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Segment Reporting

12 Months Ended

Dec. 31, 2018

Note 9 — Segment Reporting

Segment information is used by management for making operating decisions for the Company. Management evaluates the performance of the Company’s segments based primarily on operating income or loss. As discussed in Note 17, Gentherm acquired Etratech on November 1, 2017. The acquisition enhances key elements of our business strategy by greatly expanding our knowledge and capability to produce in-house electronic components for next generation intelligent thermal management products.

The Company’s reportable segments are as follows:

•

Automotive — this segment represents the design, development, manufacturing and sales of automotive climate comfort solutions, battery sub-systems, specialized automotive cable systems and automotive thermal convenience products. All of our activities with respect to electronics are also included in our Automotive segment because a majority of these activities relate to the manufacture of electronic components for our automotive products or the automotive products of third parties. Etratech’s operating results are included within Gentherm’s Automotive segment due to the concentration of Etratech’s product applications within the automotive, recreational vehicle and marine industries.

•

Industrial — the combined operating results of GPT, CSZ and Gentherm’s advanced research and development division. We perform advanced research and development on thermal management systems, including those that utilize new proprietary comfort software algorithms, to enhance the efficiency and functionality of our automotive heating and cooling products. Unlike research and development that relates to a specific product application for a customer, advanced research and development activities affect products and technologies that aren’t currently generating product revenue. The segment includes government sponsored research projects. See Note 15 for information regarding the Industrial segment assets and liabilities classified as held for sale.

•

Reconciling Items — include corporate selling, general and administrative costs and acquisition transaction costs.

Note 9 — Segment Reporting – (Continued)

The tables below present segment information about the reported product revenues and operating income of the Company for years ended December 31, 2018, 2017 and 2016. With the exception of goodwill, asset information by segment is not reported since the Company does not manage assets at a segment level. As of December 31, 2018, goodwill assigned to our Automotive and Industrial segments were $37,533 and $17,778, respectively. Due to the classification GPT’s and CSZ-IC’s assets as held for sale, an additional $6,844 of goodwill is classified within assets held for sale on Gentherm’s consolidated balance sheet as of December 31, 2018. As of December 31, 2017, goodwill assigned to our Automotive and Industrial segments were $38,912 and $30,773, respectively.

	Automotive		Industrial			Reconciling Items			Consolidated Total
2018:
Product revenues	$	948,592	$	89,667		$	—		$	1,038,259
Depreciation and amortization		43,621		4,384			2,633			50,638
Operating income (loss)		152,051		(22,530	)		(56,733	)		72,788
2017:
Product revenues	$	879,457	$	106,226		$	—		$	985,683
Depreciation and amortization		36,801		5,399			2,772			44,972
Operating income (loss)		166,378		(14,751	)		(54,529	)		97,098
2016:
Product revenues	$	847,428	$	70,172		$	—		$	917,600
Depreciation and amortization		31,826		3,789			2,149			37,764
Operating income (loss)		174,027		(16,702	)		(51,206	)		106,119

Automotive and Industrial segment product revenues by product category for each of the years ended December 31, 2018, 2017 and 2016 are as follows:

	2018		%			2017			%			2016		%
Climate Control Seat (CCS)	$	374,816		36	%	$	387,961			40	%	$	405,795		44	%
Seat Heaters		305,337		29	%		307,309			31	%		288,939		32	%
Steering Wheel Heaters		69,845		7	%		62,125			6	%		49,516		5	%
Automotive Cables		98,931		9	%		92,093			9	%		85,283		9	%
Battery Thermal Management (BTM) ⁽¹⁾		28,472		3	%		10,043			1	%		6,546		1	%
Etratech		54,267		5	%		8,398			1	%		—		0	%
Other Automotive		16,924		2	%		11,528	⁽²⁾		1	%		11,349		1	%
Subtotal Automotive		948,592		91	%		879,457			89	%		847,428		92	%
Remote Power Generation (GPT)		19,222		2	%		31,891			3	%		18,628		2	%
Cincinnati Sub-Zero Products (CSZ)		70,445		7	%		74,335			8	%		51,544		6	%
Subtotal Industrial		89,667		9	%		106,226			11	%		70,172		8	%
Total Company	$	1,038,259		100	%	$	985,683			100	%	$	917,600		100	%

(1)Battery Thermal Management or BTM product revenues include Gentherm’s automotive grade, low cost, heat resistant fans and blowers used by customer for battery cooling through ventilation and production level shipments of the advanced TED based active cool system which began during the fourth quarter of 2017.

(2)Includes $2.0 million rebate to customer during 2017.

Note 9 — Segment Reporting – (Continued)

The Industrial operating loss is net of reimbursement for developmental expenses of $1,117, $2,116 and $641 for the years ended 2018, 2017 and 2016, respectively. Reconciling items include selling, general and administrative costs of $42,857, $43,457 and $39,059, respectively, for the years ended December 31, 2018, 2017 and 2016 and acquisition costs of $0, $789 and $743 for the years ended December 31, 2018, 2017 and 2016, respectively.

Revenue (based on shipment destination) by geographic area is as follows:

	2018		%			2017		%			2016		%
United States	$	488,926		47	%	$	454,669		46	%	$	449,065		49	%
China		93,628		9	%		93,645		9	%		80,493		9	%
Germany		88,366		9	%		71,768		7	%		70,258		8	%
Japan		62,633		6	%		57,467		6	%		45,103		5	%
South Korea		58,717		6	%		64,715		7	%		75,396		8	%
Canada		44,500		4	%		46,368		5	%		37,954		4	%
Czech Republic		42,665		4	%		38,828		4	%		38,164		4	%
United Kingdom		37,533		4	%		36,033		4	%		28,540		3	%
Romania		22,435		2	%		18,050		2	%		11,907		1	%
Other		98,856		9	%		104,320		10	%		80,720		9	%
Total Non U.S.		549,333		53	%		531,014		54	%		468,535		51	%
	$	1,038,259		100	%	$	985,683		100	%	$	917,600		100	%

We rely on three customers, two domestic and one foreign, to derive a significant portion of our product revenues. The table below lists the percentage of total product revenues generated from sales to these customers:

	2018			2017			2016
Lear (domestic)		17	%		20	%		21	%
Adient (domestic)		16	%		18	%		21	%
Bosch (foreign)		8	%		8	%		8	%