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Summary of Significant Accounting Policies and Basis of Presentation | 12 Months Ended
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Dec. 31, 2014
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies and Basis of Presentation | Note 2 — Summary of Significant Accounting Policies and Basis of Presentation Consolidation The consolidated financial statements at and for the years ended December 31, 2014, 2013 and 2012, reflect the consolidated financial position and consolidated operating results of the Company. Investments in affiliates in which Gentherm does not have control, but does have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method. Intercompany accounts have been eliminated in consolidation. Certain reclassifications of prior years’ amounts have been made to conform with the current year’s presentation. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of less than 90 days to be cash equivalents. Cash balances in individual banks may exceed the federally insured limit by the Federal Deposit Insurance Corporation. Disclosures About Fair Value of Financial Instruments The carrying amounts of financial instruments comprising cash and cash equivalents, short-term investments and accounts receivable approximate fair value because of the short maturities of these instruments. The carrying amount of the Company’s long-term debt approximates its fair value because interest charged on the loan balance is variable. See Note 13 for information about the techniques used to assess the fair value of financial assets and liabilities. Use of Estimates The presentation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accrued Warranty Costs The Company recognizes an estimated cost associated with warranty claims on its products at the time of sale. The amount recognized is based on estimates of future failure rates and current claim cost experience. The following is a reconciliation of the changes in accrued warranty costs for the reporting period:
|  | December 31, |
|  | 2014 |  |  | 2013 |
Balance at beginning of year |  | $ | 10,308 |  |  | $ | 8,588 |
Warranty claims paid or retired |  |  | (1,102 | ) |  |  | (676 | )
Reversal of previously recorded liability |  |  | (3,744 | )(1) |  |  | — |
Expense |  |  | 555 |  |  |  | 2,118 |
Adjustment due to currency translation |  |  | (796 | ) |  |  | 278 |
Balance at end of year |  | $ | 5,221 |  |  | $ | 10,308 |
(1) | During 2014, we reversed accruals for warranty liabilities. The reversal was due to management’s review of the facts and circumstances of the liability and the conclusion that the likelihood of settlement would be remote. The reversal is included as a reduction to the reported cost of sales during the year ended December 31, 2014.
Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) Concentration of Credit Risk Financial assets, which subject the Company to concentration of credit risk, consist primarily of cash equivalents, short-term investments and accounts receivable. Cash equivalents consist of money market funds managed by major financial services companies. The credit risk for these cash equivalents is considered limited. The Company maintains an allowance for uncollectible accounts receivable based upon expected collectability and does not require collateral. As of December 31, 2014, Johnson Controls Inc., Lear Corporation and Magna International Inc. comprised 27%, 27% and 5% respectively, of the Company’s accounts receivable balance. As of December 31, 2013, Johnson Controls Inc., Lear Corporation and Magna International Inc. comprised 27%, 24% and 7% respectively, of the Company’s accounts receivable balance. These accounts are currently in good standing. Allowance for Doubtful Accounts We record an allowance for doubtful accounts once exposure to collection risk of an accounts receivable is specifically identified. We analyze the length of time an account receivable is outstanding, as well as a customer’s payment history and ability to pay to determine the need for an amount of an allowance for doubtful accounts. Inventory The Company’s inventory is valued at the lower of cost (the first-in, first-out basis) or market. Raw materials, consumables and commodities are measured at cost of purchase and unfinished and finished goods are measured at cost of production, using the weighted average method. If the net realizable value expected on the reporting date is below cost, a write-down is recorded to adjust inventory to its net realizable value. The Company provides a reserve for obsolete and slow moving inventories based upon estimates of future sales and product redesign. The following is a reconciliation of the changes in the inventory reserve:
|  | December 31, |
|  | 2014 |  |  | 2013 |
Balance at beginning of year |  | $ | 2,933 |  |  | $ | 2,185 |
Expense |  |  | 2,204 |  |  |  | 779 |
Inventory write off |  |  | (154 | ) |  |  | (6 | )
Adjustment due to currency translation |  |  | (181 | ) |  |  | (25 | )
Balance at end of year |  | $ | 4,802 |  |  | $ | 2,933 |
Property and Equipment Property and equipment, including additions and improvements, are recorded at cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. When property or equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts. Gains or losses from retirements and disposals are recorded as operating income or expense. Depreciation and amortization are computed using the straight-line method. The estimated useful lives of the Company’s property and equipment are as follows:
Asset Category |  | Useful Life
Buildings |  | 5 to 50 years
Plant and Equipment |  | 1 to 20 years
Production tooling |  | Estimated life of tool (2 to 5 years)
Leasehold improvements |  | Shorter of estimated life or term of lease
Computer equipment and software |  | 1 to 10 years
Capital Leases |  | Shorter of useful life or term of lease
The Company recognized depreciation expense of $14,930, $14,810 and $14,298 for the three years ending December 31, 2014, 2013 and 2012, respectively. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) Goodwill and Other Intangible Assets Goodwill and other intangible assets recorded in conjunction with business combinations are based on the Company’s estimate of fair value, as of the date of acquisition. A roll forward of goodwill from December 31, 2012 to December 31, 2014 is as follows:
December 31, 2012 |  | $ | 24,729 |
Exchange rate impact |  |  | 1,080 |
December 31, 2013 |  | $ | 25,809 |
Goodwill arising from the acquisition of GPT |  |  | 6,258 |
Exchange rate impact |  |  | (1,669 | )
December 31, 2014 |  | $ | 30,398 |
The fair value and corresponding useful lives for acquired intangible assets are listed below as follows:
Asset Category |  | Useful Life
Customer relationships |  | 10-15 years
Order Backlog |  | 0.5 years
Technology |  | 8-10 years
Production Development Costs |  | 4 years
Our business strategy largely centers on designing products based upon internally developed and purchased technology. When possible, we protect these technologies with patents. Our policy is to expense all costs associated with the issuance of new patents as incurred. Such costs are classified as research and development expenses in our consolidation statements of income. Patents purchased as part of a business combination are capitalized based on their fair values. Periodically, we review the recoverability and remaining lives of our capitalized patents, and if necessary make adjustments to reported amounts, based upon unfavorable impacts from market conditions, competitive technologies and our projected business plans. A total of $16,941, $17,570 and $15,817 in other intangible assets, including capitalized patent costs, were amortized in 2014, 2013 and 2012, respectively. An estimate of intangible asset amortization by year, is as follows:
2015 |  | $ | 15,848 |
2016 |  |  | 14,471 |
2017 |  |  | 14,471 |
2018 |  |  | 11,527 |
2019 |  |  | 10,121 |
Thereafter |  |  | 1,525 |
Impairments of Long-Lived Assets, Other Intangible Assets and Goodwill Whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable, the Company will compare the carrying amount of the asset to the recoverable amount of the asset. The recoverable amount is defined as the greater of the asset’s fair value less costs to sell or its value in use. An impairment loss is recognized if the carrying amount of an asset exceeds the recoverable or fair value amount. An assessment of fair value could utilize quoted market prices, fair value appraisals, management forecasts or discounted cash flow analyses. No such triggering events occurred during the periods ended December 31, 2014 and 2013, respectively. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) Annually on December 31st, and at interim periods when circumstances require, the Company tests the recoverability of its goodwill. The goodwill test utilizes a two-step analysis, whereby the Company compares the carrying value of each identified reporting unit to its fair value. If the carrying value of the reporting unit is greater than its fair value, the second step is performed, where the implied fair value of goodwill is compared to its carrying value. The Company recognizes an impairment charge for the amount by which the carrying amount of goodwill exceeds its fair value. The fair values of the reporting units are estimated using the net present value of discounted cash flows, excluding any financing costs or dividends, generated by each reporting unit and a comparison of market values of a group of comparable companies. The Company’s discounted cash flows are based upon reasonable and appropriate assumptions, which are weighted for their likely probability of occurrence, about the underlying business activities of the Company’s reporting units. An impairment of goodwill did not occur during the periods ending December 31, 2014 and 2013, respectively. Product Revenues Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have been transferred to the buyer, the price can be measured reliably, recovery of consideration is probable and costs incurred or to be incurred from the transaction can be reasonably estimated. The Company sells its products under purchase order contracts issued by its customers. These contracts involve the sale of goods at fixed prices and provide for related transfer of ownership risk to the customer upon shipment from the Company’s warehouse location or in some cases upon receipt of the goods at the customer’s facility. Shipping and handling costs are recognized in cost of sales. With only a few minor exceptions, payment terms for these contracts range from 30 to 120 days from the date of shipment. The Company does not extend cash discounts for early payment. For construction-type contract revenues recognized in our industrial segment, the completed-contract method is used to determine revenue and the cost of earned revenue. The transfer of ownership upon shipment is used to determine substantial completion and the recognition of revenue for these construction-type contracts. Litigation Reserves We record estimated future costs related to new or ongoing litigation. Recognition of litigation reserves are recorded when there is a current obligation from a past event, a claim is probable, and the amount of the obligation can be reliably measured. These estimates include costs associated with attorney fees and potential claims and assessments less any amounts recoverable under insurance policies. Tooling The Company incurs costs related to tooling used in the manufacture of products sold to its customers. In some cases, the Company enters into contracts with its customers whereby the Company incurs the costs to design, develop and purchase tooling and is then reimbursed by the customer under a reimbursement contract. Tooling costs that will be reimbursed by customers are included in prepaid expenses and other current assets at the lower of accumulated cost or the customer reimbursable amount. Approximately $2,298 and $1,691 of reimbursable tooling was capitalized within prepaid expenses and other current assets as of December 31, 2014 and 2013, respectively. Company-owned tooling is included in property and equipment and depreciated over its expected useful life, generally two to five years. Management periodically evaluates the recoverability of tooling costs, based on estimated future cash flows, and makes provisions, where appropriate, for tooling costs that will not be recovered. Research and Development Expenses Research and development activities are expensed as incurred. The Company groups development and prototype costs and related reimbursements in research and development. The Company recognizes amounts due as reimbursements for expenses as these expenses are incurred. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) Income Taxes We record income tax expense using the liability method which specifies that deferred tax assets and liabilities be measured each year based on the difference between the financial statement and tax bases of assets and liabilities at the applicable enacted Federal and State tax rates. A valuation allowance is provided for net deferred tax assets when management considers it more likely than not that the asset will not be realized. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We recognize interest and penalties related to income tax matters in income tax expense. Derivative Financial Instruments – Hedge Accounting The Company accounts for some of its derivative financial instruments as cash flow hedges as defined in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 815. Since these derivatives are designated as hedging instruments for future anticipated cash flows, the effective portion of the gain or loss resulting from the valuation at the balance sheet date is recognized as a separate item within equity. Any ineffective portion of the gain or loss is recognized in the income statement. These hedging transactions and the respective correlations meet the requirements for hedge accounting. The gains or losses recognized in equity are posted in the income statement when the hedged items are realized. Discounts or premiums for hedged contracts are recognized within earnings for the period, until maturity. Earnings per Share Basic earnings per share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding. The Company’s diluted earnings per common share give effect to all potential shares of Common Stock outstanding during a period that are not anti-dilutive. In computing the number of diluted shares outstanding, the treasury stock method is used in order to arrive at a net number of shares created upon the conversion of Common Stock equivalents. Stock Based Compensation Share-based payments that involve the issuance of common stock to employees, including grants of employee stock options and restricted stock, are recognized in the financial statements as compensation expense based upon the fair value on the date of grant. Share-based payments that are satisfied only by the payment of cash, such as stock appreciation rights, are accounted for as liabilities. The liability is reported at market value of the vested portion of the underlying units. During each period, the change in the liability is recorded as compensation expense during periods when the liability increases or income during periods in which the liability decreases. The Company’s stock-based compensation expense and related deferred tax benefit were $8,601 and $2,949, respectively, for the year ended December 31, 2014, $3,103 and $419, respectively, for the year ended December 31, 2013, and $823 and $301, respectively, for the year ended December 31, 2012. Pension Plans The Company’s obligations and expenses for its pension plans are dependent on the Company’s selection of discount rate and expected long-term rate of return on plan assets assumptions used by actuaries to calculate these amounts. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) Non-Controlling Interests Effective January 1, 2009 we adopted ASC 810 “Consolidation”, which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the retained interest in a gain or loss when a subsidiary is deconsolidated. ASC 810 requires that a non-controlling interest, previously referred to as a minority interest, be reported as part of equity in the consolidated financial statements and that losses be allocated to the non-controlling interest even when such allocation might result in a deficit balance, reducing the losses attributable to the controlling interest. The Company’s minority interest was primarily from the non-controlling shareholders of Gentherm GmbH. As of December 31, 2013, none of these non-controlling shares of Gentherm GmbH remained outstanding and, therefore, Gentherm owned 100 percent of Gentherm GmbH due to the purchase of certain outstanding shares during the year and due to shares tendered, as further described below. Subsequent Events We have evaluated subsequent events through the date that our consolidated financial statements are issued. No events have occurred that would require adjustment to or disclosure in the consolidated financial statements.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References No definition available. + Details
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