrative expenses

 

 

34,859

 

 

 

27,344

 

 

 

96,109

 

 

 

83,093

 

Restructuring expenses

 

 

6

 

 

 

749

 

 

 

561

 

 

 

3,631

 

Total operating expenses

 

 

57,531

 

 

 

48,683

 

 

 

159,095

 

 

 

143,144

 

Operating income

 

 

22,821

 

 

 

20,704

 

 

 

44,747

 

 

 

93,125

 

Interest income (expense), net

 

 

714

 

 

 

(515

)

 

 

(1,285

)

 

 

(2,184

)

Foreign currency (loss) gain

 

 

(8,285

)

 

 

133

 

 

 

(1,516

)

 

 

391

 

Other income

 

 

361

 

 

 

10

 

 

 

698

 

 

 

13

 

Earnings before income tax

 

 

15,611

 

 

 

20,332

 

 

 

42,644

 

 

 

91,345

 

Income tax expense

 

 

5,784

 

 

 

4,646

 

 

 

13,998

 

 

 

17,959

 

Net income

 

$

9,827

 

 

$

15,686

 

 

$

28,646

 

 

$

73,386

 

Basic earnings per share

 

$

0.30

 

 

$

0.47

 

 

$

0.87

 

 

$

2.22

 

Diluted earnings per share

 

$

0.29

 

 

$

0.47

 

 

$

0.86

 

 

$

2.19

 

Weighted average number of shares – basic

 

 

33,162

 

 

 

33,178

 

 

 

33,106

 

 

 

33,075

 

Weighted average number of shares – diluted

 

 

33,470

 

 

 

33,609

 

 

 

33,460

 

 

 

33,489

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

9,827

 

 

$

15,686

 

 

$

28,646

 

 

$

73,386

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Pension benefit obligations

 

 

6

 

 

 

 

 

 

62

 

 

 

 

Foreign currency translation adjustments

 

 

(28,682

)

 

 

(7,432

)

 

 

(60,676

)

 

 

(16,056

)

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

 

 

1,273

 

 

 

(474

)

 

 

1,490

 

 

 

(1,044

)

Unrealized loss on commodity derivative securities, net of tax

 

 

 

 

 

(35

)

 

 

(5

)

 

 

(35

)

Other comprehensive loss, net of tax

 

 

(27,403

)

 

 

(7,941

)

 

 

(59,129

)

 

 

(17,135

)

Comprehensive (loss) income

 

$

(17,576

)

 

$

7,745

 

 

$

(30,483

)

 

$

56,251

 

 

See accompanying notes to the consolidated condensed financial statements.

 

5


 

GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

28,646

 

 

$

73,386

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

30,470

 

 

 

29,430

 

Deferred income taxes

 

 

(1,207

)

 

 

3,867

 

Non-cash stock based compensation

 

 

3,383

 

 

 

11,760

 

Loss on disposition of property and equipment

 

 

620

 

 

 

638

 

Other

 

 

881

 

 

 

(650

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(55,780

)

 

 

26,162

 

Inventory

 

 

(48,930

)

 

 

(34,019

)

Other assets

 

 

(10,868

)

 

 

597

 

Accounts payable

 

 

60,983

 

 

 

9,231

 

Other liabilities

 

 

4,759

 

 

 

(3,296

)

Net cash provided by operating activities

 

 

12,957

 

 

 

117,106

 

Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(25,737

)

 

 

(29,585

)

Proceeds from the sale of property and equipment

 

 

175

 

 

 

11

 

Acquisition of businesses, net of cash acquired

 

 

(224,097

)

 

 

(2,827

)

Proceeds from deferred purchase price of factored receivables

 

 

2,168

 

 

 

 

Cost of technology investments

 

 

(350

)

 

 

(7,557

)

Net cash used in investing activities

 

 

(247,841

)

 

 

(39,958

)

Financing Activities:

 

 

 

 

 

 

Borrowings on debt

 

 

207,000

 

 

 

 

Repayments of debt

 

 

(11,559

)

 

 

(151,993

)

Proceeds from the exercise of Common Stock options

 

 

1,556

 

 

 

7,467

 

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

 

 

(5,415

)

 

 

(3,991

)

Acquisition contingent consideration payment

 

 

 

 

 

(69

)

Net cash provided by (used in) financing activities

 

 

191,582

 

 

 

(148,586

)

Foreign currency effect

 

 

(8,141

)

 

 

(1,821

)

Net decrease in cash and cash equivalents

 

 

(51,443

)

 

 

(73,259

)

Cash and cash equivalents at beginning of period

 

 

190,606

 

 

 

268,345

 

Cash and cash equivalents at end of period

 

$

139,163

 

 

$

195,086

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

13,509

 

 

$

12,348

 

Cash paid for interest

 

$

3,334

 

 

$

1,823

 

 

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