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Exhibit 99.1

LOGO

NEWS RELEASE for July 28, 2016 at 6:00 AM ET

GENTHERM REPORTS 2016 SECOND QUARTER AND SIX-MONTH RESULTS

New Subsidiary Cincinnati Sub Zero Delivers Strong Revenue

in First Quarter since Acquisition

NORTHVILLE, MI (July 28, 2016) . . . Gentherm (NASDAQ-GS:THRM), the global market leader and developer of innovative thermal management technologies, today announced its financial results for the second quarter ended June 30, 2016.

Revenues for the 2016 second quarter and first six months increased 9.0 percent and 6.7 percent, respectively, to $232.7 million and $448.4 million from $213.4 million and $420.4 million for the comparable prior year periods.

“Our overall topline growth of 9 percent included promising strength in several of our businesses and product lines, including our new Cincinnati Sub Zero (CSZ) subsidiary, our heated seats, heated and ventilated seats and heated steering wheel product lines, and our Electronics Business Unit which is part of our new Gentherm Technologies division,” said President and CEO Daniel R. Coker. “Our strategy to expand into new and high-potential vertical markets is driving our investment in additional resources and related higher operating expenses to support these new markets and products. This investment is also creating important new growth drivers and revenue streams, all of which bode well for our future. Today we are a much larger, stronger and more diversified thermal technology company than ever before.”

Coker noted that overall sales of its Climate Control Seat (CCS™), which includes both heated and cooled and heated and ventilated seat system variants, were marked by a slower growth rate than in recent quarters. He stated that the market is undergoing a shift, temporarily softening the growth rate of the higher end heated and cooled seat systems in the short term, but adding new interest in the Company’s heated and ventilated seat systems that could be a significant growth driver in the future.

“The value of our heated and ventilated seat systems is being realized by many of our customers, especially those in the mid-tier, mid-priced vehicle market,” Coker said. “We believe we are well positioned to serve this attractive market which is more sensitive to power consumption and cost. It is much larger than the luxury market where our heated and cooled seat systems have thrived, and can support significantly larger sales volumes with strong margins. It should also drive growth of Gentherm manufactured electronics products being sold with other components as a complete system.”

Coker added that the CSZ business had a strong quarter, generating $17.0 million in revenue as compared with pro-forma prior year second quarter revenue of $15.1 million. He also said that Gentherm Global Power Technologies (GPT) quarterly revenue continued to be down significantly year over year, reflecting the slowdown in oil and natural gas pipeline construction. However, Coker noted that the order activity at GPT is currently strong indicating the potential for improved revenue performance for that business in 2017.

Net income for this year’s second quarter and first six months was $18.4 million, or $0.51 per basic share and $0.50 per diluted share, and $30.3 million, or $0.83 per basic and diluted share, respectively, compared to net income for the respective prior year periods of $19.5 million, or $0.54 per basic and $0.53 per diluted share, and $39.3 million, or $1.10 per basic share and $1.08 per diluted share. Net income for the 2016 second quarter and first six months included acquisition related fees and expenses of $634,000 and $671,000,


respectively, and a one-time inventory step-up adjustment of $4.0 million, associated with the acquisition of CSZ on April 1 of this year. Net income for the first six months of 2016 also included the one-time Canadian withholding tax payment of $6.3 million and other related tax adjustments of $3.3 million recorded in this year’s first quarter, which were all associated with the closing of the Windsor, Ontario Canada facility.

Without the impact of those items, net income for the 2016 second quarter would have been $21.6 million, or $0.59 per basic and diluted share and for the first six months net income would have been $43.0 million, or $1.18 per basic and diluted share.

Second Quarter of 2016 Financial Highlights

The 9.0 percent increase in product revenues during the first quarter was largely attributable to the acquisition of CSZ and continued growth in the Company’s automotive seating products, which was partially offset by lower product revenues from GPT. Revenues for CSZ during the Second Quarter were very strong, driven by sales of both its medical and industrial products. Automotive product revenues were higher during the Second Quarter 2016 including modestly higher sales for CCS, with good growth in automotive seat heaters and strong growth in steering wheel heaters. Product revenues from GPT continued to decline year over year and sequentially, reflecting continued softness in the demand for GPT’s products in North America. GPT continues to be unfavorably impacted by the market weakness in the oil and gas industry that has reduced capital investments being made by GPT’s principal customers that build and operate natural gas pipelines. During prior quarters, this weakness had been offset by higher sales of products that are sold into geographical markets outside of GPT’s home market of North America. However, these are typically larger custom products which are more impacted by the timing of shipments and fewer of these custom systems were shipped during Second Quarter 2016. Further information regarding product sales is detailed in the table accompanying this news release.

Gentherm’s product revenues were not significantly impacted by fluctuations in foreign currency exchange rates compared to the 2015 second quarter product revenues.

Operating expenses of $49.1 million increased $10.1 million or 26 percent during the second quarter of 2016 compared with 2015. More than half of this increase represents the operating expenses of CSZ, which was acquired on April 1 of this year, totaling $5.6 million. The remaining increase is due to higher costs associated with the many new product initiatives that have reached the commercialization stage such as battery thermal management and advanced electronics, the new battery management technology development and higher administrative expenses from our new production locations in Vietnam and Macedonia.

Gross margin as a percentage of revenue for the quarter was 30.7 percent compared with 30.8 percent in the second quarter of 2015. Gross margin for this year’s second quarter would have been 32.4 percent without the one-time purchase accounting impact for CSZ. This higher gross margin percentage is due to higher gross margins for CSZ and favorable foreign currency impact on production expenses in the Mexican Peso and Ukrainian Hryvnia. During the second quarter, the Peso and Hryvnia decreased in value compared to the U.S. Dollar.

Total cash as of June 30, 2016, after using approximately $73 million to acquire CSZ in the second quarter, was $132.0 million when compared with total cash of $144.5 million at December 31, 2015. This combined with borrowing availability under the Company’s credit agreements, provides available liquidity totaling $257.4 million as of June 30, 2016.

Adjusted EBITDA for the quarter was $31.5 million. This amount included the $4.0 one-time purchase accounting inventory step-up for CSZ. Adding this amount back our adjusted EBITDA would have been $35.5 million compared with Adjusted EBITDA of $33.9 million for the second quarter of 2015, an increase of $1.6 million, or 5 percent. A reconciliation of Adjusted EBITDA, a non-GAAP measure, to net income is provided in the table accompanying this news release.


Further non-cash purchase accounting impacts associated with recent acquisitions are detailed in the Acquisition Transaction Expenses, Purchase Accounting Impacts and Other Effects table accompanying this news release.

First Six Months of 2016 Financial Highlights

Automotive revenues were higher during the first half 2016, reflecting higher sales for CCS, automotive seat heaters and significant year-over-year growth in the Company’s steering wheel heater product during the first half of 2016. Revenue for the period was favorably impacted by the acquisition of CSZ on April 1 of this year. GPT revenue declined year over year due to the unfavorable impact of market weakness in the energy markets. Further information regarding product sales is detailed in the table accompanying this news release.

Fluctuations in foreign currency exchange rates unfavorably impacted Gentherm’s product revenues by about $4.1 million, or one percent compared with 2015 product revenues.

Further non-cash purchase accounting impacts associated with the 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 the first six months of 2016 was 31.1 percent and would have been 32.0 percent without the impact of the one-time purchase accounting inventory step-up for CSZ. This amount is 0.5 percent higher than the gross margin percentage of 31.5 percent during the first six months of 2015. This higher gross margin percentage reflects higher gross margins for CSZ and favorable foreign currency impact on production expenses.

Adjusted EBITDA for the first half of 2016 was $71.9 million. This amount included the $4.0 one-time purchase accounting inventory step-up for CSZ. Adding this amount back our adjusted EBITDA would have been $75.9 million compared with Adjusted EBITDA of $69.9 million for the first half of 2015, an increase of $6.0 million, or 9 percent. A reconciliation of Adjusted EBITDA, a non-GAAP measure, to net income is provided in the table accompanying this news release.

Guidance

We continue to expect good revenue growth for the balance of 2016. Because of the slower than expected growth in the first half and continued short term softness for GPT, we now expect that our 2016 product revenue will be at the low end of our previous outlook expectations, at about 10% over the $856 million recorded in 2015.

Conference Call

As previously announced, Gentherm is conducting a conference call today to be broadcast live over the Internet at 8:00 AM Eastern Time to review these financial results. The dial-in number for the call is 1-877-407-4018 or 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), 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’s advanced technology team is developing more efficient materials for thermoelectrics and new systems for waste heat recovery and electrical power generation. Gentherm has over ten thousand employees in facilities in the U.S., Germany, Canada, China, Hungary, Japan, Korea, Macedonia, Malta, Mexico, Ukraine and Vietnam. For more information, go to www.gentherm.com.


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 press 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, currency exchange rates may change, and adverse conditions in the industry in which the Company operates may negatively affect its results. 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, 2015 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.

 

Contact:   

DresnerAllenCaron

Mike Mason (investors), mmason@dresnerallencaron.com

(212) 691-8087

Rene Caron (investors), rcaron@dresnerallencaron.com

Len Hall (media), lhall@dresnerallencaron.com

(949) 474-4300

TABLES FOLLOW


GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2016     2015     2016     2015  

Product revenues

   $ 232,720      $ 213,441      $ 448,434      $ 420,350   

Cost of sales

     161,225        147,736        308,697        288,075   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     71,495        65,705        139,737        132,275   

Operating expenses:

        

Net research and development expenses

     19,111        14,977        34,807        29,525   

Acquisition transaction expenses

     634        —          671        —     

Selling, general and administrative expenses

     29,397        24,058        52,021        49,003   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     49,142        39,035        87,499        78,528   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     22,353        26,670        52,238        53,747   

Interest expense

     (950     (544     (1,627     (1,108

Revaluation of derivatives

     —          (53     —          (1,017

Foreign currency gain (loss)

     2,796        (107     961        328   

Other income

     30        262        395        457   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income tax

     24,229        26,228        51,967        52,407   

Income tax expense

     5,783        6,734        21,628        13,093   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 18,446      $ 19,494      $ 30,339      $ 39,314   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

   $ 0.51      $ 0.54      $ 0.83      $ 1.10   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

   $ 0.50      $ 0.53      $ 0.83      $ 1.08   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares – basic

     36,442        35,971        36,400        35,871   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares – diluted

     36,637        36,585        36,572        36,429   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

MORE-MORE-MORE


GENTHERM INCORPORATED

REVENUE BY PRODUCT CATEGORY

(Unaudited, in thousands)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2016      2015      2016      2015  

Climate Controlled Seat (CCS)

   $ 103,075       $ 101,590       $ 206,959       $ 201,477   

Seat Heaters

     72,782         68,472         145,080         136,740   

Steering Wheel Heater

     12,630         10,256         24,189         20,029   

Automotive Cables

     21,604         19,979         43,446         40,089   

Remote Power Generation (GPT)

     4,201         12,591         9,573         20,159   

Cincinnati Sub-Zero Products (CSZ)

     16,978         —           16,978         —     

Other product revenues and adjustments

     1,450         553         2,209         1,856   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 232,720       $ 213,441       $ 448,434       $ 420,350   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

MORE-MORE-MORE


GENTHERM INCORPORATED

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

(Unaudited, in thousands)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2016     2015     2016      2015  

Net income

   $ 18,446      $ 19,494      $ 30,339       $ 39,314   

Add Back:

         

Income tax expense

     5,783        6,734        21,628         13,093   

Interest expense

     950        544        1,627         1,108   

Depreciation and amortization

     9,336        7,841        17,470         15,277   

Adjustments:

         

Acquisition transaction expense

     634        —          671         —     

Unrealized currency (gain) loss

     (3,602     (773     165         100   

Unrealized revaluation of derivatives

     —          53        —           1,017   
  

 

 

   

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 31,547      $ 33,893      $ 71,900       $ 69,909   
  

 

 

   

 

 

   

 

 

    

 

 

 

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.

 

MORE-MORE-MORE


GENTHERM INCORPORATED

ACQUISITION TRANSACTION EXPENSES, PURCHASE ACCOUNTING IMPACTS AND OTHER EFFECTS

(Unaudited and in thousands, except per share data)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
    Future Full Year Periods (estimated)  
     2016     2015     2016     2015     2016     2017     2018     Thereafter  

Transaction related current expenses

                

Acquisition transaction expenses

   $ 634      $ —        $ 671      $ —        $ —        $ —        $ —        $ —     

Non-cash purchase accounting impacts

                

Customer relationships amortization

   $ 1,986      $ 1,762      $ 3,731      $ 3,556      $ 7,643      $ 7,836      $ 7,836      $ 26,707   

Technology amortization

     900        758        1,650        1,531        3,426        2,695        1,292        3,024   

Product development costs amortization

     43        260        42        1,051        42        —          —          —     

Trade name amortization

     44        46        86        93        176        132        —          —     

Inventory fair value adjustment

     3,973        —          3,973        —          3,973        —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 6,946      $ 2,826      $ 9,482      $ 6,231      $ 15,260      $ 10,663      $ 9,128      $ 29,731   

Tax effect

     (2,437     (658     (3,042     (1,451     (4,229     (2,661     (2,304     (12,716
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income effect

   $ 5,143      $ 2,168      $ 7,111      $ 4,780      $ 11,031      $ 8,002      $ 6,824      $ 21,223   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share – difference

                

Basic

   $ 0.14      $ 0.06      $ 0.20      $ 0.13           

Diluted

   $ 0.14      $ 0.06      $ 0.19      $ 0.13           

 

MORE-MORE-MORE


GENTHERM INCORPORATED

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

     June 30,
2016
    December 31,
2015
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 132,007      $ 144,479   

Accounts receivable, less allowance of $1,582 and $955, respectively

     168,304        142,610   

Inventory:

    

Raw materials

     58,391        50,371   

Work in process

     10,068        4,150   

Finished goods

     26,104        29,662   
  

 

 

   

 

 

 

Inventory, net

     94,563        84,183   

Derivative financial instruments

     242        —     

Deferred income tax assets

     7,271        6,716   

Prepaid expenses and other assets

     47,463        42,620   
  

 

 

   

 

 

 

Total current assets

     449,850        420,608   

Property and equipment, net

     158,019        119,157   

Goodwill

     51,009        27,765   

Other intangible assets

     65,814        48,461   

Deferred financing costs

     896        310   

Deferred income tax assets

     23,427        22,094   

Other non-current assets

     38,561        8,403   
  

 

 

   

 

 

 

Total assets

   $ 787,576      $ 646,798   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current Liabilities:

    

Accounts payable

   $ 83,949      $ 77,115   

Accrued liabilities

     117,941        60,823   

Current maturities of long-term debt

     889        4,909   

Deferred tax liabilities

     223        211   

Derivative financial instruments

     320        725   
  

 

 

   

 

 

 

Total current liabilities

     203,322        143,783   

Pension benefit obligation

     6,805        6,545   

Other liabilities

     3,420        5,026   

Long-term debt, less current maturities

     141,098        92,832   

Deferred income tax liabilities

     12,238        14,321   
  

 

 

   

 

 

 

Total liabilities

     366,883        262,507   

Shareholders’ equity:

    

Common Stock:

    

No par value; 55,000,000 shares authorized, 36,469,431 and 36,321,775 issued and outstanding at June 30, 2016 and December 31, 2015, respectively

     259,309        256,919   

Paid-in capital

     221        (1,282

Accumulated other comprehensive loss

     (49,500     (51,670

Accumulated earnings

     210,663        180,324   
  

 

 

   

 

 

 

Total shareholders’ equity

     420,693        384,291   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 787,576      $ 646,798   
  

 

 

   

 

 

 

 

MORE-MORE-MORE


GENTHERM INCORPORATED

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Six Months Ended June 30,  
         2016             2015      

Operating Activities:

    

Net income

   $ 30,339      $ 39,314   

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

    

Depreciation and amortization

     17,547        15,323   

Deferred income tax benefit

     (12,767     (4,765

Stock compensation

     4,505        2,983   

Defined benefit plan expense

     117        105   

Provision of doubtful accounts

     274        252   

Gain on revaluation of financial derivatives

     —          (150

Loss (gain) on sale of property and equipment

     254        (41

Changes in operating assets and liabilities:

    

Accounts receivable

     (12,668     (16,711

Inventory

     6,624        (4,433

Prepaid expenses and other assets

     (6,890     (6,674

Accounts payable

     1,749        13,148   

Accrued liabilities

     22,089        1,421   
  

 

 

   

 

 

 

Net cash provided by operating activities

     51,173        39,772   

Investing Activities:

    

Proceeds from the sale of property and equipment

     27        225   

Acquisition and investment in subsidiary, net of cash acquired

     (73,666     (47

Purchases of property and equipment

     (30,828     (23,029
  

 

 

   

 

 

 

Net cash used in investing activities

     (104,467     (22,851

Financing Activities:

    

Borrowing of debt

     75,000        —     

Repayments of debt

     (31,918     (2,801

Excess tax (expense) benefit from equity awards

     (385     1,462   

Cash paid for financing costs

     (650     —     

Cash paid for the cancellation of restricted stock

     (793     (467

Proceeds from the exercise of Common Stock options

     566        4,122   
  

 

 

   

 

 

 

Net cash provided by financing activities

     41,820        2,316   
  

 

 

   

 

 

 

Foreign currency effect

     (998     (3,294
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (12,472     15,943   

Cash and cash equivalents at beginning of period

     144,479        85,700   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 132,007      $ 101,643   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for taxes

   $ 13,400      $ 19,384   
  

 

 

   

 

 

 

Cash paid for interest

   $ 1,526      $ 890   
  

 

 

   

 

 

 

 

# # # #