Revenues Up Year-Over-Year 31 Percent
NORTHVILLE, Mich., May 1, 2014 /PRNewswire/ — Gentherm (nasdaq-gs:THRM), the global market leader and developer of innovative thermal management technologies, today announced record financial results for the first quarter ended March 31, 2014.
“We had an extraordinary first quarter,” said President and CEO Daniel R. Coker. “We achieved record revenues with every part of our business contributing to growth, led by a significant year-over-year increase in sales of our Climate Control Seats (CCS™), which for the first time since the acquisition in 2011, represents the largest portion of our revenues. Gross margins, which fluctuate from quarter to quarter, came in on the high end of the expected range, and we achieved record profits for the quarter.”
Coker continued, “While we achieved a 31 percent increase in revenues over last year’s first quarter, for comparison purposes, revenue in the first and second quarters of 2013 was not as strong as in the second half of last year. Consequently, looking forward to the second half of 2014, our quarterly results will be compared to the much stronger results achieved in the second half of 2013. As a result, our year-over-year quarterly increases may not be as large as those in the first half of this year. With that said, however, I believe we remain on track to achieve another year of record results.”
For the 2014 first quarter, revenues were up 31 percent to $193.9 million from $148.1 million in the prior year period. Revenue increases resulted from continued strong shipments of the Company’s Climate Control Seats (CCS™) which grew 46 percent year over year to approximately $81.9 million. This increase was driven by new program launches since the 2013 first quarter and strong production volumes and sales of the vehicles equipped with CCS systems, particularly vehicles in the luxury segment of the automotive market. Additionally, certain vehicles that have been redesigned since the first quarter of the prior year are experiencing very strong production and sales levels, including the General Motors full size SUV platform and the Jeep Grand Cherokee. Improved sales to Japan-based customers, which had recovered from weaker sales during the year-earlier period, also contributed to the increase.
Seat heater revenue grew 25 percent year over year to approximately $80.9 million. This reflected market penetration on certain vehicle programs and also strong production volumes on General Motors’ K2XX platform, its new line of full-size trucks and large sport utility vehicles. The Company also had significant growth in the sales of heated steering wheels during the quarter which increased 58 percent year over year to approximately $8.8 million. European-based sales were significantly higher than the prior year as local economies and car sales in that region continue to improve, said Coker.
Foreign currency translation of the Company’s Euro denominated revenue for this year’s first quarter, which was approximately €39.1 million compared with €34.9 million for the first quarter of last year, increased the US Dollar-reported revenue by approximately $2.3 million. The average US Dollar/Euro exchange rate for the 2014 first quarter was 1.3790 compared with 1.3207 for the prior year period.
Net income attributable to common shareholders for the 2014 first quarter was $16.6 million, or $0.47 per basic share and $0.47 per diluted share, which included $1.1 million in fees and expenses associated with the acquisition of Global Thermoelectric Inc. (GTE), which was completed on April 1, 2014. Net income attributable to common shareholders for the first quarter of 2013 was $7.7 million, or $0.24 per basic and diluted share, which included $1.2 million in fees, legal and other expenses associated with the acquisition of W.E.T. shares.
Further non-cash purchase accounting impacts associated with the Company’s recent acquisitions are detailed in the Acquisition Transaction Expenses, Purchase Accounting Impacts and Other Effects table accompanying the release.
Gross margin as a percentage of revenue for this year’s first quarter increased to 29.4 percent, up from 26.4 percent for the 2013 first quarter. This increase was due to a favorable change in product mix, greater coverage of fixed manufacturing costs at the higher volume levels, favorable contribution from the Company’s new electronics manufacturing facility in China and foreign currency impact on production expenses in the Mexican Peso and Ukraine Hryvna.
Adjusted EBITDA for the 2014 first quarter was $32.4 million, up $14.3 million or 79 percent, compared with Adjusted EBITDA of $18.1 million for the prior year period reflecting the charges discussed previously. Adjusted EBITDA (which is a non-GAAP measure) is provided to help shareholders understand Gentherm’s results of operations due to the significant amount of acquisition-related amortization recorded against the Company’s earnings. This non-GAAP financial measure should be viewed in addition to, and not as an alternative for, Gentherm’s reported results prepared in accordance with GAAP.
The Company’s balance sheet as of March 31, 2014, had total cash and cash equivalents of $57.7 million, total assets of $513.3 million, shareholders’ equity of $251.5 million and total debt of $90.3 million.
Revaluation of Derivatives and Foreign Currency Gains and Losses For the 2014 first quarter, the Company recorded a foreign currency loss of $1.5 million compared with a gain of $987,000 for the prior year period. A loss of $247,000 related to the revaluation of derivative financial instruments was recorded for this year’s first quarter compared with a gain of $346,000 for the prior year period.
Research and Development, Selling, General and Administrative (SG&A) Expenses Net research and development expenses for this year’s first quarter were up $1.2 million to $13.0 million, reflecting additional resources, including personnel, focused on application engineering for new production programs on existing products, development of new products and a program to develop the next generation of seat comfort products. New product development includes automotive heated and cooled storage devices, automotive interior thermal management devices, medical thermal management devices, battery thermal management devices and other potential products.
SG&A expenses for the 2014 first quarter increased $1.8 million to $18.0 million when compared to the prior year period. Included are higher legal, audit and travel costs, as well as wages and benefits costs resulting from new employee hiring and merit increases. The additional employees are primarily related to establishing a new electronics production facility in Shenzhen, China, and increasing sales and marketing efforts aimed at supporting the Company’s current product development strategy.
Guidance: Barring unforeseen economic turbulence, including worsening geopolitical tensions or unfavorable fluctuations of the Euro exchange rate, the 2014 revenue growth outlook remains strong. Due to higher than expected first quarter product revenue results and the incorporation of the product revenues of Global Thermoelectric Inc., the Company is now expecting revenue for 2014 to increase by at least 15 percent over 2013 revenue, which was $662 million.
Conference Call: As previously announced, Gentherm is conducting a conference call today to be broadcast live over the Internet at 11:30 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), cable systems and other electronic devices. The Company’s advanced technology team is developing more efficient materials for thermoelectric and systems for waste heat recovery and electrical power generation for the automotive market that may have far-reaching applications for consumer products as well as industrial and technology markets. Gentherm has nearly 7,500 employees in facilities in the U.S., Germany, Mexico, China, Canada, Japan, England, Korea, Malta, Hungary and the Ukraine. For more information, go to www.gentherm.com .