SEC Filing Summary: Amerigon Incorporated (10-Q)
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for Amerigon Incorporated for the period ended September 30, 2009. Amerigon designs and markets thermoelectric device (TED) technologies, primarily the Climate Control Seat (CCS) for automotive original equipment manufacturers (OEMs). The company also operates a research subsidiary, BSST LLC, and recently formed a joint venture, ZT Plus, to develop advanced thermoelectric materials.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2009 | Nine Months Ended Sep 30, 2009 |
|---|---|---|
| Product Revenues | $18.44 million | $39.33 million |
| Gross Margin | $4.55 million (25%) | $9.49 million (24%) |
| Operating Income (Loss) | $1.22 million | ($1.47 million) |
| Net Income (Loss) | $0.79 million | ($1.02 million) |
| Net Income Attributable to Amerigon | $1.13 million | ($0.67 million) |
| Cash and Cash Equivalents | $24.90 million | $24.90 million (Ending Balance) |
| Working Capital | $30.61 million | $30.61 million |
| Debt | $0 (No outstanding loans) | $0 |
Note: Net income attributable to Amerigon for the nine months ended Sep 30, 2009, includes a $0.34 million benefit from the adoption of SFAS 160 regarding non-controlling interests.
Material Changes vs. Prior Period
- Quarter-over-Quarter (Q3 2009 vs. Q3 2008):
- Revenues increased 11% to $18.44 million, driven by new model introductions and rear seat options, despite a 21% decline in North American vehicle production.
- Unit shipments rose 13% to 268,000 units.
- Gross margin percentage decreased from 29% to 25% due to higher raw material costs (specifically Tellurium) and an unfavorable product mix.
- Net income attributable to Amerigon increased to $1.13 million from $0.65 million, aided by reduced R&D expenses and the accounting adjustment for non-controlling interests.
- Year-to-Date (YTD 2009 vs. YTD 2008):
- Revenues decreased 23% to $39.33 million, reflecting a 24% drop in unit shipments due to the global automotive downturn.
- The company reported a net loss of $1.02 million compared to net income of $3.27 million in the prior year.
- Operating cash flow turned positive at $0.26 million, compared to $3.11 million in the prior year, largely due to changes in working capital (increased accounts receivable offset by increased accounts payable).
Outlook, Risks, and Unusual Items
- Lear Corporation Bankruptcy: Amerigon's largest customer, Lear Corporation, filed for Chapter 11 bankruptcy in July 2009. Amerigon holds $6.41 million in receivables from Lear ($0.69 million pre-bankruptcy, $5.72 million post-bankruptcy). Management expects full payment under the restructuring plan and has not recorded a bad debt provision, though collection risk remains if the plan fails.
- Joint Venture (ZT Plus): In September 2009, Amerigon's subsidiary BSST formed a 50/50 joint venture with 5N Plus Inc. to develop advanced thermoelectric materials. The venture incurred a loss of $0.12 million in its first month. The partner has raised concerns about the timeline for achieving objectives.
- Raw Material Costs: Tellurium prices remain elevated compared to 2007 levels, impacting gross margins. While market prices have moderated from 2008 peaks, supplier inventory dynamics have delayed cost reductions for Amerigon.
- Liquidity: The company amended its revolving credit line in August 2009, reducing the limit from $20 million to $10 million and implementing a borrowing base. As of September 30, 2009, there were no outstanding borrowings, with $9.84 million available.
- Market Risk: The company faces significant risk from the continued decline in the automotive industry, potential bankruptcy of other OEMs, and the lengthy sales cycle for new product introductions.
Investor Verification Checklist
- Lear Receivables: Verify the status of the $6.41 million receivable from Lear Corporation and the likelihood of full collection under the bankruptcy restructuring plan.
- Tellurium Pricing: Monitor raw material costs and the company's ability to pass price increases to customers or negotiate better terms with suppliers.
- Joint Venture Viability: Assess the progress and financial health of the ZT Plus joint venture and the commitment of partner 5N Plus to fund operations.
- Automotive Production Volumes: Track North American and global vehicle production rates, as Amerigon's revenue is directly correlated to OEM production levels.
- Credit Facility Terms: Review the specific covenants of the amended $10 million credit line, particularly the minimum rolling four-quarter EBITDA requirement.