Gentherm Inc (THRM) 2003 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Amerigon second-quarter and six-month results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. At that time if you have a question (CALLER INSTRUCTIONS). As a reminder this conference is being recorded Wednesday, August 13th, 2003. I would now like to turn the over to Jill Patati of Alan and Karen. Please go ahead.

Good morning. Thank you for joining us for the Amerigon second-quarter and six-month results conference call. Before we start today's call, there are a few items I'd like to cover with you. First, in addition to disseminating through PRNewswire this morning, today's news release announcing Amerigon's results an e-mail copy of the release was also sent to a large number of conference call participants. If any of you did not receive a copy of the news release, please call our California office at 949-474-4300 after the call, and we will e-mail you a copy. Additionally, a replay of the conference call will be available on the Internet for ten days via a link provided at www.viavid.com. Finally, I have been asked to make the following statement. Certain matters discussed on this conference call are forward-looking statements that involve risks and uncertainties and actual results may be different. These forward-looking statements include any statements that relate to the intent, belief, plans, or expectations of the Company or its management, whether or not a statement of historical fact. Any forward-looking statements made on this conference call are based on current expectations and beliefs and are subject to numerous risks and uncertainties that could cause actual results to differ materially from expected results. Factors that could cause the Company's actual results to differ materially are discussed in the Company's recent filings with the Securities and Exchange Commission. Amerigon disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this conference call. Also, this call is copyrighted material material of Amerigon. No recording, broadcast, or other distribution of this call or any part of this call in any form is permitted without the Company's written permission. On the call today from Amerigon, we have been Bud Marks, Chairman; Dan Coker, President and CEO; and Bill Wells, Chief Financial Officer. They will make a few statements. And Dan will provide a review of the results. After which there will be a question-and-answer period. I'd now like to turn the call over to Bud. Good morning, Bud.

OSCAR MARX, III: Hi. Good morning Jill. Good morning everyone on the line. I'm just going to say a few words to frame what I think was a very good second-quarter and then let Dan give you some details. And then we'll throw it open for questions. Second-quarter was, I think, a very eventful quarter for Amerigon. We completed a financing in two parts -- a $2.5 million investment by one of our suppliers Ferro Tech (ph) in our company. And exercise of warrants by three existing warrant holders which brought 3 million of new equity into the Company, which was very welcome and I think will be very positive in our continuing discussion with NASDAQ about retaining our listing. We signed an agreement in principle with Visteon to develop a product based on improved thermoelectric technology which our subsidiary BSST has developed. And that would be, I think, a very significant milestone for us, both now and as we go into the future for both new product and for continued development of thermoelectric technology.

Our second-quarter results, I think, were significantly improved over prior periods. Dan will tell you that we doubled our sales compared to the prior three months of 2002. We improved our margins, we reduced our operating losses, and significantly we are beginning to record an accounting entry for Ford earning the right to have warrants in our company, based on Ford hitting volume targets. That is a charge to earnings, but it does not affect our equity. And that is footnoted as being 310,000 in the second-quarter and for the first six months. Our unit volumes are up. And in general we're making very good strides competitively in placing our products with other Ford programs. So, all in all, I think this has been a very good quarter for Amerigon. And Dan, I will turn it over to you and let you expand on that.

Thank you very much Bud. Thank you for joining us. I know you're out of the office today. I thank everybody for joining us on the line. Again we echo Bud's sentiments -- the second quarter of 2003 was a very exciting and a very good quarter for Amerigon, in all respects. Bud mentioned the revenue numbers up -- in the second quarter of 2003 our revenues or $5,600,000. And that is compared with the prior period in 2002 of about 2.8 million. And that's almost exactly double the revenues. For the six months of 2003, our revenues are around 10.9 million as compared to 2002 six months of around 4.3 million. Again, very significant increases, very dramatic increases in unit volume. And these growth numbers have been predicted. In round numbers, our units that have been shipped in 2003 are in excess of 170,000 units so far this year, compared to around 65,000 units in the same period last year. Again, as Bud mentioned earlier, we are making good progress on reducing the losses that our operations have been generating in the past periods. This year's second quarter for 2003, our posted loss is of $609,000. That is compared to a second quarter of 2002 of 1.655 million.

As Bud did point out, there is a special non-cash charge of $310,000 that we have taken for the first half, to cover the expected expense of issuing warrants to Ford Motor Company for a very successful year under our value participation agreement that we refer to as the VPA agreement. This is very good news for Amerigon. It shows that Ford and for its customers are recognizing the true value of Amerigon's heated and cooled seat technology and are continuing to buy it in very large numbers. These numbers are achieving the goals that we set for ourselves -- between Ford and Amerigon -- in our VPA agreement. And this is extremely good news for Amerigon's shareholders. As a note, this cash -- non-cash transaction does not affect the shareholder equity.

Looking at the margins -- I'm sorry -- I didn't do the six months -- six months for '03 -- our total net loss is 1.534 million, compared to the six months net loss of 2002 of 3.754 million. Bud mentioned our margins have improved. And we note those as being -- in the second quarter for '03 -- being 24.8 percent. And the same period in '02 were at 22.9 percent. And in the first quarter of '03, they were about 20.5 percent. For the six months, the margins were 22.7 percent in '03 and 19 percent in '02. Bud mentioned all of our highlights in his introduction. We are quite excited about BSST. They have signed an agreement with Visteon Corporation, a major supplier to the automotive industry, to jointly develop a series of new products, based upon BSST's advanced thermoelectric technologies. In this quarter, BSST had its first funding from Visteon and other parties -- the development programs, totaling about $246,000.

We also had a very big highlight in terms of our shipments and new customers coming on-board. One of the more exciting is the Cadillac, Deville. We have begun to ship our new CCS products to the Cadillac, Deville program -- their flagship in the Cadillac line. The new Cadillac -- I'm sorry -- the new 2004 Cadillac, Deville will offer heated and cold front seats as an option. And we have a very small quantity of those shipments in our second-quarter. And we will see those expand dramatically in the third and fourth quarter as Cadillac comes to full-speed on their 2004 models. Second half revenues as we mention that, will increase fairly significantly due to a series of new platforms that are coming on-board that have not seen any significant volume during the first half. They are the aforementioned Cadillac, Deville; the new Mercury, Monterey mini-van; the new Cadillac, XLR Sports Roadster; and the new Cadillac, Escalade ESB Platinum Edition. Each of these vehicles will begin shipping in larger quantities as the third and fourth quarter transpire.

Bud mentioned that we raised $3 million in new equity in June. We raised $3 million mainly from the issuance of a million shares of common stock, priced at $2.50 a share to one of our current shareholders and suppliers -- Ferro Tech Corporation of the USA and Japan. In addition to the issuance of the new common stock, three of our current warrant holders exercised 250,000 warrants at $2 a share, raising an additional 500,000, bringing the total equity raised to $3 million.

In summary, the future for us continues to look very good. Our revenues are continuing to grow and expand. We have new programs adding CCS to their future planned vehicles. Our focus as management will be continuing to have successful program launches in each of these new platforms. To introduce our new technology to MTM through other lines beyond the new Cadillac, Deville program and working to continue to improve our cost by continuing to work with our contract manufacturing program. Better supply chain management, as we expand our business operations. And of course, improve inventory control and management. BSST's new Visteon relationship and a larger base of new thermoelectric-driven products will also add to our very bright future. At this time, I would like to basically summarize our comments and return the questions back to our moderator. And we will open the floor for questions from Unidentified Participants.

OSCAR MARX, III: Dan, one thing to note -- this is Bud. The funding for BSST is not being booked as revenue. It's being booked as a credit against BSST's R&D expense.

Yes sir, that is correct. Their funding is not a revenue item. It is listed as an offset to expense. Operator, April, we're ready for calls.

Thank you. Ladies and gentlemen, if you'd like to register questions please press the one followed by the four on your telephone. (CALLER INSTRUCTIONS) Thomas Phillips, Private Investor.

Yes, I have the question regarding the private placements. Do you think that by substantially increasing the number of shares out there is the best way to raise capital?

OSCAR MARX, III: Maybe I can answer that. Thomas, we paced a situation where we needed to protect our listing with NASDAQ. And the NASDAQ requirement for continued listing was to have at least $2.5 million worth of net equity and have confidence that that net equity would not subsequently fall below 2.5 million. We looked at our projections. We looked at our cash flow needs and looked at the various sources of capital, which in this case had to the equity, in order to remain on NASDAQ's small cap. And most of our investors thought that was a significant and important priority to achieve. The path we took was a path that involved no bankers or private placement fees. It was at what we consider to be quite a good priced at the time, of $2.50 a share. And in the bargain, three of our significant investors chipped in, by exercising warrants that had already been issued. So they were already essentially out there. So there was no new dilution from this -- to the tune of $.5 million. So frankly, we think that is the cheapest possible financing that could have been achieved to make sure that our balance sheet was strong and that we could retain our NASDAQ listing. NASDAQ hasn't finally ruled on all that. But based on our conversations with them, we think this is going in a very positive direction.

When do you -- I'm sorry, go ahead.

That's your summary. The reason why we went out, raised the money, and think we actually did a very efficient job of doing so.

When do you expect a ruling from NASDAQ regarding your continued presence?

I would say within the month.

Within the month -- from what you're saying, you think the chances are good as to remaining on NASDAQ?

Jill's statement on forward-looking statements still applies, because there are no ironclad guarantees. We believe we've done everything possible to satisfy NASDAQ's requirements.

So there is a possibility that NASDAQ may not be satisfied.

There's always that possibility. But, I think we've done everything within our power to do that. And think we have in-fact done so.

On that same issue, do you plan any other private placements during '03?

I think I won't make any forward-looking statement. But, I think our balance sheet speaks for itself.

Okay. And just one last question. How many private placements have their been in the last years? And how many shares did that represent?

Well, we've had one private placement each year for probably the last three years, to both provide operating funds for the Company and to make sure that our balance sheet was strong enough to retain our listing. Bill, why don't we take that question off-line and get an answer. I don't have the figures in front of me to give you a precise answer Tom. But as we progress with the conference call, when Bill Wills has the answer for the number of shares issued in the last -- let's say, three years -- this year, last year, and the prior year, we will sort of blurt it out, okay?

That's fine. As long as I know there's been three placements -- 1 per year -- that is satisfactory.

Arnie Owen with Merrimen Current at Ford.

Hey guys. Good quarter. Let me be the first one to say good quarter. And this is just because ongoing getting older and I can remember so well. Could you remind me on your -- when you go out and you present the Company and you have that waterfall chart, how many more platforms -- how many platforms are you on right now? And how many do you anticipate to add in the second half of this year? And how many do anticipate to add -- and I know it's forward-looking, so edge however you like -- but how many do you anticipate to add next year?

OSCAR MARX, III: Over to you Dan.

We're currently listed as options on 12 vehicle platforms, including these four that I've just mentioned, that are coming online in the second half of this year. We also have at least one other announcement that is scheduled to be happening in the second half of this year. And, as you point out quite cleverly, we don't make forward-looking statements about how many platforms or programs are absolutely committed to coming forward. But, all I can say is that we're very much pleased with the rollout. And we feel very comfortable that we are on our targets for our schedules.

So, you can't give me any more hints?

Not any more hints.

(CALLER INSTRUCTIONS) Steve Gish and Roth Capital Partners

Hey Bud. Hi Dan. The accounting entry for the 310,000 for the expected cost of the warrants and the 160 expected in Q3 and Q4 -- where will we see that reflected in the P&L? Is that in the SG&A line? And then, is there a similar arrangement, in terms of volume targets in the cost of issuing warrants for 2004?

You are correct. The item shows up under SG&A. And there is an offsetting accounting entry in paid-in capital when the transactions are completed. So it's a cash free transaction for us. It's no change in the net shareholder equity. And yes, there is a provision in 2004, by increasing volume goals and accelerated price for the warrant.

After the financing and issuance of stock, does the basic share-count at this point around -- 12 million shares in cash -- if we take that snapshot, factor it in the cash at the end the quarter around 3.5 million -- would that be accurate?

The number of shares -- the common shares outstanding would be around 12 million. That is correct. The cash at the end of the quarter -- Bill, what is the cash?

The cash at the end of the quarter was around 450,000. From the $3 million of proceeds, net of 50,000 cost of issuance, we netted 2.9 million. We paid down the credit line by 1,800,000, made some payments to vendors for 700,000. And we had cash on the balance sheet at the end of the quarter of 450,000.

Okay. In terms of revenue concentration, can you give us a sense of how much of that is related to the Ford expedition?

Revenue of the Ford Expedition by itself?

Right.

I don't have that at my fingertips as to the Ford Expedition -- the product itself is not broken out into Expedition or Navigator. We would have to do some calculations to separate that. If you'd like, I'll give you a call after this call and work that out for you.

Maybe Dan, if you could just into little more detail of how you attained the margin improvement this quarter -- the gross margin improvement? And whether or not you think the current rate you saw this quarter is sustainable into Q3?

Obviously, there's a dramatic improvement in the volume of our business. And we have been able to maintain our cost structure -- in-fact, reduce our operating costs. There are significant factors that are in play in both the first quarter and second quarter. I think that for the first six months, our margin numbers are fairly reflected. Some of the future volumes coming in will have different margin numbers and cost aspects that we don't like to predict. So, I would try to defer any comment on projecting our margins for the future.

Lastly, if you can comment on the inventory -- it was at 3.4 million versus 1.9 last year and then subsequently about 2.3 million -- whether or not that's just related to increases in volume? Or anything else?

A portion of it is related to increases in volume. We had a significant increase in the second quarter in our finished goods inventory as we staged material for shipment in July. That unfortunately in the automotive business, most of July -- the automotive business shuts down for the first two weeks. So, we have to kind of pre-stage our inventory. We believe that inventory will be dropping back down into normal lines (technical difficulty). We also had an increase in our component-level inventory, as we continue to try to push ourselves into a contract manufacturing stance. We did pre-buy some material that is being shipped over to our Chinese manufacturing location that will bridge the time that it will take to transport the materials and get the materials into the production line to get our customers to approve that new process. We do expect our inventories to be dropping back more in-line, at the end of the third quarter.

(CALLER INSTRUCTIONS) I'm showing no further questions at this time. Please continue with your presentation or any closing remarks.

OSCAR MARX, III: We exhausted our audience. We very much appreciate everyone dialing in. We think, again, the second quarter was very good, very positive for Amerigon. A lot of milestones have been crossed. Our financing is solid. Our growth is steady and manageable. We are continuing to work on keeping our cost down and improving our business. And we thank you very much for your attendance.

Ladies and gentlemen, that does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines. (CONFERENCE CALL CONCLUDED)