THRM

Business Context and Reporting Period

Company: Amerigon Incorporated (Note: Input metadata referenced "Gentherm Inc," but the filing text identifies the registrant as Amerigon Incorporated).

Reporting Period: Quarterly Report (Form 10-Q) for the period ended June 30, 2009.

Business Overview: Amerigon designs and markets products based on proprietary thermoelectric device (TED) technology. Its principal product is the Climate Control Seat (CCS), sold to automotive OEMs and tier-one suppliers. The company also operates a subsidiary, BSST LLC, focused on advanced TED research and development.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Revenues for the six months ended June 30, 2009, decreased 39% to $20.9 million from $34.2 million in the prior year period. This was driven by a 41% drop in unit shipments (297,000 vs. 506,000) due to a significant contraction in the global automotive market.
• Profitability Shift: The company reported a net loss of $1.8 million for the first half of 2009, compared to a net income of $2.6 million in the first half of 2008. Operating income turned negative, reflecting lower volume coverage of fixed costs.
• Gross Margin Compression: Gross margin percentage decreased to 24% in the first half of 2009 from 32% in the prior year. This was attributed to higher raw material costs (specifically Tellurium), an unfavorable product mix, and lower fixed cost absorption.
• Geographic Mix: North America's share of revenue increased to 66% (from 48% in 2008), while Asia's share dropped to 27% (from 44%), reflecting the severity of the downturn in Asian automotive production.

Outlook, Risks, and Contingencies

• Lear Corporation Bankruptcy: On July 7, 2009, Amerigon's largest customer, Lear Corporation, filed for Chapter 11 bankruptcy in the U.S. and Canada. Amerigon had $1.55 million in accounts receivable due from Lear as of the filing date. Management does not expect a significant impact on operations as Lear received court approval to continue paying suppliers, but there is a risk of non-collection if the restructuring plan fails.
• Credit Facility Amendment: On August 6, 2009, Amerigon amended its revolving credit line with Comerica Bank, reducing the available amount from $20 million to $10 million. The amendment introduced a "Borrowing Base" limitation and replaced Prime-based loans with Base Rate Advances.
• Raw Material Costs: While Tellurium market prices have moderated from 2008 peaks, the company expects costs to remain elevated until suppliers work off existing inventory in late Q3 2009.
• Market Conditions: Management anticipates continued operating losses for the remainder of 2009 due to the significant decline in expected product revenue. The company relies on cash reserves and its credit line to fund operations.

Investor Verification Checklist

• Lear Corporation Exposure: Verify the status of Lear's restructuring plan and the collectability of the $1.55 million receivable balance.
• Liquidity Sufficiency: Confirm that the reduced $10 million credit facility and current cash balance ($26.2 million) are sufficient to cover operating losses through the automotive recovery.
• Raw Material Pricing: Monitor Tellurium pricing trends and supplier contract terms to assess potential further margin compression in Q3 and Q4 2009.
• Production Volumes: Track North American and Asian vehicle production rates (SAAR) to gauge the timing of revenue recovery.
• Product Mix: Assess the impact of the shift toward lower-margin "vent-only" systems versus full CCS units on future profitability.