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Summary of Significant Accounting Policies and Basis of Presentation | 12 Months Ended
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Dec. 31, 2017
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, 2017, 2016 and 2015, 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. Specifically, the Company changed its classification of prepayments made during the construction of plant assets from prepaid expenses and other assets to other non-current assets on the consolidated balance sheet. The Company reclassified $4,390 from prepaid expenses and other assets to other non-current assets on the December 31, 2016 consolidated balance sheet in order 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 $88,440 and $162,881 held in foreign jurisdictions as of December 31, 2017 and 2016, 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 U.S. Revolving Note 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, including our fixed rate debt instruments. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) 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 accrues warranty obligations for products sold based on management estimates of future failure rates and current claim cost experience, with support from the sales, engineering, quality and legal functions. Using historical information available to the Company, including claims already filed by customers, the warranty accrual is adjusted quarterly to reflect management’s best estimate of future claims. The following is a reconciliation of the changes in accrued warranty costs for the reporting period:
|  | December 31, |
|  | 2017 |  |  | 2016 |
Balance at beginning of year |  | $ | 5,443 |  |  | $ | 4,558 |
Warranty claims paid or retired |  |  | (979 | ) |  |  | (1,096 | )
Expense |  |  | 507 |  |  |  | 2,053 |
Adjustment due to currency translation |  |  | 411 |  |  |  | (72 | )
Balance at end of year |  | $ | 5,382 |  |  | $ | 5,443 |
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, 2017, Lear, Adient and Magna comprised 24%, 20% and 7% respectively, of the Company’s accounts receivable balance. As of December 31, 2016, Lear, Adient, and Faurecia comprised 25%, 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 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. We recognize a reserve for obsolete and slow moving inventories based on estimates of future sales and an inventory item’s capacity to be repurposed for a different use. We consider the number of months supply on hand based on current planned requirements, uncommitted future projections and historical usage in estimating the inventory reserve. Additional provisions are made for supplier claims for obsolete materials, prototype inventory, spare or customer service inventory and, for all periods other than at year-end, estimates for physical inventory adjustments. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) The following is a reconciliation of the changes in the inventory reserve:
|  | December 31, |
|  | 2017 |  |  | 2016 |
Balance at beginning of year |  | $ | 4,790 |  |  | $ | 4,308 |
Expense |  |  | 3,521 |  |  |  | 876 |
Inventory write off |  |  | (726 | ) |  |  | (326 | )
Adjustment due to currency translation |  |  | 302 |  |  |  | (68 | )
Balance at end of year |  | $ | 7,887 |  |  | $ | 4,790 |
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 7 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 $32,224, $24,873 and $18,399 for the years ended December 31, 2017, 2016 and 2015, respectively. 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, 2015 to December 31, 2017 is as follows:
December 31, 2015 |  | $ | 27,765 |
Goodwill arising from the acquisition of CSZ |  |  | 24,622 |
Exchange rate impact |  |  | (652 | )
December 31, 2016 |  | $ | 51,735 |
Goodwill arising from the acquisition of Etratech |  |  | 14,866 |
Exchange rate impact |  |  | 3,084 |
December 31, 2017 |  | $ | 69,685 |
Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) The fair value and corresponding useful lives for acquired intangible assets are listed below as follows:
Asset Category |  | Useful Life
Customer relationships |  | 8-15 years
Technology |  | 5-10 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 $12,425, $12,675 and $12,751 in other intangible assets, including capitalized patent costs, were amortized in 2017, 2016 and 2015, respectively. An estimate of intangible asset amortization by year, is as follows:
2018 |  | $ | 12,968 |
2019 |  |  | 10,041 |
2020 |  |  | 8,230 |
2021 |  |  | 10,762 |
2022 |  |  | 10,334 |
Thereafter |  |  | 30,950 |
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. 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, 2017, 2016 and 2015, respectively. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) Product Revenues The Company sells its products under long term supply or purchase order contracts issued by its customers. These contracts involve the sale of goods and services 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, or completion of services. 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. Cash discounts for early payment are extended to customer purchases recognized within the Industrial reporting segment. Unless the payment is for a distinct good or service, any consideration paid to a customer is recognized directly against the revenue earned from that customer. 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. For 2017, our revenues from sales to our three largest customers, Lear, Adient and Bosch Automotive were $192,756, $173,964 and $75,370, respectively, representing 20%, 18% and 8% of our total revenues, respectively. 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 $6,994 and $5,604 of reimbursable tooling was capitalized within prepaid expenses and other current assets as of December 31, 2017 and 2016, respectively. Company-owned tooling is included in property and equipment and depreciated over its expected useful life, generally two to seven 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. Income Taxes The Company records 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 base 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. At December 31, 2017 and 2016, a valuation allowance has been provided for certain deferred tax assets which the Company has concluded are more likely than not to not be realized. If future annual taxable income were to be significantly less than current and projected levels, there is a risk that certain of our deferred tax assets not already provided for by the valuation allowance would expire prior to utilization. The Company recognize 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. The Company recognizes interest and penalties related to income tax matters in income tax expense. Note 2 — Summary of Significant Accounting Policies and Basis of Presentation (Continued) 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 $12,727 and $4,339, respectively, for the year ended December 31, 2017, $8,147 and $2,891, respectively, for the year ended December 31, 2016, and $12,316 and $3,787, respectively, for the year ended December 31, 2015. 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. 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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