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Summary of Significant Accounting Policies and Basis of Presentation | 12 Months Ended
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Dec. 31, 2015
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, 2015, 2014 and 2013, 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. The Company had cash and cash equivalents of $140,088 and $81,488 held in foreign jurisdictions as of December 31, 2015 and 2014, respectively. 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 12 for information about the techniques used to assess the fair value of financial assets and liabilities, including our fixed rate debt instruments. 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, |
|  | 2015 |  |  | 2014 |
Balance at beginning of year |  | $ | 5,221 |  |  | $ | 10,308 |
Warranty claims paid or retired |  |  | (1,654 | ) |  |  | (1,102 | )
Reversal of previously recorded liability |  |  | — |  |  |  | (3,744 | )(1)
Expense |  |  | 1,339 |  |  |  | 555 |
Adjustment due to currency translation |  |  | (348 | ) |  |  | (796 | )
Balance at end of year |  | $ | 4,558 |  |  | $ | 5,221 |
(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 primarily of money market funds managed by major financial services companies. The credit risk for these cash equivalents is considered low. The Company does not require collateral from its customers. As of December 31, 2015, Lear Corporation, Johnson Controls Inc. and Faurecia comprised 28%, 27% and 5% respectively, of the Company’s accounts receivable balance. 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. 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 to record an allowance for doubtful accounts. Inventory The Company’s inventory is measured at the lower of cost or market, with cost being determined using the first-in first-out basis. 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 utilization. The following is a reconciliation of the changes in the inventory reserve:
|  | December 31, |
|  | 2015 |  |  | 2014 |
Balance at beginning of year |  | $ | 4,802 |  |  | $ | 2,933 |
Expense |  |  | 815 |  |  |  | 2,204 |
Inventory write off |  |  | (1,060 | ) |  |  | (154 | )
Adjustment due to currency translation |  |  | (249 | ) |  |  | (181 | )
Balance at end of year |  | $ | 4,308 |  |  | $ | 4,802 |
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 and building improvements |  | 5 to 50 years
Plant and Equipment |  | 1 to 20 years
Production tooling |  | 2 to 5 years
Leasehold improvements |  | Term of lease
Computer equipment and software |  | 1 to 10 years
Capital Leases |  | Term of lease
The Company recognized depreciation expense of $16,360, $14,930 and $14,810 for the years ended December 31, 2015, 2014 and 2013, 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, 2013 to December 31, 2015 is as follows:
December 31, 2013 |  | $ | 25,809 |
Goodwill arising from the acquisition of GPT |  |  | 6,258 |
Exchange rate impact |  |  | (1,669 | )
December 31, 2014 |  | $ | 30,398 |
Goodwill adjustment arising from the acquisition of GPT |  |  | 107 |
Exchange rate impact |  |  | (2,740 | )
December 31, 2015 |  | $ | 27,765 |
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 development and 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, the emergence of competitive technologies and changes in our projected business plans. A total of $12,751, $16,941 and $17,570 in other intangible assets, including capitalized patent costs, were amortized in 2015, 2014 and 2013, respectively. An estimate of intangible asset amortization by year, is as follows:
2016 |  | $ | 11,569 |
2017 |  |  | 10,893 |
2018 |  |  | 8,356 |
2019 |  |  | 8,336 |
2020 |  |  | 8,336 |
Thereafter |  |  | 971 |
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. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) In 2015, we wrote off $317 related to patents because certain claims made under specific patents we own were determined to be unpatentable by the United States Patent and Trademark Office. The impaired patents were valued using an income approach. Based on information provided in the ruling, the entire value of each component determined to be unpatentable was written off (Level 3 input). We determined that the loss of this patent protection did not cause a significant change in our projected future cash flows and therefore no other assets were impaired due to the ruling. The write-off was recorded to other intangible assets and cost of sales on the Company’s consolidated balance sheet and consolidated statements of income, respectively. No such triggering events occurred during the period ended December 31, 2014. 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, 2015 and 2014, respectively. Product Revenues 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. 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 $5,174 and $3,990 of reimbursable tooling was capitalized within prepaid expenses and other current assets as of December 31, 2015 and 2014, 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 tax rates. A valuation allowance is provided for 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. For derivative contracts which can be classified as a cash flow hedge, the effective potion of the change in the fair value of the derivative is recorded to accumulated other comprehensive income in the consolidated balance sheet. When the underlying hedge transaction is realized, the gain or loss included in accumulated other comprehensive income is recorded in earnings in the consolidated statement of income on the same line as the gain or loss on the hedged item attributable to the hedged risk. Any ineffective portion of the gain or loss is recognized in the income statement under foreign currency (loss) gain or revaluation of derivatives gain (loss). These hedging transactions and the respective correlations meet the requirements for hedge accounting. Earnings per Share Basic earnings per share is computed by dividing net income by the weighted average number of shares of Common Stock outstanding during the respective period. 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 $12,316 and $3,787, respectively, for the year ended December 31, 2015, $8,601 and $2,949, respectively, for the year ended December 31, 2014, and $3,103 and $419, respectively, for the year ended December 31, 2013. Pension Plans The Company’s obligations and expenses for its pension plans are dependent on the Company’s selection of discount rate, expected long-term rate of return on plan assets and other assumptions used by actuaries to calculate these amounts. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) Subsequent Events On January 4, 2016 and January 5, 2016, the Company completed reorganization transactions (the “Reorganization”) related to the eventual closure of the Company’s Windsor, Ontario, Canada facility (the “Windsor Operations”). As part of our original integration plan to eliminate redundancies associated with the 2011 acquisition of Gentherm GmbH (formally named W.E.T. Automotive Systems AG), the Windsor Operations will be consolidated into our existing European and North American facilities. As a result of the Reorganization, the business activities previously performed by the Windsor Operations will now be performed by other subsidiaries and the Company’s Windsor office is expected to close permanently in June 2016. Related to the Reorganization, the Company expects to pay a withholding tax in Canada and record a one-time tax expense of approximately $6,000 in the first quarter of 2016. Additionally, the Reorganization will require the Company to make a one-time income tax payment of approximately $30,000 . However, the Company will record an offsetting deferred charge for approximately the same amount because the one-time income tax payment will result in tax deductions in future periods. Therefore, the income tax payment is not expected to have a material impact on the Company’s earnings in any fiscal quarter. The income tax payment will not become due and payable until the first quarter of 2017.

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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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