Company: THRM
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0000950170-25-023344
Chunk: 219

Company: Gentherm Inc
Filing Date: 2025-02-19
Form: 10-K
Item: Item 7
Chunk 219
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 the market valuation approach is highly subjective as it requires the selection of comparable companies and valuation multiples. 

Impact if actual results differ from assumptions: As of December 31, 2024, our goodwill balance included $72.8 million related to our Automotive segment and $26.8 million related to our Medical segment. These balances could be fully or partially impaired if management does not achieve the expected cash flows assumed in the fair value estimates or if assumptions and cash flow estimates change in future periods.

The Company’s Medical segment is comprised of one reporting unit (the “Medical reporting unit”). The estimated fair value of the Medical reporting unit exceeded its carrying value by approximately 15% as of December 31, 2024. The Medical reporting unit is at risk of failing future impairment tests, as the estimate of fair value does not substantially exceed its carrying value. The Company’s 

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estimated future cash flow projections for the Medical reporting unit for the period of 2025 through 2029 assume a compound annual growth rate for revenue of approximately 13.1%, which we deem to be a critical assumption in the fair value determination as of December 31, 2024. This forecasted revenue growth, which is significantly higher than historical periods, is primarily driven by our anticipated product launches that are expected to increase volume and price due to new features and product capabilities. Realization of this assumed revenue growth is dependent on the successful launch of these new products and product features and the acceptance of customers. If this revenue growth is not achieved or if the estimated growth rates are reduced because of new information or experience, the fair value of the Medical reporting unit could decrease, which could result in a material impairment of goodwill. Additionally, forecasted cash flows assume margin expansion as a direct result of the forecasted revenue growth. If we experience higher costs than assumed in our forecast or if we experience other deviations from forecasted results and/or external factors (e.g., increase of interest rates), it could result in a material impairment.

The Company's reporting units in its Automotive segment each have a fair value that is substantially in excess of its respective carrying value as of December 31, 2024.

Income Taxes 

Critical estimates: The Company is subject to income taxes in the United States and numerous international jurisdictions. In calculating our effective income tax rate, we make judgments regarding certain tax positions, including the timing and amount of deductions and allocations of income among various tax jurisdictions. When determining whether we will be able to realize deferred tax assets, judgment is used to evaluate